Apple’s AI Push Could Reinvigorate iPhone Sales as Customers Look to Upgrade

Apple’s recent developer conference on Monday wasn’t just about showcasing the latest AI technologies, including integrations from ChatGPT. It was also a strategic move to boost iPhone sales amid challenging market conditions.

Facing tough competition and fluctuating consumer spending, Apple is turning to artificial intelligence to excite its massive customer base of over a billion users. This push aims to reverse the declining sales of its flagship product, the iPhone.

Apple introduced what it calls “Apple Intelligence,” its version of generative AI that can create text, images, and other content on demand. Demonstrations included generating custom emojis, creating cartoons to text friends, and making professional edits to emails. Siri, Apple’s digital assistant, can also prompt users to leverage ChatGPT for various tasks.

While some analysts are sceptical about whether these AI features will drive consumers to upgrade, others see potential. Forrester analyst Dipanjan Chatterjee mentioned that while the new AI features might not attract a new wave of followers, they could help stop the revenue decline from device sales.

Tejas Dessai of Global X suggested that investors are looking for a more comprehensive AI strategy from Apple. This sentiment caused Apple’s stock to fall by 2% following the news.

Not all iPhones will benefit from these AI features. Apple has made it clear that users need to upgrade to at least the iPhone 15 Pro or Pro Max to access the full capabilities of Apple Intelligence. This requirement is due to the advanced chips in the newer models that enable on-device AI processing, ensuring user data privacy.

Dan Ives from Wedbush Securities sees this as a significant opportunity, estimating that around 270 million iPhones haven’t been upgraded in four years. He predicts that over 15% of Apple’s user base might upgrade to the iPhone 16, viewing Apple Intelligence as the “killer app” many have been waiting for. The iPhone 16 is expected to be released this fall.

Gene Munster from Deepwater Asset Management highlighted Apple’s smooth integration with ChatGPT, making AI features easy to use and reducing the friction typically associated with new technology.

Despite a decline in iPhone revenue from $205.5 billion in the previous fiscal year to $200.6 billion in the year ending September 2023, Apple’s AI initiatives could attract early adopters. Martin Yang from Oppenheimer & Co. believes that while consumers may initially seek larger displays or better cameras, the AI capabilities will distinguish Apple in the consumer AI space, enhancing the user experience across apps.