Apple in Talks with Tencent and ByteDance for AI Integration

By Liam Mo and Brenda Goh

BEIJING (Reuters) – Apple (NASDAQ:AAPL) is in discussions with Tencent and TikTok owner ByteDance regarding the integration of their artificial intelligence models into iPhones sold in China, as reported by three sources familiar with the situation.

The U.S. company began rolling out OpenAI's ChatGPT on its devices this month, part of the Apple Intelligence product that enables Siri to leverage the chatbot's expertise for user queries about photos and documents like presentations.

ChatGPT is not accessible in China due to the country's regulatory requirements, which necessitate government approval for generative AI services before they can be released publicly. This has compelled Apple to seek local partners for AI features, especially as its market share in China declines.

According to the sources, Apple's discussions with Tencent and ByteDance regarding their AI models are still in the early stages, and they requested to remain unnamed as the negotiations are not public.

ByteDance has chosen not to comment, while Apple and Tencent have not responded to requests for comment.

A successful partnership for Apple’s AI services in China could position them as significant players in the increasingly crowded AI landscape, where numerous large language models have been launched by major tech companies and startups alike. These include ByteDance's Doubao, Tencent's Hunyuan, and Baidu (NASDAQ:BIDU)'s Ernie.

Reports indicate that Apple has also been in talks with Baidu to utilize its AI model in China; however, discussions reportedly faced technical setbacks, including disagreements over the use of iPhone user data to train AI models. Baidu has not commented on these reports.

The lack of AI capabilities in the latest iPhones being sold in China is viewed as a significant setback for Apple. As competition from domestic brands, such as Huawei, intensifies, Apple's market share in the world’s largest smartphone market is being challenged.

Huawei, which re-entered the high-end market in August with a new phone equipped with a Chinese-made chip, launched its Mate 70 series last month, featuring AI capabilities driven by its proprietary large language model.

Although Apple briefly fell out of the top five smartphone vendors in China in the second quarter, it recovered in the third quarter. Nonetheless, Apple’s smartphone sales in China experienced a 0.3% decline in the third quarter compared to the previous year, whereas Huawei’s sales surged by 42%, according to research firm IDC.