- Apple is set to launch its first line of AI-enabled iPhones on Monday, at an event that begins at 1 p.m. ET.
- Companies like Microsoft, Samsung and Google have tried to sell artificial intelligence hardware, but so far without success.
- Apple will need to convince its customers to pay for new hardware to show Wall Street that an iPhone upgrade cycle is underway.
In late 2022, OpenAI’s launch of ChatGPT sparked an explosion of interest in the possibilities of artificial intelligence.
In just a few months, some of the world’s biggest tech companies, including Microsoft, Meta And Googlehas joined the party by launching its own AI chatbots and generative AI tools. By the end of 2023, Nvidia has proven itself to be the only company in the world that can make huge amounts of money by powering these services.
Fast forward to 2024, and a major AI theme is around our favorite consumer gadgets, with tech companies trying to bring AI to phones and laptops.
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Earlier this year, Samsung launched its AI-powered Galaxy S24 smartphone. Microsoft, in partnership with companies like Dell, HP And Qualcommbegan selling a new generation of AI computers over the summer called Copilot+ PC. A few weeks ago, Google launched its Pixel 9 series of AI phones.
So far, these new devices have been disappointing. Rather than creating entirely new experiences, they introduced features to make it easier to edit photos, talk to a chatbot, or provide live captions for videos. Then there’s Humane’s AI pin, a clip-on gadget launched in April and available immediately. panoramic in the reviews. In August, reports It appeared that daily returns exceeded sales.
Apple will try to change the narrative.
On Monday, the company is expected to introduce its new iPhone family, featuring AI capabilities announced in June. The system is called Apple Intelligence and will be rolled out in the coming months. Current Apple devices like the iPhone 15 Pro and some newer iPads and Macs will also have access.
But Apple Intelligence will be free. So the company needs to convince hundreds of millions of iPhone customers that it’s time to upgrade.
That’s what Wall Street is waiting for when the latest iPhones go on sale this month. Will Apple Intelligence move more iPhones? Or will the post-pandemic sales decline continue?
“The reality is that GenAI is still in its early stages and the use cases that have been announced are likely just the tip of the iceberg of what’s to come,” said Nabila Popal, mobile analyst at IDC.
Apple plans to roll out Apple Intelligence in stages. It will initially only be available in US English and will likely be blocked in countries with strict AI regulations, such as China. Additionally, many features Apple announced in June won’t be ready on day one. Instead, they will be introduced in stages over the coming months.
Because of Apple’s measured deployment strategy, even the most optimistic analysts expect it will take years for the company to get its AI into the hands of the billion iPhone users.
Do consumers want AI gadgets?
Apple typically adds modest improvements to its iPhones every year. The camera is getting a little better. Processors are faster. Battery life improves. None of this is compelling enough to make consumers rush to upgrade every year or two, as they did in the early days of the iPhone, when big hardware innovations were the norm. You can expect the same kind of iterative hardware improvements for this year’s phones.
This puts more pressure on Apple Intelligence to deliver. But consumer appetite remains a question mark.
Results of a recent survey conducted by a research firm Canalys showed that only 7% of consumers were “very likely” to make a purchasing decision using AI. Interest is significantly higher in Apple’s two most lucrative markets, the United States and China, but there is a huge disparity between them.
In the United States, 15% of respondents said they were strongly or very likely to buy gadgets powered by AI. In China, where consumers tend to care more about technical specifications, the figure was 43%. The relatively muted interest, particularly in the United States, suggests that Apple will need its marketing machine to tell a compelling story about what AI can do for the typical iPhone user.
“There are a lot of great features, but you need to offer them to the normal user in situations that they can use repeatedly, not just a one-time feature,” said Gerrit Schneemann, an analyst at Counterpoint Technology. “It’s hard to tell that story in a store with a poster or a two-second sales pitch.”
Apple CEO Tim Cook speaks during Apple’s annual Worldwide Developers Conference in Cupertino, California, June 10, 2024.
Apple Intelligence will use personal data stored on your phone and help turn Siri into a more capable assistant. Plus, app developers will be able to leverage Apple’s intelligence so you can use it anywhere on your phone. Schneemann said this is a new approach to AI compared to Google or Samsung.
“There is potential to accelerate this education curve and penetrate the market,” he said.
Samsung’s Galaxy S24, its latest flagship device, sold better than last year’s model. But there’s little evidence that AI is the main driver, said IDC’s Popal. Apple is in another category.
“The mindset of premium Apple customers is different,” Popal said, adding that many iPhone customers buy their phones using financing plans, which make it easier to upgrade.
Most recently, Google launched its Pixel 9 series of phones, featuring the company’s digital AI assistant, Geminiintegrated directly into the software. Google’s smartphones have never been big sellers, but they often show what’s possible on Android phones before those features are available on Samsung or Motorola devices.
The Pixel’s flagship feature is a version of Gemini that can conduct natural conversations instead of responding one command at a time, a capability that other Gemini-equipped Android phones are expected to get in the future.
While reviews for the Pixel 9 have been positive, it’s still too early to tell if AI can finally drive sales.
In the PC market, Microsoft PC Copilot+ launched this summer, but without their flagship AI feature, Recall. (Microsoft learned the hard way that it’s not a good idea to release a product that takes screenshots of everything you do on your computer every few seconds.) Recall will come to this market later this fall for a limited number of early testers.
Without recall, there isn’t much AI in this batch of AI PCs.
The real advantage for now seems to be the power and performance of the new PC chips from Qualcomm which debuted on Copilot+ PCs. The processors are based on the same technology as the chip in your phone, which means they remain very powerful without draining the battery.
“This is the transition from the traditional PC to a mobile device,” said Alex Katouzian, Qualcomm’s general manager for mobile and wearable technologies. He said Microsoft was working on more AI features and addressing privacy concerns with Recall.
Microsoft said it expects 50 million Copilot+ PCs to ship this year, which would represent about 1 in 5 PCs expected to be sold. Katouzian said Qualcomm-powered Copilot PCs are “on track” so far.
However, Copilot PCs represented “a relatively small percentage” of PC sales at Best buy This summer, CEO Corie Barry said during the company’s latest earnings conference call. She added that customers “just want to replace and upgrade” without necessarily looking for an AI-enabled device or spending extra for it.
Apple’s AI deployment
If Apple manages to turn the tide and impress its customers with Apple Intelligence, the next step will be to roll it out globally to boost iPhone sales in markets outside the United States.
There are other obstacles in his way.
China, where Apple makes nearly a fifth of its sales, requires government approval before an AI model can be launched in the country. Apple CEO Tim Cook told CNBC in August that his team was working with Chinese regulators to make this happen.
Then there’s the EU, which has passed a series of strict laws regulating the world’s biggest tech companies. Apple said this summer that it won’t launch Apple Intelligence right away in the EU because of these regulations.
In the meantime, Apple Intelligence users will be members of a relatively exclusive club. Apple’s job is to convince customers to pay for and join a new device.
“We are very excited about the value that Apple Intelligence brings to users,” Cook told CNBC in August. “For that reason, we think it’s another compelling reason to upgrade…we’ll see how the season goes once we start shipping, but we’re very excited about it.”
Correction: Humane’s AI pin was released in April. An earlier version incorrectly indicated the month.