Apple faces another obstacle in China: Prohibition of ChatGPT
During a recent presentation, Apple revealed its exclusive AI technology named Apple Intelligence, designed to enhance AI features and announced a collaboration with OpenAI to partially utilize its widely-used ChatGPT tool. This comes into play when Siri requires additional assistance to answer queries, at which point ChatGPT steps in.
This move signifies Apple's attempt to speed up the integration of the latest AI technology, as tech competitors such as Microsoft, Google, Meta, and Samsung have already made strides in this field. A partnership with OpenAI might help Apple bridge the gap.
However, China is one of the leading nations to regulate the generative AI technology used in these popular services. In August, the Cyberspace Administration of China, the country's primary internet regulator, issued new guidelines for the industry, requiring companies to obtain approval before deployment. As of March, more than 100 AI models have been approved, all from Chinese companies.
According to a Wall Street Journal report on Thursday, Apple is reportedly seeking a Chinese AI company to partner with before the iPhone's anticipated September release, but a deal hasn't been finalized yet.
Apple declined to comment on the matter.
The urgency to find a partner arises at a time when Apple's smartphone sales took a steep 10% plunge in the first quarter of this year, as per market research firm IDC. This decline is mainly due to a significant drop in iPhone sales within China. The company has struggled in China due to nationalism, economic downturn, and fierce competition. China is Apple's second-largest market.
Resurgent competition
Meanwhile, Chinese smartphone brand Huawei experienced a 70% growth in smartphone sales in the first quarter, according to Counterpoint Research.
If a solution isn't found by fall, Chinese consumers may feel disappointed and opt to wait for a full AI experience with Apple. According to Nabila Popal, a senior director at IDC Research, "Apple is very likely to seek a local partner in China in place of OpenAI, because simply put, it needs to."
"Chinese consumers expect their premium phones to have the latest AI functionality, and may hesitate to shell out over $1000 for devices that don’t have all the AI features," Popal added.
"The long-term growth for Apple in China will come as Apple Intelligence evolves, offering more use cases, expanding language support beyond English, and when Siri can leverage local AI models to provide a ChatGPT-like function," Popal further stated.
Some AI companies in China might be better suited to cater to their consumers by offering more local dialects, argued Reece Hayden, an analyst at ABI Research.
Apple isn't the first foreign company to collaborate with the Cyberspace Administration of China for AI and smartphones. In January, Samsung partnered with Chinese tech giant Baidu to employ its AI model to power its translation service. Samsung also works with Meitu for photo editing tools. In other regions, Samsung utilizes its own proprietary AI technology, in addition to Google's AI model Gemini, which is also prohibited in China.
Samsung, however, only accounts for less than 1% of the total market share in China, as per Counterpoint Research.
Although time is running short for Apple to secure a partnership ahead of its fall software launch, Jeff Fieldhack, a research director at Counterpoint, is optimistic about Apple being able to strike a deal in a timely manner.
"Apple should be able to secure a partnership quickly because it has a strong global customer base, and it would be a valuable opportunity for these companies to work with them," Fieldhack said, suggesting they would soon establish themselves as an AI power player in the country.
CNN's Joyce Jiang contributed to the reporting.
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In light of the new regulations on generative AI technology in China, Apple might need to partner with a local tech company to ensure its devices offer the latest AI features, maintaining competitiveness in the Chinese market, a key business area for the tech giant.
Given the increasing demand for AI functionality in premium smartphones, Apple may also struggle to sell its high-priced devices without integrating ChatGPT-like features, which are currently only available through partnerships with domestic Chinese AI companies.
