Is Apple going to lean away from hardware to focus on software?
On June 27, Apple released a "Longevity by Design" report covering plans to maximize how long iPhones stay in use. This is great news for Apple users, particularly as devices become more expensive.
The report comes just a few weeks after Apple's annual Worldwide Developers Conference, where it announced the new Apple Intelligence AI platform and a series of major software updates coming later this year. All include a new emphasis on AI on a level we haven't seen before from Apple.
As Apple shifts its focus away from innovating hardware, what's next? AI and software may pave the way for the company's future.
Apple leans into longevity and device durability
This weekend, Apple released a lengthy report titled "Longevity by Design," which covers the progress Apple has made in improving its products' durability, reparability, and sustainability. According to the report, iPhones retain 40% more resale value than competitors' phones and stay in use longer with "hundreds of millions of iPhones still in use" five or more years after their original purchase date.
It's not just iPhones, either — other reports have identified similar trends among iPad users. A May 2024 report from Consumer Intelligence Research Partners (CRIP) revealed that when iPad users bought a new iPad, 67% kept using their old one in some capacity, or gave it to a family member or friend.
This is great news for consumers since it means Apple products have a history of remaining functional for several years after their purchase date. It does put Apple in a unique predicament, though. When Apple users keep their products longer, they are less likely to upgrade to newer, more expensive versions of those products each year. This may become a bigger issue in the years ahead as Apple works to address consumers' concerns about easy repairs to their Apple products.
In fact, on June 27, The Information reported Apple is developing a new battery design that will make it easier to replace iPhone batteries. That's a major victory for iPhone users, but it eliminates yet another reason someone might buy a new iPhone or trade in their old one.
How will Apple shift its business model in the years ahead as it bets on users buying new devices less often? AI and software are emerging as the road forward for Apple.
What will Apple innovate next? AI and software take center stage
Apple's efforts to improve hardware longevity hint at the company's understanding that many people use their Apple products for several years before upgrading. So, looking forward, Apple will need to find new ways to engage consumers beyond yearly hardware purchases.
It looks like Apple is turning to AI and software innovation for a solution. According to Bloomberg's Mark Gurman, Apple is betting on AI to get iPhone users to upgrade to the iPhone 16 this fall. While the iPhone 16 won't have major hardware updates from the iPhone 15, it will include more powerful processing capabilities needed for on-device AI. Gurman also noted that Apple is using a similar strategy with the iPad and Mac, which mirrors the way Apple used Siri to push upgrades to the iPhone 4S back in 2011.
Depending on how users respond to Apple Intelligence, it's possible Apple could make certain AI features a paid subscription. This may not come as a surprise since Apple's revenue from services has been on the rise. In fact, according to Apple's Q2 2024 earnings report, "Services" was the company's second-highest net sales category after the iPhone.
So, there is a lot of potential for Apple in that niche. Adding some type of subscription for certain software features could be a natural addition to the Services line-up and help bridge the gap from lower hardware sales.
While some users may not be excited to sign up for yet another subscription, this could be good news overall. It means Apple is planning to design iPhones, iPads, and Macs for long-term use with a focus on innovating software instead. So, rather than buying a new iPhone every other year, innovation will come in the form of new software features. Sure, you may need to pay for Apple Intelligence one day, but overall, everyone will benefit from more creative, advanced software capabilities on their Apple devices.
