Apple unveiled its all-new iPhone range this week, a product that accounts for nearly half of the company’s revenue.
But even though Apple promoted its latest A18 chip as being built for AI and revealed a rollout schedule for its Apple Intelligence software across key markets including Australia, analysts are skeptical as to whether the company will be able to reverse its sales slump.
Apple posted a 10 per cent drop in year-over-year iPhone sales in fiscal second-quarter results reported last May – the worst decline since the Covid-19 pandemic slowdown. Its revenue over that quarter fell 4 per cent to $90.8 billion (A$136.47 billion).
The company is hoping that its AI hardware and software push will pull new customers to it, and force existing ones to upgrade their phones.
Apple Intelligence will exclude iPhones that are lower in grade than the iPhone 15 Pro family. Hence, only the iPhone 16, iPhone 16 Plus, iPhone 16 Pro, iPhone 16 Pro Max, iPhone 15 Pro, and iPhone 15 Pro Max are eligible to receive Apple Intelligence.
Also, Apple Intelligence will be available in beta version in Australia only in December, which means that anyone buying an iPhone 16 now will not be able to fully extract the device’s AI capabilities for the next few weeks.
The Apple Intelligence software and efforts to tweak Siri to make it more conversational are very much in a nascent stage and still a work in progress, with the software yet to mature. Apple has already promised that it’s going to update it with features that will be available next year.
“The next generation of iPhone has been designed for Apple Intelligence from the ground up,” CEO Tim Cook said during the company’s presentation. “It marks the beginning of an exciting new era.”
China, one of the most important markets for the iPhone, is also seeing increased competition from local rivals. Hours after Apple revealed its iPhone 16, Huawei revealed its new Mate XT, the world’s first tri-fold smartphone.
Priced at approximately A$4,245, the phone has already seen a massive demand for it, with 3.04 million people placing pre-orders for it since the company opened reservations for it in China via its official e-commerce platform Vmall.com.
To get customers to choose its products, Apple will need to sell them on the AI features of their smartphones as being more than just a fad, according to Mark Vena, CEO and principal analyst at SmartTech Research.
“Consumers may be still somewhat resistant due to the privacy and confidentiality hurdles that need to be overcome to fully take advantage of the AI benefits in the new iPhones, but I sense that because Apple has historic brand trust with consumers, the momentum will quickly build,” said Vena, according to the New York Post.
Privacy and security concerns are rampant especially in the EU, where the bloc’s Digital Markets Act is taking aim at Big Tech and their latest offerings. In June, Apple said that it would not roll out Apple Intelligence to EU users this year because it contends that the interoperability requirements in Europe’s new Digital Markets Act “could force us to compromise the integrity of our products in ways that risk user privacy and data security.”
Ben Bajarin, CEO and principal analyst at Creative Strategies, noted that the iPhone 16’s AI enhancements could “help drive more interest to the new lineup, but the delay in some of the features could mean more people wait until they see the features as well.”
“I do think the jury is out as to whether this iPhone cycle can drive a stronger-than-usual cycle,” Bajarin added. “But I think there is good reason to believe the ageing base, along with very aggressive carrier promotions, should see a good portion of their base to upgrade given a huge portion of the base is on 3.5+ yr old phones.”
Wedbush analyst Dan Ives is instead bullish about Apple’s prospects and said in a note that initial supply chain checks for the iPhone 16 suggest sales are “much stronger” than they were for last year’s model.
He estimated initial shipments could exceed 90 million units – higher than Wall Street’s expectations of 80 to 84 million.
“We are continuing to see further indications across the Asia supply chain that this iPhone upgrade cycle could be a historical one setting the stage for a super-cycle as currently we estimate roughly 300 million iPhones globally have not upgraded in over four years,” said Ives.
The base iPhone 16 is priced at A$1,399, while the iPhone 16 Plus is slightly more expensive at $1,599. The more powerful iPhone 16 Pro and Pro Max models start at A$1,799 and A$2,149.
