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DMA is about competition, not privacy. Apple weren’t requesting a GDPR waiver.
Apple's concern is at the intersection of DMA and privacy. Apple is worried that other parties having the same level of data access that Apple has today would create privacy issues. This is because Apple's current privacy posture is "Trust Apple with your data" rather than "Trust no one with your data - including Apple", but that would be less profitable, but would have prevented the request for an exception because Apple would be on an equal footing with everyone else, if all they could see was client-encrypted data indistinguishable from random bytes.
> Apple is worried that other parties having the same level of access that Apple has today would create privacy issues

But this is solvable. The problem is the work it takes to solve it isn’t worth the hit to time to market. (And possibly even the cost.)

> But this is solvable

That's the crux of my point; Apple could have solved this on day zero if they had a consumer-centered threat-model and/or considered user data to be a liability rather than a hook for service subscriptions.

> The problem is the work it takes to solve it isn’t worth the hit to time to market. (And possibly even the cost.)

I don't consider this to be a problem, but the DMA working as intended and preventing gatekeepers from competing unfairly.

> Apple could have solved this on day zero if they had a consumer-centered threat-model

Consumer-centered threat model is perfectly well served with on-device models and Private Cloud. What isn’t is interoperability.

> the DMA working as intended and preventing gatekeepers from competing unfairly

I agree. And at the end of the day, Apple is following the law. I am sympathetic to their position, however, that this isn’t something worth building and optimizing for at launch. If we wanted to be rose tinted, EU consumers will get a fully-baked product. (EU developers get somewhat screwed, but I suppose their offshore offices could start.)

> This is because Apple's current privacy posture is "Trust Apple with your data" rather than "Trust no one with your data - including Apple"

I think that's uncharitable. Apple prefers not to have the data either, hence the preference for on-device processing.

So Apple doesn't want to compete? Cry me a river.

I could almost feel sympathy if it were something to do with some contract that Apple signed with their AI provider. Who's that, Google?

Ahh, a "competitor"? Yeah... cry me a river.