[Insights] Apple’s Quiet Pursuit of AI and the Advantage in AI Subscription Models

According to Bloomberg, Apple is quietly catching up with its competitors in the AI field. Observing Apple’s layout for the AI field, in addition to acquiring AI-related companies to gain relevant technology quickly, Apple is now developing its large language model (LLM).

TrendForce’s insights:

1. Apple’s Low-Profile Approach to AI: Seizing the Next Growth Opportunity

As the smartphone market matures, brands are not only focusing on hardware upgrades, particularly in camera modules, to stimulate device replacements, but they are also observing the emergence of numerous brands keen on introducing new AI functionalities in smartphones. This move is aimed at reigniting the growth potential of smartphones. Some Chinese brands have achieved notable progress in the AI field, especially in large language models.

For instance, Xiaomi introduced its large language model MiLM-6B, ranking tenth in the C-Eval list (a comprehensive evaluation benchmark for Chinese language models developed in collaboration with Tsinghua University, Shanghai Jiao Tong University, and the University of Edinburgh) and topping the list in its category in terms of parameters. Meanwhile, Vivo has launched the large model VivoLM, with its VivoLM-7B model securing the second position on the C-Eval ranking.

As for Apple, while it may appear to be in a mostly observatory role as other Silicon Valley companies like OpenAI release ChatGPT, and Google and Microsoft introduce AI versions of search engines, the reality is that since 2018, Apple has quietly acquired over 20 companies related to AI technology from the market. Apple’s approach is characterized by its extreme discretion, with only a few of these transactions publicly disclosing their final acquisition prices.

On another front, Apple has been discreetly developing its own large language model called Ajax. It commits daily expenditures of millions of dollars for training this model with the aim of making its performance even more robust compared to OpenAI’s ChatGPT 3.5 and Meta’s LLaMA.

2. Apple’s Advantage in Developing a Paid Subscription Model for Large Language Models Compared to Other Brands

Analyzing the current most common usage scenarios for smartphones among general consumers, these typically revolve around activities like taking photos, communication, and information retrieval. While there is potential to enhance user experiences with AI in some functionalities, these usage scenarios currently do not fall under the category of “essential AI features.”

However, if a killer application involving large language models were to emerge on smartphones in the future, Apple is poised to have an exclusive advantage in establishing such a service as a subscription-based model. This advantage is due to recent shifts in Apple’s revenue composition, notably the increasing contribution of “Service” revenue.

In August 2023, Apple CEO Tim Cook highlighted in Apple’s third-quarter financial report that Apple’s subscription services, which include Apple Arcade, Apple Music, iCloud, AppleCare, and others, had achieved record-breaking revenue and amassed over 1 billion paying subscribers.

In other words, compared to other smartphone brands, Apple is better positioned to monetize a large language model service through subscription due to its already substantial base of paying subscription users. Other smartphone brands may find it challenging to gain consumer favor for a paid subscription service involving large language models, as they lack a similarly extensive base of subscription users.

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