Updated on August 11th with details on the new iPhone 16 design and Apple's financial guidance.
Tim Cook poses for a selfie at the opening of the new Apple Store in Mumbai, India. Photo: … (+) Indranil Aditya/Bloomberg
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When Tim Cook and his team launch the iPhone 16 and iPhone 16 Pro smartphones next month, Apple will finally offer its loyal fans its latest suite of AI tools. But will Apple's decision to rely on Apple Intelligence pay off?
In Apple's most recent quarterly earnings call, the company noted that iPhone sales have been a declining percentage of the company's total revenue over the past four years, with third-quarter revenue forecasts dropping from $39.67 billion in 2023 to $39.3 billion in 2024.
One topic Cook emphasized on the call: generative AI. The oddly named Apple Intelligence technology was unveiled at the Worldwide Developers Conference in June, and the first implementations are now available in iOS developer betas ahead of its public release with the iPhone 16 and iPhone 16 Pro in September.
Apart from last year's iPhone 15 Pro and 15 Pro Max, iPhone users who want to experience AI smartphones and remain within Apple's ecosystem will have to buy a new iPhone due to the high specifications required to run the software. Apple must be assuming that the iPhone 16 family will unleash the demand for AI and sales will soar.
But Apple's decisions regarding AI implementation and pressing needs may not be enough to pull the iPhone 16 out of its slump.
Apple's iPhone 15 smartphone at the Grand Central store in New York. Photo by Gina Moon/Bloomberg
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Update: Sunday, August 11: Power On newsletter writer Mark Gurman writes about the four upcoming iPhone smartphones and why Apple isn't as optimistic about their sales potential as some hope.
Naming them iPhone 16, iPhone 16 Plus, iPhone 16 Pro, and iPhone 16 Pro Max, Gurman noted the hardware design and how little has changed compared to previous iPhone models in terms of style and relative features. There are no major changes from 2020's iPhone 12, and the offerings remain the same. For those who have an iPhone 11 or earlier model and perhaps feel the need to upgrade, the iPhone 16 family is a solid choice, but there's nothing special about it for recent owners.
Cook has sounded bullish about the potential for Apple's AI-generated systems to boost sales, but Apple's latest financial guidance said nothing about the expected increase in iPhone sales in the fourth quarter of this year. Nice words, but no indication that we can trust them.
Customers test the iPhone 14 Pro Max (Photo by Stanislav Kogiku/SOPA Images/LightRocket via Getty Images)
SOPA Images/LightRocket via Getty Images
Let's not forget that Apple is late to the generative AI party. Two weeks after the iPhone 15 family was launched, Google unveiled the Pixel 8 and Pixel 8 Pro. These were the first AI smartphones to be launched, and Google's selection of AI tools became a baseline level of expectation. With Samsung quickly following suit thanks to Galaxy AI, and Qualcomm's move to include AI in Snapdragon specifications and other manufacturers adopting its AI vision, Google has successfully defined its generative AI approach for smartphones in 2024.
Next week, Google will unveil its Pixel 9 family and its next-generation AI tools, just a month before the launch of the iPhone 16. When Apple Intelligence finally arrives, Apple's iOS will be two major versions behind the Android OS.
Apple Intelligence also won't be coming to the iPhone 16; it'll be included in an iOS update in October 2024. When it does arrive, it will be limited in its features: Apple won't release the full set of tools to consumers until Q1 2025 at the earliest. Not only will Google have a lead thanks to the Pixel 9's nearly six-month lead, but Samsung's Galaxy AI will also be getting annual upgrades alongside the Galaxy S25 family.
The Galaxy S24 Ultra was shown off at Galaxy Unpacked in London, UK on January 17, 2024.
Ewan Spence
Competitors will be years ahead of Apple, Apple Intelligence will be heavily limited at launch, and those craving AI will have already migrated to more capable platforms.
iPhone sales aren't likely to plummet, but Apple doesn't want to maintain the same sales figures as the past few years. Tim Cook has been unusually vocal about AI being a “super capability” that will unlock pent-up demand and boost sales… assuming Apple can overcome the hurdles it has imposed on itself on the road to success.
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