HTSC: AI may drive Apple users to upgrade, benefiting Apple's supply chain companies in China

According to the information from Zhitong Finance and Economics APP, Huatai Securities released a research report stating that on June 11, 2024, Apple held the first day keynote speech of WWDC 2024, launching the personalized intelligent system Apple Intelligence. The company also updated operating systems such as vision OS/iOS/iPadOS/macOS. Based on the April foreign mobile phone shipment data (mainly Apple) released by the Ministry of Information and Communications, shipments increased by 52% year-on-year. Apple actively stocked up in the Chinese region and offered discounts during the 618 period. In the global market, Apple's sales may be supported by the story of switching to new phones driven by AI applications. It is recommended to pay attention to the production volume data of new Apple phones in July and August, as well as the forecast for Apple's shipments this year.

Apple Industry Chain Companies: Luxshare Precision (002475.SZ), Goertek (01415), Pengding Holdings (002938.SZ), Huanxu Electronics (601231.SH), Industrial Fulian (601138.SH), BYD Electronics (00285), etc.

Huatai Securities' main points are as follows:

Apple's personalized intelligent AI system may drive user upgrades, benefiting industry chain companies

On June 11, 2024, Apple held the first day keynote speech of WWDC2024, launching the personalized intelligent system Apple Intelligence. The company also updated visionOS/iOS/iPadOS/macOS operating systems. The stock price dropped by 2% after the speech on the first day, but rose by over 7% the next day. Huatai Securities believes that 1) Most of Apple's functions this time are similar to existing AI functions on Android, making it difficult to drive Android customers to switch to Apple. However, it has improved Apple's internal ecosystem, and such functions will only be available on the iPhone15pro/max series and later, which may benefit Apple users upgrading their phones. 2) Users can use this AI function for free, and the future model API costs may continue to decrease, promoting the popularization of AI phones. It is recommended to pay attention to the impact of Apple phone upgrades on the supply chain companies (such as Luxshare).

Apple launches Apple Intelligence, stepping onto the starting line of generative AI

The focus of Apple's WWDC 2024 conference was on AI, introducing the new personalized intelligent system Apple Intelligence, which can 1) enhance Siri's understanding capabilities, equipped with abilities such as multi-round dialogue, information summarization, screen content perception, and intelligent interaction with applications, 2) provide intelligent email replies, notification organization, memo and call recording/writing/summarizing functions, 3) support image generation/intelligent photo editing functions, 4) integrate ChatGPT-4o into Siri and writing tools as a cloud-based alternative model. The core capabilities of Apple Intelligence include text-to-text, text-to-image, cross-app interaction, and personal context understanding, and it needs to use Open AI ChatGPT-4o as a cloud-based alternative model. It has incorporated most of the existing AI functions but lacks disruptive technological innovation, positioning itself back at the starting line of generative AI Improving Apple's internal hardware ecosystem may drive users to upgrade

Apple's Apple Intelligence system consists of large models on the Apple side, cloud-side large models, and ChatGPT, with sufficient computing power relying on terminals for simple scenarios and using private cloud computing or ChatGPT for complex scenarios. In such an ecosystem, there are requirements for chips (limited to models with A17\M1 to M4 and subsequent iterative products) and the need to integrate information across applications (Siri can integrate photos, calendar schedules, emails, messages, etc.). Huatai Securities believes that this is actually a meaningful supplement to Apple's existing ecosystem. Although it may not necessarily drive Android users to switch to Apple, it may drive Apple users to purchase the new generation of phones. It is recommended to pay attention to Apple's production data for new phones in the second half of the year and the pull on shipment volumes for industry chain companies.

Focusing on sales solutions rather than technology, turning Siri into a traffic entry point

This time, Apple uses Siri as a tool to connect AI between different apps on the phone, rather than focusing on AI applications like Samsung and Google did in the past, which were more focused on having AI complete specific tasks. Apple aims to make Siri a distribution and traffic entry point in the future, leveraging its user base of over 1.3 billion to provide good product solutions rather than selling technology.

The user base of AI phones is expected to continue growing, focusing on the payment model between phone brands and AI software

Apple phone users can call ChatGPT-4o for free through Siri, and users who purchase new phones can experience AI functions. The user base is expected to continue growing. In the future, who pays for AI software will develop into a four-way game between phone brand owners, chip manufacturers, software developers, and consumers. However, with the decreasing cost of tokens and Apple's large base of high-quality user technology, the cost of model APIs is expected to continue to decrease, driving the accelerated popularization of applications and the continuous increase in AI phone penetration rate, forming a positive cycle.

Risk Warning: Sales of hardware products may fall short of expectations, and the growth rate of service business users may slow down. The content related to companies and individual stocks in this research report is a compilation of their objectively public information and does not represent the recommendation or coverage of this research team for the company or the stock