Apple’s recent AI announcement is a big deal because it tackles a significant challenge: selling more iPhones.
Even though the public reaction to Apple’s Apple Intelligence and WWDC24 was generally positive, Wall Street’s initial response was lukewarm. The stock price dipped nearly 2 percent before bouncing back the following day, rising over 7 percent.
At the heart of Apple’s strategy is a significant upgrade to Siri, their virtual assistant, through advanced AI capabilities now branded as “Apple Intelligence.”
Apple relies heavily on iPhone sales, which comprised 58 percent of its revenue in the first quarter of 2024. However, interest in iPhones has been dropping, with global demand falling by 10 percent in the first quarter of 2024, hitting a six-year low.
Despite branching into services like Apple TV+ and Apple Fitness+, the iPhone remains Apple’s primary revenue source. Historically, iPhones have contributed up to 70 percent of the company’s income between 2015 and 2018.
The challenge for Apple hasn’t been the quality of its iPhones; new models consistently get high ratings, especially from tech reviewers and journalists. However, customers don’t usually find good reasons to upgrade their devices yearly.
JPMorgan analysts have noted that the upgrades in recent iPhone releases have been relatively small, so people haven’t been enthused about getting the newer models as soon as they launch.
Apple hopes that Apple Intelligence will change this. This is why Apple’s AI features are exclusive to the latest iPhones equipped with the A17 Pro chip or newer.
This exclusivity could drive sales of both current models, like the iPhone 15, and the new ones expected later this year. Even if the hardware doesn’t change much, the latest AI features embedded in the software could give consumers a strong enough reason to upgrade, or so Apple hopes.
Apple’s new AI features are tailored to its typical users—those who value simplicity, privacy, and functionality. For example, Siri’s improvements include a better understanding of user commands, enhanced abilities to perform tasks within apps, and new functionalities in image and text creation, transcription, summarization, and on-device search. These upgrades are designed to make Siri more practical and responsive, addressing long-standing criticisms.
Apple’s partnership with OpenAI further highlights its commitment to AI. While integrating OpenAI’s technology, Apple focuses on user privacy and security.
In essence, Apple’s latest AI initiatives are about more than just technological advancement; they’re about making the iPhone more appealing to consumers again. By enhancing Siri and ensuring these capabilities are available only on the latest devices, Apple aims to drive upgrades and maintain its leadership in the competitive smartphone market.
The improvements to Siri and the strategic use of advanced AI hardware position Apple to enhance its products and potentially reshape consumer expectations for personal digital assistants.