In Short:
Apple is betting on artificial intelligence (AI) to boost iPhone sales, with analysts divided on the impact. While some see potential for a new sales “supercycle,” others predict only gradual sales increases due to older models’ limitations and uncertain AI experiences. Concerns linger about AI’s implementation in China after recent government restrictions, but analysts believe iPhone demand there will remain strong.
Apple’s initiative to integrate artificial intelligence into the iPhone is anticipated to significantly boost sales, despite some features not being available until next year, according to optimistic analysts. In the past, hardware upgrades were the primary attraction for iPhone users; however, the current emphasis lies on how Apple’s hardware, including its custom chips, will facilitate advanced AI applications.
Paolo Pescatore, an analyst and founder of PP Insights, stated, “Regardless of whether Apple Intelligence is supported from day one, the new iPhones are future-proof.” He draws parallels with Katy Ives, suggesting this marks the onset of an iPhone supercycle. Pescatore notes that Apple’s strengths in silicon, hardware, and services will converge to realize the potential of Apple Intelligence.
Pescatore also pointed out that Siri is due for a substantial upgrade, implying that current iPhone users may now be more inclined to reconsider its capabilities.
As of now, Apple has not responded to inquiries regarding its anticipated growth in iPhone sales.
Analyst Perspectives on the Supercycle
Contrarily, some analysts remain skeptical about the supercycle narrative. Anand Joshi, an engineer and former tech executive currently analyzing for TechInsights, acknowledged that while older iPhone models’ limitations might drive upgrades, he sees only a “50-50 chance of a supercycle.” He predicts the primary catalyst for sales will be AI, yet expresses skepticism regarding the user experience.
Varun Mishra, a senior analyst at Counterpoint Research, also weighs in, suggesting this could be the beginning of a revenue “step-cycle” rather than a supercycle. He attributes this to the staggered release of Apple’s AI features over several months.
Mishra elaborated, “Most of the use cases offered through Apple Intelligence are generally ‘nice to have’ and not compelling enough for a significant portion of users to upgrade their devices ahead of schedule. We also do not observe any pent-up demand for generative AI features as seen in previous supercycles.”
The impact of these new AI-enabled iPhones on sales in China, a critical market for Apple, remains uncertain. A report from last fall by The Wall Street Journal revealed that Chinese officials instructed government employees to refrain from using iPhones and other foreign electronics during work hours. While this directive primarily affects government personnel, it raises concerns about a potential long-term impact on Apple’s brand image in China.
With the introduction of more AI features, which depend on both on-device processing and cloud data transfer, questions have arisen regarding how Apple’s Private Compute Cloud will function in China. Currently, Apple has not disclosed details on this operational aspect.
During the recent iPhone launch event, Apple announced plans to extend its AI features to additional languages, including Chinese, beginning next year.
Despite concerns, Joshi from TechInsights asserts that the Chinese government’s actions towards iPhones have not significantly influenced sales thus far, stating, “China will continue to buy the iPhone.”
Looking ahead, Ives believes that establishing a partnership in China will be crucial for Apple’s success, suggesting, “Getting a Chinese partner will be key for Apple to enable AI in China.”
