"Use ChatGPT for Free" The Strategy Behind Apple-OpenAI's Joint Venture [AI Bite News]

Apple Protecting Its Superiority
OpenAI Aiming for Unrivaled Newcomer Status
Collaboration Evaluations Likely to Vary
According to Device Landscape

The big news this week was undoubtedly Apple's 'Annual Worldwide Developers Conference (WWDC) 2024.' What drew attention was not Apple's artificial intelligence (AI) technology, but its strategy. It is true that Apple, an icon of innovation during this AI upheaval, has been unusually quiet. The collaboration with OpenAI clearly demonstrated Apple's positioning. It is fascinating that OpenAI, which appeared like a comet in the IT industry, and Apple, a latecomer to AI, have joined forces. What kind of vision do they share on this journey?

[Image source=AFP Yonhap News]

Let's start with Apple. Apple does not seem to intend to compete with AI models. It is not aiming for Artificial General Intelligence (AGI), which major big tech companies are pursuing. In fact, Apple is a company that moves only when the expected return on investment is clear.

Apple's AI system, 'Apple Intelligence,' illustrates this. Apple Intelligence is equipped with a large language model (LLM) developed in-house. However, it has only 3 billion parameters, which determine AI performance. The larger the number of parameters, the better the performance, so compared to OpenAI's GPT-4, estimated to have 1 trillion parameters, the difference is significant. Even the older GPT-3 model, whose parameters were disclosed, has 175 billion parameters.

Using a smaller model means Apple considers AI as a 'tool' to make its devices more convenient. Even open-source models with hundreds of billions of parameters are readily available, so it is clear Apple chose not to increase the size. Apple explained, "The model embedded in Intelligence is fine-tuned for user experience, such as text creation and refinement, conversation, and fun image generation." Given that competitor Samsung Electronics has already released an AI phone, Apple also needs AI to retain users.

If AI is a tool, Apple has positioned itself as the gateway to AI services. The medium for using AI services is devices such as PCs and mobiles. For AI services to reach more users, they must be integrated into devices. Among these, Apple has installed 2.2 billion devices worldwide, including iPhones, iPads, and Macs. In other words, Apple intends to maintain its 'superior' position as the gateway to 2.2 billion devices reaching users worldwide in the AI era. This is why Apple stated that it will adopt other AI models in the future and that OpenAI is just one of several partners.

Ultimately, Apple will likely generate more revenue. Equipping new iPhones with AI will stimulate more replacement demand and allow for higher prices. Additionally, Apple might impose a kind of gateway toll on AI models, similar to application fees. Perhaps for this reason, Apple's stock price reached an all-time high, making it the number one in market capitalization.

So, what is OpenAI aiming for? There have been foreign media reports that OpenAI provides ChatGPT to Apple for free. It seems they see value beyond monetary gain.

First, as mentioned earlier, they can rapidly expand users centered on Apple customers. In a situation where services similar to ChatGPT are flooding the market, they have secured a strong ally. Especially, they can strengthen their position to be on par with Google, which collaborates with Samsung phones. Even if Apple users currently use ChatGPT for free, they might switch to paid accounts in the future. Although ChatGPT incurs expensive cloud costs, giving it away for free now could lead to new revenue opportunities later. Riding on the giant Apple’s back also helps reduce the influence of their biggest sponsor, Microsoft (MS).

However, one question remains. While PCs and mobiles are currently the gateways to AI, will that remain true in the future? It took about 20 years for the center of gravity to shift from PCs to mobiles, and the mobile era is also approaching 20 years. Various form factors such as automobiles, home appliances, and robots are adopting AI and vying for dominance. Completely new devices like the portable AI assistant 'Rabbit' might emerge. If AI disrupts the device ecosystem in the future, how will the collaboration between Apple and OpenAI be evaluated?