This iPhone ‘Supercycle’ May Not Be So Super

Some of these features won’t be available until next year, but Apple’s push to add artificial intelligence to the iPhone is still likely to drive a boom in sales, optimistic analysts say. Whereas in years past the iPhone’s hardware upgrades were the big draw, now the lure is how Apple’s hardware, like its custom chips, will be in service of advanced AI.

“Regardless of whether Apple Intelligence is supported from day one, the new iPhones are future-proof,” Paolo Pescatore, analyst and founder of PP Insights, says. Pescatore, like Ives, believes this is the start of an iPhone supercycle. “Apple’s prowess in silicon, hardware, and services will all converge to bring Apple Intelligence to life.”

Pescatore adds that Siri was in need of a much-needed overhaul, and he believes iPhone customers might now be willing to give Siri another chance.

Apple did not immediately respond to inquiries about the company’s potential for iPhone sales growth.

Super Unknown

Other analysts aren’t buying into the supercycle hype. Anand Joshi, an engineer by trade and former tech executive who is now an analyst for TechInsights, says the technical limitations of older iPhone models are likely to spur upgrades. But he believes there’s only a “50-50 chance of a supercycle.”

“The biggest driver is going to be AI, but I am still skeptical of the user experience,” Joshi says.

Similarly, Counterpoint Research senior analyst Varun Mishra says this is the start of a revenue “step-cycle” for iPhone—a series of incremental boosts—rather than a supercycle. This is partly due to the fact that the release of Apple’s AI features will be staggered over several months.

“Most of the use cases offered through Apple Intelligence are generally ‘nice to have’ and not so compelling that a large section of users will upgrade their devices earlier than expected,” Mishra says. “We also don’t see any pent-up demand, like the demand in previous supercycles, for GenAI features among consumers.”

There’s also the question of whether these new AI-powered iPhones will spur sales in China, one of Apple’s most crucial markets both in terms of sales and production of iPhones.

Last fall The Wall Street Journal reported that Chinese officials ordered workers at government agencies to stop using their iPhones and other foreign-made electronics for work, which doesn’t affect the majority of the Chinese population but could have a long-term “chilling effect” on Apple’s brand in China. As Apple has rolled out more AI features, which rely on both on-device processing and data sent and received from the cloud, questions have come up as to how exactly the company’s Private Compute Cloud will operate in China. Apple hasn’t yet shared details on how this will work.

Earlier today, during the iPhone launch event, Apple said it plans to expand its AI features into other languages, including Chinese, starting next year.

Joshi, from TechInsights, says he doesn’t believe the Chinese government’s crackdown on iPhones has much impact at this point. “China will continue to buy the iPhone,” he says.

Ives thinks the key to Apple’s success in that market will be an unusual one for a company that prides itself on its full-stack technology and tightly controlling the experience it delivers: “Getting a Chinese partner will be key for Apple to enable AI in China,” he says.