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securities times reporter yan cui

nearly a year after android manufacturers' ai (artificial intelligence) mobile phones were on the market, apple's first ai mobile phone, the iphone 16, was released a few days ago. however, the ai ​​functions supported by the iphone 16 have not been fully implemented globally. instead, they will be gradually implemented in different regions. it is expected to be implemented in china in 2025.

"apple ai will become a reason for users to change their phones." last month, apple ceo cook said so. now, can iphone 16 still drive apple to usher in the "new iphone moment"?

many interviewees told the securities times reporter that since apple intelligence does not have complete language support, it is expected that iphone 16 will hardly bring much sales growth, and it will be more about preventing apple from declining. at the same time, due to factors such as apple intelligence not bringing "unavailable features" and other factors, it is expected that apple intelligence will hardly bring apple a "new iphone moment". apple is facing increasing challenges in its core market, and the era when it could easily maintain high profit margins and high word-of-mouth effects has become history.

ai system implementation is constrained

apple intelligence is a complete ai suite launched by apple at its developer conference in june this year. apple calls it a generative ai system based on personal scenarios, which can provide intelligent functions such as assistance and image creation. in essence, it is equivalent to the ai ​​big model of android phone manufacturers. apple plans to empower it to all its terminals and realize the intelligent networking of the ios closed-loop system.

previously, it was widely predicted that this year's iphone 16 would be apple's first generation of ai mobile phones, which might set off a wave of apple mobile phone replacement. stimulated by this, some time before apple's autumn new product launch conference, a-share apple concept stocks rose gratifyingly.

the so-called ai mobile phone at least has the general ai functions that current ai mobile phones can support, such as ai image removal, ai document organization and summarization, the ability to take meeting minutes, and the ability to automatically distinguish various sounds, etc. at present, some brands of ai mobile phones also have a few active service functions, such as learning user habits, launching corresponding services in an occasion, and realizing "one-click taxi", etc.

ai phones must also be equipped with a large ai model on the edge and have the ability to access a large cloud model. in addition, since the amount of data run by the ai ​​model is very large, the requirements for mobile phone transmission speeds and other aspects are also greatly increased. therefore, ai phones have higher settings in terms of memory, chips, storage, heat dissipation, and battery life than ordinary phones.

in comparison, apple’s iphone 16 series has indeed been upgraded to an ai phone in terms of software and hardware, and is also apple’s first generation of ai phones.

"with hardware upgrades such as chips, memory, and camera buttons, apple has clearly prepared its devices for the future to meet the growing demand for apple intelligence, especially ai workloads that require large amounts of memory to process large language models. these open the door to apple's intelligence-driven personalization and enhancements." canalys analyst zhou lexuan told a securities times reporter.

specifically, the iphone 16 has changed the situation where the low-end versions in the past used the pro version chips of previous years. the entire series has been upgraded to the a18 series chips, and the memory has also been upgraded from 6gb to 8gb. the camera button also carries apple’s new ai-driven visual intelligence function, which supports users to search for content and products by image, and has the function of displaying the business information and praise rate of the store where the photo was taken. in addition, its heat dissipation, battery life and other configurations have also been comprehensively upgraded.

at the software level, apple's ai phones mainly rely on the empowerment of apple's smart phones. apple revealed that apple's smart phones will be released with ios 18.1, ipados 18.1 and macos sequoia 15.1 from next month, and will be available on platforms such as iphone, ipad and mac.

although both the hardware and software conditions are in place, the iphone 16 series cannot fully implement ai functions. the problem lies in the activation of different language versions of apple smartphones.

according to the official plan, after apple smartphone is launched on iphone and other devices in october, it will temporarily only support american english. in december, it will be expanded to localized english in australia, canada, new zealand, south africa and the united kingdom, and will support chinese, french, japanese, spanish and other languages ​​next year.

"the implementation of apple's smart technology involves the learning, training, adaptation and capability output of user languages ​​in different regions, policy and regulatory issues in different regions, and business cooperation between apple and local companies, such as app adaptation and upgrading, and cloud-based large-model cooperation," omdia chief analyst li zegang told a securities times reporter.

apple's official customer service staff told reporters that the activation of apple's smart functions in the iphone 16 series is affected by region, language and user id. currently, only those who have purchased the us version of the iphone 16 series, and the language mode is us english, and the id is a us user id, can experience the apple smart functions of the iphone 16 series. "all three are indispensable, and the activation principles for other regions in the future will be similar."

"at the iphone 16 series launch conference, apple clearly emphasized on-device ai capabilities and privacy. apple attaches great importance to the future ai capabilities promised by its new iphone series." said tom mainelli, vice president of idc group.

apple china's official website also shows, "get ready for apple smartphones. the launch time of apple smartphones will depend on the approval of regulatory authorities."

“new iphone moment”

hard to come

regarding how the iphone 16 will affect apple's future development, idc research director nabila popal told reporters that although apple smartphones launched this year have many highlights, since apple smartphones do not have complete language support, it is difficult for new products to bring much growth. its impact is more to prevent apple's decline (otherwise the situation may be worse).

counterpoint research analysts expect the impact of apple's intelligence on shipment and revenue growth to be more pronounced in 2025 and beyond as the rollout of ai is phased in terms of features and regions, with iphone revenue expected to remain flat through 2024.

