Apple’s cautious approach to artificial intelligence has backfired, creating a perfect storm of delayed product launches, declining sales, and intensifying competition that threatens its premium market position and core iPhone business.
The Promise vs. Reality Gap
Apple’s artificial intelligence strategy, unveiled with great fanfare at WWDC 2024 under the “Apple Intelligence” banner, has become a case study in execution failure. The company announced in March 2025 that key Siri improvements would be delayed until 2026, representing a significant setback from the initial fall 2024 rollout plan.
Apple’s top Siri executive, Robby Walker, told staff that delays to key features have been “ugly and embarrassing,” and that the decision to publicly promote the technology before it was ready made matters worse. This internal admission reveals the depth of Apple’s AI challenges and suggests systemic problems in the company’s development process.
The most anticipated features—including Siri’s ability to understand personal context and take actions across multiple apps—remain indefinitely postponed. Some within Apple’s AI division believe that work on the features could be scrapped altogether, and that Apple may have to rebuild the functions from scratch.
Market Consequences of AI Delays
iPhone Sales Decline
The impact of Apple’s AI stumbles is already visible in sales figures. iPhone sales declined about 5% globally in the final quarter of 2024, hurt by underwhelming upgrades and competitors making inroads in China. Roughly 50% of iPhone owners who didn’t upgrade to the iPhone 16 said they held onto their older phones due to Apple Intelligence delays.
This delay is particularly damaging because Apple has been advertising the not-yet-ready features in TV commercials for nearly six months, with the company introducing the iPhone 16 last fall by selling customers on the idea that the device was “built from the ground up for Apple Intelligence”.
China Market Crisis
Apple’s AI delays have proven catastrophic in China, its second-largest market. Apple was dethroned as China’s biggest smartphone seller in 2024, with local rivals Vivo and Huawei overtaking the iPhone maker after its annual shipments in the country declined 17%. iPhone shipments in China fell by 18.2% year-on-year in the final quarter of 2024, resulting in a 17.1% market share for the company, placing it behind Huawei and Xiaomi.
CEO Tim Cook acknowledged that Apple Intelligence’s absence in China affected sales, noting that “in markets where we had rolled out Apple Intelligence, the year-over-year performance on the iPhone 16 family was stronger than those markets where we had not rolled out Apple intelligence”.
The regulatory hurdles in China compound Apple’s problems. Apple Intelligence is only available in English for now, and while Apple will release a simplified Chinese version in April, the company must work through China’s regulatory process and find a local partner licensed to offer AI services.
Strategic Missteps
The Privacy-First Paradox
Apple’s commitment to privacy-focused, on-device AI processing—while admirable from a user protection standpoint—has become a strategic liability. Apple’s refusal to enter the cloud AI space leaves it reliant on consumer hardware cycles and developer goodwill, both of which may wane as competitors offer richer, more adaptable platforms.
Most enterprise AI innovation is happening in the cloud, powered by APIs and platforms that allow fine-tuning, multi-modal inputs and integration with vast data sets. Apple’s edge-computing approach, while technically impressive, limits the sophistication of AI features it can deliver compared to cloud-based solutions.
Missing the AI Platform Shift
Apple services chief Eddy Cue suggested that AI represents a threat to Apple’s biggest business, stating “AI is a new technology shift, and it’s creating new opportunities for new entrants”. This admission reveals Apple’s recognition that AI could fundamentally disrupt the smartphone ecosystem that has driven its success.
While major AI firms are working toward a future where users simply talk to AI to get things done without touching a UI, Apple continues to double down on conventional user interfaces. This approach risks making Apple’s products feel outdated as conversational AI becomes the primary interaction paradigm.
Competitive Threats Intensify
Enterprise and Cloud AI Leadership
Apple faces formidable competition from tech giants that have embraced aggressive AI strategies. Microsoft invested $4 billion in AI talent and integrated OpenAI into its Azure cloud services, aiming to dominate the enterprise AI space. Google’s acquisition of Character.AI and its work with DeepMind make it a leader in consumer-facing AI products.
