Apple stock has hit record highs in recent months, fuelled by the unveiling of the tech titan's new artificial intelligence (AI) offerings. However, after an enviable stretch at the top, it's no longer the world's most valuable company, and storm clouds are gathering.
Despite the buzz surrounding the iPhone 16 and the brand's "Apple Intelligence" take on AI, concerns swirl around the functionality and privacy of the features. The company is also facing challenges in several other areas.
Read on to discover 10 problems Apple faces right now and the damage they could do to its reputation and bottom line.
All dollar amounts in US dollars
The iPhone remains Apple's cash cow, accounting for around half the company's total revenue. But sales have been slowing down. In the first three months of 2024, they fell by more than 10% year-on-year to $46 billion (£36bn) in contrast to the wider smartphone market, which enjoyed a 10% increase in shipments.
Apple's share of new smartphone activations has dropped to a six-year low in the US. And after briefly overtaking Samsung as the world's number-one smartphone maker at the end of 2023, it's fallen back to second position.
As noted by Forbes, iPhones have become so high-quality and long-lasting that people don't need to upgrade as frequently. The price of the devices also plays a factor. Cost of living pressures have seen iPhone users opting to stick with their older devices for longer.
Price aside, iPhone users simply haven't had much reason to upgrade as often as they used to, with smartphone innovation plateauing to mere tweaks rather than game-changing breakthroughs.
Apple's new AI offering could turbo-charge iPhone sales as it's restricted to the iPhone 16 and future devices. This means that a super upgrade cycle could be on the cards with the launch of the iPhone 16. The prospect of an AI-driven iPhone sales boom has been driving Apple's share price to record levels, and the company will be hoping its new offerings can revive flagging sales.
However, Apple's move into AI hasn't been without its challenges, particularly in the Chinese market...
Apple entered the Chinese smartphone market in 2010. By 2015, sales of its products had risen 20-fold, and today, China represents a hefty 20% of Apple's total global revenue.
The tech giant is facing more than its fair share of headwinds in the People's Republic. For starters, the country's spluttering economy has prompted consumers to tighten their belts, with Apple's high-priced premium products now off-limits to many people impacted by the downturn. And there's also the small matter of the competition...
Homegrown smartphone makers including Huawei, which recently released its luxury iPhone-killing Pure 70 range, are eroding Apple's market share in China. Huawei has just announced the launch of its new trifold smartphone, which is set to hit stores the same day as the iPhone 16 range and has so far received more than 2.7 million preorders.
Apple has also found itself at the sharp end of the growing animosity between Washington and Beijing. Last year, iPhones were banned from several Chinese government agencies and state-backed firms, apparently as payback for US restrictions on Huawei.
There's now a strong push in the country for consumers to buy Chinese products for patriotic reasons and shun American-made equivalents. iPhone sales are suffering as a result of this rise in nationalist sentiment.
Apple's new AI offering is unlikely to stimulate iPhone sales in the People's Republic, according to market experts interviewed recently by the South China Morning Post. Although there are rumours of a partnership with Chinese tech company Baidu, Apple will no doubt face huge obstacles in launching its AI in China. AI, especially when foreign-made, is strictly regulated in the country and censorship is rife.
After a dismal first quarter, iPhone sales seemed to pick up again in China, with shipments of foreign-branded smartphones, which are mostly iPhones, jumping 52% in April. But the success story was shortlived; according to the Financial Times, Apple dropped out of the top five smartphone sellers in China in the second quarter (though the company's Chinese market share has still increased since 2020).
To combat dwindling interest, Apple and its retail partners have aggressively slashed prices in the country. This may boost revenue and sales volumes in the short-term, but it does so to the detriment of Apple's profit margins and could end up cheapening the brand.
Concern has grown after Apple clocked up some major innovation fails this year. In late February, Bloomberg reported the company had ditched its plan to build an electric car that would knock Tesla off its pedestal, just one month after the launch date was pushed back from 2026 to 2028.
Apple is said to have invested more than $10 billion (£7.8bn) into the decade-long "iCar" project and, according to Bloomberg, the firm made an enormous strategic error when it embarked on the doomed project back in 2014.
Apple bit off far more it could chew by focusing on developing a fully autonomous vehicle and was forced to scale back its plans for the $100,000 (£79k) car drastically.
And The New York Times has revealed Project Titan – or "Project Titanic" as it was mockingly labelled by Apple employees – was riven from the get-go by internal disagreements that hampered its progress.
The cancellation comes as Apple pivots its research funding towards generative AI, which seems a sensible decision. But there's no denying the iCar's demise has stained Apple's reputation for innovation.
In early March, literally days after it emerged the iCar was a non-starter, Apple quietly abandoned a project to develop a microLED display for the Apple Watch and, eventually, the iPhone. That was despite the company having ploughed billions of dollars into the idea.
