We’re less than a week out from Apple’s Worldwide Developers Conference (WWDC), which kicks off on June 10 at the company’s headquarters in Cupertino, California. This year's event is highly anticipated, as Apple is expected to unveil its significant push into generative AI, introducing new capabilities for the iPhone. The buzz around this announcement has energised investors, despite the reality that a supercycle of iPhone sales might not be immediately on the horizon due to these AI advancements.
The moves are likely to energise investors who have been anxiously awaiting Apple’s foray into generative AI. However, experts believe that the generative AI itself won't be the primary driver of new iPhone sales this year, given consumers’ traditional focus on hardware upgrades over software improvements. Thomas Husson, vice president and principal analyst at Forrester, notes, “I don't think it's going to become the primary reason why people buy an iPhone. It's more likely going to augment experiences.”
This perspective is further supported by the fact that the general consumer prioritises hardware features such as screen size, camera quality, and battery life over software capabilities. As Deepwater Asset Management managing partner Gene Munster puts it, “The typical consumer is not going to care [about generative AI]. They want to know screen size, No. 1. Second is camera, third is battery.”
Despite the initial underwhelming impact on sales, generative AI holds long-term potential to boost iPhone purchases. As phones age and become incapable of running the latest generative AI experiences, users will inevitably need to upgrade their devices. This will be particularly relevant as new AI-powered features become more integrated into everyday usage. According to IDC research director Ramon Llamas, many consumer offerings in AI are still rudimentary, and there's no must-have killer app that will drive users to upgrade immediately. However, the scenario could change as Apple rolls out new functionalities such as enhanced Siri capabilities, transcribing recordings, new photo editing tools, and improved notifications.
Furthermore, while Apple’s initial AI-driven features may not be groundbreaking, their potential to enhance user experiences should not be underestimated. Features like smarter Siri, transcription tools, and advanced photo editing will incrementally improve the user experience, though it might take time for consumers to fully appreciate these advancements. Apple’s strategy appears to align with creating a foundation for future innovations rather than an immediate market overhaul.
The impending release of new iPhone capabilities propelled by generative AI will not only energise the current user base but also define future technological standards in the industry. Bloomberg reporter Mark Gurman suggests that Apple’s forthcoming innovations will include a smarter version of Siri, capable of controlling apps with voice and transcribing recordings, along with refined photo editing tools and notifications powered by generative AI. Although similar features have already been introduced by competitors like Google and Samsung, Apple’s refined and integrated approach could set a new benchmark.
In anticipation of these changes, developers are poised to play a crucial role. As Apple endows its devices with generative AI functionalities, third-party developers will need to innovate to keep up. This development cycle could lead to a new era of applications that leverage AI to offer unique user experiences, highlighting the long-term attractiveness of newer iPhone models.
Despite uncertainties surrounding the immediate impact on sales, industry analysts are cautiously optimistic. The global smartphone market, burdened by a two-year downturn, is expected to rebound with an estimated 4% growth in 2024. Although the majority of this growth will come from Android sales, iPhone shipments are anticipated to improve marginally by 0.7%. Such statistics underscore the cautious optimism surrounding Apple's generative AI push.
Interestingly, this WWDC is also expected to bring clarity regarding Apple’s broader AI strategy. Analysts like Samik Chatterjee from JPMorgan and Toni Sacconaghi from Bernstein are keenly observing how Apple has managed to align its AI advancements with overall market trends. Chatterjee notes the importance of Apple catching up with the industry, despite a perceived delay in AI investments, while Sacconaghi highlights the potential revenue model arrangements with AI leaders like OpenAI.
This year's WWDC marks a significant shift in Apple's approach, as it openly competes in the generative AI space that has been dominated by peers like Microsoft and Google. The annual conference serves as a platform for Apple to showcase its latest technologies and frameworks, giving a glimpse into the future direction of its product offerings. More than 100 technical sessions, in-depth consultations, and live forums will provide developers insights into the upcoming advancements.
The conference will also feature keynotes and deep dives into the latest updates across all Apple platforms, including iOS, iPadOS, macOS, tvOS, visionOS, and watchOS. With an AI-centric agenda, WWDC24 promises to be a ground-breaking event, especially with its focus on empowering developers to build innovative and platform-differentiating apps and games.
Moreover, Apple is making concerted efforts to involve the next generation of technologists through its Swift Student Challenge and the Apple Design Awards, celebrating excellence in app and game development. The commitment to nurturing young talent could pay dividends in the future as these emerging developers contribute to the evolution of Apple’s AI ecosystem.
As we await the developments at WWDC24, the broader implications of Apple's AI ambitions are already sparking discussions. The company's foray into generative AI could redefine the smartphone upgrade cycle, aligning with long-term technological trends. While the initial impact on sales might be subdued, the future holds immense potential as consumers and developers adapt to the new AI-enhanced hardware and software environment.
Looking ahead, the success of Apple's generative AI strategy will likely hinge on several factors. Continuous innovation, seamless integration of AI features, and sustained engagement with developers will be critical. Additionally, Apple will need to address any technical challenges and ensure that its AI-powered functionalities offer tangible benefits that justify device upgrades.
In conclusion, the anticipated announcements at WWDC24 mark the beginning of an exciting chapter in Apple's evolution. The blend of hardware and software advancements powered by generative AI will shape the future of iPhones and potentially set new industry standards. Despite the modest initial sales expectations, the groundwork is being laid for a transformative journey, with Apple's AI initiatives at the forefront.
