Apple's AI plan in China rings US alarm bells

Alibaba AI would be installed on iPhones

- TRIPP MICKLE

Apple believes the future success of the iPhone depends on the availability of new artificial intelligence features. But tensions between Washington and Beijing may cripple the tech giant's plans to deliver Al in its second-most-important market, China.

In recent months, the White House and congressional officials have been scrutinising Apple's plan to strike a deal with Alibaba to make the Chinese company's AI available on iPhones in China, three people familiar with the deliberations said. They are concerned that the deal would help a Chinese company improve its artificial intelligence abilities, broaden the reach of Chinese chatbots with censorship limits and deepen Apple's exposure to Beijing laws over censorship and data sharing.

The scrutiny is the latest example of the challenges that Apple has run into as it tries to sustain its businesses in the United States and China at a time of rising geopolitical tensions. Three years ago, the US government succeeded in pressuring the company to abandon a deal to buy memory chips from a Chinese supplier, the Yangtze Memory Technologies Corp, or YMTC. More recently, the company has been challenged by US tariffs on Chinese-made products like the iPhone, threatening to cut into the company's profits.

Walking away from an Alibaba deal would have far graver consequences for Apple's business in China, which accounts for almost a fifth of the company's sales. The partnership with the Chinese tech company is critical to bringing Al features to iPhones in one of the world's most highly regulated and competitive markets. Without the Alibaba partnership, iPhones could fall behind smartphones from Chinese rivals like Huawei and Xiaomi.

PARTNERSHIP CONCERNS