How 2024 is shaping up for Apple: What you should know

Tim Cook, CEO, Apple. Image: Justin Sullivan/Getty Images

The first few months of 2024 for Apple have seen resurgent Chinese rivals, reportedly waning enthusiasm for the Vision Pro headset and the end of Apple’s EV project. Here are five things you should know about the tech giant as we head into the rest of the year.

1. Earnings and China

Last week, Apple’s results for its fiscal second-quarter that ended March 30 showed a 10 percent fall worldwide in sales of the iPhone, the product which accounts for half of the company’s revenues. In reported terms, a fall in sales in China, Apple’s third-biggest market, was an important contributor, but CEO Tim Cook pointed to a one-time impact, worldwide, during the same quarter last year that skewed the comparison. Excluding that, sales would be flat year-on-year.

Apple doesn’t break out region-specific individual product numbers. Overall sales – including Mac computers, iPads, wearables and services – fell 8 percent in what the company refers to as “Greater China,” which includes Hong Kong, Macau and Taiwan.

Counterpoint Technology Market Research estimated in April that iPhone shipment fell 19 percent in China during Jan-March 2024 versus the year-earlier period. Chinese rival Huawei, which has been a major target of US trade sanctions, surged 70 percent in the same period and Xiaomi improved its sales by 8.6 percent.

In Apple’s latest fiscal second quarter, sales rose marginally in the EU, but fell in the Americas, which includes Latin America, Japan, and “rest of Asia Pacific” as well. Overall, Apple’s revenues fell 4.3 percent, supported by services like Apple Music and iCloud, which continue to grow strongly.

Services rose to account for 26 percent of revenues in Q2 versus 22 percent a year earlier. iPhone sales went from 54 percent to 50.6 percent.

Also read: Apple's iPhone exports from India have doubled, but component manufacturing needs to pick up

CEO Tim Cook told investors on May 2, discussing the results, that in comparing the latest Q2 numbers with the year-ago period they should keep in mind a close to $5 billion one-time boost because of pent up demand from the three months ended Dec. 31, 2022 being fulfilled in the quarter ended April 1, 2023.

Excluding that amount, the latest Q2 sales were “flat,” CFO Luca Maestri told investors on the call. Apple’s forecast of low-single-digit growth for the current quarter is in line with street expectations, reports out of the US say.

Cook also said iPhone sales rose in mainland China in the latest Q2, but didn’t provide further details. They added that emerging markets such as India and Indonesia, another promising market, showed strong growth.

The company’s board has approved a $110 billion share buy-back plan that made investors happy, sending its stock higher, but overall, Apple’s market value remains below the $3 trillion mark it hit last year.

Meanwhile, famed investor Warren Buffett, whose firm Berkshire Hathaway has Apple as the biggest holding in its portfolio, told his investors that the firm had sold about 13 percent of that stake in the Jan-March period, CNBC reported on May 4.

Buffett suggested the sale was more to do with tax rates and what he anticipates in terms US monetary policy, and Berkshire Hathaway still held about $135.5 billion of Apple stock, according to CNBC.

2. A big launch and a surprise end

One portion of Apple’s business that continues to grow strongly is services business, which alone is pushing towards the $100 billion mark on an annual basis. That said, hardware remains at the heart of Apple, accounting for over three-quarters of its revenues.

Its biggest hardware launch in recent times has been the Vision Pro headset, with which Apple sought to reimagine virtual reality – and many experts agreed that it succeeded in doing so.

The company introduced us aam janta (general public) to what techies would have known as spatial computing – with the Vision Pro launched as a spatial computer in June 2023. The headset, which sets one back $3,500, became available for purchase in the US in February this year.

Also read: Can Apple upset Samsung's applecart in India?

However, as The Verge reported, several buyers were looking to return the tech marvel within the 14-day return period owing mostly to discomfort from its weight as well as problems like dizziness – a problem that’s always existed with VR headsets long before the Vision Pro.

 On April 23, well-known Apple analyst Ming-Chi Kuo wrote that the company was cutting back production of the headset due to lower-than-expected demand ahead.

 On the enterprise front, apart from sales of Macbook computers growing, “more than half of the Fortune 100 companies have already bought Apple Vision Pro units” to figure out what they can do with it, Cook said on the conference call.

 The first few months of 2024 have also seen Apple take another big hardware call, ending a decadal effort to build an electric vehicle, popularly called the Apple Car. The company was moving many of the 2,000-person EV team – the project was code named Project Titan – to Apple’s AI unit, Bloomberg reported on February 28.

If the EV effort showed how circumstances can make some projects unviable even for Apple, less glamorous, but more immediately material efforts are also taking longer. For example, Apple still has to buy 5G modems for its iPhones from Qualcomm, with whom it has a long-running rivalry.

Reports in February this year suggest that Apple is likely to be dependent on Qualcomm for these modems until 2027, even as it has completely moved its devices to its own core processors, which it calls “Apple Silicon.”

 3. What’s Apple’s AI strategy?

2024 is also shaping up to be the year when the expectation for Apple to articulate its artificial intelligence (AI) strategy is becoming more urgent, as rivals such as Samsung Electronics are showing off feature after feature on their Android phones.

Google itself, on its own Pixel phones, has been releasing some cool features. For example, the ability to pull together multiple pictures into one that combines the best shot for each person in a group selfie.

Apple has usually gone the way of putting all its tech under the hood and not using the commonly accepted language to talk about them. Instead, it comes up with its own branding oriented descriptions that it expects will become part of the verbs in our daily vocabulary. “Airdrop” is a simple, old example that Apple users would be familiar with, without even thinking about it, really.

Also read: India's dream of becoming the 'new factory of the world' gets a boost in 2023

 Very common among Apple users to say “I’ll airdrop it to you,” in sharing a picture or a file.

