Apple’s recent unveiling of the iPhone 16 series has been met with considerable excitement, mainly due to the introduction of Apple Intelligence — an ambitious suite of AI-powered features. Analysts speculate these advancements could trigger a significant shift in the iPhone market, potentially leading to a so-called “iPhone supercycle.”
This term refers to an extended period of heightened economic activity and substantial sales growth. However, whether these new AI features will be sufficient to drive such a supercycle, especially in challenging markets like China, remains a topic of intense debate.
The Promise of an iPhone’supercycle”
The iPhone 16 and iPhone 16 Pro are expected to play a pivotal role in what analysts hope will be a supercycle. This phenomenon is characterized by a surge in sales exceeding typical market cycles, potentially surpassing the previous record of 231 million unit sales in 2015.
Morgan Stanley analysts have indicated that Apple Intelligence features could catalyze this growth. They believe these features will help unlock pent-up demand and accelerate iPhone replacement cycles.
Apple’s new AI capabilities include advanced photo-editing tools, AI-generated custom emojis, and a significantly improved Siri voice assistant. These innovations represent a shift from hardware-centric upgrades to enhancements driven by AI, potentially reinvigorating interest in the iPhone.
Analysts like Paolo Pescatore argue that Apple’s silicon, hardware, and services prowess will converge to bring Apple Intelligence to life, suggesting that this could mark the beginning of a supercycle.
Market challenges
Despite the optimism, Apple faces substantial challenges that could impact the effectiveness of these new features. The global smartphone market is saturated, with longer upgrade cycles and increased device longevity.
Many users hold onto their phones longer due to extended support for older models and the push for more repairable devices, driven partly by Right to Repair advocacy. It’s estimated that 300 million iPhones have not been upgraded in four years.
Last year, Apple experienced a decline in iPhone sales for four consecutive quarters, though they saw a boost during the holiday season. Globally, iPhone sales were down 1 percent year-over-year. More concerning was the 6.5 percent decline in sales in China, a key market for Apple.
This drop was more significant than the 2.4 percent decline analysts had anticipated, and Apple is no longer among the top five smartphone sellers in the country. This decline poses a significant challenge for Apple, given China’s importance as a major market and a critical production hub.
Some opposing views
Analysts do not universally accept the potential for an iPhone supercycle. While some, like Paolo Pescatore, are optimistic about Apple Intelligence’s impact on sales, others are more cautious. Varun Mishra from Counterpoint Research suggests that the new AI features may lead to incremental revenue boosts rather than a dramatic supercycle.
He argues that many features are “nice to have” rather than essential, which might not drive a significant surge in early device upgrades.
Impact on key markets
The impact of Apple Intelligence on the Chinese market is particularly uncertain. Despite recent government actions against foreign electronics, some analysts believe iPhone sales will continue in China. However, the success of Apple Intelligence in this crucial market may depend on Apple’s ability to navigate local regulations and potentially form strategic partnerships with Chinese companies.
Apple has announced plans to expand its AI features into additional languages, including Chinese, starting next year. This move could significantly determine the success of its AI initiatives in international markets. If Apple can effectively address regulatory challenges and tailor its offerings to local needs, it may improve its standing in China and other critical markets.
While Apple’s AI advancements represent a significant technological leap and could potentially drive new sales, the overall impact on the market, particularly in China, remains uncertain. The promise of an iPhone supercycle hinges on whether these new features can effectively stimulate demand in a saturated market and overcome the challenges of longer upgrade cycles and market-specific issues.
As Apple continues to roll out its AI features, the company’s immediate and long-term success will likely depend on how well it leverages these innovations to address evolving consumer needs and market dynamics.
