Apple (AAPL, Financial) and Alibaba (BABA) are facing significant hurdles in launching their AI service, "Apple Intelligence," in China due to heightened geopolitical tensions between the U.S. and China. The collaboration aims to integrate Alibaba’s AI models into Apple's latest iPhone to enhance competitiveness in the Chinese market. However, the approval process has been stalled by Chinese regulatory bodies amid ongoing trade tensions.
Regulatory bodies have extended review times for collaborations involving U.S. companies, particularly in sensitive technological fields like AI. The delays also involve China's State Council, which has been engaged in trade negotiations with the U.S., complicating the approval process. Despite CEO Tim Cook's efforts to secure U.S. government support, President Trump continues to pressure Apple to relocate manufacturing back to the U.S., threatening tariffs on overseas-produced iPhones.
Should Apple fail to introduce its AI functionalities timely, it risks losing market share, especially with local brands like Huawei and Xiaomi rapidly advancing their AI capabilities. Apple's market share in China's high-end sector has dropped from 70% to 47% since early 2023, while Huawei's has increased from 13% to 35%. This scenario could further exacerbate Apple’s challenges under the U.S.-China trade war.