According to US website MacRumors, the tech, which is vastly superior to the OLED display that currently graces the Apple Watch, was simply "too expensive and too complex" for Apple – one of the wealthiest and most talent-packed companies on the planet – to design and bring to market.
Critics view the project's cancellation as yet another sign Apple is losing its innovative edge. Industry website Display Daily has slammed the company for "dropping innovation when it gets hard" and falling behind competitors like Samsung and Xiaomi in the screen stakes.
Semiconductor firm Techovedas warns that rivals could now take the lead in developing and releasing microLED smartwatches, with microLED smartphones presumably to follow, leaving Apple lagging even further behind when it comes to display technology.
Is Apple losing its marketing mojo as well as its innovative edge? That's the question many people asked themselves when the company released its controversial iPad Pro advert in May.
The ad depicts a selection of creative items and gadgets, including a trumpet, sculpture, and arcade game, being crushed by a hydraulic press to the dulcet tones of Sonny & Cher’s All I Ever Need Is You.
Created in-house, the ad intended to show how myriad forms of creativity and entertainment could be compressed into the new extra-skinny multitasking iPad – though the internet didn't quite see it that way...
Horrified at the wanton destruction and what they saw as the "gruesomely arrogant" Apple crushing human creativity, critics railed against the ad, including actor Hugh Grant, who took to X to describe it as "the destruction of the human experience. Courtesy of Silicon Valley."
TechRadar called the ad "disgusting" and even Samsung got involved, releasing a cheeky ad mocking the fiasco.
Apple responded with a craven apology for having “missed the mark” and swiftly ditched plans to run the ad on TV (at that point, it had only been shown on YouTube and X). But the damage has been done and Apple's tone-deaf promotion for its new iPad indicates the tech giant's knack for marketing could be waning.
With iPhone sales stumbling, Apple may have been hoping its market-leading range of wearable devices, which includes the Apple Watch and AirPods, would offset the dip. But a report from market intelligence firm IDC shows that shipments of Apple wearables nosedived by 18.9% year-on-year in the first three months of 2024.
At the same time, global shipments of these devices grew 8.8% overall, and Apple's leading competitors in the field experienced astonishing annual growth, including China's Xiaomi and Huawei, which saw shipments increase by 43.4% and 72.4% respectively.
Apple still rules the roost, but its share of the global wearables market has declined from 24.5% in Q1 of last year to 18.2% in Q1 of 2024.
IDC has put Apple's wearables sales slump down to several factors. For instance, the AirPods range was last updated in 2021, so it figures that sales would be subdued as potential buyers hold off until an upgrade is released.
A US ban on the latest Apple Watches has also significantly contributed to the wearables sales dip. In January, Apple had to release modified versions of the latest Series 9 and Ultra 2 models in the US after a court prohibited the sale of Apple Watches containing a disputed blood oxygen sensor technology.
Could there be brighter times on the horizon though? Alongside its new iPhone 16 range, Apple unveiled updates" to various iterations of the Apple Watch and AirPod models. Though sales aren't expected to bounce back this year, analysts have predicted that revenue from Apple's wearables segment will increase by 6.2% to $39.5 billion (£30bn) in 2025.
In less positive news, adding further to Apple's headache is the muted reception its Vision Pro mixed-reality headset has received.
The gizmo impressed diehard Apple fans and scored some decent reviews upon its release in the US in early February, although the buzz was short-lived and hardly anyone was talking about it by late March.
As highlighted by US business magazine Fast Company, this lack of interest in the company's first major release for years should have wowed the wider public, not just tech nerds. Needless to say, the gadget has struggled to sell.
Demand for the Vision Pro was falling off a cliff just a month after its launch, according to a report by TF International Securities analyst Ming-Chi Kuo. The expert later revealed that Apple has cut its sales forecast for 2024 by as much as 50%, with between 400,000 and 450,000 units expected to sell instead of the 800,000 that was previously projected.
Apple has been rolling out the device internationally since June. Complaints about the Vision Pro's steep $3,499 (£2.7k) price tag abound, as do gripes over its weight (which can make it uncomfortable to wear), the lack of app choice, and the narrow field of vision.
Perhaps the biggest indication the Vision Pro could be a flop is its current resale value, which has plummeted since the gadget's release. In fact, they're already being sold on eBay for a fraction of the original price, and market tracker IDC believes Apple is unlikely to shift 500,000 units before the end of 2024.
Apple prides itself on its policies of inclusion and diversity and claims to have achieved gender pay equality in 2017.
But two female former employees beg to differ. Earlier this year, they filed a class-action lawsuit in California, accusing the tech giant of wilfully paying thousands of women in the state less than their male counterparts for similar work.
The lawsuit, which covers 12,000 Apple employees, alleges the company's policies, particularly its habit of requesting salary expectations from new hires, breaks California law and results in lower pay for women. It also alleges that the system used to review company pay is biased towards male staff.
