Apple and OpenAI inked a partnership in 2024 to integrate ChatGPT into Siri as part of iOS 18. The collaboration was widely seen as a major step for both companies, bringing generative AI capabilities directly to millions of iPhone users. However, a new report indicates that OpenAI is now deeply dissatisfied with how the partnership has unfolded and is considering taking legal action against Apple.
According to sources familiar with the matter, OpenAI’s legal team has been working with an outside firm to explore a range of options, including sending Apple a formal notice alleging breach of contract. Such a notice could serve as a prelude to a full lawsuit, though OpenAI reportedly hopes to resolve its grievances outside court. The report paints a picture of a partnership that started with high hopes but soured as expectations clashed with reality.
The terms of the deal
Under the agreement, ChatGPT was woven into Apple’s software ecosystem in several ways. It served as a fallback for Siri when handling world-knowledge queries, appeared in Image Playgrounds for image generation, and powered Visual Intelligence features. Apple did not pay OpenAI directly for using its technology. Instead, the financial model relied on in-app subscriptions for ChatGPT Plus, with Apple taking a customary cut typically around 15% to 30% for such purchases made through the App Store.
OpenAI believed this arrangement would funnel millions of paying customers to its subscription service, generating billions of dollars annually. The company anticipated deep integration across more Apple apps and prime placement within Siri to drive adoption. However, OpenAI executives now claim that Apple has not lived up to the deal. One unnamed executive told the report that Apple has “not made an honest effort” and that OpenAI has “done everything from a product perspective” while Apple failed to deliver on its promises.
Subscription revenue disappoints
A central point of contention is the underwhelming subscription revenue generated through the partnership. OpenAI had projected that sign-ups via the Settings app on iPhone could bring in massive recurring income. Yet the actual numbers have fallen far short of those ambitious targets. “When we heard about this opportunity, it sounded amazing: being able to acquire a giant number of customers and have distribution in such a big mobile ecosystem,” the executive said. But Apple was unwilling to share exactly what the product would be, telling OpenAI to “take a leap of faith and trust us.” That leap, according to the executive, ended up being a failure for the startup.
The deal’s structure meant that Apple’s interests were not perfectly aligned with OpenAI’s. While OpenAI needed to convert free users to premium subscribers, Apple’s primary motivation was to enhance Siri’s capabilities without additional cost. Without a direct payment from Apple, OpenAI bore the risk of integration costs without guaranteed returns. The lack of prominent placement and aggressive promotion within iOS may have limited the visibility of ChatGPT subscriptions. Users could encounter ChatGPT through Siri’s fallback or in specific apps, but the experience was not deeply embedded in the daily iPhone workflow, leading to lower conversion rates than expected.
Legal options on the table
OpenAI’s legal strategy appears to be a measured escalation. The company is preparing a breach-of-contract notice that would formally accuse Apple of failing to fulfill its obligations under the partnership agreement. Such a notice often precedes litigation and can press the other party to renegotiate or improve compliance. The report notes that “no final decisions have been made,” and OpenAI still prefers an out-of-court resolution. However, the threat of legal action signals deep frustration within the AI company’s ranks.
If the case were to proceed to court, it could hinge on the specific language of the contract regarding integration depth, marketing support, and revenue-sharing expectations. Legal experts suggest that proving breach might be challenging if the contract contained vague or open-ended terms. But OpenAI could argue that Apple’s actions—or inaction—failed to meet the implied covenant of good faith and fair dealing. The situation is complicated by the absence of upfront payments, which may have left Apple with fewer contractual obligations to rigorously promote ChatGPT subscriptions.
Apple’s shift to multi-model AI
Adding to OpenAI’s displeasure is Apple’s anticipated pivot toward supporting multiple AI models. At the upcoming Worldwide Developers Conference (WWDC), Apple is expected to announce a next-generation Siri powered by Google Gemini. Furthermore, iOS 27 will reportedly allow users to integrate with other AI models, including Anthropic’s Claude. This move could dilute the value of OpenAI’s exclusive integration by offering users alternatives directly within the operating system.
According to insiders, the decision to open up iPhone to other AI models is not the primary driver of OpenAI’s legal action, because the partnership was never meant to be exclusive from the start. However, it adds another layer of competitive pressure. OpenAI had hoped its integration would be the default AI across Apple’s ecosystem, but with multiple models competing for the same space, user adoption of ChatGPT could further fragment. The executive remarked, “Apple has so much market power that they can dictate terms. We already took this leap of faith with you, and it didn’t work out well.”
