Is the price drop in iPhone 15 a big blow for Apple’s AI phones?

2024 has only been three months in, yet Apple has already become one of the most severely struggling tech giants.

On one hand, the highly anticipated Vision Pro by Apple received mixed reviews after its launch, leading to a wave of returns in less than half a month. On the other hand, Apple’s long-planned car manufacturing project has been officially declared a failure, with billions of dollars in investments going down the drain. However, what really deserves attention is Apple’s smartphone business, as it remains the company’s most profitable sector.

Apple

(Picture source: Apple)

Apple’s smartphone business is facing some dangers, mainly because its leading position in technology is gradually being overtaken. For example, Samsung was the first to establish the concept of “Galaxy AI” in the global market, leading to record-breaking pre-sales of the Galaxy S24 series. In terms of imaging, the introduction of self-developed large-scale models with AI assistance in imaging during the launch of Xiaomi 14 Ultra has taken smartphone imaging to a new level.

Samsung

(Picture source: Samsung)

If falling behind in technology only worries the market about the future of the iPhone, then Apple’s decision to proactively lower prices reflects some concerns about its flagship business as well. It is reported that during the 2024 “Spring Renewal Season,” Apple’s official Tmall flagship store displayed discount strategies. All four models of the iPhone 15 series were offered a ¥1000 discount coupon, exceeding expectations in terms of price cuts.

Of particular note is that Apple’s Tmall official store is not a third-party channel discussed before. In a sense, the discount strategies implemented by this store represent Apple’s official stance and position. Just six months after its launch, Apple is running a major promotion for the iPhone 15 series, indicating that Apple might be feeling pressured.

Why the plummeting prices of the iPhone 15?

Sales performance of the last two iPhone generations has been disappointing, but the iPhone 15 series is experiencing a particularly dire situation for the first time.

On the day of its release, the iPhone 15 series experienced a “breaking sale.” Models like the iPhone 15 and iPhone 15 Plus were widely discounted by ¥300-500 on third-party platforms, with even unpopular colors like black failing to attract buyers despite price cuts. What’s even more surprising is the fate of the iPhone 15 Pro, which, despite Apple’s push for its “titanium metal,” also suffered from a day one price drop.

Apple

(Picture source: Apple)

Perhaps not unexpectedly, the iPhone 15 Pro is the least popular model in the iPhone 15 series in comparison to its predecessors. For instance, the standard iPhone 15 highlights “Agile Island” and “Fusion Glass,” while the iPhone 15 Pro Max features a new 5X optical lens. In comparison, except for the “titanium metal,” the iPhone 15 Pro lacks any significant upgrades.

Apple

(Picture source: Apple)

However, it’s not just the iPhone 15 Pro that’s unpopular; the entire iPhone 15 series has failed to capture consumer attention, posing the biggest crisis for Apple. Looking at the limitations of the iPhone itself, signal strength, imaging, and charging speed remain major drawbacks. Failing to deliver a good fundamental user experience is likely to drive away a large number of existing users. On the market side, 2024 has seen the introduction of a massive number of powerful new phones, such as Xiaomi 14 Ultra, OPPO Find X7 Ultra, and vivo X100 Pro+, all of which could deal a heavy blow to the iPhone.

This has forced Apple to adjust its marketing strategy in the Chinese market, with proactive price reductions being the best option.

During the “Spring Renewal Season” event, Apple’s Tmall flagship store offered a discount of ¥1000 off for every ¥5999 spent, making it possible to get an iPhone 15 for ¥4849 and an iPhone 15 Pro for ¥6849 after stacking Tmall coupons, which is quite a bargain. Some might argue that such prices have long been available in the multi-billion subsidy promotions across various platforms. However, Apple’s Tmall flagship store is an official channel, providing certain guarantees for after-sales service and warranty.

(Source: Tmall)

In any case, from a consumer’s perspective, it’s a good thing that Apple can offer discounts through official channels, providing “Apple fans” interested in the iPhone 15 series with a more affordable and secure purchasing option. However, price reductions are ultimately a temporary solution. If Apple can only attract consumers through price cuts, its market advantage will soon diminish.

Apple fans are adaptive, and sales are the backbone of Apple’s “lying flat” strategy

After the iPhone 12 series, Apple’s innovations have stalled. However, Apple’s users (Apple fans) seem not to care about AI, imaging, or folding features. For many Apple fans, buying an Apple product is just like buying a Louis Vuitton or Gucci bag, “just buying a bag,” so what innovation do they need when buying a bag? This has become the backbone of Apple’s “lying flat” strategy – the market is the best judge, and as of now, Apple still maintains a high market share and shipment volume.

According to Counterpoint Research’s 2023 global smartphone shipment rankings by model, the top 7 are iPhones, with the remaining three being Samsung’s mid-to-low-range models. It is interesting to note that the top-selling model is not the newly released iPhone 15 series but the iPhone 14.

(Source: Counterpoint Research)

Some changes in the rankings are worth noting, such as the market demand for the iPhone 14 far exceeding that of the iPhone 14 Pro Max. More cost-effective previous models have replaced the current flagships as consumers’ top choices. Due to the poor reputation of the iPhone 15 series, the cheaper iPhone 14 has become the preferred choice for many loyal Apple fans looking to upgrade.

