Life After Smartphones: Are Critics of Apple’s iPhone Sales Slump Missing the Bigger Picture?

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09-01-2024
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Tech giant Apple has come under fire in recent weeks following underwhelming iPhone sales and a perceived lack of innovation among its smartphone releases. But is the reality that Apple is preparing for a future bigger than the iPhone?


Sales issues surrounding the iPhone have led to Apple’s stock receiving two rating downgrades within a week, sending share values tumbling at the start of January 2024.


Following an initial Barclays downgrade, Harsh Kumar from Piper Sandler & Co. opted to downgrade Apple’s rating from ‘Overweight’ to ‘Neutral’, underlining a troubled period for the stock on Wall Street.


“We are concerned about handset inventories entering into 1H24 and also feel that growth rates have peaked for unit sales,” explained Kumar in a note.


Barclays analysts led by Tim Long also shared the perspective that iPhone sales were insufficient. “Our checks remain negative on volumes and mix for iPhone 15, and we see no features or upgrades that are likely to make the iPhone 16 more compelling,” the analysts confirmed.


Apple stock price

Apple stock price


Apple’s stock has long struggled to capture any meaningful momentum since Q3 2023, and the iPhone’s perceived shortcomings, along with geopolitical tensions leading to reported bans on Apple products in China, have paved the way for growing negative sentiment towards the innovative tech firm.

Interest in iPhones Waning?

On the surface, iPhone specifications have begun to appear relatively familiar from model to model as technological limitations prevent the implementation of powerful new features packed into handsets.


Taking a deeper glance at how recent iPhone models compare, we can see that the iPhone 15 features the same display, front camera, and connectivity as well as very similar features in terms of battery life and physical appearance as the iPhone 14.


This, accompanied by growing consumer wariness about the drawbacks of iOS system updates through fears of slowing handset speeds, battery drainage, and a lack of meaningful features, illustrates that Apple’s iPhones have become limited in the level of innovation available to consumers in new models.


As wider economic headwinds are caused by high inflation, lingering high interest rates, and geopolitical conflict, consumer spending has been dealt a sizeable blow in the US and beyond, creating greater hesitation over upgrading products with fewer tangible benefits.


The widespread consumer spending downturn has seen Taiwanese firm Foxconn report a heavy 27% drop in December 2023 sales, with forecasts remaining gloomy in the new year–adding to the concern that iPhone sales aren’t set to recover any time soon.


The Financial Times’ flagship opinion column, Lex, suggests that news of slowing iPhone sales is unlikely to trouble Apple over the long term, however.


While the column offers a reminder that Apple still dominates the growing smartphone premium market with a 71% global share, the innovative tech firm also has its attention firmly fixed on groundbreaking innovations elsewhere in the near future, all with the potential to outlast the smartphone as we know it today.

2024 Will See Apple Embrace Generative AI

So far, Apple has been slow to embrace the generative AI boom, which was sparked by OpenAI’s launch of ChatGPT in late 2022.


However, this is set to change quickly as the firm has begun committing $1 billion per year to the development of generative artificial intelligence products.


“But you can bet that we’re investing, we’re investing quite a bit, we’re going to do it responsibly and it will — you will see product advancements over time where those technologies are at the heart of them,” confirmed Tim Cook, Apple CEO.


In December 2023, Apple launched MLX, a machine learning framework that allows developers to build models that run on Apple Silicon and deep learning model library MLX Data.


In addition to this, Craig Federighi, Apple’s senior vice president in charge of AI and software engineering, has been working on adding AI to upcoming rollouts of iOS. This would introduce large language models to Apple devices that could help bring greater artificial intelligence to a range of core Apple services.


For instance, Siri could benefit from vast improvements in terms of comprehension and the quality of query responses, while Apple’s Messages app would gain the ability to field questions itself and auto-complete sentences intuitively.


Apple has been cautious with its adoption of generative AI, but as the iPhone approaches a technological ceiling in its current form, the Wall Street speculators of today may be sorely missing the bigger picture: the future of Apple won’t feature the iPhone.

Innovating Beyond iPhone

In a world where generative AI can intuitively write messages on your behalf and generate a conversational level of comprehension with consumers, the future of the smartphone could face an upcoming challenge for relevance.


Apple has long been seeking out what a future without smartphone dependency looks like, and its lack of major iPhone developments in recent years portrays a company that’s finally beginning to believe that the end is in sight for the heyday of the smartphone.


While Apple’s generative AI push may be at its fledgling stage, 2024 could yet prove to be a transformative year for the company as dives into the world of spatial computing with the launch of the Vision Pro.


“Today marks the beginning of a new era for computing,” declared Cook when announcing the Vision Pro last year. “Just as the Mac introduced us to personal computing, and iPhone introduced us to mobile computing, Apple Vision Pro introduces us to spatial computing."


Apple ecosystem

Apple ecosystem


Crucially, the Vision Pro operates as an ‘infinite canvas’ that delivers a fully interactive and three-dimensional user interface that’s controlled primarily by the user’s eyes, hands, and voice.


This offers an indication of Apple’s future intentions. We’re looking at a life beyond hardware, and control delivered through biometrics.


Although the Vision Pro’s launch may be initially impacted by the same consumer spending issues that have hampered iPhone sales in recent months, it’s an innovation that has the potential to unite a range of technologies for entertainment, productivity, and social purposes.

Building a Sustainable Future

Apple’s future will ultimately lie beyond the iPhone, but its success could be hampered by the sheer scale of the technological revolution on the horizon. With firms like Meta and Microsoft still betting big on the metaverse, Apple’s spatial computing ambitions with the Vision Pro could face rivals that carry similar purposes.


This technological space race will depend on many emerging technologies and their long-term sustainability.


However, it’s important to keep the bigger picture in mind when looking at Apple’s recent iPhone sales struggles. In the future that Apple is preparing for, the iPhone will be obsolete.

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