OpenAI’s hardware ambitions
In parallel, OpenAI is developing its own hardware products, a move that has strained its relationship with Apple. The AI company has poached numerous Apple engineers to work on these devices, and the effort is being led by none other than former Apple design chief Jony Ive. Apple executives have reportedly been “fuming for more than a year” over OpenAI’s recruiting tactics. The hardware project, which remains shrouded in secrecy, is believed to be an attempt by OpenAI to reduce its dependence on platforms like the iPhone and create a dedicated device optimized for AI interactions.
This recruitment rivalry underscores the growing tension between the two companies. While they currently have a business partnership, they are also becoming direct competitors in the hardware space. OpenAI’s hardware could eventually challenge Apple’s dominance in consumer devices, especially if it integrates ChatGPT in a deeply native way. The involvement of Jony Ive, who was instrumental in defining Apple’s modern design language, adds a layer of poetic irony to the conflict. Ive left Apple in 2019 and has since been working on various projects, including collaborating with OpenAI on a device that could revolutionize human-computer interaction.
Background of the partnership
The original deal between Apple and OpenAI was announced with great fanfare at WWDC 2024. It was seen as a validation of OpenAI’s technology and a smart move for Apple to instantly bolster Siri’s intelligence without building a full generative AI stack from scratch. At the time, Apple was under pressure to catch up with competitors like Google, Microsoft, and Samsung, all of whom had already integrated large language models into their products. The partnership allowed Apple to launch ChatGPT integration within months, while internally developing its own AI foundation models.
OpenAI, for its part, gained immediate distribution to over a billion active Apple devices. The company had already achieved mainstream attention with the launch of ChatGPT in late 2022, but smartphone integration was seen as the key to converting casual users into paying subscribers. The deal with Apple was a major milestone, but the reality of implementation appears to have fallen short of the hype.
From a technical perspective, the integration was seamless. When Siri encountered a query it couldn’t handle, it would prompt the user to ask ChatGPT. This fallback approach, however, may have limited the number of interactions. Many users might not even realize ChatGPT was available, or they might dismiss the prompt out of habit or privacy concerns. Additionally, the integration required users to enable ChatGPT through settings, adding friction to adoption.
Industry implications
The potential legal battle between OpenAI and Apple could have far-reaching consequences for the tech industry. It highlights the challenges of partnerships between giant platforms and AI startups, where power imbalances and misaligned incentives can lead to conflict. If OpenAI proceeds with a breach-of-contract claim, it could set a precedent for how AI companies negotiate with platform holders. Other AI firms, such as Anthropic and Google, may be watching closely as they consider similar integrations with Apple or other smartphone makers.
Moreover, the dispute underscores the volatile nature of the AI race. Companies are racing to secure distribution and user data to improve their models, but the terms of these arrangements are often opaque and experimental. The OpenAI-Apple deal, though high-profile, may serve as a cautionary tale for future collaborations. It also raises questions about whether hardware makers should pay for AI capabilities directly, rather than relying solely on subscription cuts. Apple has traditionally taken a cut of digital goods and services sold through its store, but that model may be ill-suited to the fast-evolving AI landscape.
As Apple prepares to announce its own AI advancements and partnerships at WWDC, the timing of this report is notable. It suggests that tensions have been simmering for months and could come to a head during one of Apple’s biggest events. OpenAI may be applying public pressure to gain leverage in private negotiations. Meanwhile, Apple is unlikely to want a high-profile legal fight that could distract from its AI strategy and damage its relationship with the developer community.
The hardware competition adds another dimension. If OpenAI can bring a compelling AI-first device to market, it could reduce its dependency on Apple’s ecosystem. However, building a successful hardware product is extremely difficult, even with talent like Jony Ive. The market is dominated by Apple, Samsung, and Google, and consumers may be reluctant to adopt a new device that doesn’t integrate seamlessly with their existing digital lives. OpenAI’s hardware efforts are still in early stages, and any legal fight with Apple could complicate recruitment and supply chain relationships.
For now, the ball is in Apple’s court. The company could choose to address OpenAI’s concerns by improving the visibility and depth of the ChatGPT integration, perhaps by making it the default AI assistant for certain tasks or increasing marketing of the subscription option. Alternatively, Apple could double down on its multi-model approach, betting that user choice will ultimately benefit its platform more than any single exclusive deal. Either way, the outcome of this dispute will be closely watched by the entire tech industry.
Source: 9to5Mac News