An iPhone super cycle?

Hey everyone, it’s Mark. Apple’s AI features keep getting delayed — and that slow rollout likely means that the iPhone 16 won’t see a “super cycle” of orders. Also: Everything to expect from the phone’s launch event on Monday; Sonos delays its Roku-style product as it contends with an app crisis; and Apple could be fined billions the day after the iPhone 16 debut.

Last week in Power On: Apple’s succession strategy is to keep its old guard around as long as possible.

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A customer purchasing an iPhone 15 at an Apple store. Photographer: Dhiraj Singh/Bloomberg

In recent days, Apple Inc. made the decision to postpone more of its highly anticipated artificial intelligence features, underscoring the idea that its AI push will take time to pay off.

And yet, some analysts are still hoping that the Apple Intelligence features will set off a long-awaited “super cycle” for the new iPhone 16 — a rush of upgrades following pent-up demand. Their rationale: Consumers are excited about AI right now, and many have been waiting years to buy new iPhones.

Well, allow me to provide a dose of reality. A super cycle is simply unlikely this year. Some of the reasons are macroeconomic: There’s still smartphone softness in China, and many other consumers around the world are holding tight to their money.

But the bigger issue may come down to the technology itself. For one, the new iPhones will look nearly identical to last year’s models. Sure, there will be some minor camera upgrades and other features, but nothing gets consumers to upgrade like a new design — and we’re not getting that this year.

Then there’s the promise of AI. The new Apple Intelligence tools will indeed be a big part of Monday’s launch event for the iPhone 16. But it also will become increasingly clear that consumers will have to wait for the best features.

Here are the concerns:

• Apple Intelligence is still not fully baked. The initial version will be missing many features — including ChatGPT — that were unveiled in June. 
• Apple Intelligence also won’t be available in the EU, a critical region for the company that includes Italy, France, Spain, Sweden and Germany. It also won’t be ready for another crucial overseas market: China.
• Though AI is an exciting new field for technology fans, the vast majority of consumers aren’t well-versed in it. Many of them won’t understand why they would even need Apple Intelligence, and it will take the company several months to explain the benefits of the technology.

Even if everything goes smoothly, the Apple Intelligence introduction will be slow and staggered. The iPhone 16 won’t even ship with the capabilities when it goes on sale later this month. The features will start rolling out as part of iOS 18.1 software updates in October.

As I’ve written previously, the beta version of iOS 18.1 gives a good idea of what’s coming next month. There are features that summarize notifications and web content, tools to improve writing, and a way to remove people or objects from images. You’ll also get automated transcriptions of your phone calls, and the software will prioritize important emails within the Apple Mail app. 

We already knew that OpenAI’s ChatGPT chatbot wouldn’t be integrated into the software until later this year and that all of the major new Siri features aren’t coming until next year. But now even more capabilities have been pushed back.

Apple made the decision to delay its new image-generation features to iOS 18.2 (rather than 18.1), which is scheduled for release in December. That includes the Image Playground app and the Genmoji capability, which uses AI to make emoji based on inputted text.

This spread-out approach means it’s unlikely for the AI platform to be compelling enough to drive serious upgrades this year. Instead, Apple will have to tout some of the changes to the phone itself. That includes a new photo-snapping button, and the addition of the Action button to lower-end models.

By fall of 2025, when it’s time for the next iPhone, Apple should be in a stronger position. Apple Intelligence will be fleshed out and available in more of the world. Moreover, the iPhone will have a real upgrade driver: a new look.

That’s all to say: Don’t believe the hype about an iPhone 16 super cycle. But you can start believing in one for the iPhone 17 next year.

Apple Chief Executive Officer Tim Cook with the iPhone 15 Pro. Photographer: David Paul Morris/Bloomberg

Everything to expect at Monday’s big product launch. The unveiling — the first of two Apple events this fall — will focus on the iPhone ecosystem. You can read the details on everything to expect here in my extensive preview. A major topic will be Apple Intelligence and the capabilities showcased in June, as well as new health features for the Apple Watch, a refresh of the lower-end AirPods line and camera upgrades for the iPhone. At this point, I expect another event in October that will focus on the M4 Mac mini, iMac and MacBook Pro — in addition to new iPad models.

The Sonos section inside of a Best Buy store. Photographer: Bloomberg

Sonos delays its first TV set-top box and scales back headphone shipments in face of mobile app turmoil. Sonos Inc. is struggling to bounce back from a flawed app release, and it’s hard to think of many companies that have suffered this much from a software problem.

When a company has a hardware glitch, it’s understandable that it might take a while to fix. But software is usually something that can be resolved more quickly. And yet, Sonos is still in the middle of a crisis. Though the company has made headway in repairing the damage, the fallout will be felt for months. 

Sonos has already had to lay off employees, likely in part to cope with the mounting costs and loss of sales. And the company has had to delay two products so that it can focus on the software problem. One of the two devices, I’m told, is a Roku-like offering codenamed Pinewood (the company’s first TV set-top box). It will be postponed until next March from January.

The other bad news for Sonos is that its new Ace headphones are underperforming. The company originally sought to build about 900,000 to 1 million units per year (2,500 headphones per day). That number is now down to roughly 250 units a day, which would be about 90,000 to 100,000 units annually.

Sonos is in a fragile position, and its stock is down 32% this year (compared with a 13% gain for the S&P 500 Index). Only time will tell if it can turn things around, but the crisis has marred a year that was meant to be a breakthrough time for the company — with a long-awaited push into new products. Now it has to focus on cleaning up a mess.

Apple’s campus in Cork, Ireland. Photographer: Paul Faith/AFP

Apple faces threat of major fine just one day after iPhone 16 debut. About eight years ago, the European Commission alleged that Apple and Ireland worked together to help the iPhone maker dodge corporate taxes on more than $100 billion generated in Europe between 2004 and 2014. The commission fined Apple close to $14 billion for what it deemed to be unpaid taxes. Since then, the case has worked its way through courts and an appeals process, and the giant fine amount — a record-sized penalty — has been stuck in an escrow account. 

Now, the European Commission has set a date to announce whether Apple has to pay the fine: Tuesday, Sept. 10. Coincidentally enough, that was the same day when Apple had hoped to reveal the iPhone 16, creating a scheduling problem. The company doesn’t know how it will fare in the case, but it would have been too big a risk to hold its launch event at the same time that it’s potentially hit with one of the largest corporate fines ever.

So, here we are: There will be a rare Monday iPhone event — followed a day later by this monumental decision. Apple also had another reason for avoiding an iPhone launch on Sept. 10: That’s the date of the first US presidential debate between Kamala Harris and Donald Trump.

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