Apple forced to make a risky bet on artificial intelligence with the iPhone 16 Pro

Updated July 19 with details on reduced orders in the iPhone 16 supply chain.

With demand for Apple’s iPhone slowing, how will Tim Cook and his team attract consumers to their ecosystem? Data from CIRP analysts shows that demand for the iPhone (specifically the current iPhone 15 model) is lower than that for the iPhone 14 this quarter. This reflects the pattern of lower demand seen in Q1 2024.

Update: Friday, July 19: While there is talk of an AI boom when Apple launches its generative AI-capable iPhones, that has yet to be reflected in the supply chain. Two major component manufacturers in the supply chain do not expect growth due to increased orders.

Analyst Ming-Chi Kuo reports on TSMC and Largan’s earnings calls, and his forecasts for next year are similar to last year’s.

“I understand that some suppliers have seen an increase in iPhone 16 orders for the second half of 2024, but from an EMS/assembly perspective, iPhone 16 orders for the second half of 2024 have not seen much change (about 87 million units), still slightly lower than iPhone 15 orders for the second half of 2023 (about 91 million units).”

As Apple is the biggest player in this market, any increase in orders to cover the upcoming iPhone 16 family would have a positive impact on its projections. As things stand, it’s the same story as in 2023: solid sales, but nowhere near unlocking an untapped market thanks to AI.

The report also highlights one way Apple hopes to boost sales, but it’s a bet that requires patience from the fickle smartphone market.

Apple will focus on a key driver of the iPhone 15 family, which is already accelerating Android sales. Generative AI has transformed the vision of what a smartphone can offer to consumers, from editing photos and videos to synthesizing and analyzing text and images, and helping with creativity.

Following the announcement of Apple’s AI plans at the Worldwide Developers Conference in June, the company’s stock rose seven percent, largely on the promise of increased iPhone sales. Because of the high demands that generative AI places on hardware and Apple’s effort to process as much user data as possible on the user’s device, Apple Intelligence will only run on one existing iPhone model: the iPhone 15 Pro Max.

Consumers who don’t have the most expensive iPhone on the market will need to buy the latest iPhone hardware to access the A18 Pro chip designed specifically to support generative AI routines.

However, the artificial intelligence that the iPhone clearly lacks at the moment will not be available until the first quarter of 2025. Tim Cook and his team will ask Apple loyalists to buy the smartphone with the promise of receiving artificial intelligence at some point in the future.

Meanwhile, all of those benefits are available on Android and have been since Google introduced the idea of ​​an AI-powered smartphone in October 2024 during the launch of the Pixel 8. With Google’s Pixel 9 family set to be announced in August, Apple’s iPhone will be two generations behind Android’s AI efforts before it has even left the Cupertino stage.

Will consumers be happy to wait for Apple to catch up with the competition, or will they decide that the AI ​​revolution can’t wait? If the former, Apple’s decision to “bet on the future” should help revitalize iPhone sales. But if the latter, the Android ecosystem may have found Tim Cook’s Achilles’ heel.

Now read more about Apple’s iPhone 16 and iPhone 16 Pro launch plans…

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