Apple Likely to Face Bigger Challenges in 2025
In his latest industry research, noted Apple analyst Ming-Chi Kuo predicts that Apple will encounter significant hurdles in 2025. Despite the company’s past successes, Kuo points out several key factors that could hinder growth—ranging from nearly stagnant iPhone demand to underwhelming progress with Apple Intelligence (AI) and a continued decline in the Chinese smartphone market.
Below is a summary of Kuo’s key observations and insights:
Cautious iPhone Outlook in 2025
Apple has taken a conservative approach to discussing 2025 iPhone production targets with its key suppliers, leading to forecasts that overall iPhone shipments may reach only 220–225 million units, falling short of the market consensus of 240 million or more. Although a new iPhone SE4 could debut around early 2025, it is not expected to meaningfully lift sales. Shipments during the first half of 2025 could decline by around six percent compared to the previous year, and December 2024 data from China suggests that overall smartphone shipments remained stable while iPhone shipments dropped by roughly 10–12 percent.Ultra-Thin and Foldable iPhones: eSIM-Only Challenges
The ultra-thin iPhone slated for the second half of 2025, which could measure around 5.5 mm at its thinnest point, may be restricted to eSIM-only support, raising potential hurdles in markets like China that have not broadly adopted eSIM. Similar concerns apply to a possible foldable iPhone, which is in the planning phase and may also rely solely on eSIM. Without design modifications or a shift in local market preferences, these devices could face weaker shipping momentum. Even if the ultra-thin model ships in higher volumes than the iPhone Plus, its likely high price, paired with downgraded components and an experience too similar to existing models, may limit its ability to boost overall iPhone demand.Apple Intelligence Not Driving Hardware or Services Growth—Yet
In a recent interview, Tim Cook stated that there has never been any internal discussion about charging for Apple Intelligence, suggesting that it will not generate subscription revenue in the near term. A consumer survey further indicates that most iPhone users do not feel compelled to upgrade for on-device AI features, aligning with reports from the supply chain that Apple Intelligence has not spurred iPhone replacement demand. Although Apple Intelligence garnered attention at its WWDC 2024 debut, its appeal has since diminished compared to cloud-based AI services that have progressed rapidly in the intervening months. While long-term prospects remain, there is currently no solid evidence that Apple Intelligence will boost hardware sales or service revenue, underscoring the importance of caution amid earlier market optimism.What This Means for Apple and Investors
Kuo stresses that these trends do not imply Apple is in dire straits, but they do warrant a cautious outlook. Much of the optimism surrounding Apple’s 2025 performance has been fueled by high expectations—particularly for AI-driven services and bold hardware innovations like a foldable iPhone. However, Kuo argues there is currently no clear evidence that these initiatives will significantly boost either hardware sales or service revenue in the near term.As we move closer to 2025, Apple will likely need to manage investor expectations carefully, balancing excitement around new technology with the realities of a saturated smartphone market and emerging structural challenges.
Disclaimer: The information presented here is based on Ming-Chi Kuo’s research and reflects current industry discussions. Actual results may vary as Apple continues to refine its product strategies and market approach. This is not investment advice.
Credit: Ming-Chi Kuo on Medium
