This complicates their efforts to boost iPhone sales in a market where demand is declining; the company is increasingly relying on artificial intelligence to keep its product attractive.
Recently, Apple unveiled its new strategy with Apple Intelligence, emphasizing its investment in advanced AI features to revitalize the iPhone. A partnership with OpenAI was announced to integrate ChatGPT into Siri, marking a clear attempt to compete with Microsoft, Google, Meta, and Samsung in the race for leadership in AI.
However, China has emerged as one of the first countries to impose strict regulations on generative AI technologies, which are essential for these popular services. This poses a significant obstacle to Apple’s plans in the region, where the adoption of AI is strategically important for technological innovation and global competitiveness.
In August, the Chinese Cyberspace Administration, the country’s main regulatory authority for the internet, introduced new guidelines requiring companies to obtain prior approval for implementing AI technologies. By March, more than 100 AI models from Chinese companies had received approval.
According to a Wall Street Journal article from Thursday (20th), Apple is currently seeking a partnership with a Chinese AI company ahead of the planned iPhone launch in September, but no agreement has been reached so far. The company has not responded to the Journal’s requests for comment.
The urgent need to find a partner comes at a critical time for Apple, especially following a significant 10% decline in smartphone sales in the first quarter of this year, according to IDC. This decline was primarily driven by a drop in iPhone sales in China, where the company faces rising nationalism, a challenging economic situation, and an increasingly competitive market. China is Apple’s second-largest market, underscoring the critical importance of reviving momentum in this region.

In addition to the challenges in China, restrictions on Apple’s new AI tools in the European Union are also a concern. In a statement to CNN International, Apple expressed strong interest in making these resources available to customers worldwide but acknowledged the regulatory challenges it faces in the EU.
“Given the regulatory uncertainties stemming from the Digital Markets Act (DMA), we do not believe we will be able to introduce three of these features—iPhone Mirroring, SharePlay enhancements, and Apple Intelligence—for our EU users this year,” a spokesperson stated.
“We are particularly concerned that the interoperability requirements of the DMA may force us to compromise the integrity of our products in a way that jeopardizes user privacy and data security,” they added. “We are committed to working with the European Commission to find a solution that allows us to provide these features to our EU customers without compromising their safety.”
In China, concerns about iPhone sales are growing, especially with a notable 70% increase in smartphone sales from Huawei in the first quarter, as reported by Counterpoint Research.
If no solution is found by the fall, Chinese consumers may become dissatisfied and delay their purchases until they can enjoy the full AI experience with Apple devices, the analysis suggests.
“In this scenario, it is highly likely that Apple will seek a local partner in China out of necessity rather than OpenAI. Chinese consumers expect their premium smartphones to offer the latest AI features and may hesitate to invest over $1,000 in devices lacking comprehensive AI capabilities,” commented Nabila Popal, Senior Director at IDC Research.
She continued, “Apple’s sustainable growth in China will depend on how well Apple Intelligence is developed, expanding use cases, adding support for languages beyond English, and improving Siri’s ability to leverage local AI models to offer features comparable to ChatGPT.”
However, some AI companies in China may be better positioned to reach local consumers by providing more support for local dialects than foreign AI models, emphasized Reece Hayden, an analyst at ABI Research.
Apple would not be the first foreign company to collaborate with the Cyberspace Administration of China on AI and smartphone initiatives. In January, Samsung partnered with Chinese tech giant Baidu to utilize their AI model and enhance their translation services. Additionally, the South Korean brand is also working with another AI company, Meitu, on advanced photo editing tools.
In other regions, Samsung uses its own AI technology and collaborates with Google’s Gemini AI model, which is, however, banned in China.
Despite these collaborations, Samsung holds a market share of less than 1% in China, according to a report from Counterpoint Research.
While time is running short for Apple to secure a partnership before the software launch in the fall, Jeff Fieldhack, Research Director at Counterpoint, remains confident that the company will reach an agreement in time. He emphasizes that Apple is well-positioned to quickly establish strategic partnerships due to its strong global installed base and leadership in the tech market. Fieldhack notes that Chinese AI companies would view collaboration with Apple as a valuable opportunity to not only expand their reach but also strengthen their position in the growing AI market. He predicts that Apple could soon play a strong and influential role in the AI sector in China by leveraging its reputation and expertise to make significant strides in this strategic market.
As Apple works to overcome regulatory challenges and compete with local players like Huawei and other Chinese tech firms, its ability to establish strategic partnerships will be crucial in gaining the trust of Chinese consumers and boosting iPhone sales. The future of Apple in China will depend not only on the quality of its products but also on how effectively it can integrate advanced AI features like ChatGPT into its platforms and services to meet local market expectations.