Such market demand changes have forced Apple to be cautious. Unable to introduce mid-range models to “boost sales,” Apple has resorted to the blunt strategy of lowering prices. However, from a practical perspective, even if the iPhone 15 Pro Max is reduced by over 1000 yuan, its price still remains around 8000 yuan, and in this price range, there are already many powerful Android models to choose from.

(Source: Apple)

It is noteworthy that one of the crucial reasons for the strong iPhone sales in recent years is that Huawei couldn’t fairly compete in the market. Until the Mate 60 series, Huawei was largely absent from the high-end flagship market. A significant portion of the high-end market vacated by Huawei was captured by Apple. Even with the return of the Huawei Mate 60, limited production capacity has resulted in supply shortages. Next, as Huawei smartphones gradually recover, Apple may find it challenging to maintain its dominant position.

However, Apple is not yet anxious. Firstly, the iPhone continues to perform strongly in the market, despite its flaws, remaining one of the most influential flagship models in the high-end market. Secondly, Apple has cultivated a massive user base through its ecosystem, making it difficult for these users to truly escape the iPhone camp and switch to Android devices. Thirdly, Apple enjoys a high level of pricing power. While Android devices dominate in terms of value for money, iPhones capture most of the market’s profit. Realistically, Apple still has room to lower prices, which is part of its competitive edge.

The saying “no innovation, but good sales!” has the flip side of “good sales, but no innovation!” This is the dilemma that Apple faces.

The era of AI smartphones is approaching, and Apple is already falling behind

Without foresight, there will be immediate concerns. The fact that Apple’s most popular models are not the current flagships indicates a declining appeal to non-Apple ecosystem users. Facing the upcoming era of “AI Phones,” Apple hastily abandoned its car business to focus on AI, all the while branching into the uncertain Vision Pro business line. While iPhones may continue to sell well in the next couple of years, Apple’s room for imagination is shrinking, which is an undeniable fact.

The application of AI on smartphones is progressing faster than we think. Large models are just beginning to be integrated into smartphones, primarily as intelligent assistants to help users with simple tasks, such as Xiaomi’s Xiao Ai, emphasizing natural language question-and-answer interactions. Within a few months, vivo and OPPO have introduced the Blue Heart and Andes large models, respectively, incorporating not only natural language but also various generative AI features like article summaries and copywriting.

(Source: Lei Technology On-site Production)

Recently, at the Xiaomi 14 Ultra launch event, their self-developed large-scale imaging model officially debuted. Its arrival primarily addresses four issues: tone, optical fusion, portraits, and colors. In simple terms, the large-scale imaging model eliminates the “digital feel” brought by traditional computational photography, using AI calculations to restore optical texture.

(Source: Xiaomi)

During the just-concluded MWC, Honor unveiled the Magic 6 Pro overseas, making a high-profile announcement regarding their understanding of AI phones. At the same time, Honor brought together the five global AI giants (Google, Microsoft, Intel, NVIDIA, Qualcomm) to establish an organization similar to the OHA (the Android alliance behind), hoping to lead a new revolution in human-computer interaction.

It’s difficult to predict what changes AI could bring to the mobile phone industry. Perhaps in the near future, generative video models like Sora will land in the mobile phone field, where users can simply provide their facial features to generate an interesting vlog. However, none of the mentioned AI features are available on the iPhone.

Just as consumers were puzzled by the introduction of 5G, they were still willing to pay for the experience of new technology. The iPhone 11 series faced heavy criticism for not having 5G network support. Now, Apple is facing a similar dilemma. It’s not simply a matter of meeting market demands by reducing prices; it’s about having advanced technology or not.

(Source: Apple)

Certainly, AI is just one of the issues for the current iPhone. Including the aforementioned imaging, signals, and even the basic aspects like charging speed, battery life, and heat control, there are areas where iPhones need improvement. With half a year until the launch of the iPhone 16 series, will Apple choose to focus on solving these issues or continue to offer discounts to attract sales growth, it’s hard to say.

Final Thoughts

Many say that the current status of AI phones is not clear, and some pessimists believe that AI phones are just a marketing gimmick, an attempt by phone manufacturers when traditional smartphones are no longer as popular.

Indeed, AI phones are still in the early stages of development, and industry exploration is needed to see what they will evolve into. But the attitude of Android phone manufacturers to courageously explore, experiment, and innovate with new technologies is undoubtedly more commendable than Apple’s approach of “picking ready-made solutions.” Not only in AI phones, but also in dimensions like mobile phone imaging, foldable phones, Android phones are at the forefront, while Apple either follows or watches from the sidelines.

Over the years, Apple has become more accustomed to being late in integrating technology. Building on the trial and error of others, they create their products, relying on a powerful combination of brand, marketing, and ecosystem to achieve success. As a latecomer, Apple may avoid pitfalls, while Android phones have also reduced costs in the supply chain over the years, perhaps this is what is referred to as a latecomer advantage. However, even if this approach brings significant commercial success, the corresponding company cannot be considered a “great company,” and Apple is no longer the Apple that continuously changed the world—a somewhat regrettable realization.

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