Apple's AI Push Encounters Obstacles In China With Stricter Regulations And Local Competitors On The Rise


Apple Inc. AAPL’s ambitious venture into artificial intelligence is encountering significant challenges in China, a key market for the tech giant.

What Happened: Apple’s AI expansion, which includes an upgraded version of its voice assistant Siri, is being impeded by China’s stringent AI regulations, reported CNBC.

The company’s market share in China is also under pressure from local competitors such as Huawei, who are promoting their own AI features.

Apple has announced that its AI will initially roll out in U.S. English, with further languages, features, and platforms to follow. However, the company has been silent on its plans for the Chinese market, which is known for its complex regulatory environment.

"China is in another world when it comes to AI given the regulatory environment there, so China is a big asterisk on Apple's big announcements last week," said Bryan Ma, Vice President of Devices Research at IDC, according to the report.

China has implemented strict regulations on AI in recent years, particularly concerning data protection and large language models. These rules will pose a challenge for Apple, as some of its AI features are based on its own language model, which would require approval from Chinese authorities.

Apple will likely need to develop both an on-device AI model and a cloud-based AI model to comply with local regulations, according to Canalys analyst Nicole Peng.

Additionally, Apple’s use of OpenAI’s ChatGPT, which is banned in China, will necessitate finding a domestic equivalent. This could potentially lead to partnerships with Chinese tech giants such as Baidu BIDU and Alibaba BABA, which have their own language models and voice assistants.

According to CCS Insight Chief Analyst Ben Wood, for Apple to succeed with AI in China, the company must develop a localized AI experience on its devices that resonates with Chinese users.

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"Localising the Apple Intelligence experience will be a major challenge for Apple," Wood said, according to the report. "As with all technology deployments, there are nuances to the way the service is delivered to respect the specific customs, regulations and use cases in a particular country."

Why It Matters: Apple’s AI ambitions are not new. Gene Munster from Deepwater Asset Management recently suggested that Apple could replicate its AI moves in China through partnerships with Baidu and Alibaba. He noted that these partnerships could help Apple introduce third-party AI features like ChatGPT in China.

At the WWDC 2024, Apple unveiled significant updates to its operating systems and introduced new generative AI features, including Apple Intelligence and ChatGPT integration. Analysts from Goldman Sachs believe these advancements will drive product upgrade demand and open avenues for future AI monetization.

In March, Apple initiated preliminary discussions with Baidu to incorporate its advanced generative AI technology into Apple devices within China. This move aligns with Chinese regulations that mandate generative AI models to undergo scrutiny by the nation’s cyberspace regulator before public release.

Price Action: Apple Inc.’s stock last closed at $209.68, down 2.15% for the day. In after-hours trading, the stock rose 0.15%. Year to date, the stock has gained 12.95%, according to the data from Benzinga Pro.

Read Next: Elon Musk Lures Tesla Employees With Stock Awards After His $56B Pay Package Receives Shareholder Backing: Report

Image Via Shutterstock

This story was generated using Benzinga Neuro and edited by Kaustubh Bagalkote

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