The Apple Siri AI icon is displayed on a smartphone, with Apple Intelligence in the background.
Jonathan Raa | Nuphoto | Getty Images
Apple Intelligence is the Cupertino giant’s game which aims to integrate AI into all its devices. It offers an improved version of Apple’s voice assistant Siri, as well as features that automatically organize your emails or transcribe and summarize audio clips.
Apple said Apple Intelligence will roll out in US English this fall, with additional languages, features and platforms expected to arrive over the next year. The company, however, remained silent on product offerings in China when it launched the AI at its annual developers conference this month.
This is likely due to China’s strict AI rules, analysts told CNBC, as Apple tries to figure out how to approach this complex market.
“China is in a different world when it comes to AI given the regulatory environment there, so China is at the top of Apple’s big announcements last week,” said Bryan Ma, vice president of the device research at IDC, to CNBC via email.
Beijing has adopted various regulations in recent years, focusing on areas ranging from data protection to large language models – the massive sets of data that underpin applications such as ChatGPT.
China’s AI market is heavily regulated. Some rules include requirements for LLM providers to obtain approval for commercial use of their models. Generative AI providers are also responsible for removing “illegal” content.
Navigating these rules will be tricky for Apple.
First, some Apple Intelligence features are based on Apple’s own language model, which works both on the phone and on the company’s own servers.
Under Chinese rules, Apple would likely have to get its AI model approved by authorities.
Second, one of the biggest announcements this month was that Apple’s Siri voice assistant can access OpenAI’s ChatGPT for certain requests – but ChatGPT is banned in China, meaning Apple should find an equivalent national partner.
Baidu and Alibaba are among the Chinese tech giants that have their own LLMs and voice assistants, making them among the companies Apple can potentially partner with.
Meanwhile, China’s internet is heavily censored, with regulators concerned about the potential for AI services to generate content, which could go against Beijing’s views or ideology.
It’s likely that Apple will need to create an on-device AI model and a cloud-based AI model that complies with local regulations, Nicole Peng, an analyst at Canalys, told CNBC via email.
The other part of the AI equation for Apple to succeed in China, according to CCS Insight chief analyst Ben Wood, is for the company to create a localized AI experience on its devices that appeals to users Chinese.
“Localizing the Apple Intelligence experience will be a major challenge for Apple,” Wood told CNBC. “As with all technology deployments, there are nuances in how the service is delivered to comply with customs, regulations and use cases specific to a particular country.”
A key part of Apple’s AI launch pitch was a focus on privacy. The company announced Private Cloud Compute, in which AI is processed on Apple-owned servers. Apple has stated that the processed data is not stored.
Whether the tech titan will be able to fully own its own servers is another question. Chinese iCloud data is stored on servers located in China and managed by a third party.
This could mean Apple may need a similar partnership for its AI computer servers, opening the tech giant to criticism over the degree of data privacy.
“Maintaining complete user privacy in the AI era in heavily regulated markets like China will be the biggest test for Apple yet,” Neil Shah, partner at Counterpoint Research, told CNBC. “It will be difficult for Apple to fully control its own private computer servers in China.”
CCS Insights’ Wood said Apple’s focus on privacy could help introduce AI features to the market. China passed a major data protection law in 2021, which aims to limit how information is collected and stored.
“Apple’s continued focus on privacy and security practices can help appease local regulators and Apple has not been afraid to make concessions when necessary,” Wood said.
CNBC contacted Apple about Private Cloud Compute and the company’s AI ambitions in China. A spokesperson did not directly respond to these questions, but referred CNBC to an interview in the business magazine Fast Company with Craig Federighi, Apple’s senior vice president of software engineering.
Federighi expressed a desire to bring Apple Intelligence to China.
“We certainly want to find a way to bring all of our best product capabilities to all of our customers,” he said in the Fast Company interview, adding that “in some parts of the world there are regulations that must be respected.” “.
The Apple executive said the process was underway to introduce AI products to China, but gave no timetable.
Smartphone makers around the world are touting their AI features as a way to sell premium phones to consumers who want to keep their devices longer.
Apple faces many challenges in China, where its market share fell to 15% in the first quarter of 2024, compared to 20% in the same period the previous year, according to Canalys data. Huawei, whose smartphone business was crippled by U.S. sanctions, has come back to life and is now the biggest smartphone player in China, where it competes with Apple with phones targeting the high-end segment.
Apple’s lag behind domestic rivals in launching AI features in China is unlikely to hurt iPhone sales.
“For Apple, the deployment of China-level Apple Intelligence is going to be a marathon, not a sprint. It will be rolled out in stages over the years until Apple is confident and by then it will have to cope to some competition,” said Counterpoint Research’s Shah. .
Wood said Apple’s control over its hardware and software integration will allow it to offer a different experience than its competitors.
“Apple has an uncanny ability to explain its services and features better than its competitors, even if it offers essentially the same experience or a subset of what its competitors can offer,” Wood said.
“Despite the current focus on AI by competing China-based smartphone makers, Apple is still expected to be in a strong position.”