Apple has suffered from a slump in iPhone sales in China and last year ceded its status as the country's best-selling smartphone brand to two local rivals.

Reports of a tie-up between Alibaba and Apple sent the Chinese firm's share price soaring this week, and chairman Joseph Tsai confirmed Thursday that the California-based company would "use our AI to power their phones".

"Inside China, because of regulatory issues and things like that, (Apple) need to work with Chinese companies that develop AI," Tsai said at the World Governments Summit in Dubai.

"Apple has been very selective. They talked to a number of companies in China and in the end, they choose to do business with us," he said.

"We're very fortunate and... feel extremely honoured to be able to do business with a great company like Apple."

Alibaba's stock rose more than nine percent in Hong Kong on Thursday but lost much of its gains after Tsai's remarks.

Apple claimed 15 percent of the Chinese smartphone market last year, behind Vivo's 17 percent and Huawei's 16 percent, according to a report by industry data provider Canalys.

Two other domestic brands, Oppo and Honor, also logged market shares of 15 percent, the data showed.

China aims to become a global AI leader by the end of the decade and several Chinese companies are already making waves in the sector.

Chinese firm DeepSeek made headlines last month when it unveiled an AI chatbot that can match its American competitors apparently at a fraction of the cost.

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