Apple is turning the corner, expect a little good news
Has the EU forced the App Store out of business? No. Has China really fallen out of love with iPhone? Doesn’t look that way. Has Apple completely missed the boat on AI? Perhaps a little, but its moat seems bigger than that boat and it is already in the process of turning challenge into opportunity.
Skip the opinion, check the evidence
This is how to consider things as Apple switches on the iPhone 16 supply lines in preparation for new models this fall. As we speak it seems iPhone 16 displays are about to come rolling off the line, and other components were ordered in last week.
Fears that no one is purchasing these things seem somewhat overblown.
Still big in China
In China, state data shows that Apple’s move to discount its devices led to a 52% YoY spike in April’s iPhone sales. Smartphone shipments in China surged that month, and iPhone accounted for the vast majority of 3.5 million non-Chinese branded smartphones sold at that time. Yes, there was a slump, but the interest remains, it seems.
“The growth reflects two things: Apple was preparing for the 618 online shopping festival, which we could see from its recent price discounts,” IDC analyst Will Wong told China Economic Review.
“The resilient high-end users showed signs of buying better mobile devices to use for a longer time, which in turn will lead to longer replacement cycles.”
While there is no doubt that Apple is facing a range of economic headwinds, its products are still shifting, its profits remaining stable, and its reach remains strong.
Sticking with EU
That strong reach means a lot, and in the EU it means the majority of consumers do seem to be sticking with Apple’s App Store rather than choosing to go elsewhere for their digital supplies.
Analysts at Evercore put it this way: “EU App Store revenue data does not currently show any meaningful change to revenue levels since Apple’s compliance with the Digital Market Act.”
They think App Store profits in the EU climbed in March and April, but do say that if the Core Technology Fee Apple levies is successfully challenged by the courts this is still unlikely to have significant impact. It is also true to say that Apple’s brand loyalty and user satisfaction levels are so high that its customers won’t swiftly shift to third party stores.
Loyalty, privacy, and AI
But that loyalty also means customers will bear with Apple as it introduces new AI tools across its platforms. That’s what the Bank of America notes as it gave a $230 stock target today. Analysts there note that the move to AI iPhones will drive a smartphone upgrade cycle across the industry.
“We view the upcoming AI-enabled phones (IntelliPhones) to drive a multi-year upgrade cycle similar to the step function improvement driven by the introduction of smartphones,” they wrote.
Additional drivers to this will include contextual awareness, privacy, and the capacity to run AI at the edge – all of which Apple is said to be working on. The analysts also feel that because these smarter smartphones will deliver so many useful features consumers on older/lower cost devices will be driven to upgrade. Apple will benefit from all these trends.
Apple will also benefit from its promise: Privacy.
The company is said to be developing solutions that will enable server side processing of the most complex GenerativeAI models in such a way that even Apple won’t know what requests are made. In other words – all the AI tools you need at the same time as maintaining data privacy.
Put all of this together and it seems reasonably clear that reports of Apple’s demise are over-exaggerated. As they so frequently have been.
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