Apple’s new AI strategy might play an important role in its upgrade of iPhone. Apple, used its annual developer conference today as a platform to announce Apple Intelligence. This Apple strategy is decidedly non-generative nomenclature for a suite of new AI features that, like other generative AI tools, are trained on massive datasets.
Apple’s (AAPL.O) developer conference on Monday was about more than infusing its software with the latest artificial intelligence technology, including from ChatGPT.
Apple’s AI strategy
Apple AI introduction strategy was also about selling more iPhones. Facing choppy consumer spending and resurgent tech rivals, Apple has looked to AI as a way to invigorate its loyal fan base. Apple also wants to reverse a sales decline for its biggest-selling product, iPhone.
As per analysts, the software, which requires at least an Apple iPhone 15 Pro or Pro Max to operate and upgrade, may encourage a cascade of new purchases. Some predicted the biggest upgrade cycle would be in autumn since Apple’s release of the iPhone 12 in 2020.
“What we saw today was more compelling than anything we’ve seen since,” analyst Gil Luria of D.A. Davidson said.
iPhone’s AI features
The company showcased what it called Apple Intelligence, its take on generative AI that can conjure text, images and other content on command.
Apple demonstrated how its AI could generate custom emojis, a cartoon to text friends or edits making an email sound more professional. Its digital aide Siri could prompt users if they wanted ChatGPT’s help too.
Some analysts voiced skepticism, predicting consumers would not race to Apple stores to get more AI on their phones.
Tejas Dessai of Global X added, “Investors clearly want a more comprehensive and ambitious strategy from Apple when it comes to AI.” The company’s stock fell 2% on the news.
Apple iPhone’s upgrade
The Apple’s AI features would not be available for all iPhone. The company said smartphone customers have to upgrade to the iPhone 15 Pro or Pro Max that Apple began selling in September 2023. The AI, built so it can process data privately on a user’s device, depends on chips in Apple’s newer smartphones.
In Wedbush Securities analyst Dan Ives’ view, that represents a big opportunity. He estimated some 270 million iPhones had not been upgraded in four years.
“We estimate 15%+ of the Apple installed base will upgrade to iPhone 16 as Apple Intelligence is the killer app many have been waiting for,” Ives said.
The iPhone 16 release is expected sometime this autumn.
Apple and ChatGPT
Gene Munster, a managing partner at Deepwater Asset Management, said another feather in Apple’s cap was its easy-to-use integration with ChatGPT. “They’re really taking the friction out of using AI,” he said.
Apple’s revenue
Apple’s iPhone revenue for its fiscal year that ended in September 2023 was $200.6 billion, down from $205.5 billion the prior year, the company’s latest annual report showed.
Will Apple’s AI strategy work?
Apple now has a new way to compel iPhone buyers to upgrade. This time it’s not just selling them on a new camera jammed into the same container. It will also undoubtedly try its hardest to convince customers that any newer iPhone is a much smarter smartphone. The new one will offers a flavor of generative AI much more palatable than the AI chat platforms still in search of application.
As per Martin Yang of Oppenheimer & Co., AI is just a part of Apple’s draw to consumers. They may primarily want a bigger iPhone display or better camera, but the AI updates would appeal to early adopters. It will also stand apart for their ability to take actions in and across apps.
