Apple Negotiated With Tencent and ByteDance about the Incorporation of their AI Functions with Its Products

 

 

On Thursday (Dec. 19) Apple (NASDAQ: AAPL) was reportedly negotiating with Chinese tech giants Tencent Holdings Ltd (HK: 0700) and ByteDance about integrating their AI models into Apple's devices sold in China.

 

Negotiations between the companies are in the early stages. Previous reports indicated that Apple had negotiated with Baidu (NASDAQ: BIDU ) to use its AI models but technical issues had paused talks.

 

Apple is looking for local Chinese partners to offer its devices AI capabilities. AI integration, known as Apple Intelligence, was a major selling point for Apple's latest series of products, particularly the iPhone 16. Apple recently launched its iPhone models with AI functions powered by ChatGPT.

 

However, due to government restrictions, ChatGPT is unavailable in China. US companies are also not allowed to share advanced AI technology with Chinese companies.

 

Hence, Apple needs to adopt Chinese AI models to continue the selling point. Tencent's AI model, Hunyuan, and ByteDance's Dubao are some of China’s more advanced AI products. Given Apple's large user base in China, any Chinese company that partners with Apple is likely to be greatly benefited.

 

However, Apple's market share in China has steadily declined due to rising competition with local Chinese electronics. Apple has also fallen far behind its rivals like Samsung Electronics Co Ltd (KS: 005930) in AI integration with mobile devices. The European Commission (EC) pressured Apple to redesign the iOS operating system, making it compatible with rivals' supporting devices and to open up its technologies to third-party developers. If Apple fails to satisfy the EC's demand, the EC could launch an investigation against it in early 2025, which could lead to hefty fines.

 

These unfavorable add uncertainty to Apple's potential partnership with Tencent and ByteDance.

 

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