Apple iPhone 16 Feedback Is Negative, Ferragu Says

Looking forward to these numbers dropping a little bit later, just share your thoughts with us on how the new iPhone is doing, what you're seeing just in terms of sales relative to the same kind of thing from last year with a new product. Hey John, yes, so we are just like in the very early innings of getting feedback from the market on how the iPhone is doing. As we were expecting so far, the feedback we get is pretty negative. We already hear about weak consumer reception and Apple poking on cutting orders with their supply chain, but it's still very, very early. What we expect usually is like late November and early December that news flow to accelerate and more evidence of that coming. And of course, if Apple has to make a significant adjustment to its supply chain, it's going to become very tangible and material in the first weeks of January. But so far, what you see is that Apple has gained a lot of market share in China. It's now reversing with Chinese manufacturing coming back into the higher end of the market. What you see is like a consumer demand across the world. You just mentioned like the demand in the auto industry being very weak. So you don't have a lot of consumer spending. And last but not least, the big focus in terms of innovation of Apple this year was Apple Intelligence introducing AI features to the phones. And what we see is that these features, even if they are like the right direction of travel, are unlikely to have a significant impact on consumer preferences in the near term. Yeah, a lot to unpack there. Can we just pick out the geographic piece of it? You mentioned China. Is there a read across from the struggles of luxury, the likes of Alvio made to an Apple in China at the moment? Is that the wrong way of looking at things? Yeah, that's that's an interesting one. When you look at it globally, it looks like consumer weakness tends to be more in the lower end of the market and the higher end of the markets being better protected. And that's what we we saw in the feedback. Like the weakness of the iPhone 16 is more like the non-pro models in China. You have potentially a different situation. You mentioned the data points of every image indeed. Well, maybe the higher end of the market could be could be slowing there, but it's still very early and would probably be more specific to China. How much are you seeing the bar as being lower for, say, an Apple than a Microsoft, then a Google, then even a meta? Just simply because there has been so much angst, really, about how it's going to deploy A.I. and whether it can really get some sort of upgrade cycle going. Yeah, it's a good question. I think you have like. A lot of excitement around the eye and being deployed by Apple came through over the summer. You saw the stock rate reacting to that very significantly and quite interestingly, expectations are very non tangible, intangible. People are excited about A.I., but nobody is really hanging on to a specific feature and to any sort of killer app. And you see a very similar situation at Microsoft, where Microsoft is doing quite a good job at putting that copilot in the end of their users. They seem to be also doing already quite a good job at monetizing it and charging for it. And the feedback from users is very ambivalent. On one hand, it says, well, it's not really useful. It's a bit disappointing. But on the other hand, they stick to it and they're like, yes, you know, it is A.I. So I need to get used to it. And I'm actually even if it's a bit disappointing, I'm using it every day. So that's really this ambivalence that you feel everywhere, where everybody wants to hear about A.I., everybody wants to try A.I. But nobody is really coming up with very, very strong evidences of a killer app that makes it clear to read. A lot of people are talking also about Apple as sort of the underdog when it comes to people truly understanding their services revenues. Is that going to be something that will surprise yet again as one of the major drivers? There was a time when people thought this would ultimately be a services company. So that's like, I think if you look at Apple and A.I. in the medium term over three to five years, I think that's the right way to think about it. Apple has done a very good job at leveraging its user base to create additional very high quality, high profitability and very recurring service revenues. And, you know, as the A.I. use cases are getting a bit a bit more, a bit clearer, Apple will have a very fantastic distribution power. The ability to put a high A.I. in the hands of users and and they should be able at some point to charge for it. But I don't think the technology is ready for that yet. I don't think you have enough of a high value A.I. use case for Apple to start charging on a monthly basis for it. Here, I know we talk a lot about China and the potential growth impact this is going to have on Apple. But recently, the former president told us Tim Cook called him to complain about the European Union. How much are those potential financial penalties weighing on Apple and Tim Cook? Well, financial penalties for Apple are not like never like a significant moving part. It's a very, very large and very profitable company. So, you know, when you compare the risk of these penalties to the market cap of Apple, it's very, it's very insignificant. And then indirectly, we know that it's very unlikely that any jurisdiction in the world, including the European Union, could really take, you know, like steps that would materially hurt Apple's business for a very simple reason. Apple has a very strong bargaining power because consumers like their products a lot.