Remember Apple's memorable 2011 commercial? It famously said, "If you don't have an iPhone, well, you don't have an iPhone."  Apple’s ads don’t just sell a product; they sell the fear of missing out on a revolution.

Creativity and innovation are at the heart of the Cupertino-based behemoth. So, for a company known for setting the trend in the industry, it has been a little surprising that Apple added AI—which it calls Apple Intelligence—to its iPhone months later than its competitors did.

The company, last week, announced the launch of iPhone 16, along with new versions of iPods and the Apple Watch. CEO Tim Cook said that the new phone has been designed for Apple Intelligence “from the ground up.”

The latest phone has a camera button and AI integration, representing Apple's latest attempt to innovate. However, competition is stiff, as other brands have already incorporated generative AI features into their devices.

While the pre-booking of the handset started on September 13 it will be shipped to you (or will be available in stores) from September 20. 

But here’s the big worry: it won’t have Apple Intelligence in it. At least, not yet.

Yes, the new iPhones will be power packed with A18 and A18 Pro chips that can handle the heavy AI tasks but not with Apple Intelligence, which is still in testing mode. The AI features will come to customers only in October in its iOS 18.1 update, and that too in beta version.

This means that Apple has created a customised version of the iOS 18.1 beta specifically designed for the iPhone 16 lineup. In earlier versions of the iOS 18.1 beta, users reportedly encountered issues where they couldn't restore backups from their old iPhones running the beta version to their new devices. 

With this release, Apple has apparently addressed those issues, ensuring that users can now restore their backups smoothly when setting up their new iPhone 16 devices.

But the real question is this: Will people buy Apple’s latest offering when it doesn’t have what it claims? And with it, will iPhone 16 help revive Apple’s flailing sales? 

An AI iPhone With No AI In It…Yet

To answer the first question, we need to look at previous trends. According to data by Consumer Intelligence Research Partners (CIRP), new features matter less to buyers than the condition and reliability of their current phones, which has led to longer upgrade cycles. 

Almost all new iPhone buyers would already own a smartphone, and that smartphone is mainly another iPhone. The data also says that over the past year, more than one-third of new US iPhone buyers kept their previous phones for three years or longer, while just under one-third had owned their phone for two years or less.

That’s not a very hopeful picture for Apple, which is banking on the new iPhone 16 to revive its less than perfect sales in the last one year. The CIRP says that the trend of holding onto phones longer is likely to continue, whether there is an AI-powered iPhone in sight or not.

Can Apple Intelligence Move The Needle?

The first half of 2024 has been slow for Apple, with record-low upgrade rates (the rate at which existing iPhone users upgrade to newer models) in Q1 and Q2, indicating a cautious consumer market. 

With iPhone sales stalling—down 1 per cent over the nine months ending June 29—Apple has been under pressure to offer new features to stimulate demand. 

The promise of Apple Intelligence sure sounds exciting but the "Glowtime" event didn’t quite dazzle Wall Street. The tech giant’s share price dipped during the event and ended the day flat. 

Over 45 million iPhones were shipped during the second quarter of 2024 -- five million units less than sales in the previous quarter and a three million increase compared to the same quarter in the previous year. 

The biggest hit to iPhone sales came from China. The company reported $14.73 billion in revenue from its Greater China region for the June 2024 quarter, down 7 per cent year-over-year, marking the fourth consecutive quarter of declining sales in China. This was below estimates of $15.7 billion revenue in the region.

Valued at a staggering $3 trillion, Apple is banking on Apple Intelligence to reignite consumer interest and spur a new wave of upgrades.

The company is betting that integrating more sophisticated AI features into its ecosystem will differentiate the iPhone experience from competitors like Google and Microsoft, making it more indispensable to users. 

However, whether Apple Intelligence can truly "move the needle" remains to be seen. 

Will We See A Made-In-India iPhone 16?

Apple started producing iPhones in India in 2017. Initially, the production line was limited to cheaper and older versions of iPhones—mainly iPhone 12, 13 and 14—but in 2023, iPhone manufacturer Foxconn’s factory in Tamil Nadu started producing iPhone 15.

Since the hindrance in global supply chains during the COVID-19 pandemic, many tech companies decided to shift their production out of China. Microsoft also moved some Xbox manufacturing to India. 

Up until now, India has not produced the ultra-premium Pro and Pro Max models. But it seems with the iPhone 16, this could change. The Minister for Electronics and Information Technology, Ashwini Vaishnaw confirmed as much from his X account.

https://x.com/AshwiniVaishnaw/status/1833428651083268349

 

According to the Economic Survey of 2023-24, India accounted for 14 per cent of Apple's global iPhone assembly, valued at $14 billion. And according to some reports, this number will likely climb to 25 per cent by 2028. 

Also, the Production Linked Incentive (PLI) scheme, which was launched in 2020, has been pivotal in boosting India's smartphone production and exports. By 2024, smartphone exports surged 42.2 per cent year-over-year, cementing their place among India’s top five export items. 

Despite a 10 per cent decline in iPhone sales year-over-year and a 4 per cent drop in overall revenue, Apple's revenue in India hit $2 billion in the March 2024 quarter, bolstered by strong Pro model sales in the country.

Cook, in the company’s Q2 2024 earnings call, emphasised on the necessity of local production to remain competitive in India's rapidly growing smartphone market.

And the iPhone is getting cheaper in India. Unlike the iPhone 15 Pro, which launched at a rate of Rs 134,900 last year, the iPhone 16 Pro is now priced lower at Rs 119,900. This is mostly due to reduced import duties on devices.

Apple needs its AI gambit to pay off. Another major factor that could play in Apple’s favour is its expanding production footprint in India. 

Apple’s next moves will be critical in proving that it still has the magic to turn cutting-edge technology into must-have experiences.