Apple (AAPL) is reportedly in discussions with Tencent and ByteDance, the parent company of TikTok, to integrate their artificial intelligence models into iPhones sold in China, according to an exclusive Reuters report. The tech giant recently started with the rollout of OpenAI’s ChatGPT into AAPL devices.
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AAPL Has to Navigate the Regulatory Landscape in China
Currently, ChatGPT is not available in China, as the country’s regulatory requirements mandate government approval for generative AI services.
These strict regulations have compelled Apple to seek local partnerships to introduce AI features to Chinese users. While Apple’s discussions with Tencent and ByteDance are still in early stages, such partnerships could help the company navigate the complex regulatory landscape while addressing its declining market share in China.
Apple has also explored partnering with Baidu, but these talks reportedly hit roadblocks due to disputes over iPhone user data and technical challenges, according to a report from The Information.
AAPL’s Market Share Is Suffering in China
The lack of AI capabilities in iPhones sold in China has become a significant drawback for Apple. Facing rising competition from domestic brands like Huawei, Apple’s market share has been under pressure. In the second quarter, Apple briefly fell out of China’s top five smartphone vendors before recovering in the third quarter. However, its smartphone sales in China slipped 0.3% year-over-year in the third quarter, while Huawei’s sales surged 42%, according to data from IDC Research.
Is Apple a Buy, Sell, or Hold?
Analysts remain cautiously optimistic about AAPL stock, with a Moderate Buy consensus rating based on 20 Buys, nine Holds, and two Sells. Over the past year, AAPL has increased by more than 25%, and the average AAPL price target of $243.72 implies a downside potential of 1.8% from current levels.
