Recent reports indicated that Apple (NASDAQ:AAPL) is exploring a collaboration with Baidu (NASDAQ:BIDU), a leading Chinese search engine, to integrate generative AI technology into its products available in China.
Through a potential partnership, the tech giant aims to incorporate Baidu's generative AI product, Ernie Bot, into its upcoming iPhone 16 as well as in the Mac OS and iOS 18 versions specifically for the Chinese market.
“We believe a deal makes sense as BIDU is the dominant search player with strong government relations on AI. Both parties would mutually benefit and have an existing working relationship on Search,” Macquarie analysts commented on a potential deal.
Given its pre-existing partnerships for default search functions on iOS with Google globally and with Baidu in China, it’s no surprise Apple is looking to extend these collaborations to include AI technologies, they explained. In China, the arrangement is shaped by local regulatory requirements and the current state of Baidu's search integration, which is comparatively underdeveloped.
The analysts believe that any forthcoming agreement between Apple and Baidu regarding AI will likely follow the template of Apple's deals with Samsung, starting on a limited basis.
“We believe an Apple/Baidu deal will be similar to the Google/ Samsung deal as Baidu/Samsung and Apple/Google seem to follow that too,” they wrote.
“This would involve Apple gaining license versions of AI models on-device to power new AI applications - these could include voice recognition, photo editor and Circle to Search functions with Search traffic from Siri or applications routed through Baidu.”
Should the two parties come to an agreement, it would likely provide an immediate boost for Apple’s iPhone sales, while Baidu would gain a vast user base to enhance its ERNIE Search and refine its model, Macquarie analysts believe.