Apple's AI Takes Center Stage as iPhone 16 Series Launches: Limited Sales Boost, Shifting Supply Chain Landscape

Apple's AI Takes Center Stage as iPhone 16 Series Launches: Limited Sales Boost, Shifting Supply Chain LandscapeAt 1:00 AM Beijing time on September 10th, Apple's annual fall product launch event, themed "It's Glowtime," unfolded as expected. As in past years, Apple showcased its new iPhone, Apple Watch, and AirPods

Apple's AI Takes Center Stage as iPhone 16 Series Launches: Limited Sales Boost, Shifting Supply Chain Landscape

At 1:00 AM Beijing time on September 10th, Apple's annual fall product launch event, themed "It's Glowtime," unfolded as expected. As in past years, Apple showcased its new iPhone, Apple Watch, and AirPods. Among them, the iPhone 16, Apple's first AI-powered phone, garnered significant market attention.

Apple's AI: iPhone 16's Biggest Selling Point, Short-Term Impact Limited

During the launch, Apple CEO Tim Cook stated that the iPhone 16 was "designed for Apple's AI," emphasizing its AI capabilities. Apple's AI functionalities closely resemble those unveiled at WWDC in June, including text summarization, image search, and enhanced voice assistant features. In terms of hardware, the iPhone 16 upgrades were relatively limited, mainly focusing on processor advancements, a new camera control button, screen enhancements, and improved camera capabilities.

While Apple's AI stands as the iPhone 16 series' biggest selling point, industry experts generally believe its impact on iPhone 16 sales will be positive but minimal. Counterpoint Research projects the iPhone 16's shipment volume in the second half of this year to increase only 2 to 3 percentage points compared to the iPhone 15 in the same period last year. Neil Shah, Vice President of Counterpoint Research, suggests that the impact of Apple's AI on Apple's phone shipments and revenue growth will be more pronounced in 2025 and beyond, as the rollout of AI features is phased across functionalities and regions.

Currently, Apple's AI is not yet available on mainland China's iPhone 16 series. According to official announcements, Apple's AI will begin testing in US English in October; Chinese, French, Japanese, and Spanish versions will be launched next year, but the specific timeline remains uncertain.

Limited Hardware Upgrades, Direct Confrontation with Huawei

This fall's launch event brought four new phones: iPhone 16, iPhone 16 Plus, iPhone 16 Pro, and iPhone 16 Pro Max. The base models come in five colors: Teal, Deep Teal, Pink, White, and Black; the Pro series offers four colors: Titanium, White Titanium, Black Titanium, and Desert Titanium.

Visually, the most significant changes in the 16 series are the screen sizes and the camera control button. The iPhone 16 and Plus maintain the same screen sizes as their predecessors, 6.1 inches and 6.7 inches respectively; the iPhone 16 Pro has been upgraded to 6.3 inches from 6.1 inches, while the iPhone 16 Pro Max has been increased to 6.9 inches from 6.7 inches. This also explains why Counterpoint Research's report stated that the panel shipments for the iPhone 16 series are 20% higher compared to the iPhone 15 series in June and July 2023.

Additionally, all iPhone 16 models feature a "Camera Control" button, enabling users to take photos, record videos, adjust camera settings, and more. In terms of internal components, Apple primarily focused on upgrades to the processor and camera capabilities. The iPhone 16 and Plus are equipped with the A18 chip, manufactured using a 3nm process, offering a 30% CPU performance boost and a 40% GPU performance improvement compared to the iPhone 15. The Pro models are upgraded to the A18 Pro chip, also built on a 3nm process, delivering a 15% increase in CPU performance and a 20% increase in GPU performance compared to the A17 Pro.

Regarding photography, the iPhone 16 Pro series comes standard with a 48-megapixel ultra-wide-angle camera, a 48-megapixel fusion camera, and a 5x telephoto lens. Thanks to sensor upgrades, this series supports 4K video recording at 120 frames per second.

