Between Apple’s underperformance in China and its slow start in the AI race, 2024 has the makings of a difficult year for the Silicon Valley giant. However, recent forays into generative AI suggest that a turnaround might be forthcoming for the world’s second most valuable company.

On March 18, Bloomberg reported that Apple has opened talks with Google over integrating Gemini into upcoming iPhone releases. However, as the AI model has yet to secure government approval for public use in China, a potential partnership with Baidu could hold the key to unlocking the lucrative Chinese market.

According to The Business Times, the Chinese generative AI market has over 200 models on offer, including products from Alibaba and Tencent. Samsung’s newest Galaxy S24 smartphones already leverages Baidu’s Ernie Bot to power AI features in China, while utilizing Google’s Gemini outside China. Likewise, Honor and Lenovo have established similar collaborations with Baidu.

Not wanting to be left behind, Apple has held preliminary talks with Baidu about integrating Ernie Bot into its devices in China.

Discussions over the usage of Gemini and the Ernie Bot tie into a wider shift in Apple’s strategy toward the burgeoning field of generative AI. This month has seen Apple publish its MM1 research paper, showcasing a multimodal model capable of integrating image and text inputs, as well as the announcement of the M3 Macbook Air, which it touted as “the world’s best consumer laptop for AI.” The acquisition of Canadian startup DarwinAI, alongside 32 other AI startups that Apple acquired in 2023, further highlights the company’s commitment to expanding its AI arsenal.

These developments are timely in light of Apple’s recent struggles in China, its third biggest market. Bloomberg reported that the fourth quarter of 2023 saw Apple’s iPhone sales in China drop by 13% to USD 20.8 billion, notably short of the USD 23.5 billion predicted by Wall Street analysts. This slump continued into 2024, with revenue falling by 24% year-on-year in the first six weeks.

While unusually high shipments by Apple at the start of 2023 may partially account for this decrease, increased competition could be the primary cause. Local rival Huawei’s sales surged by 64% in the first six weeks of 2024, buoyed by the release of the Mate 60 last September. Competitive pricing by companies such as Xiaomi, Vivo, and Oppo has also applied further pressure in an already-crowded Chinese market.

Bloomberg reported that, in response to challenging market conditions in China, Apple has reduced the price of its iPhone 15 Pro Max by as much as RMB 1,300 (USD 180) on online platforms such as Tmall and JD.com.

Apple opened its latest store in Shanghai on March 21 and has announced plans to establish a new lab in Shenzhen for applied research and testing of its iPhone, iPad, and Vision Pro product lines. The tech giant has already invested USD 140 million to build applied research labs in Beijing, Shanghai, and Suzhou over the past five years, signaling long-term ambitions in China.

Meanwhile, the true extent of Apple’s generative AI ambitions is expected to be unveiled during WWDC 2024 in June. The company is anticipated to announce details regarding iOS 18, which is likely to incorporate proprietary generative AI features. Native smartphone AI capabilities will be crucial for Apple, especially as China’s top phone brands—including Vivo, Xiaomi, and Huawei—are also reportedly working on their own on-device AI models.