Apple isn't the first tech titan to be accused of paying women less than men.
According to US news site SFGate, the plaintiffs' lawyer has successfully represented employees suing Oracle and Google for gender-based pay discrimination.
But a high-profile case of this kind is the last thing Apple needs right now, given the damage it could do to the company's reputation. It all depends on how the case pans out and whether Apple can refute the allegations.
In March, the US Department of Justice (DoJ), together with the District of Columbia and 15 states, filed a landmark antitrust lawsuit against Apple, accusing the tech giant of creating an illegal smartphone monopoly and crushing competition. (The number of states involved has since increased, with Indiana, Massachusetts, Nevada, and Washington joining the lawsuit in June.)
The lawsuit alleges that Apple maintains the monopoly by using its closed ecosystem to block or suppress rival "super apps", mobile streaming services, and third-party digital wallets.
According to the DoJ, Apple "makes it harder for Americans to switch smartphones, undermines innovation for apps, products, and services, and imposes extraordinary costs on developers, businesses, and consumers". By way of example, Google, which is also in the DoJ's crosshairs, paid Apple $20 billion (£16bn) in 2022 for the privilege of being Safari's default search engine.
Apple filed a motion to dismiss the case on 1 August, but the litigation is likely to drag on for years.
Rebecca Haw Allensworth, an antitrust professor at Vanderbilt Law School, told The Verge that the DoJ has made a strong case, while Forbes contributor Anshel Sag of Moor Insights believes the lawsuit will fundamentally change Apple's business, particularly its profitable Services division, impacting its bottom line as a result.
Yet other experts doubt the government can win the case and competition policy specialist Joe Coniglio has said the lawsuit is a clear example of antitrust overreach. This is the third time since 2009 the DoJ has sued Apple and the previous two cases didn't end in disaster for the company. Whatever the outcome, though, it's another problem that Apple really doesn't need right now.
Fresh from forcing the tech titan to include a standard USB-C port on its devices, the EU flexed its regulatory muscles in March and fined Apple $1.9 billion (£1.5bn) for breaking competition laws over music streaming. And the bloc is reportedly getting ready to fine the firm up to $50 million (£39m) a day for failing to comply with its new super-stringent Digital Markets Act (DMA), despite Apple creating a third-party app store for EU users.
Apple could face similar restrictions in the UK following the passing of the Digital Markets Competition and Consumers Act (DMCCA) in May. Like its European counterpart, the act could lead to Apple having to change its business practices in the country, harming its bottom line.
Adding to its troubles, the European Court of Justice has just ruled against Apple in a 10-year court battle that was sparked when the European Commission ordered Ireland, which is home to Apple's EU HQ, to recover 13 billion euros ($14bn/£11bn) in back taxes from the tech giant in 2016. Apple has been fighting the order ever since and it's expected to challenge the latest ruling, but damage has already been done, with company shares down 1% mere hours after the news was announced. Watch this space...
The regulatory heat has been rising in other markets, too.
Japan's parliament has just passed an antitrust law that prohibits the likes of Apple and Google from restricting third-party apps on their platforms. Regulators in other Asian countries are doubling down on their scrutiny of the major tech industry players. India, for instance, is planning its own digital antitrust legislation, which Apple is reportedly lobbying against.
Australia is also getting in on the act. Its regulator has called for new competition laws for digital platforms, which, like the EU, UK, and potential Indian versions, could spell trouble for Apple's closed ecosystem-based business.
Apple Intelligence, the tech titan's much-anticipated AI offering, was unveiled on 10 June. As we've already mentioned, the announcement set the company's share price on fire.
Integrated into the iPhone 16, the "personal intelligence system" will offer Apple device users a suite of AI-powered features, including image generation, writing assistance, and a smarter version of digital assistant Siri.
Apple Intelligence could be just what Apple needs to revive iPhone sales, with the market sanguine about the prospects of an upgrade bonanza given the booming share price. But concerns have been raised over the development...
Critics are sceptical about the company's claims it can protect users' personal data. Simpler requests will be processed on the device, while more complex queries will be dealt with in the cloud by OpenAI's ChatGPT. Detractors claim this could affect functionality and create security vulnerabilities. However, Apple has insisted the system is water-tight.
On another note, some experts suggest Apple's reliance on Microsoft-backed ChatGPT shows how far it's fallen behind in the AI race. While this saves the company the enormously expensive task of creating its own large language model (LLM), relying on a competitor for the more complicated AI tasks puts Apple in a vulnerable position.
Apple is being battered by headwinds from multiple directions. Yet while its business may have to significantly adapt to the changing regulatory landscape, fiercer competition, and various other obstacles, the company's fundamentals are still incredibly strong.
Apple's financials are nothing short of outstanding, and its gigantic customer base is unlikely to abandon the company in large numbers any time soon.
While it does have plenty to contend with, none of Apple's problems appear to pose an existential threat to the business – for now, at least.
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