On a recent Friday, the renowned analyst Ming-Chi Kuo from TF International Securities released a striking report suggesting that the market's expectations for Apple may be overly optimistic
Kuo warned that Apple is likely to face a multitude of significant challenges by the year 2025, which could substantially hinder the company’s expansion and profitability.
The outlook for Apple's flagship product, the iPhone, appears particularly lacklusterWhile Apple itself has adopted a conservative stance regarding the future of its smartphone segment, in-depth investigations of the supply chain indicate that iPhone shipments are expected to fall below market consensus predictions by approximately 8% to 10% in 2025. In discussions with key suppliers regarding iPhone production plans for 2025, Apple has exhibited extreme caution, a move that inevitably sends a pessimistic signal to the marketDespite some anticipation surrounding the mid-2025 release of the new iPhone SE4, this model is unlikely to significantly boost iPhone sales
Forecasts suggest that shipments in the first half of 2025 will still face a year-over-year decline, with the first quarter impacted by an early pull due to tariff concerns following a possible change in the U.Sadministration, resulting in figures potentially aligning with last year’sHowever, in the second quarter of 2025, a noticeable decline in shipments is projected.
Turning to the critical Chinese market, Apple's business there has been consistently shrinkingBy December 2024, the overall smartphone shipments in China are expected to remain stable compared to the previous year; however, iPhone shipments are predicted to decline by approximately 10% to 12%. This trend indicates that Apple’s market share is increasingly being eroded in this key region
Furthermore, the anticipated ultra-thin iPhones and folding models expected to commence production in the latter half of 2025 may face additional hurdles due to their reliance on eSIM technology and the lack of support for traditional SIM cardsCurrently, the Chinese market does not promote phones that exclusively support eSIM; hence, if these designs do not change, such adaptations could severely hinder their market presenceAlthough the ultra-thin iPhone 17 is projected to out-ship the iPhone Plus, component downgrades alongside high pricing and minimal differentiation in user experience compared to existing models mean that overall sales are unlikely to see significant growthOverall, iPhone shipments are expected to hover around 220 million units in 2024, with projections for 2025 barely reaching between 220 million and 225 million units, drastically below the market consensus of 240 million units or higher.
In the realm of AI services, no compelling evidence has yet emerged to suggest that Apple Intelligence will substantially contribute to hardware upgrade trends or service revenues
During a recent interview with Wired, Apple CEO Tim Cook confided that the issue of charging for Apple Intelligence had never been discussed internallyThis revelation effectively dismantled the previously optimistic projections held by some analysts and media members who had envisioned Apple Intelligence as a vehicle for driving service business growth through potential subscription modelsFurthermore, prior surveys indicated a significant disinterest among iPhone users regarding Apple Intelligence, aligning with supply chain findings illustrating that the rollout of Apple Intelligence has provided no tangible benefits toward stimulating hardware upgrades.
Additionally, Apple faces multiple structural challenges while promoting edge AI
Following the impressive reception of Apple Intelligence at the WWDC 2024 event, showcasing capabilities like smart replies and writing tools, excitement appeared palpableHowever, just months later, cloud-based AI quickly evolved, seizing the spotlight with its robust computational capabilities and expansive functionality, overshadowing Apple Intelligence in the public consciousnessUsers have begun to notice limitations in Apple Intelligence's capabilities; issues like underdeveloped features and slow support for languages like Chinese have significantly undermined the user experienceAlthough Kuo does not dismiss the long-term potential of Apple Intelligence, he acknowledges that solid evidence demonstrating its capacity to drive hardware upgrades and service revenues remains unobservedTherefore, the market must approach the previously overly optimistic view of Apple’s future development with caution, fostering a more measured perspective on its ongoing trajectory in the AI domain and the multitude of challenges it encounters.