CNN
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Gross sales issues in China. Patent lawsuits within the US. Behind in generative AI. It’s just a few weeks into 2024, and Apple’s yr forward is paved with hassle.
The tech large’s barrage of challenges impression many components of its general enterprise. Simply final week, Microsoft took Apple’s spot as probably the most invaluable publicly traded firm, after trailing behind the iPhone maker for the higher a part of the final decade. Microsoft’s inventory climb is due largely to its early and sweeping bets on generative synthetic intelligence, an space through which Apple has largely remained mum.
However some analysts consider the corporate will have the ability to navigate its method by the mounting minefields all year long.
“Being Apple, which remains to be the biggest firm on the earth by market cap, I’m positive it’ll do all it may possibly to reduce the impression of those drawback areas,” mentioned David McQueen, an analyst at ABI Analysis. “It should nonetheless have an especially loyal base of customers in order that its model worth and recognition, and high quality will not be compromised.”
Right here’s a better take a look at what’s forward for Apple:
One in all Apple’s largest hurdles this yr can be addressing the market in China, the world’s second-largest financial system.
The corporate has scrambled to draw iPhone prospects within the nation following the discharge of the wildly profitable Huawei’s Mate 60 Professional smartphone. In a shock transfer, Apple not too long ago supplied temporary discounts on its iPhones and different merchandise in China, dropping costs about $70 for iPhones. (Macs and iPads had been additionally closely discounted). It’s regular for different sellers who carry Apple merchandise to trim costs however the firm itself hardly ever presents reductions.
The transfer raised eyebrows about how nicely the iPhone is performing in one among Apple’s most important markets, which drove about 20% of the corporate’s gross sales final yr. A latest Reuters report noted iPhone gross sales in China dropped 30% within the first week of the yr amid strain from rival Huawei.
Dan Ives, an analyst with market analysis agency Wedbush, referred to as China each Apple’s largest problem and alternative. Regardless of rising competitors, he mentioned China has about “100 million iPhones within the window of an improve alternative.”
One in all Apple’s hottest merchandise, the Apple Watch, stays at present banned within the US, as one of the crucial momentous patent disputes in fairly a while continues to unfold.
Final week, a US federal appeals courtroom reinstated a ban on a number of the extra premium variations of the Apple Watch. Apple had requested a keep on the ban whereas it appealed a US International Trade Commission ruling that went into impact final month. That ITC order prevented Apple from importing the Apple Watch Series 9, Apple Watch Ultra 2 and different more moderen fashions to the US as a result of it was in violation of medical firm Masimo’s pulse oximeter patent.
Apple bought 49 million smartwatches in 2022 and about 26.7 million within the first 9 months of 2023. Though a ban will probably impression gross sales outcomes, Jitesh Ubrani – a analysis supervisor at market analysis agency IDC – mentioned its Apple’s repute that’s additionally on the road.
“It’s not an excellent look,” he mentioned. “There could also be an impression on gross sales within the first quarter of subsequent yr, however on the finish of the day, nobody desires to be caught infringing on patents.”
It’s unclear how lengthy the dispute will final or if Apple will settle the lawsuit.
Main tech corporations, together with Microsoft, Meta, Google and Samsung, proceed to roll out generative AI options to their providers, computer systems and smartphones. Nonetheless, Apple has been largely quiet on the subject.
The corporate is rumored to introduce new Siri options powered by AI within the launch of iOS 18 later this yr. Some on-device generative AI options additionally might turn into unique to iPhone 16 fashions, thanks partially to its customized chips.
However AI improvements on flagship smartphones isn’t totally novel. Google’s newest Pixel 8 lineup, which launched in October 2023, already has many AI options, and Samsung’s Galaxy S24 lineup, which hits cabinets later this month, packs AI-powered instruments comparable to real-time translation, generative AI-powered search and up to date photograph enhancing options.
The push round AI is a part of a better effort by smartphone makers to distinguish themselves in a crowded market and drum up pleasure the place innovation has largely stalled in recent times.
Though it’s unlikely customers will change to different manufacturers particularly for AI options, folks will finally come to count on Apple to ship related or extra superior options.
This isn’t the primary time Apple has lagged in rising areas, comparable to 4G, 5G and foldable screens – none of which precipitated important setbacks.
McQueen mentioned though Apple’s opponents, specifically Samsung, may have bragging rights and “have the ability to level out this AI weak spot,” he questioned if prospects actually know what they’re getting with on-device AI and why it’s worthy of an improve.
On the similar time, iPhone adoption stays sturdy. Market analysis agency IDC recently released data that exposed Apple handed Samsung in smartphone shipments final quarter for the primary time.
The strain is on Apple to spice up gross sales throughout its different product classes. In November, Apple posted year-over-year gross sales declines for the fourth quarter in a row, struggling specifically with Mac and iPad gross sales. iPhone income, nonetheless, grew 3% to $43.8 billion.
Nonetheless, Barclays downgraded Apple inventory earlier this month citing disappointing iPhone 15 gross sales in China and softening demand for the newest iPhone. The following-generation iPhone 16 due out later this yr is predicted to have solely incremental upgrades, as nicely.
Apple additionally faces challenges across the upcoming rollout of the Vision Pro headset, which can be its riskiest product launch in years. The corporate should show a tool that blends each digital actuality and augmented actuality, a know-how that overlays digital pictures on reside video of the true world, is certainly the way forward for computing. And it gained’t be a straightforward promote: Whereas modern, it’s nonetheless a $3,499 clunky laptop you put on in your face.
A handful of main tech corporations deemed by the EU to be dominant “gatekeepers,” together with Apple, should implement new platform guidelines this yr. Meaning Apple might have to surrender unique management of how iOS apps are distributed, a transfer that might finally impression its income.
The brand new Digital Markets Act (DMA), which handed in 2022, goals to bolster on-line providers competitors. Among the most seen proposed adjustments for EU customers contain apps, comparable to how one can set up them and what could be pre-installed on units.
One change would require dominant working programs to permit smaller, third-party app shops to exist, in addition to the power to put in apps from anyplace exterior the official app retailer.
Though Google has allowed for each on the Android platform, Apple has maintained tight management over iPhone apps. Apple and different trade gamers have argued that opening up working programs on this method might go away customers susceptible to downloading extra dangerous apps.
Below the brand new guidelines, dominant app shops gained’t have the ability to de-list apps for refusing to make use of the gatekeeper’s proprietary fee programs, a difficulty highlighted most not too long ago by Apple’s antitrust case with Epic Games. A lot of Apple’s app retailer income comes from the 30% minimize it receives by its fee channels from in-app gross sales of digital items and providers, so the provisions might instantly have an effect on the corporate’s enterprise mannequin.
This month, the US Supreme Court docket declined to listen to an enchantment by Apple and Epic within the case, leaving in place a lower-court ruling discovering that Apple illegally monopolized app distribution. The choice to not hear the case additionally successfully upheld an injunction requiring Apple to change a few of its developer phrases.
The corporate hasn’t shared too many different particulars about it plans to adjust to the laws however the early March deadline is quickly approaching.
CNN’s Brian Fung and Clare Duffy contributed to this report