Apple’s iPhone slumps as consumers wait for AI

IDC’s latest preliminary data on the smartphone market suggests Apple’s traditionally weakest smartphone quarter might be a little weaker than usual this year as political tension gnaws away at the company.

If IDC is correct, this unravelling has lopped a few more hairs from Apple’s Big Tech scalp, with Q1 iPhone sales down as much as 9.6%. That means Samsung is once again the temporary King of the Hill, even as China’s Xiaomi also makes gains. Comparative market share only tells part of the story, of course: Apple still allegedly sold 50 million iPhones in the first quarter of 2024, according to IDC. 

Morgan Stanley has a more optimistic view. In a client note received by Computerworld, analyst Erik Woodring wrote: “Contrary to market expectations, our Greater China Tech Hardware colleagues just raised their June quarter iPhone builds.”

Specifically, Woodring tells us analysts bumped up their “iPhone build expectations by 5%, or 2 [million] units, to 39 [million] units (-5% Y/Y) citing checks with Hon Hai and reflecting strength of legacy iPhone models in emerging markets, and relative stability elsewhere.”

Apple’s weakest quarter is weak, says IDC

When it comes to the overall market, IDC has a slightly rosy outlook. “The smartphone market is emerging from the turbulence of the last two years both stronger and changed,” said Nabila Popal, research director with IDC’s Worldwide Tracker team. 

The big trend is that global political realignment is evidencing itself in a new wave of smartphone competitors. “There is a shift in power among the Top 5 companies, which will likely continue as market players adjust their strategies in a post-recovery world,” said Popal.

It is inevitable US business will be affected by international political polarization. Indeed, as things continue to unravel, it is tempting to believe the architects of division on all sides will not rest until ordinary humans are once again reduced to speaking to each other using tin cans and string.

Hopefully we can avoid that outcome.

What can Apple do?

It’s never good to see an almost 10% decline in sales of a company’s most important product, but there are other reasons for provide optimism. Not only is Apple now actively engaged in developing new business plans for a more regulated industry, it’s also practicing its next pivot to pirouette around the twin themes of AR and AI. 

Claims Apple AI will run directly on the device should translate into an accelerant for iPhone sales, particularly among privacy/security conscious consumers and enterprise professionals. But there are other people who will welcome incredibly productive smartphones capable of handling complex tasks.

The value of new markets

Accurate recognition of the true value of growing markets remains a challenge for analysts looking to enumerate potential sales data in terms of specific company achievements. There is a possibility that Apple’s continued moves to build bigger business in India and elsewhere might not yet have been accurately baked into expectations. 

However, even if the IDC data is accurate, it’s worth reflecting that Apple’s move to make iPhones in India has been met by strong gains in local share — and there may be longer legs to find. Apple’s anticipated plan for more powerful iPhones with on-device edge AI will appeal to customers in growing markets, some of whom may have almost entirely skipped personal ownership of computers. These smart devices might yet turn out to be all the computer an even greater number of consumers need. They should be capable of replacing PCs for even more tasks.

Bicycle or hype cycle?

Indeed, while there’s plenty of excitement around AI/Generative AI (genAI) across mature markets (evidenced if by nothing else by the vast number of “Get Rich Quick” scams festooned across Twitter/X), it’s plausible to think that the true liberation of human potential will come from the democratization of access to computing these things represent. This, of course, is central to Apple’s core DNA, which has always described computers as “bicycles of the mind.”

The company won’t be alone, of course. Every tech firm is running to climb aboard the AI hype machine, in part to build big market slices in advance of inevitable regulation. But for Apple, if you also factor in second user and refurbished devices and think about actual devices in use, that means hundreds of millions will gain access to these new tools in a few months for no extra cost.

In fact, as consumers choose to use their handsets longer, the only thing that really matters when it comes to smartphone sales this year is the extent to which Apple’s forthcoming AI iOS upgrade is backwards compatible. Because today’s happy customers will become repeat customers in tomorrow’s upgrade cycle. That’s how this river flows.

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