William Gallagher
Investment bank JP Morgan believes that Apple's combination of AI and privacy will mean a large swathe of users will upgrade to the new iPhone 16 throughout 2025, and that should reassure investors that are worried about the company's future.
Ahead of the WWDC announcements on June 10, 2024, analysts at JP Morgan have told investors to expect Apple to concentrate on AI on-device features. It says that there will be cloud and data-center elements, but Apple will stress the on-device privacy and showcase improvements to existing apps.
In a note seen by AppleInsider, the analysts predict that WWDC will be what they call a "tick all the boxes" announcement, that is specifically aimed at showing investors Apple has not fallen behind on AI. They say that investors will look particularly for any deals between Apple and OpenAI or Google, but that regardless of how it's done, Apple's AI implementation will be across all its native apps.
JP Morgan does not foresee any third-party apps benefiting from Apple's AI features, or at least not initially. That may change after the forthcoming iPhone 16 range is launched, however.
When that happens, the company expects to see increased revenues in the App Store. That's partly because they predict more apps will be sold, but also they believe developers will charge more for AI features.
The analysts also expect that the iPhone 16 range will benefit from the AI announcements. Where it says around 15% of users currently upgrade, JP Morgan thinks it could grow to 20% — which is what happened when 5G was introduced.
However, they also note that 5G benefited from the increased demand for smartphones during the pandemic. In comparison, an AI iPhone will be launching as Apple faces greater competition in China.
Nonetheless, JP Morgan predicts that there will be greater upgrade cycle because of AI, but also that it will begin in 2024 with the full weight felt in 2025 from the iPhone 16. That's despite it previously claiming that AI features will not appear in iPhones until the iPhone 17 range in 2025.
The analysts still believe that significant hardware improvements like more RAM in-device will wait until the iPhone 17. But it says that user interest in the AI features will drive sales sooner than that.
Separately, WWDC is again predicted to focus solely on software updates. It is a software developer conference, but it has on occasion launched new hardware, but it isn't expected to this year.
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2 Comments
I will be updating to the 16, but not because of the AI features I’ve heard rumours about so far. Most of those I would be disabling if at all possible.
We simply don't know the system requirements for running LLMs on-device. With Apple just having signed a deal with OpenAI it is likely that Apple didn't know either when designing iPhone 16. The processor won't be designed for OpenAI. Apple will need to work the other way and adjust the software. That will improve the experience during 2025. Likely the iPhone 16 will be short on memory like most products from Apple causing it to swap and use more power to deliver AI.
Besides AI it seems iPhone 16 (Pro) will mainly be yet another lens shuffle on the back, yet another button for Pro, adding colors after they were removed from 15, and Wifi 7 (absent from iPad Pro and needed on MBP but not really important on a phone). The only real improvement is AI in a version 1.0 format. I will likely keep my 15 Pro for 1 more year.