Smith Experts Discuss how Apple’s AI-enhanced iPhones will Affect Users, Market Position

Apple’s introduction of its “Apple Intelligence”-powered iPhone 16 lineup is “long overdue and brings a significant advantage for both the company and its customers,” says Dean's Chair in Marketing Science P.K. Kannan at the University of Maryland’s Robert H. Smith School of Business.

Generative AI-enhanced camera features for photos and videos (computational photography), Kannan adds, “will undoubtedly be welcomed by users” while boosting the tech giant in terms of it “having lost ground to rivals in the Chinese market due to the absence of these features, which were already standard in competing devices.”

User Privacy Factor

Kannan says iPhone’s privacy-protecting AI capability is one of the most important aspects of the update. “Apple has long prided itself on safeguarding consumers’ privacy, and the on-device data processing, as Apple claims, ensures that AI functionality is delivered with customers’ data remaining entirely on their devices,” he says. “This contrasts with some competitors, whose AI solutions may require data to be processed outside their ecosystem. Apple’s AI tools, he adds, “are deeply integrated into its core products through seamless hardware and software integration, enhancing the everyday user experience in a focused, efficient way.”

Likewise, Smith Associate Professor of Marketing Daniel McCarthy says by emphasizing on-device processing and user control, “Apple's stated focus on privacy is ‘on brand’ and consistent with prior policies such as App Tracking Transparency (ATT). Even though the partnership with OpenAI could raise data sharing concerns, I believe that Apple's approach will keep user data private.”

Potential Caveat

McCarthy, however, notes: “My research would suggest that this focus on privacy could have significant unintended consequences. For example, early accounts suggest that Apple's AI solution is not very effective because the ‘engine’ that is powering it is not as powerful and slower than it otherwise could be due to on-device processing, and it has less available data upon which to personalize over time due to data not being shared. There is a risk that Apple's AI solution ends up being a slightly more useful version of Siri. If so, user uptake may be a lot slower than it otherwise would have been.”

Kannan, the Smith School’s associate dean for strategic initiatives, further summarizes the iPhone update and its implications: “Beyond just photography, customers will benefit from AI through a smarter Siri, improved battery management and more personalized, user-friendly experiences. Additionally, these enhanced features will allow Apple to seamlessly support AR/VR experiences, preparing the company for future innovations in this space like the metaverse,” he says. “And, unlike competitors like Google, Amazon and Microsoft, which focus on large-scale AI implementations, Apple’s AI initiative is centered on personal, everyday use products that can resonate with consumers. Here, Apple’s AI capabilities directly touch customers in a personal way, offering significant opportunities for success and market expansion.”