In large-scale tech partnerships, financial terms can be misleading. For Google, the rumored $1 billion payment from Apple is secondary. The real prize is access to the iPhone's massive data ecosystem, which is invaluable for refining its AI models and core products, thus maintaining market dominance.
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Unlike competitors feeling pressure to build proprietary AI foundation models, Apple can simply partner with providers like Google. This reveals Apple's true moat isn't the model itself but its massive hardware distribution network, giving it leverage to integrate best-in-class AI without the high cost of in-house development.
Despite OpenAI securing an initial Siri integration, Google's long-standing relationship with Apple won the more significant partnership. This shows that for AI model distribution, powerful incumbent relationships can be more decisive than speed, pressuring challengers like OpenAI to build their own hardware and distribution channels.
Currently, Apple receives billions from Google for search traffic. A host predicts this will reverse for LLM queries as inference costs drop and monetization through ads and commerce increases, making each query net profitable and Apple's user base a valuable asset for LLMs.
Currently, Apple pays Google for search defaults. The hosts predict this will reverse for AI. As inference costs drop and monetization (via ads, affiliate fees, transactions) improves, LLM queries will become profitable on average, making access to Apple's users a revenue stream worth paying for.
Apple is avoiding massive capital expenditure on building its own LLMs. By partnering with a leader like Google for the underlying tech (e.g., Gemini for Siri), Apple can focus on its core strength: productizing and integrating technology into a superior user experience, which may be the more profitable long-term play.
In a major strategic move, Apple is white-labeling Google's Gemini model to power the upcoming, revamped Siri. Apple will pay Google for this underlying technology, a tacit admission that its in-house models are not yet competitive. This partnership aims to fix Siri's long-standing performance issues without publicly advertising its reliance on a competitor.
The Apple-Google AI deal isn't a simple API call. Apple is incorporating Gemini models directly, allowing it to adapt them for products like Siri while processing data within its own on-device or "private cloud" infrastructure. This structure is key to upholding its stringent user privacy standards.
While critics say Apple "missed AI," its strategy of partnering with Google for Gemini is a masterstroke. Apple avoids billions in CapEx, sidesteps brand-damaging AI controversies, and maintains control over the lucrative user interface, positioning itself to win the "agent of commerce" war.
Apple's partnership with Google for Siri was less about Google's technological superiority and more a strategic move to avoid empowering OpenAI, which is increasingly becoming a direct competitor in consumer hardware like smart glasses and audio devices. Giving OpenAI access to Apple's ecosystem would train a future rival.
By licensing Google's Gemini for Siri, Apple is strategically avoiding the capital-intensive foundation model war. This allows them to focus resources on their core strength: silicon and on-device AI. The long-term vision is a future where Apple dominates the "edge," interoperating with cloud AIs.
