Source: Golden Ten Data

For a long time,$Apple (AAPL.US)$It has always relied on the Chinese market and iPhone to achieve growth. As these revenue streams continue to decline, the company must explore new regions and products to get back on track.

Additionally, Apple's next big thing is a device-based large-scale language model; iPad retail sales are declining; Vision Pro sales are losing momentum; and iOS 17.5 includes a change that could disrupt the App Store.

Apple is being attacked on all sides. Regulators and legislators in several countries are reviewing the company. It is catching up in the field of artificial intelligence. It is struggling to find new product categories, as shown by the recent collapse of its automotive project.

Perhaps more worryingly, the company's two traditionally reliable business units are falling into a slump: iPhone and sluggish sales in China.

After a brief recovery during the holiday season, iPhone sales are expected to decline again when Apple releases its latest earnings report. According to Wall Street estimates, this will drag down overall revenue by about 5%, the fifth decline in the past six quarters. Unit sales are also falling, and IDC expects iPhone sales to drop 10% in the first three months of this year.

For Apple, the good news is that currently iPhone users in China haven't changed their phones a lot. The problem seems to be more about attracting new users to the Apple product ecosystem and getting existing users to upgrade as soon as possible.

As we all know, iPhone upgrades have slowed down in recent years. There are many reasons for this: a lack of old-school operator subsidies, rising mobile phone prices, a sluggish economy, and the world still struggling to recover after the pandemic. But it's also clear that Apple is reducing the reasons for consumers to upgrade.

Let's face it: Apple's flagship product hasn't changed much since the iPhone 12 was released in 2020. Prior to that, there were no major upgrades since 2017. Gone are the days of having a major overhaul of the iPhone every few years.

To make up for this, Apple is fully committed to service and accessories. Although iPhone users may not upgrade their smartphones every two years, they may still spend hundreds of dollars each year on services, apps, and AirPods. Maybe they'll even pay for an Apple Watch. It's just the icing on the cake when users finally decide to buy a new iPhone.

But even this strategy has reached its limit. Sales growth has stagnated, and changes are clearly needed.

What can Apple do? The most obvious answer is to launch an important new product category, but there won't be any new products coming soon. The company spent ten years and $10 billion developing a car, but the car will never be released. It took another eight years, and cost billions of dollars to create the $3,500 Vision Pro, but the device won't be a major money-making tool for years. Until Apple can produce products that are lighter in weight and cheaper, Apple headphones will still be a niche product.

But I do think there's a way to resume growth without creating a brand new device. Apple's best course of action is probably to develop a cheaper iPhone and re-enter emerging markets.

Since the launch of the first iPhone, there have been calls for cheaper models. But that's not what Apple is actively pursuing. Apple's first attempt at making the device more affordable was cutting the price of the one-year-old model by $100 when the new version went on sale. Apple then launched the iPhone 5c in 2013, but most of this model was just an old version wrapped in colored plastic, and the discount was also $100.

In 2016, Apple tried to launch the iPhone SE again. The $399 price was an improvement, a few hundred dollars cheaper than the high-end model, but its design quickly became obsolete. Today's SE costs $429, which isn't cheap considering its lack of features.

Next year, Apple plans to upgrade the SE and switch to a full-screen design to make it look more like a modern smartphone. But thanks to the use of faster chips and high-quality materials, it is certain that its price will be much higher than $400.

If Apple wants to take emerging markets seriously, it should develop an iPhone that costs around $250. This probably isn't something Steve Jobs would do, but what Apple needs now is probably lower prices.

Apple can cut costs by adopting a full-screen LCD screen (instead of the currently more expensive OLED display on iPhones) and reducing the number of cameras. The device will use an older but still capable chip, and will probably also use a plastic case (still retaining Apple's industrial design). Also, the company is likely to limit sales of phones to emerging economies.

This requires a shift in mindset. Apple will have to forget its boastful profit margins and just pursue revenue and market share. The move could help establish the company's brand in developing countries, and Apple may eventually upsell more expensive devices to these consumers. In the process, more and more people will fall in love with Apple's services and apps.

Apple hasn't taken this move due to concerns about diluting its high-end brands. Someone told me that's why discussions about selling really cheap iPhones aren't progressing. “We don't offer simplified, terrible products,” Jobs said many years ago, and Apple still upholds this philosophy.

But the market is changing. The competition has improved, and the stakes are higher. Apple also recently took an initiative to show it's more open to new ideas: the company now sells a $699 M1 MacBook Air through Walmart, but isn't advertising it on its own channels.

Billions of people around the world don't use Apple products, and this probably won't change if there aren't more affordable options. The biggest opportunity is probably India, where Apple is already expanding.

Advanced cellular access continues to grow in India. India's middle class continues to grow, and more people buy smartphones every year. Apple has already opened two specialty stores in the region and plans to open at least three more. The country is also becoming a manufacturing hub. Apple is rapidly expanding iPhone assembly in the country and plans to eventually manufacture more devices in the country.

Neighboring markets such as Vietnam, Indonesia, Thailand, and Malaysia are also very attractive. Apple has already opened two specialty stores in Thailand and is about to open its first store in Malaysia. Last year, the company opened an online store in Vietnam. This move usually indicates that Apple will promote on a larger scale in a certain region. Like India, these markets are increasingly becoming final assembly bases for the company's products.