Notably, at 2:30 PM today, Apple's long-standing competitor, Huawei, will be launching its new phone. The market is eagerly anticipating this "epic showdown." Based on information released earlier by Huawei's official online store and Weibo platform, Huawei will be unveiling its first tri-folding phone, the Huawei Mate XT. Pre-orders for the device opened on September 7, and as of September 9 at 9 PM, the number of reservations had surpassed 3 million.

Ethan Qi, Deputy Research Director at Counterpoint, notes that the target audiences for the Huawei Mate XT and the 16 series are distinct, making the impact of the Mate XT on the 16 series' sales quite limited. He believes the Mate XT's significance lies in solidifying Huawei's technological leadership in the foldable phone market and accumulating experience for developing more complex foldable smartphones.

Fruit Chain Companies Experience Overall Performance Improvement, Pro Assembly Landscape Shifts

When Apple announced the launch of Apple's AI in June, the market anticipated a "replacement wave" driven by the AI, injecting dynamism into the consumer electronics market. However, current feedback suggests that Apple's AI's impact on sales is projected to be limited. Ryan Reith, Research Director at IDC, points out that consumers may be interested in Apple's AI, but the market already has GPT and various other solutions; users can utilize AI on their present (other) devices. Consequently, Apple's AI is unlikely to directly drive new consumer purchases.

However, the iPhone 16 series benefits from other positive factors. Neil Shah tells Caijing reporters that as Apple's last iPhone revenue supercycle occurred in 2021, a substantial number of consumers are using iPhone 12 and iPhone 13 devices. These consumers may opt to upgrade, driving revenue growth. IDC predicts that the smartphone market will likely experience a 6% growth this year, primarily driven by a 7% growth in Android and an approximate 1% growth in Apple; the prediction for next year is a 4% growth for Apple and a 2% growth for Android.

From the perspective of domestic suppliers, the overall iPhone 16 series shipments are projected to see a slight rise, benefiting the industry chain to a certain extent. Bluesky's semi-annual report emphasizes the "end-side AI implementation as a significant driving force for the company's revenue growth." Since July, relevant factories have been actively recruiting employees. Fruit chain leading companies like Luxshare Precision, Foxconn, Bluesky, and BOE are actively hiring at high wages. According to a Foxconn recruitment intermediary, this year's hiring numbers and wages surpass those of last year. However, on the evening of September 9, a labor intermediary informed reporters that the peak recruitment season is nearing its end, and demand has subsided.

Notably, the most significant change in the overall production landscape for Apple phones is in the Pro series. Firstly, there are changes in suppliers: previously, Luxshare Precision primarily assembled iPhones for Apple's base models. However, starting with the 15 series, Luxshare Precision began assembling Pro models, and its involvement in the 16 series' production has increased. Recently, a fruit chain insider confirmed the news reported by renowned Apple analyst Ming-Chi Kuo, stating that Luxshare Precision has successfully secured the NPI (New Product Introduction) contract for the iPhone 16 Pro Max. Additionally, Kuo published a statement on September 9, indicating that Hon Hai (Foxconn) and Luxshare's production order ratios for the iPhone 16 series are 55%-60% and 40%-45%, respectively.

Furthermore, there are shifts in production locations. Apple's Pro series was previously manufactured solely in China. However, a recent report from Bloomberg indicates that Foxconn's factory in Tamil Nadu will begin producing Pro and Pro Max models. Despite the ongoing delays in India's iPhone production schedule and the controversy surrounding its products, Apple's commitment to the "multi-supply policy" remains evident.

In this context, concerns are mounting regarding Apple's potential shift in its supply chain. Fan Boyu, an analyst at TrendForce, shares with Caijing reporters that, from a long-term perspective, supply chain relocation is inevitable, which will undoubtedly impact the market share of domestic suppliers. However, in the short term, supply chain shifts will not be significant, as the relocation process is gradual and entails considering numerous supporting factors. Furthermore, with diversified deployments, some supply chain companies may establish new locations closer to their brand partners' needs to ensure the stability of their market share.