Apple launches its iPhone 16, the first equipped with generative AI

On Monday, Apple announced the launch of a new iPhone equipped with generative artificial intelligence (AI), in a bid to boost its sales and keep up with the technology race.

These are the "first iPhones designed from the ground up for (the AI system) Apple Intelligence," Tim Cook, the firm's CEO, said in a video broadcast at the company's headquarters in Cupertino, California, and online.

The Silicon Valley tech giant has a lot riding on its iPhone 16 and hopes to seduce customers with AI-equipped models.

With sales of $39 billion last quarter,the iPhone weighs 60% of Apple's revenue, and remains the gateway to the firm's services, such as the App Store or Apple TV, which are growing in importance for the company founded by the late Steve Jobs.

"These new iPhones are very important. It is Apple's most profitable product category and an essential cog in its expanding universe of services and subscriptions, its second most profitable business," noted Gadjo Sevilla, an analyst at Emarketer.

Apple must contend with customers who tend to hold on to their iPhone models longer and longer.

"This iPhone 16 launch is all about Apple Intelligence" and the AI revolution, summarized analyst Dan Ives of Wedbush in a note to investors.

"Apple Intelligence" is a new breed of computing capabilities for all of the company's devices, announced in June along with a partnership with OpenAI, creator of ChatGPT.

Initially, these capabilities include image editing through AI, translation and creative functions for messaging, in line with similar proposals from OpenAI or Google.

According to the company, its AI will even be able to suggest answers to emails. Users will be able to ask more complicated questions to Siri, Apple's voice assistant, for example, to find a photo in their albums through a simple verbal description.

Ives expects software makers to generate AI-enhanced apps and services, something that would boost iPhone sales.

Google, Meta (Facebook and Instagram), and Microsoft (OpenAI's main investor), have been marketing tools that allow good-quality content to be produced by simple requests for several months.

Strategy and risks

"Apple will surely explain that only newer devices will be able to fully utilize AI," Sevilla estimated.

"This strategy has a double objective: to deploy more slowly its new system (...) it will be easier to manage on a large scale and access to the new AI will lead (consumers) to buy the latest models," changing out the old ones, he added.

But Dipanjan Chatterjee, an analyst at Forrester, warns that "if Apple customers perceive little difference" between the new range of cell phones and older ones, "they will not be in a hurry to upgrade."

All brands considered, sales of smartphones with generative AI should grow 344% this year worldwide, according to consultancy firm IDC, and will come to represent 18% of the total smartphone market between now and the end of the year.