Apple makes a once-unlikely agreement with Sam Altman in order to catch up on AI

Sam Altman, then a 23 year old, took to the stage in 2008 at Apple Inc.’s annual developer’s conference. He gushed over the ability to use Apple Inc.’s App Store to market his software, Loopt, which is a friend-finding service. Altman stated, “We believe this is the new era in mobile and we are thrilled to be a part of it.”

Apple has called the entrepreneur back 16 years after he first approached them. But this time, there’s a new twist. Apple needs him as much as the entrepreneur needs Apple.

Altman is currently the CEO of OpenAI, a leading startup in generative AI. Apple is racing to catch-up in this area and has formed a partnership with OpenAI to integrate ChatGPT’s ChatGPT within the iPhone’s OS.

Apple’s Worldwide Developers Conference will focus on the agreement next week, even though Altman won’t be there. It shows how the power balance in Silicon Valley has changed over the last few years.

OpenAI now has access to hundreds and millions of Apple customers, many of whom may have hesitated to use ChatGPT in the past. Apple gains access to the latest AI technology – a chatbot that has eerily strong abilities – which it can use with its own services.

Apple has developed a number of AI features. Some run on Apple devices, while others require cloud computing. Apple is also infusing AI into its Siri digital assistant. The company’s chatbot, however, is not yet up to par.

Dag Kittlaus is a technology veteran who founded and managed the Siri business prior to its acquisition by Apple. You can bet they’ll be hard at work building their own capabilities here.

Apple’s CEO Tim Cook delivered the WWDC keynote speech on June 10th. It is considered to be its biggest sales pitch for years. It is important that Apple convinces consumers, investors and developers that it can succeed in the AI age. Apple’s business has stagnated, and revenue has declined in five out of the last six quarters.

Terms of the agreement are not clear. Apple, based in Cupertino California, and OpenAI, based in San Francisco, declined to comment.

Apple had an early lead in AI services. Siri was released in 2011, before Amazon.com Inc.’s Alexa or Google Assistant. It fell behind its rivals and was unable to catch up until 2022, when ChatGPT launched.

OpenAI’s chatbot, introduced in November that year, captured the attention of consumers. Tech giants were compelled to create their own AI-based services. Apple’s major competitors have made significant progress since then. Google’s Gemini bot is competing with ChatGPT to be the market leader in this nascent industry. Microsoft Corp., OpenAI’s largest backer, is now integrating its AI-assisted Copilot software. Amazon.com Inc. has shown off an AI-enhanced Alexa.

In contrast, Apple kept its AI ambitions quiet until now. Cook stated last year that Apple would tread cautiously in this new area and only introduce AI technology “on a very thoughtful basis”. He has argued more recently that Apple’s “unique combination” of seamless hardware integration, software, and services will give it an edge in AI.

Apple employees are working hard behind the scenes to deliver on this promise. Small teams in Apple’s AI division and its software engineering division began developing a ChatGPT competitor using Ajax around the time the ChatGPT was launched.

Craig Federighi, the software chief at Apple, urged managers to include as much AI in the new version of the iPhone/iPad operating system (known internally as “Crystal”) as possible. Eddy Cue’s services division began work on a new data center infrastructure to power online AI services. The staff also started investigating how AI might be integrated into Apple Music, the company’s productivity apps and Apple Music.

Apple’s AI proved to be powerful enough to support features such as voice memo transcription and photo editing. It also powered new search functions in Safari and auto-replies in apps such as Messages. It was clear that OpenAI, Google and other companies were ahead of Apple in the chatbots category and on-the fly assistance.

This put Apple in an awkward position. Executives were worried about the reputational damage that could be caused by a chatbot. The company’s technology was not ready. People familiar with the situation said that some people at Apple are averse to a chatbot.

Apple knew that customers would expect it to provide such a service. This led to the deal with OpenAI. The company met with OpenAI, Google and other chatbot suppliers several months ago to discuss integrating their technology into iOS.

Apple is able to distance itself from technology, as well as its inaccuracies or hallucinations. It also links Apple with a startup that has been plagued by turmoil and controversy. Altman, 39, was briefly dismissed last year, for reasons that are still unclear. He also recently attracted the ire from Scarlett Johansson over a sound-alike AI voice.

Apple has reached an agreement first with OpenAI, even though it is still in discussions with Google to use Gemini on its devices. Apple is negotiating deals with third-party chatbots on a case by case basis.

Apple chose OpenAI to be its first AI partner because of a number of reasons, according to one person. Apple chose OpenAI because it offered better terms of business than Google and believes its technology is superior to that of Google. Google AI being integrated into the iPhone could have also given the impression Apple’s main technology rival was beating it in an important new area.

OpenAI will gain massive exposure by being integrated into the best-selling tablets and smartphones in the world. Apple’s involvement could bring more scrutiny to ChatGPT’s privacy and safety concerns. Apple’s plans for integrating the chatbot into its software could also mean that OpenAI will have access to users’ personal information. This could be unsettling to some.

Apple will offer its new AI services as an opt-in option, according to people familiar with this matter. Customers who are hesitant could avoid them easily.

The OpenAI agreement will likely be a temporary measure. Apple has a history of bringing in technology from outside, like when it replaced Intel Corp’s chips with its own.

Apple is also looking beyond chatbots. The people claimed that Apple is looking to use large-scale language models, a key component of generative AI, to power two robotic devices it has been secretly developing.

This includes a tabletop robotic arm that has a large display, similar to an iPad. The company has also been working on developing a mobile robot which can follow the user and do chores for them. It’s also looking to equip AirPods with AI and cameras.

Kittlaus stated that Siri has the chance to live up to its full potential immediately. This could be a vindication for a company founded by Steve Jobs, who conceived the idea of a smart assistant.

Kittlaus stated that “there are no technical limitations to realising Siri’s original vision.” Bloomberg

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