Apple Partners with Alibaba, Snubbing Baidu and DeepSeek /

Produced by｜Business Show

Following DeepSeek's early-year media buzz, on February 11 evening, news rippled through the tech world.

According to CaiLian Press quoting The Information, Apple has decided to collaborate with Alibaba, utilizing Alibaba's model to provide Apple Intelligence services for its Chinese iPhone version. This partnership is awaiting approval from Chinese regulators.

In essence, Alibaba will handle all AI functionalities for Apple phones.

Post-announcement, Alibaba's US stock price surged over 1%, whereas Baidu's stock price dipped by more than 4%. What are the business dynamics behind Apple's alliance with Alibaba? Why did Apple turn away from Baidu and DeepSeek?

-Business Show-01 Apple's AI Deployment Journey in China

Since 2023, with the global surge in AI technology, competition for AI smartphone features has intensified.

Apple, recognizing the vast demand and potential for AI in the Chinese market, began testing various AI models from prominent Chinese AI developers, reflecting its high regard for AI in China.

By 2024, after rigorous evaluations, Apple chose Baidu as its primary partner to co-develop models for "Apple Intelligence".

As a pioneer in China's AI field, Baidu boasts deep expertise in core technologies like deep learning, natural language processing, and computer vision. With a substantial R&D team and notable technical achievements, Baidu's self-developed AI models, such as ERNIE Bot, enjoy significant industry influence.

Apple valued Baidu's technical depth and AI R&D capabilities. The rationale was that leveraging Baidu's technology could create AI features tailored to local needs, enhancing competitiveness for Chinese users, thereby strengthening Apple's market position in China.

The significance of the Chinese market to Apple is undeniable. As the second-largest market outside the US, Apple faces stiff competition from local brands like Huawei and Xiaomi, leading to a substantial sales decline.

Data from Singapore-based research firm Canalys released on January 16, 2025, shows that Apple's smartphone shipments in China fell 17% year-on-year to 42.9 million units in 2024, ranking third in market share. Meanwhile, China's smartphone market shipments grew by 4% in 2024, adding 12.1 million units.

A significant portion of Apple's lost market share was captured by Huawei, which increased its shipments by 37% to 46 million units.

Regarding revenue share, Apple's fiscal year 2024 (ending September 2024) data reveals operating revenue of $391 billion, a 67% increase from $233.7 billion in fiscal year 2015. However, Apple's growth in Greater China, including Hong Kong and Taiwan, was only 14%, and its share of Apple's overall revenue declined from 25% in 2015 to 17% in 2024.

Furthermore, AI features have emerged as a key competitive factor in the smartphone market. Some local Chinese brands have launched AI-powered features beloved by consumers, while Apple lags in AI technology, particularly in adapting to Chinese market needs, hindering sales growth.

Amidst this backdrop, Apple urgently needs to harness local Chinese AI technology to enhance user experience and competitiveness.

However, Apple's collaboration with Baidu faced hurdles. According to The Information, two individuals directly involved in the project stated that the partnership was later canceled due to Baidu's progress in developing AI models for Apple falling short of the American company's standards.

Although specific progress standards remain undisclosed, the cancellation indicates Baidu failed to meet Apple's requirements during AI model development.

Some analysts suggest Baidu might have deficiencies in development speed, model performance, and function adaptability. From a technical standpoint, unexpected challenges arose during development, such as sluggish progress in optimizing natural language processing accuracy and multimodal data fusion efficiency, impacting overall model performance. Regarding communication and collaboration, differences in project management processes, technical standard identification, and communication mechanisms between Apple and Baidu led to delayed information transmission and workflow disruptions, further slowing development.

This news shook the tech industry and sparked speculation about Apple's AI deployment.

Nevertheless, after encountering obstacles with Baidu, Apple actively explored other options in recent months. Models from Tencent, ByteDance, Alibaba, and DeepSeek entered Apple's evaluation scope.

-Business Show-02 Abandoning Baidu and DeepSeek

After parting ways with Baidu, Apple continued its evaluations but also discarded the recently popular and formidable DeepSeek.

During the 2025 Spring Festival, DeepSeek made a splash with astonishing momentum, becoming the tech world's focal point.

Application data reveals DeepSeek's unparalleled popularity. Just 20 days after launch, daily active users surpassed 20 million. Within days, it topped the download charts in both Chinese and American regions of the Apple App Store, outperforming ChatGPT's long-standing high rankings during the same period.

Netizens even joked, "Previously, using ChatGPT required VPN, now foreigners have to learn Chinese to use DeepSeek!" This phenomenal popularity catapulted DeepSeek into global spotlight, achieving a remarkable transformation from obscurity to global top flow.

The capital market also responded robustly to DeepSeek's popularity. During the Spring Festival holiday alone, investment banks and securities firms held over 60 roadshows in 8 days, even issuing research reports on New Year's Eve and the Spring Festival.

In the Hong Kong stock market, influenced by the DeepSeek wave, AI concept stocks performed exceptionally well, with notable increases in Kingsoft Cloud, Fourth Paradigm, and SMIC's stock prices. On February 4, despite the A-share market being closed, DeepSeek concept stocks showed a pre-market surge trend.

