Apple's AI partners in China may undergo changes. Recently, it was reported that Apple is negotiating with Tencent and ByteDance to integrate the AI models of the two companies into iPhones sold in China, but the negotiations are still in the early stage. Regarding the authenticity of the news, Tencent told reporters that they would not comment. At present, there is no response to ByteDance.
It is worth noting that there have been rumors that Baidu has become a partner of Apple, but recently it was reported that the two sides have differences in technology and privacy issues. Affected by the news, on December 20th, Baidu Group's stock price in Hong Kong fell by 2.56%, while Tencent Holdings' stock price rose by 2.7%. Baidu Group, a US stock company, opened down 0.63% on Friday.
Anyway, in order to quickly boost iPhone sales in China and explore the business model of Apple Intelligence, Apple needs to finalize its domestic AI partners as soon as possible. For Baidu, which got up early in the field of big models, if it is squeezed into its own AI market share due to losing its partner Apple, it may need to re-examine its strategy.
Apple may need to accelerate the finalization of AI partners
Apple attaches great importance to AI enabled terminal products. At Apple's performance briefing in November, CEO Tim Cook mentioned that Apple Intelligence marks the beginning of a new chapter for Apple products. From the current situation, considering that Baidu is considered one of the most likely AI manufacturers for Apple to cooperate with in China, if there is a disagreement between the two companies, in order to accelerate the implementation of AI functions, Apple may accelerate the search for new partners.
From a timeline perspective, Apple launched the Apple Intelligence feature based on large models in June of this year. In November, Apple Intelligence was launched in English from the United States, with a subsequent version localized to the United Kingdom, Australia, Canada, Ireland, and New Zealand. In addition, Apple plans to add more languages in April next year. Overseas, Apple has also partnered with OpenAI, and ChatGPT has been fully integrated into Apple's iPhone, iPad, and Mac this month.
In China, there is currently no definite timetable for the implementation of Apple's AI functions. Tim Cook previously stated during his visit to China that Apple is working hard to complete the regulatory process for launching Apple Intelligence in the Chinese market.
For Apple, it is important to quickly finalize cooperation with domestic AI manufacturers and accelerate the implementation of AI functions. Apple's revenue in Greater China has declined in the latest quarter, and AI may be needed to boost iPhone sales. In the fourth quarter of the 2024 fiscal year ending on September 28, Apple's revenue from Greater China was $15.033 billion, compared to $15.064 billion in the same period last year. Greater China was the only region where Apple's revenue declined and fell short of analysts' expectations of $15.8 billion.
After the release of Apple's new iPhone 16 this year, it seems that the decline in iPhone sales in China has not been significantly reversed in the short term. According to data from market research firm Counterpoint Research, compared to the 2023 iPhone 15, the sales of iPhone 16 in the first three weeks after its launch in the Chinese market increased by 20%. However, at the same time, the total sales of iPhone in China decreased by 2% year-on-year. During this year's Singles' Day holiday, iPhone 16 Pro and iPhone 16 Pro Max were the best-selling models, but due to a large number of competitors releasing flagship products before and during the holiday season, Apple's sales fell by double digits year-on-year.
Some market analysis agencies believe that the iPhone sales growth brought by Apple Intelligence to Apple will not be reflected so quickly, and it needs to be gradually reflected as AI functions are phased out in different regions. In addition to potentially driving hardware sales such as iPhones, Neil Shah, Partner and Vice President of Research at Counterpoint Research, told reporters that in the future, Apple may also require users to pay for the use of advanced AI features or individual AI features in Apple One subscriptions to maintain Apple's high gross profit margin and operating profit.
What would happen if Baidu loses Apple?
In addition to Tencent and ByteDance, it has also been reported recently that Apple is also negotiating with AI startup Zhipu AI to use its big model in the domestic version of iPhone, and Zhipu AI has not responded to this matter yet. Apple seems to have many partners to choose from in China. What impact will Baidu's AI layout be if it loses its partner Apple?
At present, multiple mobile phone manufacturers have made layouts in AI or large-scale models, and the industry is already looking forward to deeper applications of AI in end devices such as mobile phones in the coming years. Tan Dai, president of ByteDance's volcanic engine, recently revealed that most Android phones in China are cooperating with Doubao. In October of this year, Zhipu AI launched its autonomous agent AutoGLM, which can replace humans to control electronic devices and complete operations such as ordering takeout and high-speed rail ticket purchases. Some hardware manufacturers have also expressed to reporters that large models will move from data centers to the end side and enter more end side devices.
From the perspective of the domestic mobile phone market landscape, Apple's market share in the Chinese smartphone market in the third quarter of this year was 13.5%, ranking sixth, behind Vivo, Huawei, Xiaomi, Honor, and OPPO. However, considering the high selling price of Apple phones, users may have a strong willingness to consume, and it cannot be ruled out that Apple phone users may be more willing to pay for AI features in the future, which may be attractive to large model partners.
Baidu executives have previously stated on multiple occasions that intelligent agents are the best form of AI applications, and the industry is also looking forward to the landing of intelligent agents on mobile devices next year. If Baidu loses its cooperation partner in the mobile phone field, it will lose a major scenario for the landing of AI on the end side, and the landing scenario of intelligent agents may be limited as a result. The subsequent landing scenarios of Baidu AI may rely more on existing business layouts such as search and autonomous driving, and continue to provide intelligent cloud services.
According to Baidu's third quarter performance released in November, over 20% of Baidu's search results pages covered AI generated content, while intelligent cloud AI related revenue accounted for over 11%.
According to IDC data, Baidu AI Cloud will have a 19.9% market share in China's big model platform and application market in 2023, ranking first, surpassing vendors such as Shangtang Technology, Zhipu AI and Baichuan Intelligent. Looking ahead, as more manufacturers lay out mobile applications, the market landscape may change, and Baidu will also face more intense competition.