Why Apple's Generative AI Push Won't Launch an iPhone Supercycle in 2024

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We're less than a week away from Apple's (AAPL) Worldwide Developers Conference (WWDC), which kicks off on June 10 at the company's headquarters in Cupertino, California. The company is expected to unveil its big generative AI push this year. Capabilities for iPhone

The move will likely bolster investors anxiously awaiting Apple's foray into creative AI. But don't expect self-generative AI to fuel a new iPhone sales supercycle this year. This is because when it comes to smartphones, consumers care more about hardware than software.

“I don't think it's going to be the main reason people buy an iPhone,” explained Thomas Husson, vice president and principal analyst at Forrester. “It's more likely to enhance experiences.”

But that doesn't mean AI won't power iPhone sales in the coming years. That's because as phones age and aren't capable of running creative AI experiences, users will inevitably have to upgrade.

People usually buy new smartphones for the hardware, not the software.

“The average consumer doesn't care. [about generative AI]Deepwater Asset Management managing partner Jane Munster explained. “They want to know the screen size, No. 1. Second is the camera, third is the battery.”

There's another reason creative AI on the iPhone isn't likely to get people lining up outside their local Apple Store: the software is still very new.

Many of the consumer offerings out there are still relatively basic. Microsoft's ( MSFT ) Copilot will soon provide helpful tips on how to solve common PC problems, and Google's ( GOOG , GOOGL ) Gemini for Workspace makes it easy to draft emails. But by and large, there are no creative AI apps.

Even Microsoft's AI-centric Copilot+ PCs are more interesting for their new Qualcomm ( QCOM ) chips, which are believed to rival Apple's own M3 processors, than for their For AI software named after

Supercharged sales? An Apple Store in Pittsburgh. (AP Photo/Jane J Poskar) (Concerned Institution)

“If you go to Joe and Jane Smith on Main Street, USA, and say to them, 'Hey, you can put general AI in your iPhone,' now they're going to say, 'Great. Now I can do that.' What should I do?' And this is the … crossroads at which we find ourselves right now,” explained IDC Research Director Ramon Llamas.

According to Bloomberg reporter Mark Gorman, Apple will introduce a new, smarter version of Siri that lets you control apps and recordings with your voice, new photo-editing tools, and better notifications powered by generative AI. will allow.

Certainly, making Siri useful would be a huge step in the right direction, though it will be interesting to see how often people use the voice assistant. When was the last time you asked Siri to do anything other than set a cooking timer or check the next day's weather?

Transcription and photo-editing tools would also be helpful, but Google and Samsung already offer those features in their phones, and they don't seem to be driving sales. And it's likely that Apple will offer its own tech on transcription and photo apps as well.

More importantly, we'll have to wait to see how iPhone developers use generative AI technologies to improve their third-party apps. think about it. You probably spend most of your time on your iPhone using third-party apps like WhatsApp, TikTok, or Gmail. The same will happen with AI-powered creative apps, but it will take time for developers to get them up and running.

While creative AI may not trigger a sales bonanza this year, it will have consumers ponying up for new iPhones in the years to come. That's because creative AI features will require some of Apple's most advanced chips, and users with older phones will either be unable to use these functions or will run slower. And nothing makes people want to buy a new phone more than when apps are slow.

“It's going to take six months, a year, two, three years for people to realize that the hardware they had pre-generative AI isn't working like your phone,” Munster said. “The battery wouldn't last, because it would put more weight on the CPU or the AI ​​chip … things like that. I think this iPhone AI upgrade cycle, it's like a two- or three-year cycle.

That doesn't mean Apple won't see a boost in sales when it releases its next iPhone in September. The smartphone market, in general, is starting to turn around after a two-year slog. According to IDC, global smartphone sales should grow by 4 percent year-over-year in 2024. However, the majority of that will come from Android sales, although iPhone shipments should improve by some 0.7 percent. Not exactly a staggering number, but an increase nonetheless.

As for sales growth, it's likely to come down further as Apple fine-tunes its generative AI features and developers phase out more AI-powered generative apps that tax older iPhones. As for the supercycle, it will just have to wait.

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Email Daniel Hawley at dhowley@yahoofinance.com. Follow him on Twitter. @DanielHowley.

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