Apple (AAPL) is facing challenges in introducing its proprietary artificial intelligence (AI) models in China, according to an exclusive report from the Financial Times. A senior Beijing official has warned that foreign companies, including Apple, will face a “difficult and long process” to gain approval for running their own AI models unless they partner with local companies.
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This challenge comes as Apple CEO Tim Cook embarks on his third visit to China this week, coinciding with the company’s efforts to expand the rollout of its AI suite, Apple Intelligence, in the country.
AAPL Is Facing Hurdles in China
Despite these efforts, China’s strict regulatory framework presents a significant obstacle. Companies offering generative AI services must navigate a “lengthy and complex approval process,” including rigorous testing of their large language models (LLMs).
In light of these challenges, a Cyberspace Administration of China official suggests that Apple’s best chance lies in using already-approved LLMs from Chinese tech firms, which would streamline the approval process.
AAPL Is in Discussion with Chinese Tech Firms
Given these constraints, Apple has been in discussions with prominent Chinese technology players, including Baidu (BIDU), ByteDance, and Moonshot, the developer of the Kimi AI chatbot, to explore potential partnerships. Should Apple be unable to deploy its own models, these collaborations may become crucial for powering AI features on devices sold in China.
AAPL’s Sales in China Are Declining
This roadblock for the company comes at a time when Apple is facing declining sales in China, which accounts for 17% of its revenue. Sales in the country have dropped 8% year-over-year, fueled by state-led campaigns discouraging iPhone use among government employees and nationalist sentiments driven by U.S.-China tensions.
What Is the 12-month Price Target for Apple?
Analysts remain cautiously optimistic about AAPL stock, with a Moderate Buy consensus rating based on 24 Buys, eight Holds, and two Sells. Over the past year, AAPL has increased by more than 20%, and the average AAPL price target of $245.06 implies an upside potential of 4.2% from current levels.
