Baidu and Apple join hands

Author: Huang Yu

Editor: Zhou Zhiyu

Is Baidu also going to be a part of the "Fruit Chain"?

On March 25th, there was news that Apple's products released in China this year, such as iPhone 16, will be equipped with AI functions provided by Baidu. Apple is expected to charge through API interfaces.

In response to this, Wall Street News reached out to Baidu for confirmation, but as of the time of publication, no response has been received. However, an internal source from Baidu confirmed that Apple has indeed been in talks with Baidu recently.

An analyst from Nomura Securities stated that for Baidu, if they can successfully cooperate with Apple this time, it will be a perfect brand promotion activity for Baidu and its generative AI product Wenxin Yiyuan.

The reason Apple is incorporating domestic large-scale AI functions into Chinese iPhones and other devices is mainly due to compliance requirements. In addition to Apple, Chinese versions of Samsung, Honor, and others have also partnered with Baidu to integrate or develop applications based on the Wenxin large-scale AI model.

Wang Peng, a deputy researcher at the Beijing Academy of Social Sciences, told Wall Street News that in China, the requirements for data security and privacy protection are becoming increasingly stringent, especially when it comes to personal data and cross-border data transfers. By partnering with local Chinese companies like Baidu, Apple can better comply with relevant regulations and reduce compliance risks.

Since the second half of last year, major smartphone brands have been actively promoting generative AI, embedding AI large-scale models in their mobile systems. As a global tech giant, Apple not only lags behind other tech giants like Google, Microsoft, Meta, and Amazon in generative AI, but also trails behind its smartphone competitors.

Facing external doubts, Apple CEO Tim Cook emphasized during his recent visit to Shanghai, "Apple's generative AI will have news announced later this year."

Unlike domestic smartphone brands like Huawei and Vivo that independently develop AI large-scale models, Apple has chosen a faster route to catch up by partnering with established AI large-scale companies.

Choosing to collaborate with Baidu in China is because Baidu is relatively mature in commercializing AI at the moment.

An industry insider told Wall Street News that in the fierce competition of large-scale AI models in China, Baidu has entered the top tier due to its outstanding large-scale model capabilities and clear commercialization path.

An analyst from CITIC Securities also stated that from the perspective of AI technology system, Baidu is one of the few companies in China that has independently developed a full-stack layout in the field of AI, with self-research investments in chip layer, framework layer, model layer, and application layer, forming a certain industrial ecosystem and influence.

Over the past year, Baidu has been comprehensively promoting the AI-native restructuring of its products and services, launching AI-native applications such as Baidu New Search, Baidu New Library, and Wenxin Yiyuan App In 2023, the usage of Wenxin Yiyuan and the API calls of Wenxin's large model have maintained rapid growth. Public data shows that as of the end of December last year, the user base of Wenxin Yiyuan has exceeded 100 million.

More and more enterprises and developers are choosing to use Wenxin's large model to develop their own AI native applications, and the daily usage of Wenxin's large model continues to rise.

Recently, at Baidu's performance meeting, Baidu's founder, chairman, and CEO Robin Li revealed that the daily usage of Wenxin's large model has exceeded 50 million times, with a quarterly growth of 190%; in December last year, about 26,000 companies used Wenxin's large model, with a quarterly growth of 150%.

The high usage of Wenxin's large model has brought additional revenue to Baidu. Baidu's financial report shows that Baidu Intelligent Cloud's total revenue in the fourth quarter was 8.4 billion yuan, with the large model contributing approximately 660 million yuan in incremental revenue to the cloud business.

Robin Li predicts that by 2024, this incremental revenue is expected to reach tens of billions of yuan, mainly from the sales of advertising business and AI cloud services.

If the cooperation with Apple can be successfully achieved this time, it will undoubtedly help Baidu take a big step forward in the commercialization of AI large models.

Baidu is indeed ahead in the commercialization of AI large models and is becoming a new engine for Baidu's performance growth, but it is not enough.

Firstly, in terms of capabilities, there is still a certain gap between Wenxin's large model and the world's leading AI large models; secondly, Baidu has not yet developed consumer-facing phenomenal AI applications, which is the key to achieving scalable profitability in the future.

Lastly, and most crucially, the research and development of AI large models and AI applications heavily rely on resources and strong funding. In 2023, Baidu's R&D expenses reached 24.2 billion yuan, accounting for 18% of total revenue. If the high investment continues without further progress in commercialization, it will undoubtedly test investors' patience.

The speed of iteration of AI large models is getting faster, and there have been many applications that have caused a stir in the industry, from the early Sora to the recent domestic Kimi. Facing fierce competition and massive investments, Baidu needs to go all out