We’re less than a week away from Apple (AAPL). Worldwide Developers Conference (WWDC)It begins June 10 at the company’s headquarters in Cupertino, California. The company is expected to roll out its big generative AI push with new capabilities for the iPhone this year.
These moves should be exciting for investors who have been eagerly awaiting Apple’s development of AI. But don’t expect AI to fuel itself this year, creating a new iPhone sales supercycle. Because when it comes to smartphones, users care more about hardware than software.
“I don’t think it’s going to be the primary reason people buy an iPhone,” explained Thomas Husson, Forrester’s vice president and principal analyst. “It’s more likely to enhance experiences.”
But that doesn’t mean AI won’t power iPhone sales in the coming years. That’s because as phones get older and unable to run AI experiences, users will inevitably need to upgrade.
It’s all about the hardware… first
People generally buy new smartphones for the hardware, not the software.
“The typical consumer is not going to care [about generative AI]” explained Gene Munster, managing partner of Deepwater Asset Management. “They want to know the size of the screen, the no. 1. Second camera, third battery.”
There’s another reason the AI being built into the iPhone isn’t likely to have people lining up outside their local Apple Store: the software is still new.
Many of the consumer offerings out there are still relatively basic. Microsoft’s ( MSFT ) Copilot will soon offer helpful tips on how to fix common PC problems, and Google’s ( GOOG , GOOGL ) Gemini for Workspace makes it easy to draft emails. But on a large scale, there is no AI application that can be developed.
Even Microsoft’s AI-centric CoPilot+ PCs are more interesting thanks to their new Qualcomm ( QCOM ) chips, which rival Apple’s own M3 processors, than their eponymous AI software.
“If you go to Joe and Jane Smith on Main Street in America and say to them, ‘Hey, you can have General AI on your iPhone,’ now they’re like, ‘Great. Now, what do I do with that?’ And that’s the … intersection we’re seeing right now,” explained ITC Research Director Ramon Llamas.
According to Bloomberg reporter Mark GurmanApple will release a new, smarter version of Siri, powered by AI to control apps with your voice, create recordings, new photo editing tools and improved notifications.
Of course, making Siri useful would be a big step in the right direction, but it will be interesting to see how often people use the voice assistant. After all, when was the last time you asked Siri to do anything other than set a cooking timer or find out the weather for the next day?
Transcription and photo-editing tools are also helpful, but Google and Samsung already offer those features on their own phones, and they haven’t boosted sales. Also, Apple will offer its own choice of transcription and photo applications.
More importantly, we’ll have to wait to see how iPhone developers use generative AI technologies to improve their own third-party apps. Think about it. You probably spend most of your time on your iPhone using third-party apps like WhatsApp, TikTok or Gmail. The same is true of AI-powered apps that are in the works, but it takes time for developers to get them up and running.
Sales will come
While the AI that can be created won’t start a sales boom this year, it could encourage consumers to get new iPhones in the coming years. That’s because AI features that can be developed will require some of Apple’s latest chips, and users with older phones won’t be able to use those functions or they’ll run slower. People don’t want to buy a new phone because the apps are slow.
“Like your phone, it’s going to take six months, a year, two, three years for people to understand that pre-AI hardware doesn’t work,” Munster said. “The battery doesn’t last because it puts too much weight on the CPU or the AI chip … things like that. I think this iPhone AI upgrade cycle is like a two- or three-year cycle.
That’s not to say Apple won’t see a sales bump in September when it releases its next iPhone. The smartphone market, in general, is starting to bounce back after a two-year slump. According to IDC, global smartphone sales will improve by 4% annually through 2024. However, most of that will come from Android sales, although iPhone shipments will improve by 0.7%. Not a staggering number, but an increase, nonetheless.
As for the sales boost, it’s more likely to trickle down as Apple fine-tunes the AI features it builds and developers remove more AI-powered apps that tax older iPhones. As for Supercycle, that will have to wait.
Email Daniel Hawley at [email protected]. Follow him on Twitter @Daniel Hawley.
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