Amazon’s huge investment in Anthropic and AWS cloud dominance gives it a strong foothold in the AI race, though Amazon’s AI strategy is more enterprise-focused.
Hardware Competition Emerges
The threat extends beyond software to Apple’s traditional hardware advantage. OpenAI in May acquired the startup io for about $6.4 billion, bringing in former Apple chief designer Jony Ive to build AI hardware. This development signals that AI companies are moving into Apple’s core hardware territory.
Gene Munster of Deepwater Asset Management suggested “They probably need to acquire Anthropic,” which would be by far Apple’s largest acquisition, given that Anthropic was valued at $61.5 billion in a funding round in March.
Financial and Operational Risks
Stock Performance and Investor Confidence
Apple’s AI struggles have weighed on investor sentiment. Investors were less convinced by Apple’s WWDC 2025 presentation, with the company’s stock closing down 1.2% for the day. Morgan Stanley analyst Erik Woodring lowered his price target on Apple from $275 to $252 on concerns that the Siri delays will impact iPhone upgrade cycles throughout 2025 and 2026.
Shares of Apple, which makes 90% of its products in China, have fallen more than 16% this year, wiping off over $600 billion from its market value.
Development Costs and Resource Allocation
Apple has invested an estimated $20 billion in AI over the past five years, with the company planning to invest $25 billion in AI over the next 3-5 years. Despite this massive investment, the company has little to show for its efforts compared to competitors.
The continued failure to get artificial intelligence right threatens everything from the iPhone’s dominance to plans for robots and other futuristic products, according to Bloomberg’s reporting on internal sentiment at Apple.
The Road Ahead: Limited Options
Acquisition Challenges
Apple faces limited options for quickly addressing its AI deficit. Major AI companies like Anthropic carry valuations that would make acquisitions extremely expensive, even for Apple. Anthropic was valued at $61.5 billion in a funding round in March, representing a significant premium over Apple’s largest previous acquisition of $3 billion for Beats Electronics in 2014.
Regulatory and Geopolitical Risks
The Trump administration has signaled that some tariffs could come in the coming weeks, creating uncertainty for Apple which makes 90% of its products in China. Combined with AI regulatory challenges in China and other markets, Apple faces a complex web of geopolitical risks that could further hamper its AI rollout.
Technical Debt and Platform Constraints
There are concerns internally that fixing Siri will require having more powerful AI models run on Apple’s devices, which could strain the hardware, meaning Apple either has to reduce its set of features or make the models run more slowly on current or older devices.
This technical constraint highlights a fundamental challenge in Apple’s edge-computing approach: the need to balance AI capability with device performance and battery life.
Why It Matters
Apple’s AI struggles represent more than just delayed product features—they threaten the company’s fundamental business model and competitive position. The iPhone, which generates the majority of Apple’s revenue, faces an existential challenge as AI becomes the primary interface for digital interactions.
Three Critical Takeaways for Business Leaders:
- Platform Risk: Apple’s closed ecosystem approach, long a competitive advantage, now limits its ability to compete in the AI era where open, cloud-based platforms dominate innovation.
- Market Share Erosion: The China market decline demonstrates how quickly dominant positions can erode when companies fail to deliver on technology shifts that matter to consumers.
- Execution Over Vision: Apple’s AI vision may be sound, but poor execution and unrealistic timelines have created a credibility gap that may take years to recover from.
The next 18 months will be critical for Apple. Without significant AI breakthroughs or strategic acquisitions, the company risks being relegated from technology leader to premium niche player in an AI-driven world. For business leaders across industries, Apple’s AI struggles serve as a cautionary tale about the dangers of underestimating the speed and scale of technological disruption.
This entry was posted on July 4, 2025, 1:30 pm and is filed under AI. You can follow any responses to this entry through RSS 2.0.
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