Apple relies on future AI upgrades to boost iPhone demand, specifically in China, where consumer appeal is currently low. However, a significant roadblock stands in its way: China banned WeChat, but WeChat is a core part of ChatGPT, which will soon become Siri.
Apple recently previewed its proprietary solution to support sophisticated AI, Apple Intelligence, which was announced at the company’s presentation. Moreover, it unveiled a collaboration with OpenAI to integrate the latter’s ChatGPT into Siri to deepen users’ engagement with the technology.
This announcement comes as Apple has sought to deploy advanced technology due to increasing pressure from its counterparts in the same industry, such as Microsoft, Google, Meta, and Samsung. The latter has incorporated advanced AI into its devices. Thus, cooperation with OpenAI is viewed as the way to close the gap between these companies.
However, China is a challenge as it is one of the pioneers to ban some generative AI technologies as the base for such services. In August, the Cyberspace Administration of China issued guidelines regulating AI project approval. As of March, the administration had approved over a hundred models belonging to local companies.
In a Wall Street Journal story, Apple is reportedly looking for a Chinese AI firm with which to strike a deal regarding the release of a new iPhone model, expected in September this year. However, an agreement has yet to be signed, and Apple does not want to discuss its actions.
The need to find a partner arises when the company’s smartphone sales have reduced by 10 per cent within the year’s first quarter. iPhone sales in China have declined mainly because people in China have been showing increasing nationalism, which affects their purchasing decisions. Overall, the sales of foreign brands, including Apple’s, have also been affected by the country’s economic and market challenges.
Regulatory Challenges Extend to Europe
Legal barriers are not limited to the Chinese market only but are present Worldwide. Specifically, the company recognised issues relating to the DMA in the EU that made it difficult for the firm to implement the AI features this year.
“Because of the unpredictable nature of regulations made by the DMA, we expect to halt the launch of three features – iPhone Mirroring, SharePlay Screen Sharing improvements, as well as Apple Intelligence – for EU users this year,” said an Apple source.
Apple expressed concern that DMA’s interoperability standards threaten the quality of the products and, thus, the privacy of consumers and their data. The company is ready to work with the European Commission to identify reasonable solutions to protect consumers from potentially dangerous features.
Competitive Landscape in China
However, an issue arises regarding Apple’s future position in the Chinese market, given the increase in the activity of domestic manufacturers such as Huawei. Smartphone sales at Huawei also increased by 70% in the first quarter, which is a competitive threat to Apple.
During the interview, Nabila Popal, Senior Director at IDC Research, focused on incorporating more sophisticated AI features to meet Chinese customers’ demands. Popal elaborated that local partnerships would also mean that APPLE could further explore the aspect of its AI that consumers care about but are not ready to compromise.
However, based on the difficulties above, analysts such as Jeff Fieldhack from Counterpoint Research believe Apple can quickly gain a Chinese partner. Fieldhack acknowledged that Apple has a strong base in most international markets and is appealing to partners, indicating that a partnership could enhance Apple’s positioning as one of the premier artificial intelligence applications in the Chinese market.
Thus, Apple’s experience addressing the regulatory environment and competitive pressures in China and other countries, as well as the company’s capacity to integrate cutting-edge AI more neatly into iPhones and other products, will define the company’s potential achievements in revitalising iPhone sales and increasing market relevance across the globe.
