Apple's AI ambitions in China provoke resistance from Trump administration

By Tripp Mickle

 

The Trump administration and congressional officials have raised concerns about a deal to put a Chinese firm’s artificial intelligence on iPhones. 

Apple believes the success of the iPhone depends on the availability of new AI features. But tensions between Washington and Beijing may cripple the tech giant’s plans to deliver AI 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 sources said. They are concerned that the deal would help a Chinese company improve its AI 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 US and China. Three years ago, the US government succeeded in pressuring Apple to abandon a deal to buy memory chips from a Chinese supplier, YMTC. More recently, the firm 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 its sales. The partnership with the Chinese tech company is critical to bringing AI features to iPhones in one of the world’s most highly regulated and competitive markets. Without the Alibaba partnership, iPhones could fall behind Chinese rivals like Huawei and Xiaomi. 

Officials at the White House and the House Select Committee on China have raised the deal directly with Apple executives, the sources said. During meetings in US with Apple executives and lobbyists, government officials asked about terms of the deal, what data Apple would be sharing with Alibaba, and whether it would be signing any legal commitments with Chinese regulators. In the meeting with the House committee in March, Apple executives were unable to answer most of those questions. 

US concern about the deal has been heightened by a deepening conviction that AI will become a critical military tool. Worried about a future US-China conflict, Washington officials have tried to limit Beijing’s access to AI technology, cutting off its ability to make and buy AI chips. 

Apple, the White House, and Alibaba did not comment. Apple hasn’t publicly acknowledged the AI deal, but Alibaba’s chairman, Joe Tsai, confirmed it publicly in February. 

If the deal with Alibaba collapses, there is also a potential knock-on effect because Alibaba is a major e-commerce retailer that could sell and market iPhones, said Richard Kramer, a senior analyst at Arete Research. 

US firms could also help Chinese AI providers reach more users and use the data they collect to improve their models. The risk would be that Baidu, Alibaba, ByteDance, and other Chinese firms could then use those improvements to help China’s military.

 

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