Apple's efforts to strengthen its position in China's competitive smartphone market have hit a significant roadblock as Beijing regulators delay approval for its AI partnership with Alibaba.
The collaboration, first announced in February 2025, would integrate Alibaba's AI technology into iPhones sold in China, providing Apple with a compliant local partner to navigate China's strict regulatory environment. Alibaba Chairman Joe Tsai had confirmed the deal, stating that Apple "talked to a number of companies in China, and in the end, they chose to do business with us."
However, applications submitted to the Cyberspace Administration of China (CAC) have been stalled, with sources citing "increasing geopolitical uncertainties" between China and the United States as the primary reason. Under Chinese regulations, all consumer-facing AI products require regulatory approval before public release, making this an essential hurdle for Apple's AI strategy in the region.
The timing couldn't be worse for Apple, which has seen its market share in China's premium smartphone segment drop dramatically from 70% in early 2023 to just 47% in the first quarter of 2025. Meanwhile, domestic rival Huawei has surged to 35% market share, integrating DeepSeek's AI models into its devices and cloud services.
Industry analysts have identified the absence of advanced AI features—a key selling point in latest-generation smartphones—as a significant disadvantage for Apple in the Chinese market. Morgan Stanley analysts had previously called the Alibaba partnership "a critical catalyst for Apple's competitive standing in China," suggesting it could help solve Apple's iPhone sales slump in the country.
The delay comes amid broader tensions between the two countries, with President Trump threatening new tariffs on imported electronics and urging Apple to move more production to the United States. In May, Trump warned that Apple could face a 25% tariff on devices if it didn't shift manufacturing out of China, further complicating the company's position in this crucial market.