📷 Image Credits: Canalys
At WWDC this week, Apple introduced Apple Intelligence, a comprehensive response to the industry on their AI strategy, 18 months after ChatGPT was launched. As predicted in our AI-capable smartphone report, the hybrid AI model approach, the focus on the developer community and differentiating through privacy features and Siri capabilities are some of the announced outstanding features. What stands out is the clear message to consumers and developers on implementing AI based on Apple values, with a significant emphasis on the human role in the decision-making process. The overall announcements align with industry-standard offerings while setting new benchmarks to prevent the company from lagging behind its rivals.
Canalys estimates that AI-capable smartphones will account for 54% of global shipments by 2028, while 75% of PCs will be AI-capable by 2028. The on-device AI on smartphones (as well as PCs) will enable at least three revenue models for device vendors – AI-as-a-feature, AI-as-a-service and AI-as-an-interface. For Apple, implementing AI is not just about catching up with industry expectations. The potential to unlock more revenue opportunities is significant.
Apple’s AI announcement did not address a crucial market – Mainland China, Apple’s second-largest market by volume and revenue, accounting for 21% of global iPhone shipments as well as that of the iPhone Pro series. In Q1 2024, Apple experienced a 25% year-over-year decline in Mainland China, with market share dropping from 20% in Q1 2023 to 15% in Q1 2024. Apple has been impacted by the resurgence of Huawei, a company with strong full-value chain capabilities in AI. The challenge for Apple in Mainland China lies in whether it can introduce Apple Intelligence in the region, given the country’s stringent regulations on AI services. Regulations including Mainland China’s Personal Information Protection Law impact how AI models are trained and where inferencing occurs. This might necessitate different AI algorithm configurations to comply with regional norms, particularly stringent consent and data handling standards. The high privacy standards and practices Apple set up could prove to be a plus with local regulators, which are driving AI data sovereignty and user data governance at the same time.