DeepSeek's outstanding technical performance is another reason for its popularity. Its new-generation large model R1 excels in multiple evaluations, outperforming leading open-source models and rivaling the world's top closed-source model GPT-4o.

Remarkably, its training cost is exceptionally low. According to the official technical paper, DeepSeek-V3 was trained for just 2 months using 2048 GPUs during the pre-training stage, costing only $5.576 million, compared to GPT-4o's approximately $100 million training cost. This comparison amazed the AI community.

Moreover, during the Spring Festival, DeepSeek continued to expand its application scenarios. Statistics show that over 60% of users utilized AI for travel itinerary planning, foreign language translation, and local dialect learning.

In terms of cloud platform access, during the Spring Festival, domestic and foreign cloud platforms, including the three major operators, focused on launching DeepSeek. Additionally, major cloud platforms like Alibaba Cloud, Baidu Intelligent Cloud, Huawei Cloud, and Tencent Cloud, along with overseas vendors like Amazon AWS, Microsoft Azure, and NVIDIA, successively announced DeepSeek model integration.

DeepSeek's founder Liang Wenfeng also garnered attention during the Spring Festival. His every move attracted public scrutiny. Banners and arches adorned Mililing Village, Liang Wenfeng's hometown in Zhanjiang, Guangdong, welcoming this tech hero back.

Nonetheless, Apple ultimately discarded DeepSeek, despite its recent popularity.

The Information reported that the DeepSeek team lacked the manpower and experience to support major clients like Apple.

By February 11 evening, news spread that Apple had chosen Alibaba. In comparison, Alibaba indeed showcases unique advantages in multiple aspects of cooperating with Apple.

Firstly, as an e-commerce giant, Alibaba possesses vast amounts of Chinese consumer data, encompassing multidimensional information like shopping preferences, payment habits, and consumption behaviors. These data are crucial for AI to understand Chinese users' needs and behavior patterns, enabling AI to provide more personalized and precise services. For instance, by analyzing users' shopping history, AI can recommend tailored products or provide more relevant search results.

Secondly, Alibaba boasts a huge and comprehensive ecosystem spanning e-commerce, finance, logistics, and cloud computing. This allows Apple-Alibaba collaboration to achieve coordinated development across multiple fields and expand AI function application scenarios.

For example, in e-commerce, AI can swiftly assist users in finding their favorite products; in finance, AI can offer intelligent financial management advice and risk assessments; in logistics, AI can optimize delivery routes and enhance efficiency. This ecological synergy offers users a more comprehensive and convenient service experience, injecting new vitality into Apple's development in the Chinese market.

Furthermore, Alibaba has achieved technological breakthroughs in artificial intelligence, big data, cloud computing, and other fields. On January 29, 2024, Alibaba's Qwen 2.5 Max model demonstrated highly competitive results in multiple benchmark tests, affirming Alibaba's AI prowess and providing technical support for Apple collaboration.

-Business Show-03 An "All-Win" Scenario in the AI Industry

After thorough evaluation, Apple ultimately selected Alibaba. Currently, Apple and Alibaba have submitted their jointly developed AI functions to regulators for approval.

Undoubtedly, this "handshake" is significant for multiple parties.

For Apple, grappling with declining sales in the Chinese market in recent years, this is a crucial measure to reverse its fortunes. Since May 2024, Huawei and others have integrated generative AI features into flagship models, intensifying competitive pressure on Apple in the Chinese market.

The AI features developed in collaboration with Alibaba will add unique selling points to the Chinese iPhone version, aiding Apple in regaining market share. Simultaneously, leveraging Alibaba's data and ecological advantages, Apple can better understand Chinese user needs, achieve localized product innovation, and further entrench itself in the Chinese market.

For Alibaba, this is a major opportunity.

As a Chinese e-commerce giant, Alibaba has unique data advantages. It possesses vast amounts of Chinese consumer data and has developed the large language model Tongyi Qianwen, achieving notable results in natural language processing. Collaboration with Apple is a testament to its technical prowess and opens a new avenue for commercializing its AI technology.

By partnering with a globally renowned brand like Apple, Alibaba can enhance its influence in the global tech field, expand business horizons, and accelerate AI technology application and promotion in more fields. Additionally, this collaboration may bring more business opportunities to Alibaba in cloud computing, data services, and other areas.

From an industry and market perspective, Apple-Alibaba collaboration will intensify AI market competition and propel industry technology development. Other tech companies may increase AI investments and launch more competitive products and services to respond to Apple and Alibaba's challenges. This will drive continuous innovation in the entire AI industry, bringing more high-quality AI applications to consumers.

Upon this news, both companies' US stock prices surged over 3% on the day of the announcement.

In summary, Apple's collaboration with Alibaba is a strategic choice grounded in business logic and market demand, comprehensively considering technical strength, data resources, service capabilities, and other factors.

This collaboration will not only reshape Apple's competitive landscape in the Chinese market but also present new development opportunities for Alibaba. Simultaneously, it will profoundly impact the entire AI industry.

We eagerly anticipate the early implementation of this collaboration, bringing users a more intelligent and convenient experience. [End]