by We’re less than a week away from Apple’s (AAPL) Worldwide Developers Conference (WWDC), which kicks off on June 10 at the company’s headquarters in Cupertino, California. Capabilities for the iPhone.
These moves are likely to energize investors who have been anxiously awaiting Apple’s foray into next generation AI. But don’t expect self-generation AI to drive a massive iPhone sales cycle this year. That’s because when it comes to smartphones, users care more about hardware than software.
“I don’t think this is the main reason people buy an iPhone,” explained Thomas Husson, vice president and principal analyst at Forrester. “It’s more likely to add to experiences.”
But that doesn’t mean AI won’t power iPhone sales in the years to come. That’s because as phones age and become unable to run AI-genuine experiences, users will inevitably need to upgrade.
It’s all about the hardware… first
People usually buy new smartphones for the hardware, not the software.
“The typical consumer won’t care [about generative AI],” explained Deepwater Asset Management managing partner Gene Munster. “They want to know the size of the screen, No. 1. The second is the camera, the third is the battery.”
There’s another reason AI generation on the iPhone isn’t likely to get people on the line outside their local Apple Store: The software is still too new.
Many of the consumer offerings out there are still fairly basic. Microsoft’s (MSFT) Copilot will soon provide helpful tips on how to fix common PC issues, while Google’s (GOOG, GOOGL) Gemini for Workspace makes drafting emails easier. But for the most part, there is no must-have AI generation app.
Even Microsoft’s AI-centric Copilot+ PCs are more interesting for their new Qualcomm (QCOM) chips, which are meant to rival Apple’s own M3 processors, than for the AI software they’re named after.
“If you go to Joe and Jane Smith on Main Street, USA, and you say to them, ‘Hey, you can have Gen AI in your iPhone,’ now they’re going to say, ‘Great. Now, what do I do with it?’ And that’s the intersection … we have right now,” explained IDC research director Ramon Llamas.
According to Bloomberg reporter Mark Gurman, Apple will roll out a new, smarter version of Siri that will let you control apps with your voice and transcribe recordings, new photo editing tools, and improved notifications all powered by generational AI.
Certainly, it would be useful to make Siri a big step in the right direction, although 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 the cooking timer or find out the weather for the next day?
Transcription and photo editing tools would also be helpful, but Google and Samsung already offer those features in their own phones, and they don’t seem to be driving sales. And Apple will likely offer its own version of transcription and photo apps as well.
More importantly, we’ll have to wait to see how iPhone developers use AI generation 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 will be true for AI-powered generation apps, but it will take time for developers to get them up and running.
Sales will come
While next generation AI may not kick off a sales bonanza this year, it will allow consumers to take advantage of new iPhones for years to come. That’s because the AI generation features will require some of Apple’s latest chips, and users with older phones won’t be able to use those functions or will run slowly. And nothing makes people want to buy a new phone more than when apps are slow.
“It’s going to take six months, a year, two, three years, for people to start realizing that the hardware that pre-genre AI isn’t performing as well as your phone,” Munster said. “The battery won’t last, because it’s going to put more 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 that Apple might not see a sales bump in September when it releases its next iPhone. The smartphone market, in general, is starting to turn around after a two-year slog. According to IDC, global smartphone sales should improve 4% year-on-year in 2024. Most of that, however, will come from Android sales, although iPhone shipments should improve by around 0.7%. Not exactly a huge number, but an increase, nonetheless.
As for the sales increase, that will likely come further down the line as Apple fine-tunes its AI generation features and developers ditch more AI-powered generation apps that criticize older iPhones. As for the supercycle, it will have to wait.
Email Daniel Howley at dowley@yahoofinance.com. Follow him on Twitter at @Daniel Howley.
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