Alibaba to partner with Apple on AI features

CGTN Europe

CGTN Europe discussed this with Marc Ostwald, Chief Economist & Global strategist with ADM Investor Services

Transcript

00:00Mark Oswald is Chief Economist and Global Strategist at ADM Investor Services.

00:04Good to see you again, Mark. Welcome back to the program.

00:07So, Apple had a choice here, didn't they?

00:09But they've gone for Alibaba over other Chinese AI companies.

00:13Why did they choose them?

00:16I think it really boils down to retail footprint,

00:20where Apple needed a local partner for AI,

00:27and there are other partners.

00:31Indeed, we've had an announcement today that Baidu is also working with Apple on that front.

00:37But the most important thing is Apple's iPhone sales in China have been declining.

00:44The pace of growth has basically fallen quite dramatically in recent years,

00:51and with AI basically being at the center of the next stage of developments in terms of mobile telephony,

00:59it's key that they find a very strong local partner with a very large retail footprint,

01:05and I think that's the primary motivation.

01:09So, good news for Apple, then. Is it going to save their iPhone sales, though?

01:16I think it will to some extent,

01:19but one really has to then look at it in the broader context of what's happening with Chinese consumer spending,

01:27and it's clear that consumers don't feel that comfortable as yet.

01:34What would obviously help is if wages started to pick up again,

01:40and if the property crisis was resolved.

01:42We always end up in pretty much the same space with that,

01:47and Apple obviously being at the high end in price terms in terms of its phones faces a lot of stiff competition from locally produced phones.

01:57So, I think it will help,

02:00but probably more at the margin than in terms of giving a big boost, as big a boost as perhaps Apple are hoping.

02:10And what about for Alibaba? What does it mean for them and the broader AI market in China?

02:18Well, I think since we had the news broke about DeepSeek a couple of weeks ago,

02:26there is this realization, and it's probably the most important one in terms of all the AI development,

02:33that it can be basically done a lot cheaper, a lot less resource and energy intensively,

02:40and China being at the forefront of everything to do with renewable technology,

02:50it really has a strong chance here to break into the market,

02:56and what was thought to be some exceptionalism about the US AI market is probably now being undermined.

03:06And it's not before time, because at the end of the day, both in terms of the energy transition and in terms of AI,

03:13broader AI implementation, particularly generative AI,

03:17the sort of cost base that's being implied at the moment is simply not sustainable,

03:22and it's not going to be the sort of mass market product that it will aim to be, and it will eventually become.

03:31But in the first instance, everything needs to work towards massively reducing the cost of it.

03:40And you mentioned Baidu just now. Let's talk about them.

03:43They've also announced that they're going to make their own AI chatbot free from April.

03:49Does that give them an edge? Does that change things in the AI space there?

03:55Certainly. Anyone who makes their AI bots basically effectively open source is stealing a march on their competitors.

04:09It's a question of what everybody else does then. Does that set the benchmark for everybody else?

04:16Does everyone else follow that route, or will others basically try and seek other enhancements?

04:24The biggest problem with AI is actually there's not really much of a consumer hawk, i.e. if it's free,

04:33then people will just bounce around between whatever's there.

04:38And at the end of the day, if you're trying to enhance your company's offerings, be it Baidu or Tencent or Alibaba or elsewhere,

04:48you need some sort of hawk, a subscription type hawk, to keep people in your space.

04:58And that's really where the big competition is going to be, not only in China, but also globally.

05:03Mark, great to talk to you. Thank you so much for joining us, as always.

05:06That's Mark Oswald from ADM Investor Services.

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