Apple Sues OpenAI: AI Smartphone Plans in Jeopardy

Apple has filed a federal trade secrets lawsuit against OpenAI, potentially delaying OpenAI's planned AI smartphone. This 41-page complaint alleges that OpenAI and its hardware subsidiary, io Products, systematically stole proprietary information. Apple claims hundreds of its former employees funneled sensitive information to help OpenAI build consumer AI devices. These devices are designed to compete directly with the iPhone. The lawsuit centers on OpenAI's acquisition of io Products, led by former Apple designer Jony Ive, for approximately $6.5 billion. Apple argues this acquisition was a vehicle for unauthorized access to its network and a coordinated effort to transfer proprietary knowledge. Apple had previously sent a cease-and-desist letter to OpenAI in February 2026. Now, Apple seeks to block or force a redesign of OpenAI’s planned hardware releases, including a screenless AI smartphone anticipated for late 2026. This legal action introduces significant litigation risk for the entire AI hardware sector.