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Here’s a question for your friendly digital assistant: can artificial intelligence revive iPhone sales?
For investors, the answer is yes. Apple shares hit a new high on Wednesday, two days after the company unveiled its long-awaited AI strategy. The stock’s 10 per cent gain since Monday’s close has added more than $300bn to the company’s market capitalisation. It briefly overtook Microsoft to become the world’s most valuable company again during Wednesday’s trading session.
The market may be getting ahead of itself. Apple Intelligence, as Apple’s AI platform is called, doesn’t look groundbreaking. Some of the features that will be rolled out this autumn — automatic edits and suggestions when writing an email or text — already exist in Google’s Gmail and Microsoft products. Using AI to better organise and filter our inboxes? Gmail’s got that too.
Only Apple’s newest devices, such as the iPhone 15 Pro and the 15 Pro Max, will be able to use the new AI features. New summarisation tools, customised emojis and an AI-powered Siri could be nifty. But it is not obvious that it is enough to get consumers rushing out to Apple stores to upgrade their phones.
The iPhone is Apple’s biggest moneymaker, accounting for more than half of the $383bn in total revenue it pulled in last year. But sales of the device have slowed sharply. They fell 10 per cent year over year for the fiscal second quarter that ended in March. That follows a 2.4 per cent decline for the fiscal 2023 year.
The problem is in the US, Apple’s biggest market by revenue, inflation-pinched consumers are holding on to their devices longer. In China, its number two market, AI will do little to reverse a state crackdown on the use of its devices by government employees. Rising tensions with the US have also boosted domestic brands such as Huawei.
Samsung, Google, and Chinese maker Honor are already selling handsets with AI-powered features. Yet consumers’ appetite to have AI deeply embedded in their lives remains untested.
Apple, with its dedicated base of users and vast share of their attention, has advantages in this regard — even if the monetisation of these services is unclear. Apple’s characteristic determination to maintain control with its own chips and models will prompt questions about spending, and the impact of AI plans on margins, if a new phone sales supercycle does not take off quickly.
Still, Apple had underperformed its Big Tech peers on a lack of any AI information at all. After two years of silence, the market is probably relieved that Apple has jumped into the AI race.
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