Alibaba confirms Apple AI deal for Chinese iPhones

Selling flagship smartphones without generative AI in China right now is a brutal handicap. Apple has been feeling that pain in every single earnings call, but relief might finally be around the corner.

On Thursday, Alibaba confirmed a blockbuster partnership with Apple to power AI features for iPhones sold in China. Speaking at the World Government Summit in Dubai, Alibaba chairperson Joseph Tsai laid it bare: Apple shopped around, but ultimately shook hands with Alibaba.

Apple talked to a number of companies in China, Tsai told the audience, adding that Apple wants to use Alibaba's AI to power its devices and that Alibaba feels extremely honored to do business with them.

The messy search for a local partner

Apple did not land on Alibaba overnight.

Earlier reports indicated Apple initially worked on a deal with search giant Baidu, but the integration was reportedly plagued by persistent technical issues trying to adapt Baidu's models. Apple is also believed to have explored options with ByteDance and DeepSeek before settling on Alibaba.

For an American tech giant, foreign AI models like OpenAI's ChatGPT cannot legally ship in mainland China. Partnering with an approved local provider is the mandatory ticket through Chinese regulatory scrutiny. According to reports, both Apple and Alibaba have already submitted the necessary materials to local authorities for clearance.

A super cycle stall that Apple must fix

Apple is desperate to get this engine running because its China numbers are flashing bright red.

iPhone sales plummeted 11% year over year in the region, according to Apple's latest earnings report. Research firm Canalys reported that in Q4 of last year, Apple's market share collapsed from 24% to 15%, leaving it in a dead heat for third place with Xiaomi and Oppo. Vivo took the crown with 17%, while a resurgent Huawei grew shipments by 37% to secure second place with 16%.

CEO Tim Cook was unusually candid about the culprit. In an interview with CNBC, Cook noted that in markets where Apple Intelligence actually launched, iPhone 16 sales outperformed regions that did not get the rollout. The promised AI super cycle simply cannot happen when the signature feature is locked behind regulatory walls.

Why it matters

For Chinese consumers, this deal finally offers light at the end of the tunnel after feeling like second-class iPhone buyers. That said, it is not worth rushing out to buy an iPhone 16 today just for this news, as regulatory approval takes time and there is still no concrete launch date.

For the AI landscape, this is a massive commercial victory for Alibaba. While Baidu was widely viewed as the early favorite and DeepSeek stole global headlines, Alibaba proved that its enterprise maturity and cloud infrastructure could win the most demanding client in the world. It sets Alibaba up with a distribution pipe of tens of millions of premium mobile users.

We think choosing Alibaba was Apple's smartest realistic move, but it still highlights an awkward reality. Apple is now forced to run a bifurcated AI strategy, leaning on OpenAI in the West and Alibaba in the East. Making those experiences feel cohesive across borders will be a monumental engineering headache, and ongoing trade tensions mean smooth sailing is never guaranteed.