China’s Alibaba Group Holding has formed a strategic alliance with U.S. tech giant Apple to integrate AI-powered features into iPhones for the Chinese market, according to a report by the South China Morning Post on Tuesday.
Sources familiar with the agreement revealed that Apple selected Alibaba due to the advanced capabilities of its Qwen AI model, which is considered highly sophisticated and a leader in artificial intelligence innovation.
This collaboration comes as Apple faces declining iPhone sales in China, where the absence of local AI-powered features has been a major disadvantage. CEO Tim Cook attributed an 11% drop in iPhone sales in the region to the lack of Apple Intelligence, while domestic competitors like Huawei have capitalized on this gap.
In its search for a local AI partner, Apple evaluated several companies, including DeepSeek and ByteDance, before ultimately deciding on Alibaba.
On January 29, Alibaba introduced the upgraded Qwen 2.5 AI model, which it claims surpasses DeepSeek-V3, a well-regarded rival. The adoption of this technology is seen as a crucial move for Apple, especially as iPhone sales underperformed during the holiday season—historically its most profitable period—largely due to the absence of anticipated AI features.
Chelsey Lam, a senior equity analyst at Morningstar, commented on the development, stating, “The collaboration with Apple reinforces Alibaba’s credibility in AI and its Qwen 2.5 Max model. Choosing a strong partner for Apple Intelligence could play a key role in revitalizing iPhone sales in China.”
She further noted that although specific details of the agreement remain undisclosed, the most notable outcome is that Alibaba has secured Apple as a key partner, potentially attracting further business opportunities from other companies.
Both Apple and Alibaba have submitted their jointly developed AI-powered iPhone features for regulatory approval by China’s cyberspace authorities.
