To be fair, with the original iPhone they weren't competing. Google did backend web stuff well, so Apple partnered with them and made nice local apps that were fed by Google's cloud data. The same was true for the YouTube app.

After Google saw the iPhone (before the public), they pivoted their vision for Android (it was originally on blackberry-style hardware), and that's when the "thermonuclear war" started. Kind of interesting Steve Jobs would have showed the iPhone off like that, when something very similar happened with Bill Gates, which prompted the development of Windows (according to Jobs).

19 years later, it's probably time to be pragmatic again. If Apple isn't able to deliver on some of these AI integrations into the OS, they risk losing users to Android. If they have to pay someone for a model, they might as well choose the one they think is going to be best for their users. This keeps existing iPhone users on iPhone, and may pull over some Android users looking for the same features, but with better privacy. That seems like a win for Apple. To pay OpenAI instead of Google would just be spite at this point. Maybe well deserved, but the leadership has all changed over in the last two decades, so they'd be fighting old wars. Though I think they should still think twice before showing Google anything that hasn't yet been released.