Apple Gambles on New iPhone With AI Features at Lower Cost

Apple has announced a new iPhone which brings artificial intelligence (AI) features at a lower cost than its flagship handsets.

The iPhone 16e has the same processor as the larger iPhone 16, Apple said, with similar storage options, though a lower spec elsewhere, including fewer cameras.

Apple has been struggling to find a new product that excites consumers – sales of iPhones dropped at the end of last year.

It will be hoping that bringing enhanced AI functionality to a less expensive phone will address that – however analysts have been cautious about the sales boost such tools bring.

Its name is clearly a nod to its iPhone SE series, which were released from 2016 to 2022, and similarly priced significantly lower.

Apple said the iPhone 16e will be available for pre-order from February 21 in 59 countries.

It will launch in the UK for £599, which is £200 less than the iPhone 16 – but more than double what the original iPhone SE went for when it launched in 2016.

“This now becomes one of the most affordable powerful iPhones now on the market,” industry analyst Paolo Pescatore told BBC News.

“The move should help accelerate adoption and especially its foray into AI with Apple Intelligence.

“Apple’s trust and credibility is critical – this alone will help drive sales and lure users from rival devices and platforms.”

Apple Intelligence

Much of the conversation around the new handset will likely centre around its power, with Apple electing to use the same A18 chip behind its more expensive devices.

This means the 16e will be capable of playing the same games and running the same apps as other iPhones – though AI is likely at the heart of this decision.

Apple boss Tim Cook said in the announcement the new model featured “the performance, intelligence and privacy” Apple fans “expect” from the firm.

And he said the Apple Intelligence features on the device would “help you save time, quickly get more things done, and express yourself in new ways”.

The firm introduced its spin on the tech – Apple Intelligence – with this series of devices, which includes new tools for writing and incorporating OpenAI’s chatbot ChatGPT into Siri.

It hasn’t always gone well, with the firm at one point suspending its AI-generated news alerts after they created false headlines attributed to news organisations including the BBC.

It now presents the summaries in italics.

Apple said its new phone is “built for Apple Intelligence”, and pointed to certain features of the tech, like an easy way to clean up photos or search your image library.

Other phone manufacturers have similar features on their devices – though the iPhone 16e will be by far the cheapest way to access AI on an Apple handset.

“The iPhone 16e generates a new revenue stream for Apple, and this will be particularly noticeable in key markets like India, where iPhones are out of reach for most people,” said Forrester principal analyst Dipanjan Chatterjee.

“There is also a second-order effect of cheaper devices like the iPhone 16e, bringing new customers into the Apple ecosystem.

“We’ve seen a limited appetite among many of the installed base to upgrade from previous versions, but the new phone reduces the cost hurdle of joining the Apple Intelligence bandwagon.”

Apple’s current offerings are also underwhelming in light of the company’s prolific investments in research and development. Cory Johnson, Epistrophy Capital Research chief market strategist, said Apple has spent $189bn on R&D over the last decade alone.

“All we have to show for that is the HomePod and $3,500 ski goggles,” Johnson said. “AI should be right in Apple’s wheelhouse. But Apple fanboys, fangirls, and investors are right to be disappointed so far.”

(BBC)