• The iPhone 16 shows hardware improvements but ultimately is building Apple Intelligence’s foundation.
• Apple and US carriers are pushing the iPhone 12 installed base to upgrade.
• With this launch, the carriers and Apple hope to improve upgrade rates in H2.

Overall, the iPhone 16 signifies more than a new phone. It is a strategic move towards a future powered by Apple Intelligence, with the potential to reshape consumer expectations and secure Apple’s dominance in the mobile landscape. Below are the key takeaways for the US market from the latest iPhone launch:

• Springboard for Apple Intelligence: While the iPhone 16 boasts new features such as upgraded cameras, better battery performance, and upgrades to the A18 Apple Silicon, the true long-term play is the integration of Apple Intelligence (GenAI) across all new iPhone models. While there were not many new Apple Intelligence announcements that weren’t already showcased at Apple’s WWDC, this event still tied things better together for the consumer. Apple users in the US will be able to take advantage of features like creative writing aids, enhanced search for content in images, image generation and email and notification summaries. This launch could pave the way for a new era of innovation, starting by reshaping the way users interact with their iPhones, content and apps, via an enhanced Siri platform – potentially expanding to the broader Apple ecosystem in the future.
• Targeting the iPhone 12 upgrade wave: Apple is strategically incentivizing the iPhone 12 base in the US. According to Counterpoint’s Apple 360 Service, a large installed base of around 50 million iPhone 12 devices is approaching the upgrade window. During the event, Apple reinforced this by highlighting key differences like a 60% CPU and 2x GPU improvement with the A18 chip compared to the iPhone 12. Camera enhancements across the new range (including the ability to shoot spatial images and video) further highlight the hardware changes compared to four-year-old iPhones. Apple also called out iPhone 12 and iPhone 12 Pro users who would get $800 and $1,000 off respectively with carrier promotions by trading in their devices. Conversely, Apple.com non-carrier trade-in deals declined. Almost all N-1 and N-2 models saw reductions in trade-in value compared to the iPhone 15 launch. The N-2 Pro model saw the biggest reductions in trade-in value with a 17% YoY drop to $400.

Source: Apple and Counterpoint Research

• Navigating a slow start: Despite Apple’s efforts, the company saw a sluggish H1 2024. Record low upgrade rates at US carriers in Q1 and Q2 indicate a cautious consumer market in the country. This poses a challenge for achieving significant growth in H2, even with the iPhone 16 launch. The carrier-focused trade-in promotions demonstrate that carriers want to funnel more sales through their own promotions, likely trying to help push upgrade rates higher in H2 after record lows in H1.
• Long-term growth engine: While the short-term outlook may be tempered, the long-term vision appears focused on AI integration. As GenAI matures within the iPhone 16 and future iterations, Apple expects to foster a more compelling upgrade cycle for users, potentially leading to sustained growth over the coming years. Apple is also making its way into more health verticals, such as the hearing aid market with its new Apple AirPods Pro 2 and the sleep apnea space with the new Apple Watch Series 10. Improving overall health metrics fits well into the Apple Intelligence playbook as Apple seeks to help its users do more with their own data.