Vidostream | News, sport and opinion from the Vidostream's US Edition

https://vidostream.com

AI May Not Be What Sells Apple’s Next iPhone

Apple is expected to make AI the heart of the next iPhone, but pent-up demand following three weak years may be a bigger factor helping sales this time.

The iPhone 12 family that Apple CEO Tim Cook introduced in October 2020 sparked the smartphone’s last strong selling cycle. PHOTO: BROOKS KRAFT/APPLE/REUTERS

The iPhone 12 family that Apple CEO Tim Cook introduced in October 2020 sparked the smartphone’s last strong selling cycle. PHOTO: BROOKS KRAFT/APPLE/REUTERS

Apple has yet to even detail the software powering its next generation of iPhones, but Wall Street is already expecting them to sell big. That isn’t as crazy as it sounds. 

At the kickoff of its Worldwide Developers Conference on Monday, Apple is expected to share the enhancements going into its next mobile operating system, as well as its plans for generative artificial intelligence. The former is in keeping with the longstanding purpose of the event for the company. The latter is now a necessity for the only tech firm commanding a trillion-dollar-plus market capitalization that hasn’t yet outlined a generative AI strategy

Apple typically doesn’t use its WWDC conference to detail coming iPhone models. But AI is already expected to play a major role in the family of devices coming this fall—presumably under the iPhone 16 moniker. Analysts widely expect the new phones to come with on-device AI, which refers to the capability of processing AI algorithms on the phone’s hardware. Siri, Apple’s 12-year-old digital assistant, is also expected to get a major AI upgrade. “We expect Apple to introduce its broadest, and most important, AI-enabled software overhaul at WWDC 2024,” Morgan Stanley analyst Erik Woodring wrote in a report this week. 

The big question is whether an AI-enabled iPhone will spark a big jump in sales. Major upgrades such as bigger screens and 5G capabilities have correlated with strong iPhone cycles in the past, and hopes are already riding high for the coming devices. In a report last week, BofA analyst Wamsi Mohan said “Inteliphones” will drive a “multi-year upgrade cycle” for Apple. Ben Reitzes of Melius Research noted past iPhone “supercycles” and predicted in a May 20 note that “there could be another one coming that can last awhile.” 

Analysts’ consensus compiled by Visible Alpha calls for the new iPhones coming this fall to spark a 9% jump in unit sales to 242 million in the fiscal year ending September 2025. That would be a big help to what is still Apple’s most dominant business. The iPhone has accounted for more than half the company’s revenue for the past 12 fiscal years. 

But it is also a mature business in an industry where consumers are holding on to their phones for longer periods. That is due in part to rising price tags that are now well above $1,000 in many cases. Analysts expect iPhone unit sales to notch their second consecutive decline in the current fiscal year ending in September. That would be the first time that has happened in Apple’s history, according to Visible Alpha estimates and data from Apple, which stopped reporting unit sales of its devices in 2018.

But the extended sales slump means Apple might be primed for a good iPhone cycle anyway—particularly since a large number of users are now on the iPhone 12, which came out in the fall of 2020. Apple’s first 5G iPhone proved to be a big seller, thanks in large part to heavy promotions from wireless carriers. The iPhone 12 lineup accounted for 73% of iPhone unit sales in fiscal 2021, according to Visible Alpha. Its predecessor, the iPhone 11, accounted for just 63% of iPhone sales the previous year.

A large base of users on a four-year-old device will make it much easier for Apple to sell its first AI iPhone, even if the use cases look incremental. Consumer interest in AI phones is still a bit unclear. Samsung managed to sell about 13 million units of its first AI phone following its launch in the first quarter, according to estimates from IDC. But that didn’t fully offset the weakness in the rest of the company’s portfolio; Samsung’s total smartphone shipments in the quarter declined slightly on a year-over-year basis, per IDC’s data. 

Apple’s smarter iPhone will need to do better. 

Author: Editors Desk, Dan Gallagher

Source: WSJ:

We are using cookies to give you the best experience on our website. By continuing to browse, you are agreeing to our Cookie Policy.
You did not use the site, Click here to remain logged. Timeout: 60 second