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Apple's AI push could revitalize iPhone sales as customers look to upgrade

Apple’s AI push could revitalize iPhone sales as customers look to upgrade

Apple’s developer conference on Monday was about more than just infusing its software with the latest AI technologies, including ChatGPT.

It was also about selling more iPhones.

Facing faltering consumer spending and a resurgence of technology rivals, Apple has looked to artificial intelligence as a way to bolster its loyal base of more than a billion customers and reverse declining sales of its best-selling product.

The program, which requires at least an iPhone 15 Pro or Pro Max to operate, could encourage a flurry of new purchases, several analysts said. Some predicted the biggest fall upgrade cycle since Apple released the iPhone 12 in 2020, which attracted consumers in part because of its 5G connectivity.

“What we saw today was more compelling than anything we’ve seen since,” said Gil Loria, an analyst at DA Davidson.

The company showcased what it called “Apple Intelligence,” its approach to generative artificial intelligence that can pull up text, images and other content on demand.

Apple demonstrated how its AI can create custom emojis, a cartoon to send text messages to friends, or edits to make email look more professional. Its digital assistant Siri can also ask users if they want ChatGPT’s help.

Some analysts were skeptical, predicting that consumers would not rush to Apple stores to get more artificial intelligence on their phones.

“There may be enough in Apple’s new and improved Siri-powered smart devices to stem some of the hardware revenue eroding recently, but not enough to create a new group of followers,” analyst Forrester Dipanjan said. Chatterjee.

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“It’s clear that investors want a more comprehensive and ambitious strategy from Apple in the AI ​​space,” added Tejas Desai of Global X. The company’s shares fell 2% on the news.

Upgrading to artificial intelligence

Like it or not, Apple’s AI features aren’t available on every iPhone.

The company said smartphone customers should upgrade to the iPhone 15 Pro or Pro Max, which Apple will start selling in September 2023. Artificial intelligence, which is designed to process private data on a user’s device, is based on chips in Apple’s newer smartphones.

According to analyst Dan Ives of Wedbush Securities, this is a huge opportunity. It is estimated that about 270 million iPhones have not been updated in four years.

“We estimate that more than 15% of Apple’s installed base will upgrade to the iPhone 16 because Apple Intelligence is the killer app that many have been waiting for,” Ives said.

The iPhone 16 is expected to be released sometime this fall.

Another selling point for Apple is its easy-to-use integration with ChatGPT, said Gene Munster, managing partner at Deepwater Asset Management. “They really take the friction out of using AI,” he said.

The company’s latest annual report showed that iPhone revenue for the fiscal year ending September 2023 amounted to $200.6 billion, down from $205.5 billion the previous year.

However, artificial intelligence is only part of Apple’s appeal to consumers. “They may primarily want the iPhone’s larger screen or better camera, but AI updates will attract early adopters and differentiate them with their ability to take actions within and between apps,” said Martin Yang of Oppenheimer & Co.

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“This practical part will make Apple a direct leader in consumer AI,” Yang said.