OpenAI drafts contract breach notice after Apple integration fails to deliver expected revenue
What was once pitched as a landmark alliance between two of the most powerful names in technology is now unraveling — and it may end in court.
Apple and OpenAI, which announced a high-profile partnership in June 2024, are facing a significant breakdown in their relationship. OpenAI lawyers are actively working with an outside legal firm on a range of options, including potentially sending Apple a notice alleging breach of contract. No lawsuit has been filed, and OpenAI still hopes to resolve the situation without litigation — but the preparations are real, and the deliberations are ongoing.
Apple shares felt the pressure Thursday, slipping to a session low and falling as much as 1.2% to $295.38.
A Deal That Never Delivered for OpenAI
The partnership was built on a straightforward premise— weave ChatGPT into Apple‘s software ecosystem, and OpenAI would gain access to hundreds of millions of iPhone users, driving subscriptions and establishing the chatbot as the dominant AI tool on mobile. OpenAI initially believed the deal could generate billions of dollars per year in subscriptions. That has not come close to happening.
The use of OpenAI technology across the operating systems remains limited, and features can be hard to find. The way the integration was structured requires users to specifically invoke ChatGPT by name when issuing a command through Siri — a friction point that has suppressed organic discovery. Responses through the interface also appear in a constrained window with limited information, a far cry from the full ChatGPT experience available through the standalone app.
Customers are overwhelmingly more likely to turn to the standalone ChatGPT app rather than accessing OpenAI’s technology through Siri and other services, based on user studies the AI company conducted. OpenAI also believes the implementation has actively damaged its brand with consumers.
How Apple Fell Short
OpenAI entered the deal expecting more. The company anticipated deeper integration across Apple apps, prominent placement within Siri, and a genuine promotional push across the iPhone, iPad, and Mac ecosystem. Instead, OpenAI’s attempts at renegotiating the deal have stalled.
Apple has had its own concerns about OpenAI, including whether the company does enough to protect user privacy. A separate tension emerged when OpenAI acquired a next-generation devices startup co-founded by former Apple design chief Jony Ive — a move that positioned the AI company as a potential hardware competitor. Apple executives have been fuming for more than a year over the way OpenAI has recruited engineers from its hardware team, with the AI company offering stock-based packages worth millions of dollars more than Apple provides.
Apple’s AI Struggles and the $250 Million Lawsuit
Apple’s position in this dispute is complicated by its own stumbles in artificial intelligence. The company felt pressure to integrate ChatGPT in 2024 precisely because its internal generative AI features were not ready. Earlier this month, the tech giant settled a class action lawsuit for $250 million that alleged it engaged in false advertising about its Siri features — technology marketed to consumers in 2024 that has still yet to fully come to market.
Now, the company is moving to dilute OpenAI’s role entirely. The iPhone maker is opening up its platforms to rival AI providers later this year, with testing underway for integrations with both Claude and Google Gemini. A revamped Siri featuring this expanded capability is expected to debut at Apple Worldwide Developers Conference on June 8 as part of the iOS 27 operating system. The company is paying Google roughly $1 billion annually to use its AI technology.
What Comes Next
Any formal legal move by OpenAI is unlikely before the conclusion of the Elon Musk trial — a separate legal battle the company is currently managing. But the direction is clear. A partnership that was once compared to Apple’s multibillion-dollar search deal with Google in the Safari browser has instead become a source of mutual frustration, legal preparation, and strategic repositioning on both sides.
The window for a quiet resolution is narrowing.
Source: Yahoo Finance