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But that does have to do with privacy.

Apple wants to implement features that access data locally. It doesn’t want to allow competition for offering those features, but if it did, competitors may use that access to local data to exfiltrate.

So it is about both competition and, as a result of creating competition, privacy.

Thats what Apple wants you to think. In reality it has nothing to do with privacy. Apple could let 3rd parties tap into these APIs but only after the user clicks away a big scary message telling the user they are leaving the comfort of the apple curated garden.

This allows competition, but also allows privacy for those who want it. See? Simple really, but Apple being Apple dont want to let 3rd parties use its AI APIs and so we have this standoff.

Big scary warnings aren’t a solution either. I watch the way my son interacts with consent screens and warnings, and it’s barely believable- the average person is very well trained to click through the warnings.

Someone might believe that people who ignore the warnings deserve everything they get, but I respectfully disagree. I remember helping my grandma uninstall and remove all the hostile browser extensions that had tricked her into installing them. If Apple is protecting vulnerable populations by taking the choice out of the users hands, even if it’s only profit motivated, I’m okay with that until someone presents an alternative that actually addresses those needs.

Apple is using Cloud compute as well to enable Siri AI.

If you want to you could still use Apple or another provider you decide to trust - or even one that does everything locally. The competition would still have to follow GDPR after all.

Apple PCC has been independently audited to be ultra secure.

Will the EU enforce the same for 3rd party integrations?

If Apple had e.g. required competitors to undergo similar independent audits that would probably be allowed as it is quite similar to how Apple solved the third party app store issue.
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This is mostly wrong. The DMA has a process to determine if a service provider acts a gatekeeper to the market, and let's be honest if Apple is not one, then I don't know who else besides Google.. So there is no privacy argument in there except Apple didn't want to design a interface that complies and is safe.