AI devices have failed so far. Apple aims to change that – NBC New York

• Apple is preparing to introduce its first artificial intelligence-powered iPhone series on September 9.
• Companies like Microsoft, Samsung, and Google have tried to sell AI hardware but have not been very successful so far.
• Apple will need to convince customers to pay for new hardware before it can show Wall Street that the iPhone upgrade cycle has begun.

OpenAI’s launch of ChatGPT in late 2022 has increased interest in the possibilities offered by AI.

Within months, some of the world’s largest technology companies, Microsoft, Meta And Googlejoined the party and launched its own AI chatbots and generative AI tools. By the end of 2023, Nvidia It has proven to be the only company in the world that is in a position to make huge amounts of money by supporting these services.

Fast forward to 2024, one of the major themes in AI was around our consumers’ favorite gadgets, with tech companies working to bring AI to phones and laptops.

Earlier this year, Samsung launched its AI-powered Galaxy S24 smartphone. Microsoft is partnering with: Dell, HP And Qualcommover the summer it began selling a new line of AI computers called Copilot+ PCs. A few weeks ago, Google launched its Pixel 9 line of AI phones.

So far, these new devices have been underwhelming. Instead of creating entirely new experiences, they’ve offered features that make it easier to edit photos, talk to a chatbot, or provide live captions for videos. Then there’s Humane’s AI Pin, a clip-on gadget that launched in May and is already on the market. pan fried in reviews. Until August, reports It turns out that daily returns outpaced sales.

Apple will try to change the narrative.

The company is expected to introduce its new iPhone family on September 9, equipped with the AI ​​capabilities announced in June. The system is called Apple Intelligence and will be available in the coming months. Existing Apple devices, such as the iPhone 15 Pro and some new iPads and Macs, will also have access to it.

But Apple Intelligence will be free, so the company needs to convince hundreds of millions of iPhone customers that it’s time to upgrade.

That’s what Wall Street is expecting when the latest iPhones go on sale this month. Will Apple Intelligence sell more iPhones? Or will the post-pandemic sales slump continue?

“The reality is that GenAI is still in its early stages, and the use cases that have been announced are probably just the tip of the iceberg of what the future holds,” said Nabila Popal, a mobile analyst at IDC.

Apple plans to roll out Apple Intelligence in phases. It will initially be available only in US English and will likely be blocked in countries with strict AI regulations like China. Additionally, many of the features Apple announced in June won’t be ready on day one. Instead, they’ll be rolled out gradually over the coming months.

Because of Apple’s cautious rollout strategy, even the most optimistic analysts predict it will take years for the company to get its AI into the hands of nearly 1 billion iPhone users.

Do consumers want AI devices?

Apple adds modest improvements to its iPhones every year. The camera gets a little better. The processors get faster. The battery life gets better. None of these things are compelling enough to compel consumers to upgrade every year or two, as they did in the early days of the iPhone, when major hardware updates were the norm. Expect the same sort of iterative hardware improvements for this year’s phones.

This puts more pressure on Apple Intelligence to deliver, but consumer appetite is a question mark.

The results of a recent survey by the research firm Channels showed that only 7% of consumers have a “very high propensity” to make a purchase decision because of AI. Interest is significantly higher in the US and China, Apple’s two most lucrative markets, but there is a huge gap between them.

In the US, 15% of respondents said they had a high or very high inclination to buy a device because of AI. In China, where consumers care more about specs, that number was 43%. The relatively muted interest in the US, in particular, suggests that Apple’s marketing machine needs to tell a compelling story about what AI can do for the typical iPhone user.

“There are a lot of compelling features, but you have to offer them to regular users in situations where they can use them over and over again, not just as a one-time feature,” says Gerrit Schneemann, an analyst at Counterpoint Technology. “It’s hard to tell that story with a poster in a store or a two-second sales pitch.”

Apple Intelligence will use personal data stored on your phone and help turn Siri into a more capable assistant. Additionally, app developers will be able to tap into Apple Intelligence so you can use it everywhere on your phone. Schneemann said it’s a new way of looking at AI compared to Google or Samsung.

“There is potential to help accelerate that education curve and penetrate the market,” he said.

Samsung’s latest flagship device, the Galaxy S24, has sold better than last year’s model, but IDC’s Popal said there’s little evidence that AI is the primary driver. Apple is in another category.

“The psychology of premium Apple customers is different,” Popal said, adding that many iPhone customers buy their phones using financing plans that make it easier to upgrade.

Google recently launched the Pixel 9 series phones that feature the company’s digital AI assistant. Geminibuilt right into the software. Google’s smartphones have never been big sellers, but they often showcase what’s possible on Android phones before these features make their way to Samsung or Motorola devices.

The Pixel’s highlight feature is a version of Gemini that can engage in natural conversations rather than responding to one command at a time. This feature is expected to be added to other Gemini-powered Android phones in the future.

While reviews for the Pixel 9 have been positive, it’s too early to say whether AI will boost sales.

Microsoft in the PC market Copilot+ Computers It launched this summer, but without its signature AI feature, Recall. (Microsoft learned the hard way that it’s not a good idea to ship a product that takes screenshots of everything you do on your computer every few seconds.) Recall will be available to a limited number of early testers this fall.

Without recall, there isn’t much AI in this batch of AI PCs.

For now, the real benefit appears to be the power and performance of new PC chips. Qualcomm Copilot+ is the first PC to feature processors based on the same technology as your phone’s chip, meaning they’re powerful without draining your battery.

“This is a transition that makes the traditional PC look more like a mobile device,” said Alex Katouzian, Qualcomm’s general manager of mobile and wearable technology. He said Microsoft is working on more AI features and addressing privacy issues with Recall.

Microsoft has said it expects 50 million Copilot+ PCs to ship this year, which would account for a fifth of the PCs it expects to sell. Katouzian said Qualcomm-powered Copilot PCs are “on track” so far.

Still, Copilot PCs accounted for a “relatively small percentage” of PC sales Best Buy CEO Corie Barry said on the company’s most recent earnings call this summer, adding that customers want to “just swap and upgrade” without having to search for a device with AI or pay a premium for it.

Apple’s AI launch

If Apple can buck this trend and successfully impress its customers with Apple Intelligence, the next step will be to roll it out globally to boost iPhone sales in markets outside the US.

There are other obstacles in your way.

China, where Apple accounts for nearly a fifth of its sales, requires government approval before an AI model can be launched in the country. Apple CEO Tim Cook He told CNBC in August that his team was working with regulators in China to make that happen.

Then there’s the EU, which has passed a series of tough laws regulating the world’s biggest tech companies. This summer, Apple Apple won’t launch Intelligence in the EU immediately because of these regulations.

Meanwhile, Apple Intelligence users will be members of a relatively exclusive club. Apple’s job is to convince the customer to join and pay for a new device.

“We’re very excited about the value that Apple Intelligence brings to users,” Cook told CNBC in August. “So we think that’s another compelling reason to upgrade… we’ll see how the season goes when we start shipping, but we’re very excited about it.”

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