Apple’s AI strategy faces scrutiny as WWDC approaches

New York (CNN) — Apple is about to reveal what’s next for its most important products at its annual Worldwide Developer’s Conference on Monday. This year, the stakes are significantly higher than usual.

Apple announced its long-awaited push into artificial intelligence at last year’s event by introducing Apple Intelligence, a suite of AI-powered features for the iPhone and other products. But delays and underwhelming capabilities have put Apple on its back foot. The company has struggled to convince consumers and Wall Street that it’s a leader in the crucial technology, which is expected to overhaul the way people work, communicate and find information online.

Now, one year after introducing Apple Intelligence, the company is on the hook to prove at this week’s Worldwide Developer Conference (WWDC), a key annual event for the company, that it can make a name for itself in the AI space as its chief rivals like Google continue to charge ahead.

Addressing the problem

At this year’s WWDC, which kicks off Monday with a keynote address from Apple CEO Tim Cook and other executives at 10 a.m. PT, don’t expect Apple to show off a flashy new iPhone or Apple Watch. Instead, the company will outline new capabilities for its current devices that lay the foundation for where it could be going next.

“WWDC, from a developer conference perspective, is maybe more interesting than others,” said Carolina Milanesi, president and principal analyst at technology analysis firm Creative Strategies. “It does give consumers a peek as to what they can expect coming to whatever device that they already own.”

How much or how little those software updates incorporate Apple Intelligence could be telling. Apple did not immediately respond to CNN’s request for comment regarding its WWDC plans and AI strategy.

Apple’s AI struggles are larger than just a product delay. The bigger issue is that Apple’s current AI tools don’t offer experiences that are notably different from what you can get elsewhere. Apple Intelligence can summarize text messages, identify real-world surroundings with the iPhone’s camera, erase unwanted objects from photos, rewrite emails and prioritize notifications. But those features are similar to capabilities offered by other companies such as Google, OpenAI and Samsung.

In fact, rivals like Google and OpenAI are already moving one step further with technology they claim can execute tasks for consumers rather than just answering questions or generating summaries.

There are benefits to waiting; Apple has largely been able to avoid the embarrassing AI gaffes of its rivals, with one exception. Apple is also known for popularizing new technologies rather than being first, as was the case with smartwatches and tablets, two categories it now dominates.

But Apple has yet to prove it can do the same with AI. And it doesn’t sound like that’s going to change at WWDC, according to Bloomberg’s Mark Gurman, who wrote the event “may be a letdown from an AI standpoint,” citing “people within the company.”

However, the report did say Apple may open its models to developers so that non-Apple apps can incorporate text summarization and its other AI-powered features. The company may also announce an AI-powered battery management tool, according to Bloomberg.

But Dan Ives, global head of technology research for Wedbush Securities and an Apple bull, isn’t concerned about whether Apple makes significant AI announcements on Monday. He thinks Apple has a big opportunity to monetize Apple Intelligence moving forward despite its slow rollout, he wrote in a June 6 report.

The competition

Google, whose Android operating system is the only major rival to Apple’s iOS, has been barreling ahead with new AI tools and services. Its annual I/O developers conference was entirely focused on AI, with the company showing how the tech will be incorporated into everything from its ubiquitous search engine to its popular Chrome browser and Gmail.

At that event, Google also announced an upgraded version of its AI-generated video engine that made headlines and raised alarm for its ability to create startingly realistic clips.

“I think it’s becoming clearer how far behind they (Apple) are in AI,” Deepwater Asset Management managing partner Gene Munster told CNN in March.

Samsung is also said to be partnering with AI startup Perplexity to package its app and digital assistant into its Galaxy phones, according to Bloomberg. This comes after Motorola incorporated AI technology from several companies, including Perplexity, on its new Razr flip phone – further underscoring that the technology could play a bigger role in smartphones.

That presents a major opportunity for Apple; it’s the world’s second-largest phone maker by market share and also the only mobile device company to completely control both the hardware and software of its products. That crucial benefit has long been an advantage for Apple, giving it more freedom to develop exclusive features tailored for its products on its own timeline rather than coordinating with partners. Wedbush Securities estimates that “25% of the world’s population will eventually access AI through an Apple device over the next few years,” Ives wrote.

But Apple has yet to execute on that potential with AI, and the clock is ticking.

“We need more time to complete our work on these features so they meet our high quality bar,” Apple CEO Tim Cook said in reference to the more personal version of Siri on the company’s May earnings call. “We are making progress, and we look forward to getting these features into customers hands.”

Building the future

There’s a growing belief in the tech industry that some new type of device could one day supplant, or at least partially replace, the smartphone. And those devices, unsurprisingly, will largely run on AI.

Eddy Cue, the longtime Apple executive that leads the company’s services division, even acknowledged this, saying during his testimony in Google’s search antitrust trial that “you may not need an iPhone 10 years from now,” Bloomberg reported. Veteran former Apple designer Jony Ive and OpenAI CEO Sam Altman are also partnering to develop a new AI hardware product, the pair announced last month.

Companies like Google, Samsung and Meta are also investing in smart glasses with built-in digital assistants that can identify objects in a person’s environment as a potential successor to the smartphone.

That doesn’t mean iPhones will become obsolete anytime soon, nor does it mean consumers will switch to Android or avoid upgrading because of a lack of new AI features.

But in the near term, AI could give Apple another means to encourage iPhone upgrades if executed properly. Apple Intelligence is only supported on newer models, specifically the iPhone 15 Pro and later, meaning customers with older phones must upgrade to use it. Apple touted the iPhone 16 as being “built for Apple Intelligence” when announcing the device in September.

Cook said during Apple’s most recent earnings call that year-over-year iPhone 16 performance was stronger in countries where Apple Intelligence was available than those where it was not available, perhaps an indication that its AI efforts are somewhat helping sales.

The fact that people carry their iPhones – along with their AirPods and Apple Watch – everywhere they go could give Apple’s Siri a leg up compared to rivals like Amazon’s Alexa.

That is, if Apple does it right.

“The fact that Siri knows me so much more, just because my main driver, from a phone perspective, is an iPhone will make that interaction even more valuable than what Alexa does,” said Milanesi. “(Alexa) sees me in my home context, but doesn’t necessarily come with me in the outside world. So that is the potential right now.”

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