Analysts believe that Apple's AI upgrade cycle in the first year will not be significantly affected by the EU's Digital Markets Act, and Apple has enough time to address these issues in FY2025.
Despite the high expectations for Apple's AI system, "Apple Intelligence," the company's announcement last Friday poured cold water on the EU market. The statement from Apple said that in order to find a solution that complies with EU regulations and protects consumer privacy, the release of the AI system in the EU will be delayed. This has raised concerns about the possible impact of the delay on Apple's AI upgrade cycle in the EU. However, Morgan Stanley is confident in Apple's ability to deal with this delay. According to a report released on the 24th by analyst Samik Chatterjee, the delay will not significantly affect sales in the EU region. This is because the AI upgrade cycle is more likely to follow a two-year "staggered climb" pattern rather than a one-year "super cycle." In these two years of the AI upgrade cycle, Apple's sales focus in the first year will be in North America, with enough time to solve the EU problem, whereas the second year is expected to focus on the European and Chinese markets. $Apple (AAPL.US)$In their report released on the 24th, Morgan Stanley analysts expressed confidence in Apple's ability to deal with the delay in releasing their AI system "Apple Intelligence" in the EU region, despite high market expectations. Last Friday, Apple's statement poured cold water on the EU market, citing a need to find a solution that complies with EU regulations and protects consumer privacy as the reason for the delay. This raised concerns about the possible impact of the delay on Apple's AI upgrade cycle in the EU.
The release of Apple's AI system "Apple Intelligence" in the EU will be delayed due to the company's efforts to find a solution that complies with EU regulations and protects consumer privacy, according to a statement by Apple. This has raised concerns about the possible impact of the delay on Apple's AI upgrade cycle in the EU, although Morgan Stanley analysts expressed confidence in Apple's ability to handle this situation in their report released on the 24th.
In their report released on the 24th, Morgan Stanley analysts expressed confidence that the delay in releasing Apple's AI system "Apple Intelligence" in the EU will not significantly affect sales in the region. They believe that the AI upgrade cycle is more likely to follow a two-year "staggered climb" pattern rather than a one-year "super cycle." Therefore, during these two years of the AI upgrade cycle, Apple's sales focus in the first year will be in North America, giving them enough time to solve the EU problem. They expect the second year to focus on the European and Chinese markets.
The AI upgrade cycle is more likely to follow a two-year "staggered climb" pattern rather than a one-year "super cycle," according to a report released on the 24th by Morgan Stanley analysts. Therefore, during these two years of the AI upgrade cycle, Apple's sales focus in the first year will be in North America, giving them enough time to solve the EU problem. They expect the second year to focus on the European and Chinese markets.
The gradual growth pattern during the AI upgrade cycle is based on several factors. First, North America will be the main contributing market for the first cycle, with sufficient sales expected to meet upgrade expectations. Secondly, the second upgrade cycle depends more on the EU and China, which is key to ensuring that Apple's future upgrade cycle is not affected. Additionally, the Apple Intelligence feature will not be introduced all at once, but gradually. iPhone 15 Pro and 15 Pro Max users will have to wait until the second year to upgrade with the iPhone 17.
North America will be the main contributing market for the first cycle of the AI upgrade cycle and is expected to satisfy upgrade expectations.
The second upgrade cycle depends more on the EU and China and is key to ensuring that Apple's future upgrade cycle is not affected.
The Apple Intelligence feature will not be introduced all at once, but gradually. iPhone 15 Pro and 15 Pro Max users will have to wait until the second year to upgrade with the iPhone 17.
The gradual penetration of AI has led to a reevaluation of Apple's upgrade cycle.
In the 5G cycle that started in 2020, Apple topped the global smart phone sales chart with the release of their first 5G phone, the iPhone 12 series. According to Gartner's analysis of data from that season, many users bought new phones to experience the 5G feature.
The AI upgrade cycle is different from the 5G super cycle and will be a two-year staggered growth cycle, with one key factor being the Chinese market, according to analysts.
China was the main driving force behind the iPhone 5G cycle, but Morgan Stanley is hesitant to credit China with contributing to this AI upgrade cycle because of the rise of local Chinese brands that reduced Apple's market share.
The AI-led upgrade cycle will be dominated by North America, followed by China.
In their report, Morgan Stanley analyzed the contribution of different geographical markets to Apple's iPhone sales. The data showed that Western Europe (excluding the UK) accounted for only about 14% of Apple's total iPhone sales. In contrast, North America, China, and the Asia-Pacific region were the main sales contribution markets. In the 5G upgrade cycle, iPhone sales increased from 190 million units in fiscal year 2020 to 238 million units in fiscal year 2021. North America increased by 110 million units, China increased by 18 million units, and the Asia-Pacific region increased by nine million units. Contributions from Western Europe and other regions were relatively small, increasing only by 600 and 400 units, respectively.
In the AI upgrade cycle, analysts predict that iPhone sales will increase by 22 million units in the first year, followed by an additional 24 million units in the second year.
In the AI upgrade cycle, analysts predict that iPhone sales will increase by 22 million units in the first year, followed by an additional 24 million units in the second year.
Although North America will play a major role in the first year of the AI upgrade cycle, Western Europe and China will be equally important in the second year. The report suggests that in the second year of the AI upgrade cycle, Apple will depend more on the international market and will work to limit delays in introducing new features in these markets.
After Apple's WWDC conference on June 11th, the market is generally bullish on Apple's future performance. Morgan Stanley, JP Morgan, and Bank of America previously said that the gradual penetration of Apple Intelligence will drive a new round of growth in the supply chain.
Apple said that to find a solution that complies with EU regulations and protects consumer privacy, the release of their AI system "Apple Intelligence" in the EU will be delayed. This has raised concerns about the possible impact of the delay on Apple's AI upgrade cycle in the EU, although Morgan Stanley analysts expressed confidence in Apple's ability to handle this situation in their report released on the 24th. Apple's stock price on the secondary market rose 18.15% in the past month and is currently at $208.14 per share.
Editor/Somer