Apple to make AI announcement to support iPhone sales in China

Apple sales in China: Apple is set to announce plans to integrate generative AI into its iPhones in a bid to rejuvenate sales, particularly in the crucial Chinese market, amidst an anticipated decline in quarterly revenue. Despite Apple's longstanding status as a Wall Street favourite, its shares have recently lagged behind other major tech players, dropping over 10 per cent this year amid concerns over slow AI service deployment and increased competition from Huawei.

Analysts forecast a major downturn of 10.4 per cent in iPhone sales for the first quarter of 2024, the largest decline in over three years. This decline is measured against a high base from the previous year when Apple met pent-up demand following the COVID-19 pandemic. Executives attribute part of the previous year's surge to recovering from disruptions in iPhone production caused by pandemic-related lockdowns in China.

Even when considering the catch-up sales from the previous year, Wall Street still anticipates a slight decline in iPhone sales, contributing to an estimated 5 per cent drop in total revenue for Apple's fiscal second quarter. This would mark Apple's most substantial revenue decline since the December 2022 quarter.

Recently surpassed by Microsoft as the world's most valuable company, Apple faces pressure to innovate its flagship device after several years without major upgrades. Talks with OpenAI and Google-owned Alphabet to integrate genAI features into the iPhone have surfaced, with expectations that these features could be announced at the upcoming developer conference in June. Analysts view such integration as potentially driving demand for the next iPhone series.

While Apple CEO Tim Cook has been relatively reserved about the company's AI plans compared to counterparts at Microsoft, Alphabet, and Meta Platforms, analysts believe that integrating AI features into iPhones could improve competitiveness, particularly against Huawei and Samsung Electronics, the current top smartphone vendor.

In addition to AI integration, attention will be on Apple's stock buyback plan and the performance of Vision Pro, its latest product released in February. Demand for the $3,500 mixed-reality headset has shown signs of slowing, prompting adjustments in production estimates.

Amidst soft demand for hardware products like iPads and Macs, Apple appears to be focusing on upgrades and enhancements. Reports suggest the unveiling of a revamped iPad lineup and updates to every Mac model featuring faster, AI-centric M4 processors.

Despite challenges in hardware sales, Apple's services business, encompassing the App Store and subscription services like Apple TV, is expected to continue its growth trajectory with a forecasted revenue increase of 7.7 per cent.

Closing at $169.30 on Wednesday, Apple shares are closely watched as investors await Thursday's earnings report for insights into the company's performance and future strategies.

(With Reuters inputs)