 Similarly, Apple will probably come up with terms that won’t necessarily say AI – just so it can differentiate itself from rivals who use AI in their marketing. Samsung on the other hand, boldly says its latest phones offer a lot of AI – via its Galaxy AI suite.

This all said, the general perception is that Apple lags rivals such as Google in its AI efforts, and that investors are getting restless as Apple hasn’t publicly set out the main tenets of its AI strategy – whatever that might be.

 “Apple really hasn’t made a big splash in the AI space yet,” Brian Mulberry, a client portfolio manager at Zacks Investment Management said in a February 29 report by Live Index, a capital markets publication in the US.

On the other hand, “We think AAPL (Apple’s stock symbol on the Nasdaq stock exchange) has a solid AI strategy,” analysts at Evercore ISI, an investment banking advisory firm in the US wrote in a note after Apple’s latest earnings results, as reported by Investing.com on May 5.

 These analysts think that Apple’s AI strategy centres around deploying AI on the edge, meaning on its hardware devices, for example. “The goal of this for AAPL is to make the user experience better and the ecosystem stickier, while triggering an iPhone super cycle down the road,” they wrote, according to Investing.com.

 “Apple has taken a more measured approach to generative AI compared to its big tech peers who have invested tens of billions in infrastructure and R&D,” they added, according to Investing.com.

 Apple is reportedly in talks with companies ranging from Google to China’s Baidu, and also OpenAI and Anthropic to include their generative AI software in iPhones.

The earliest we’re likely to find out more is on May 7 at the Let Loose event that Apple has announced, where the company is expected to show off the latest in iPads, Apple Pencil, M4 Chips, and so on. The event will be streamed on the Apple website.  

It’s more likely, however, that Apple will outline its AI plan at its much anticipated annual developer conference – which draws thousands of attendees from around the world. This year’s edition of the WWDC (worldwide developer conference) will run from June 10 to June 14.

 4. Regulatory scrutiny ratcheting up

The year 2024 is shaping up to be no different in terms of increasing regulatory scrutiny of big-tech companies, including mostly Apple, Google, Amazon, Meta Platforms and Microsoft.

In the case of Apple, the latest challenge the company faces has come in the form of an accusation by the US Justice Department, joined by 16 state and district attorneys in the country, that the tech giant uses its dominance to thwart competition and restrict consumers’ and developers’ options.

In a lawsuit in March, the US Justice Department alleged that “Apple’s broad-based, exclusionary conduct makes it harder for Americans to switch smartphones, undermines innovation for apps, products, and services, and imposes extraordinary costs on developers, businesses, and consumers.”

Listen: Apple threat notifications: Why they are cause for concern

In its latest quarterly report filing on May 3, Apple told the US capital markets regulator, the Securities Exchange Commission, that the company expects to “vigorously defend itself.”

The European Union, whose diktats on standardising to Type-C USB connections for a host of devices, last year, forced Apple to switch iPhones to such connectors as well, has continued its scrutiny of Apple’s App Store policies.

On March 25, the European Commission, the executive arm of the EU, announced that it had opened two investigations into Apple under the EU Digital Markets Act. The Commission is probing Apple’s policies on two fronts: First, what restrictions app developers face when they tell end-users about various offers and how the users can pay the developers.

Second, what are the default settings on iPhones, policies on uninstallation of apps, and what choice users have when it comes to web browser selection on Apple’s iOS software platform. If the Commission concludes that Apple’s policies violate EU laws, it can force the company to end those practices and impose fines of up to 10 percent of Apple’s annual worldwide revenues.

After the Commission, earlier in the year, told Apple it must allow side loading of apps, third-party app stores, and support alternative payments systems than Apple’s own, the company introduced what it called a “core technology fee” for developers under an opt-in plan. Large developers including Meta, Spotify and Epic Games have criticised this plan. And it remains to be seen what the EU will do about the core fee, once its investigations conclude.

5. Why India doesn’t move the needle yet

To wrap up, let’s circle back to India. Over the last two years, especially, Cook has repeatedly called India out as a strategic market of immense potential for Apple. It’s nine years since Cook’s first official visit to India, in May 2016, when he famously said Apple’s approach to India was about staying in the market “for a thousand years.”

At the time, Apple was looking to sell pre-owned iPhones in India as one way of addressing the affordability issue in the hugely price-sensitive market. Today, Apple has a large network of retailers, including authorised premium retailers – like the Imagine and iPlanet chains – as well as, finally, two of its own stores that it opened last year in Mumbai and Delhi.

Also read: iPhone manufacturer Foxconn ready to cash in on India's expanding economy

In February, Counterpoint estimated Apple, for the first time, sold more than 10 million iPhones in India in a year, for the year 2023. The company’s overall revenues, including other hardware and services, hit $10 billion for the year, Mint newspaper reported on January 31 this year.

Mint didn’t cite a source, but consider that Counterpoint reckons Apple’s average sale price on an iPhone at almost $900, then that revenue number ballpark in India, a nascent market for services, seems right.

 In comparison, revenues from China is close to 6X bigger. Therefore, even the double digit growth in India in Apple’s latest fiscal second-quarter, a new March-quarter record as Cook mentioned on the earnings conference, isn’t enough yet to move the needle for the tech giant in the overall scheme of things.

Apple is ramping up its local manufacturing aggressively in India, including via a long-term partnership with the Tata Group. Apple’s exports from India are surging. Exports from India for the 12 months ended March 2024 (FY24) nearly doubled to $12.1 billion from FY23.

 If the company can pull off a similar 2X growth in local sales as well, then the subcontinent will become a much more important contributor to its revenues. The question is, how soon?