iPhone 16 Launch Looms: WeChat Conflict, AI Concerns, and Innovation Drought, Can Apple Hold Onto China?

iPhone 16 Launch Looms: WeChat Conflict, AI Concerns, and Innovation Drought, Can Apple Hold Onto China?At 1 AM on September 10th, 2024, the iPhone 16 and a slew of other Apple fall products will be formally unveiled. Following tradition, the iPhone 16 will hit store shelves on the first Friday after the launch

iPhone 16 Launch Looms: WeChat Conflict, AI Concerns, and Innovation Drought, Can Apple Hold Onto China?

At 1 AM on September 10th, 2024, the iPhone 16 and a slew of other Apple fall products will be formally unveiled. Following tradition, the iPhone 16 will hit store shelves on the first Friday after the launch. Unlike previous years where tech releases were met with indifference, this year's new iPhone has sparked significant attention - albeit for reasons seemingly detached from the product itself.

In May, Apple issued a warning to Tencent, stating that if they failed to prohibit developers from using non-Apple payment methods for WeChat mini-games and disabled the "in-game messaging" feature, Apple would cease updating WeChat on the iOS platform. Over three months later, as the iPhone 16 series nears its launch, the repercussions of this incident linger. Rumors even circulated that the iPhone 16 would not support WeChat, forcing users to choose between the two. Some even cited the "iOS WeChat no longer updating" rumor as "evidence." Of course, on September 6th, a routine update to the WeChat iOS version debunked these claims. Yet, many remain perplexed about the upcoming iPhone 16 series.

To help you navigate the impending launch, we've compiled a list of the most pressing questions surrounding the iPhone 16.

1. Will the iPhone 16 work with WeChat?

Yes, absolutely. We already explained the ins and outs of the Apple-WeChat conflict last week. The core of the dispute lies in the clash between the AppStore's commission and WeChat's revenue sharing model for in-app purchases within mini-programs. Apple argues that WeChat mini-programs avoid the AppStore's in-app purchase agreement by redirecting users to pay via official accounts, impacting Apple's revenue. WeChat, on the other hand, believes Apple's actions harm its mini-program ecosystem.

However, judging from the recent iOS update for WeChat, the conflict has not reached a "choose one or the other" point. For both Apple and WeChat, losing each other would be a significant loss: WeChat is irreplaceable in China, functioning not just as a social app but also encompassing payments, e-commerce, content distribution, and more. WeChat mini-programs are a crucial part of the mobile internet landscape. For WeChat, the global high-end smartphone market backed by iOS is equally vital. iOS users comprise a significant portion of mature markets like North America and Europe, where users demand high app stability and are willing to pay for quality services. Losing iOS support would limit Tencent's global expansion, especially its penetration among high-net-worth individuals. After all, who would buy a 1TB iPhone without the convenience of retaining their precious WeChat chat history?

2. Will Apple lower its AppStore commission in China?

It's highly unlikely, but not completely impossible. This question is better suited for WWDC than an iPhone launch event. However, the WeChat revenue sharing issue has sparked discussions about the "Apple Tax," so we might as well analyze the possibility of a commission reduction.

Currently, Apple charges varying commissions for in-app purchases (IAP) in different markets. Businesses earning less than $1 million annually pay a 15% commission, while those exceeding that threshold pay 30%. Compared to some Android phone brands with a 50% commission, Apple's rates are not particularly high.

However, unlike other Android brand IAP terms, within the iOS ecosystem, individual developers cannot use independent payment channels within WeChat mini-programs; they must use the WeChat IAP system. Of course, developers have the option to redirect users to a webpage to bypass Apple IAP, as seen with services like Netflix and Spotify. Users have to purchase subscriptions through the website. Similarly, some domestic developers have adopted a similar approach. For instance, the "Samsung-affiliated" icon pack "Completing Plan" uses a third-party website for payment.

Therefore, unless Apple differentiates between WeChat IAP and developer IAP within the WeChat ecosystem, the 30% "Apple Tax" will likely remain the norm. Instead of directly reducing the commission rate, individuals would prefer AppStore to open up third-party payment channels in the domestic market, allowing for more choices for developers and users.

