US concerned over Apple-Alibaba AI deal for iPhones in China
What's the story
Apple's future iPhone success relies on sophisticated artificial intelligence (AI) capabilities.
But the recent tensions between the US and China could put these plans at risk in China, Apple's second-largest market.
The White House and congressional officials have expressed concerns over a possible partnership between Apple and Chinese e-commerce giant Alibaba, according to The New York Times.
Deal scrutiny
Concerns over AI partnership
The US government fears that Apple's partnership with Alibaba could boost the latter's AI capabilities and broaden the reach of Chinese, censorship-prone chatbots.
Not to mention, the deal could also increase Apple's exposure to China's censorship and data-sharing regulations.
The scrutiny stems from growing geopolitical tensions and their influence on Apple's business in the US and China.
Historical hurdles
Past challenges and potential consequences
Three years ago, the US government had pressured Apple to call off a deal with Chinese supplier Yangtze Memory Technologies Corporation (YMTC) for memory chips.
More recently, US tariffs on China-made iPhones have added to Apple's woes.
If Apple were to ditch its partnership with Alibaba, it could face dire consequences in China, where nearly 20% of its sales come from.
Strategic alliance
Importance of Alibaba partnership for iPhone
The collaboration with Alibaba is critical for bringing AI features into iPhones in one of the world's most competitive and heavily regulated markets.
Without this partnership, Apple's iPhones could fall behind those from Chinese rivals like Huawei and Xiaomi.
Officials from both the White House and The House Select Committee on China have directly grilled Apple executives over the deal's details, including data-sharing agreements with Alibaba.
Scenario
Significant victory for Alibaba in China
Alibaba confirmed a partnership with Apple to enable AI services in China-based iPhones back in February.
For Alibaba, this marks a significant victory in China's fiercely competitive AI landscape, which includes players like DeepSeek, known for developing models at a fraction of the cost of their Western counterparts, such as OpenAI and Meta.