Apple Relys On AI Technology To Encourage Sales Of IPhones

JAKARTA - Apple's (WWDC) developer conference held on Monday 10 June is not only about embedding the latest artificial intelligence technology, including from ChatGPT, into its software, but also about increasing iPhone sales.

Facing volatile consumer spending and increasingly fierce technology competition, Apple sees AI as a way to revive its loyal fan base that reaches more than 1 billion subscribers and reverses the decline in sales of its main products.

This AI software requires at least the iPhone 15 Pro or Pro Max to operate, which is expected to drive many new purchases, according to some analysts. Some predict the largest update cycle since the release of the iPhone 12 in 2020, which attracts consumers mostly due to 5G connectivity.

"What we saw today is more interesting than anything we've seen since then," said analyst Gil Luria of DA Davidson.

Apple shares rose 3.3% to record highs in early trading Tuesday, June 11 after previously dropping nearly 2% on Monday.

Apple showcases what it calls Apple Intelligence, its version of generative AI that can generate text, images, and other content on demand. Apple demonstrates how its AI can generate custom emojis, cartoons to send to friends, or edit email to make it sound more professional. Its digital assistant, Siri, can also ask for help from ChatGPT.

Some analysts are skeptical, predicting that consumers will not flock to Apple stores to get more AI on their phones. "There may be enough new and upgraded Siri devices to hold back some of the declining device's revenue recently, but not enough to create a new group of followers," said Forrester analyst, Dipanjan Chatterjee.

"Investors obviously want a more comprehensive and ambitious strategy from Apple in terms of AI," said Tejas Dessai of Global X. Apple's shares fell 2% after the announcement.

Apple's AI features will not be available to all iPhones. The company says smartphone subscribers should upgrade to the iPhone 15 Pro or Pro Max which goes on sale in September 2023. This AI, which is built to be able to process personal data on users' devices, relies on chips on Apple's latest smartphones.

According to Wedbush Securities analyst Dan Ives, this is a huge opportunity. It estimates that around 270 million iPhones have not been updated in the last four years. "We expect more than 15% of Apple's installed bases to upgrade to the iPhone 16 as Apple Intelligence is a flagship app that many people have been waiting for," Ives said.

The release of the iPhone 16 is expected this fall. Gene Munster, managing partner at Deepwater Asset Management, said Apple's easy-to-use integration with ChatGPT is another added value. "They really remove barriers in using AI," he said.

Apple's iPhone revenue for the fiscal year ending in September 2023 was USD 200.6 billion, down from USD 205.5 billion the previous year, according to the company's latest annual report.

However, AI is just part of Apple's appeal to consumers. They may prefer larger iPhone screens or better cameras, but AI updates will be of interest to early and prominent users because of its ability to take action inside and across apps. "That part of the action will make Apple a direct leader in consumer AI," said Martin Yang of Oppenheimer & Co.