Chinese tech heavyweight Alibaba Group Holding Ltd will partner with US consumer electronics company Apple Inc to roll out artificial intelligence features for iPhone users in China.

The move, industry experts said, demonstrates the growing recognition of Alibaba's capacities and strengths in the AI-powered large language model sector.

Joe Tsai, co-founder and chairman of Alibaba, confirmed the company's partnership with Apple at the World Governments Summit in Dubai, the United Arab Emirates, on Thursday.

"They (Apple) talked to a number of companies in China. In the end they chose to do business with us. They want to use our AI to power their phones," Tsai said.

Some media outlets reported that Apple had considered models developed by ByteDance, Alibaba, Tencent and Chinese AI startup DeepSeek, but it gave up DeepSeek as the company's team lacked the manpower and experience needed to support a large customer.

Both companies have submitted AI features they codeveloped for iPhones in China to the country's regulator for approval.

The deal comes as Apple is seeking to secure a local AI partner to boost sales of its iPhones in China, where the US tech company is facing a challenge as Apple Intelligence features are unavailable to iPhone users in the world's largest smartphone market.

Pan Helin, a member of the expert committee for information and communication economy under the Ministry of Industry and Information Technology, said Alibaba has gained an upper hand in the field of LLMs, the application of AI models across industries, as well as computing power and AI infrastructure construction, which will provide a better AI experience for Apple users and help reinvigorate iPhone sales in China.

Alibaba Cloud, the company's cloud computing arm, recently unveiled its latest AI model, Qwen2.5-Max, which boasts enhanced math and coding capabilities and has outperformed other leading AI models such as US-based OpenAI's GPT-4o and DeepSeek's V3.

The company's Qwen model offers a low-cost DeepSeek alternative as US computer scientists have successfully developed a new reasoning model that has been trained for less than $50 with the help of Alibaba's open-source technology.

Lu Yanxia, research director at market research company IDC China, said Alibaba enjoys a huge consumer base in China and large amounts of user data based on its vibrant e-commerce ecosystem, and these advantages will help Apple better understand the personalized needs of users.

Industry experts also said the e-commerce giant has a deep understanding of users' shopping and payment habits, which could help it train models and deliver more customized AI services.

Apple is facing mounting challenges from local rivals. Data from market consultancy Counterpoint Research showed that Huawei reclaimed the top spot in China's smartphone market in the fourth quarter of 2024, capturing 18.1 percent of the market share.

Xiaomi secured the second spot in the quarter with a 17.2 percent market share, while Apple held 17.1 percent, experiencing a sharp 18.2 percent decline in sales.

Analysts at Morgan Stanley said Alibaba's partnership with Apple would be a critical catalyst for the latter's competitive edge in China, and suggested it could solve Apple's iPhone sales slump in the country.

Industry insiders said AI capabilities on smartphones will drive upgrades and represent a significant opportunity for both vendors and application developers alike. Shipments of AI-powered smartphones across the globe are expected to rise by 73.1 percent year-on-year in 2025, according to a report from IDC.

The triple-digit growth in 2024 will be followed by four consecutive years of double-digit growth as handset manufacturers look to incorporate generative AI features across their device offerings, the consultancy said.

By 2028, IDC forecasts that global shipments of generative AI smartphone will reach 912 million units, with the compound annual growth rate hitting 78.4 percent between 2024 and 2028.

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