In China's cutthroat phone market, AI becomes a necessity, not a luxury

Foreign giants Samsung and Apple are doubling down on innovations powered by artificial intelligence to bolster market share in China's fiercely competitive smartphone market. Will the pivot toward more localized and personalized experience work?

Samsung released the AI-focused Galaxy S25 Series in Shanghai on Tuesday, while media reports on the same day said Apple is in talks with Chinese tech giant Alibaba to offer localized Apple Intelligence services in China.

Generative AI is rapidly evolving, with features like real-time translation and content creation now standard, even in mid-range devices among local brands. For Samsung and Apple, success hinges on balancing global AI frameworks with China-specific adaptations – a challenge compounded by stringent data regulations and fierce local competition.

Samsung's Galaxy S25 series focuses on AI

Samsung's newly launched Galaxy S25 series positions AI as its core spotlight. The flagship line integrates upgraded Galaxy AI capabilities, transforming its AI bot Bixby into a personal "partner."

With upgraded AI, Galaxy users can drag images or documents into Bixby's interface, enabling tasks like visual analysis, document summaries and creative content generation through a blend of visual-language models, seamless AI translation during calls and context comprehension.

Different from third-party AI chatbot apps like the popular DeepSeek and Kimi in China, the built-in Galaxy services embed AI into photography, communications and security, saving steps for copy-pasting and opening installed apps. It's a boon for elderly people who aren't tech savvy, and it saves time and complicated controls for all users.

For example, Samsung's new Galaxy S25 models support automatic image quality improvement for video shooting in poor-light conditions and intelligently chooses different soundtracks for videos, Shanghai Daily learned through on-site demos.

Samsung's Galaxy S25 models have a starting price of 5,999 yuan (US$821), with a top line product cost of 13,199 yuan.

Apple's alliance with Alibaba

Meanwhile, Apple is forging a critical partnership with Alibaba to localize its AI ecosystem, media reports said on Tuesday. But both Apple and Alibaba declined to comment on the reports.

Before choosing Alibaba's multimodal AI, which is renowned for outperforming global rivals like GPT-4o, to power its China-specific Apple Intelligence, Apple held talks with major Chinese tech giants like Alibaba, Baidu, ByteDance, Tencent and the new industry star DeepSeek, business website The Information reported.

Apple, which has launched Apple Intelligence in the US market to offer integrated ChatGPT services, is expected to launch localized AI services in China around April. But it still needs to negotiate details and obtain regulatory approval.

This collaboration with Alibaba underscores Apple's urgency to reverse its two-year sales decline in China, where Huawei, Vivo and Xiaomi have captured market share with aggressive AI integration.

Analysts noted that Apple's delayed AI rollout has left it vulnerable to domestic rivals.

Apple saw its market share and shipments shrink in 2024 due to increased competition in the market and "uncertainty around the launch of Apple Intelligence in China," research firm IDC said in a recent note.

Consumers are watching the battle of the giants. A Shanghai-based iPhone 16 user who goes by the name Mio said she is not satisfied with any domestic AI services at present and may not choose next-generation iPhone.

Affordable AI as the new battleground

The AI race highlights a broader industry trend, especially amid the emergence of low-cost, open-source tools like DeepSeek. China's unique market demands are driving this shift.

Local brands like Huawei and Vivo have set high benchmarks by embedding generative AI across price segments, pressuring foreign players to adopt deeper, culturally attuned integration.

For Samsung and Apple, success hinges on balancing global AI frameworks with China-specific adaptations. It's a challenge compounded by stringent data regulations and fierce local competition, industry experts said.

Meanwhile, domestic companies like Huawei and Oppo have recently announced plans to integrate DeepSeek into new products and operating systems.

As competition intensifies, manufacturers are focusing on delivering innovative features, affordable pricing and customized user experiences to attract a wider audience. The mid-range segment – in particular phones costing between 2,000 and 6,000 yuan – is expected to drive growth in coming years, analysts said.

Stimulus policy is a changing point

Besides AI, another factor influencing the market landscape is China's latest round of government subsidies to stimulate consumer spending and boost the economy.

In January for the first time, China included smartphones in its nationwide "trade-in" subsidies that encourage people to trade in old consumer electronics for newer ones. The initiative, which began in March 2024, was broadened to also include tablets and smartwatches.

Smartphones costing 6,000 yuan or less are eligible for the new subsidy, which is expected to trigger a surge in phone replacements. The subsidies cover most brands, including basic-line and previous-generation iPhones.

After the broadened program rules, the Ministry of Commerce reported receiving subsidy applications for 10.8 million electronic devices over a four-day period starting January 20.

However, most new iPhones and Samsung's Galaxy phones cost more than 6,000 yuan, which means the overseas brands are essentially outside the incentives policy.

As Samsung and Apple escalate their AI investments, the focus will shift to sustainability.

Samsung's plan to monetize Galaxy AI services risks alienating cost-sensitive users, while Apple's reliance on Alibaba's ecosystem raises questions about long-term data governance. Yet, one truth remains clear: In China's cutthroat smartphone arena, AI is no longer a luxury but a necessity to survive.