3. Will China be able to use the AI features on the iPhone 16?

It's likely that China will have access in the future, but there might be differences from the global version. As a major highlight of the iPhone 16, AI-related features will eventually be introduced in China, but the timing and specific implementation remain unclear. Currently, Apple's intelligent services (AI services) are only available in the United States. We can only glean insights into their completion through experiences shared by overseas bloggers. Based on feedback, Apple's intelligent services are still quite basic. Therefore, I believe it's unlikely Apple will deliver a complete AI service in the initial release of iOS 18. The question of when we can utilize these services depends on how Apple implements its intelligent services in China.

In a post following WWDC, I mentioned that Apple's intelligent services utilize a "hybrid" model: in addition to the fundamental local computation module, Apple also has its own large language model cloud-based. Apple only requests external AI services from ChatGPT when users explicitly require them.

Considering the operating model of "China-specific iCloud," Apple's future intelligent services for Chinese users might adopt a similar model. Local machine learning would be handled by Apple on the iPhone device itself, while more complex computations would be provided by companies like "Cloud-based Aiper" (the Chinese iCloud service provider). External AI models would be supplied by other domestic AI service providers. Given that not all intelligent service requests require external AI providers, this model could satisfy domestic regulations while offering "the most authentic" Apple intelligent services.

4. Is Apple's lack of innovation its biggest problem?

The iPhone launch events in recent years have generated significantly less buzz than those preceding the iPhone Xs. This is primarily due to the declining influence of the iPhone within the Chinese market. Although Apple continues to upgrade hardware yearly, such as more powerful chips, enhanced cameras, and improved battery life, these advancements have not led to revolutionary user experiences, leaving consumers feeling like innovation is stagnant.

In contrast, domestic flagship phones seem to embrace innovation more boldly and diversely. Enhanced cooling capabilities, superior cameras, and foldable screen technology have not only boosted user perception of domestic phone brands but also conveyed a sense of cutting-edge advancement.

Furthermore, as Apple's ecosystem matures, users' reliance on iPhones stems more from the system's fluidity and interconnectedness than solely from hardware innovation. However, this ecosystem advantage is not enough to completely offset consumer disappointment with the lack of innovation, especially in a context where expectations for hardware innovation are steadily rising. The market pressure and consumer demands on the iPhone are mounting, particularly as the lower market competitiveness clashes with increasingly high user expectations. These issues, veiled by Apple's aura, naturally surface, explaining the consistent "problems" Apple has encountered in China in recent years.

5. Is this Apple's most challenging time?

According to a recent report by market research firm Counterpoint Research, the global smartphone market rebounded in Q2 2024, growing by 6% year-over-year.

Samsung, Apple, Xiaomi, vivo, and OPPO remain the top five brands globally. Samsung holds the top spot with a 20% market share, Apple follows with 16%, and Xiaomi ranks third with a market share of 14%. Xiaomi's global sales also saw a 22% increase year-over-year, boosting its market share from 12% to 14% and inching closer to Apple.

Facing the threat from domestic phone brands, Apple is keenly aware of its precarious situation. They have abandoned their car manufacturing plans and are fully investing in AI, hoping to maintain competitiveness through AI-powered phone technology. However, the iPhone still lags behind domestic brands by several versions in AI applications, raising concerns about its competitiveness.

In conclusion, the 2024 smartphone market is even more intense than 2023, with AI phones and high-end foldable screen technologies introducing greater uncertainty. This uncertainty has shaken the iPhone's foothold in the domestic market. How Apple intends to use the iPhone 16 to defend its territory in this fiercely competitive market is about to be unveiled.

From September 6th to 10th, IFA (Berlin International Consumer Electronics Show) 2024 will kick off in grand fashion. Chinese tech giants like Lenovo, Honor, TCL, Hisense, Changhong, Jiangpo Long, Spacetime Pot, Yunjing, Pursuing, XGIMI, Dangbei, Baseus, Green Union, Insta360 (Ying Shi), DJI, and Leifeng will gather in Berlin to unveil their latest products and flex their muscles on the world stage. Lei Technology's IFA 2024 reporting team will be present to provide comprehensive coverage, stay tuned for updates.