"while there's a lot to be excited about, the delayed launch of apple's full range of intelligent features feels like a missed opportunity, which may impact apple's iphone sales in the short term." zhou lexuan believes that this launch is the first step for apple to lay the foundation for ai hardware, but the real differentiation of its ai will come when apple releases software during the next wwdc to drive differentiation from competitors.

many professionals even believe that even if apple's smart phones are fully implemented in the future, it may not be able to reverse the situation of apple's continued decline in sales.

according to a research report last month by analysts at investment firm wedbush, more than 300 million iphones worldwide have not been upgraded in more than four years.

as we all know, iphone is apple's flagship product. in the second quarter of this year, iphone contributed 46% of apple's revenue, but it showed a downward trend year-on-year. in the first quarter of this year, apple's iphone revenue fell 10% year-on-year to us$46 billion. in the second quarter, apple fell out of the top five in the chinese smartphone market for the first time. correspondingly, apple's revenue in greater china has declined for four consecutive quarters.

wang kai, research manager of idc china, told the securities times that it may be difficult for apple intelligence to bring a new "iphone moment" to apple. on the one hand, the function cannot be implemented in large quantities in a short period of time. on the other hand, apple intelligence has not brought any functions that "others do not have but i do" in the chinese market, and it has lagged behind significantly in terms of launch progress compared to competing products in the chinese market. therefore, without the support of chatgpt, to what extent apple's ai function will be recognized by consumers and whether it can bring about actual improvements in indicators at all levels still needs to be verified in subsequent nps research.

mark gurman, apple professional reporter for bloomberg news, said that the development of apple's smart technology may not be immediately reflected in sales because consumers may have limited excitement about new features, but as technology advances and consumers rely more on ai features, it may become a key factor in driving iphone sales growth in the long run.

nabila popal emphasized the importance of apple's smart technology in maintaining its existing user base and attracting new users. she believed that the development of apple's smart technology and its marketing strategy would affect the long-term sales performance of the iphone to a certain extent. she believed that apple's real growth might have to wait until apple's smart technology developed further and its market acceptance increased.

the era of high profit margins is over

as a leader in the smartphone industry, apple has long been the world's leading high-end smartphone brand since the release of the first iphone in 2007, with gross profit margins ranking first in the industry. in 2023, the gross profit margin of apple's iphone, ipad and other products reached 36.5%, and as early as 2009, the gross profit margin was as high as 57.7%.

apple ceo cook has publicly talked about apple's high profit margins. he believes that high-end products with higher prices can bring greater value. the direct source of apple's high profits is the high-price strategy. according to statistics, the average selling price of apple phones last year was $624, while the average selling price of android phones was only $185.

today, with android manufacturers increasing their r&d investment, accelerating their innovation, and collectively impacting the high-end market, and apple's innovation slowing down in recent years, the challenges apple faces in the smartphone market are gradually increasing.

according to the latest research of idc nps tracker, apple will still hold the no. 1 position in nps (net promoter score) in the mobile phone market in the first half of 2024. however, mainstream domestic mobile phone brands are challenging apple by relying on rapid technology iteration and continuous product innovation. in the latest research, huawei, vivo, honor and xiaomi have narrowed the nps gap with apple.

the above research shows that apple is not sitting back and relax in the mobile phone market. although the continuous price cuts of iphone have driven a significant increase in sales, apple's disadvantages in product competitiveness have begun to be felt by more consumers.

"in the chinese market where ai phones have been popular for half a year, whether the belated apple intelligence can reverse apple's declining product reputation may require more cautious judgment. what is certain is that for apple, the easy era of maintaining high profit margins and high nps at the same time has become history. the highly competitive chinese market requires apple to invest more attention and respect." wang kai told reporters.

zhou lexuan also told reporters that apple is facing increasing challenges in its core markets. in china, the resurgence of huawei and the active release of new phones by domestic brands are challenging its position. apple needs to make more efforts in product innovation and market strategy to maintain its competitiveness in the chinese market. in the united states, the macroeconomic situation and fiscal constraints have led to a weakening of the discounts on the latest iphones. "apple is seeking growth in emerging markets such as india, southeast asia and latin america to seize opportunities from the expanding middle class and young population, which is consistent with its target audience."

according to local indian media reports on september 12, after the release of iphone 16, apple's phone 14 and iphone 15 were significantly reduced in price in india, with discounts up to nearly 10,000 rupees. the iphone 14 128gb version was also reduced by about 10,000 rupees.

at the same time, zhou lexuan told reporters that apple is diversifying its production in india to reduce its dependence on mainland china.

canalys 2023 data shows that india's production capacity has increased over the past year, and apple plans to produce its pro series products in india. however, most electronic components are still produced in other regions and assembled in india. in 2022, apple produced nearly 15 million iphones in india (about 6% of its total), increasing to 25 million in 2023 (about 12% of its total), and this proportion is expected to reach 23% by the end of 2025. this shift has also led to india's iphone exports more than doubling from 8.5 million in 2022 to 20.5 million in 2023.

apple's marketing strategy of lowering prices in many places has affected the profit margins of supply chain companies to a certain extent. in the first half of this year, the profit margins of a-share apple industry chain companies generally declined year-on-year.