As we look towards the next year, the outlook for Apple iPhone sales and the impact of artificial intelligence (AI) on consumer interest in smartphones appear subdued. According to a recent survey conducted by UBS Equity Research, analyst David Vogt suggests that we are unlikely to see a significant surge in phone sales driven by AI features. Here’s a detailed look at the findings and what they mean for Apple and the broader smartphone market.

Tepid iPhone Purchase Intent Across Key Markets

One of the most striking takeaways from the UBS survey, which involved approximately 7,500 consumers globally, is the muted interest in purchasing new iPhones over the next 12 months. This trend is particularly pronounced in the United States, Apple’s largest market, where purchase intent has decreased by 3 percentage points year-over-year.

While there was a slight increase in purchase intent in China, other major markets such as the UK, Germany, and Japan also reported declines in consumer interest for the coming year. This data aligns with UBS’s forecast that iPhone build rates for calendar year 2024 are likely to remain flat or decline. Sales, or “sell-through,” are also expected to be down this year, with only a modest uptick anticipated next year.

Limited Interest in AI-Driven Smartphones

When it comes to AI integration in smartphones, consumer interest appears to be tepid outside of China. The survey reveals that only about one in four respondents globally express interest in purchasing a smartphone with advanced AI features. This sentiment is considerably stronger in China, where there is a notable curiosity and willingness to explore AI-enabled devices.

However, in regions outside China, the enthusiasm for AI smartphones is less pronounced. This suggests that the anticipated “super cycle” of phone upgrades driven by AI innovations may not materialize, at least not in the near future.

Concerns and Considerations: Price and Privacy

The UBS survey highlights two primary concerns among consumers regarding GenAI smartphones: price and privacy. Nearly half of the respondents (47%) indicated that the cost of these devices is a significant factor in their decision-making process. This suggests that despite the potential benefits of AI features, the higher price points associated with these advanced technologies could be a deterrent for many consumers.

Privacy is another critical factor, particularly in China, where approximately 61% of respondents cited it as a reason for their reluctance to purchase AI-integrated smartphones. This underscores a broader concern about how personal data is handled and protected, especially as smartphones become more sophisticated and capable of processing sensitive information.

Implications for Apple

For Apple, these insights present both challenges and opportunities. The decline in purchase intent for iPhones across several key markets indicates that the company may face difficulties in driving significant growth in the near term. However, the strong interest in AI features within the Chinese market suggests that Apple could capitalize on this trend by emphasizing its privacy-centric technologies, such as the Secure Enclave. This technology isolates and protects user data, potentially addressing privacy concerns and attracting consumers who prioritize data security.

Additionally, while the global appetite for AI-driven smartphones remains limited, Apple’s reputation for innovation and quality could position it well to lead the market as consumer interest in AI technology evolves.

The findings from UBS Equity Research highlight a cautious outlook for the smartphone market, with subdued demand for new iPhones and mixed interest in AI features. As Apple navigates these trends, its ability to innovate and address consumer concerns about price and privacy will be crucial in maintaining its market leadership and driving future growth.