It's no surprise that Apple CEO Tim Cook (Tim Cook) visited Vietnam, Singapore, and Indonesia in Southeast Asia last week and promised to increase investment there. Cook also had a similar visit to China a few weeks before that.

There are other opportunities outside of Asia, including parts of Eastern Europe and Latin America. Further afield, Apple may even make a big foray into Africa. There are still limitations in terms of infrastructure, but Apple is clearly studying this prospect. A few years ago, it expanded some of its services in the region. Last year, the company hired a new general manager for Nigeria, the second in three years.

Apple's next big thing: large language models on devices. As I've discussed before, the company is exploring some “next big thing” projects, including augmented reality glasses and personal robots. But later this year, it will make greater efforts in the field of more advanced artificial intelligence. In this field, Apple is catching up with companies such as OpenAI and Google under Alphabet (GOOGL.O), and its initial artificial intelligence capabilities may not be superior to competitors. But the way it implements this technology could still be a game changer.

Apple has been developing a large language model — an algorithm that supports generative artificial intelligence capabilities — and all indications are that it will be implemented entirely on devices. This means that the technology is powered by the processor within the iPhone, not in the cloud. What are the results? In some cases, Apple's artificial intelligence tools may be slightly inferior in terms of functionality and knowledge (the company can fill the gap by partnering with Google and other AI vendors), but this approach will greatly speed up response times. Also, it's easier for Apple to maintain privacy.

Apple will also adopt a few different marketing messages. Instead of hyping up the power of chatbots and other generative artificial intelligence tools, Apple plans to show how this technology can help people in their everyday lives. We should know all the details at the company's June Global Developers Conference, when the company will unveil its AI strategy.

Retail supply of iPads declined before the May update. As I reported a few weeks ago, Apple plans to launch the iPad in early May, when it will update the Air model and equip the Pro version with a sleek new OLED screen. Now, we've got more clues that Apple is about to launch a new iPad. When Apple prepares to launch a new model, it usually cuts shipments of existing product lines, and this is exactly what we've seen. According to several retail store sources, stocks of several iPadAir models have begun to decline.

We haven't seen this happen with the iPad Pro, which is still well-stocked. This could mean that Apple has a lot of inventory to deal with (which is a likely scenario), or that the company plans to keep existing models after launching new ones. From a marketing perspective, the second scenario might be a challenge: Who would want a low-end old iPad that is supposed to be a high-end product? But if the price of the new model increases drastically, this also makes sense.

Remember VisionPro? It feels like VisionPro is repeating the mistakes of all previous VR headsets. After an exciting launch period, sales surged, and users flocked to the store for demonstrations, people's interest in it has waned.

Here's what I've heard from Apple retail stores: Demand for demos has dropped drastically. Users who make reservations often don't come; at least at some retail stores, sales have dropped from a few units a day to only a few units a week. Apple also had to step up the marketing of its online homepage. At the top of the site, there's a huge promotion about VisionPro, which is the most positive promotion since the device went on sale in early February.

A big question is whether current users of VisionPro are no longer using headsets often — an issue that has always plagued previous virtual reality systems. Let me talk about my own experience. I used VisionPro every day for the first few months (sometimes several times a day). Now I use it once or twice a week.

Initially, I used Vision Pro every time I watched a movie or YouTube, or wanted a more immersive screen on my Mac computer at home. Today, as the initial craze fades, people seem to be clearly aware that Vision Pro is too heavy for everyday use. The process of connecting the battery, booting, and navigating the interface is often not worth it. Also, there hasn't been a killer app yet, so I can choose it.

Vision Pro also took me out of the real world, so it was inconvenient to use it in front of family or colleagues. You can only enjoy it better when you're alone, like on a long flight or working from home.

Apple has fixed a few bugs that initially plagued VisionOS (the device's operating system), but hasn't done much to improve the experience. VisionPro still lacks two “environments” (visual backgrounds showing nature and other scenes), and many of Apple's apps aren't optimized for the platform. The app store on the device is also still lackluster.

On the upside, Apple did recently add a spatial character feature to make you feel like you're in the same virtual room as other VisionPro users. But this is best achieved if you know other VisionPro users, and there aren't many users you can find right now.

The iOS 17.5 beta added an EU-regulated feature, which poses a threat to the App Store. The EU's Digital MarketsAct (DigitalMarketsAct) came into effect last month, requiring devices such as iPhones to install apps directly from the Internet. The goal is to make smartphones more like personal computers, and installing software online becomes second nature. But this is a huge change for Apple, which could disrupt its App Store business, especially if the practice spreads outside of Europe.

Apple is more than satisfied with the EU's separate but related requirements to allow third-party app stores. These markets are cumbersome to set up and operate, so it seems impossible for many markets to start. The consumer experience may also be less than enjoyable. Users first launch a store, sign up for an account, and search for what they're looking for in an unfamiliar environment. By contrast, downloading from the internet is very simple: just go to the developer's website or find the download link via Google.

However, even though Apple is unwilling to provide an online download function, this feature is still present. It appeared in the second beta version of iOS 17.5, which was launched last week. Now, there are still a few hurdles to downloading the app. The software requires notarization with an active developer account, and the iPhone will display a license screen before installing the app. Additionally, developers are required to pay half a euro (about 53 cents) for every 1 million or more installations per year. Obviously, Apple isn't welcoming this new approach.

editor/tolk