Apple WWDC to Unveil AI Strategy, Competes in AI Race

Apple to Unveil AI Features at WWDC Amid Fierce Competition, Aiming to Tap into 43% AI Smartphone Market by 2027

By Alex P. Chase

6/10, 00:31 EDT
Apple Inc.
Alphabet Inc.
Microsoft Corporation
NVIDIA Corporation

Key Takeaway

  • Apple to unveil "Apple Intelligence" at WWDC, featuring AI enhancements for iOS 18, iPadOS 18, and macOS 15.
  • Partnership with OpenAI could impact Apple's revenue-sharing deal with Google; negotiations ongoing for integrating Google's Gemini technology.
  • Despite competition from Google, Microsoft, and others, Apple's strong consumer base and A17 Pro chip position it well in the AI race.

Apple’s AI Push at WWDC

Apple Inc. is set to showcase its advancements in artificial intelligence (AI) at its annual Worldwide Developers Conference (WWDC) on Monday. This event marks a pivotal moment for the tech giant as it aims to reassert its position in the rapidly evolving AI landscape. Historically, Apple has been an early pioneer in AI, integrating it into features like photo processing, health applications, and the Siri digital assistant. However, the company has recently been perceived as lagging behind competitors such as OpenAI, Google, and Microsoft, especially with the advent of generative AI technologies like ChatGPT.

During the keynote address, Apple plans to unveil a suite of features under the banner of "Apple Intelligence." These features will be integrated into the upcoming software updates for iOS 18, iPadOS 18, and macOS 15. The enhancements include summarizing notifications, text messages, and emails, synthesizing meeting notes, transcribing voice memos, and creating custom emojis. Additionally, Apple is working on a more powerful version of Siri and its own large language models, although it is not yet as advanced as some of its rivals.

To bolster its AI capabilities, Apple is expected to announce a partnership with OpenAI, which will provide the company with a chatbot. This collaboration could potentially impact Apple's existing revenue-sharing agreement with Google, which generates billions of dollars annually. The terms of the deal with OpenAI remain unclear, and Apple is also negotiating with Google to incorporate its Gemini technology as a chatbot option on the iPhone.

Bernstein analyst Toni Sacconaghi highlighted Apple's significant advantage: its massive and loyal consumer base. "It has a very powerful consumer installed base for which it can act as a channel — just like it has for search and the App Store, the two most lucrative parts of Apple’s business today, outside of iPhone," Sacconaghi said.

Competitive Landscape and Challenges

Apple's foray into AI comes amid fierce competition from tech giants like Google, Microsoft, Meta, and Amazon, all of which have made significant strides in generative AI. Samsung, Apple's biggest smartphone rival, has already integrated Google AI features into its devices. The shift towards AI-based operating systems is expected to revolutionize how users interact with their devices, gather information, and create content.

Despite its efforts, Apple faces several challenges. The company has been under scrutiny from the European Union and the Biden administration over alleged antitrust violations. Additionally, while Apple's shares have recovered from a slump earlier this year, iPhone sales have plateaued after a significant growth spurt post-pandemic. The company is also vying with Nvidia for the rank of the second most valuable US company.

JPMorgan analyst Samik Chatterjee emphasized the importance of Apple's upcoming announcements. "Apple needs to dispel the perception that it has been behind on generative AI," Chatterjee said. "They need to be able to say: ‘OK, we have caught up with the rest of the industry.’"

AI Strategy and Technological Advancements

Apple's strategy has traditionally been to perfect existing technologies rather than pioneer new ones. This approach has been successful in the past, as seen with the iPod and iPhone. However, the rapid advancements in AI have put pressure on Apple to act swiftly. The company has built a team of top AI talent, led by former Google Brain executive John Giannandrea, and has developed a powerful chip, the A17 Pro, capable of running AI applications.

The competitive race in AI involves three key dimensions: developing powerful chips, creating compelling applications, and securing access to advanced generative AI models. Apple's A17 Pro chip, which exceeds the 30 trillion operations per second benchmark, positions it well in the hardware aspect. However, the iPhone 15 Pro's 8GB of RAM lags behind Samsung's S24, which has 12GB.

The International Data Corporation (IDC) predicts that AI smartphones will constitute 43% of global smartphone shipments by 2027. Nabila Popal, a research director at IDC, stressed the importance of a clear AI strategy for Apple. "If Apple wants to change this trajectory and accelerate this growth, it is crucial for them to outline a clear AI strategy in the coming weeks," Popal said.

Street Views

  • Toni Sacconaghi, Bernstein (Bullish on Apple's AI potential):

    "It has a very powerful consumer installed base for which it can act as a channel — just like it has for search and the App Store, the two most lucrative parts of Apple’s business today, outside of iPhone."

  • Ruslan Salakhutdinov, former director of AI research at Apple:

    "They’ve always watched what the space is like and have long decided they don’t have to be first, but they have to get it right."