Apple Likely to Face Fiercer Challenges in 2025, Requiring Caution Against Potential Downside Risks from Earlier Overly Optimistic Market Sentiment

My latest industry research indicates that Apple will encounter more challenging hurdles in 2025, including nearly stagnant iPhone growth, AI services that have yet to contribute, and ongoing decline in the Chinese market. More details are as follows.

2 min readJan 10, 2025

Apple has adopted a cautious stance when discussing 2025 iPhone production plans with key suppliers.
Even with the new iPhone SE4 (expected to launch around mid-1H25), iPhone 1H25 shipments are projected to decline by about 6% YoY. (1Q25 shipments were roughly flat YoY due to front-loading in January ahead of Trump’s tariff policy, while 2Q25 is expected to decline.)
In December 2024, overall smartphone shipments in China were about flat vs. those in December 2023; however, iPhone shipments dropped by about 10–12% YoY, reflecting a continued slide in Apple’s Chinese market share.
The 2H25 ultra-thin iPhone (with the thinnest part around 5.5mm) and the foldable iPhone, which is in the planning stage, will likely only support eSIM due to their ultra-thin design. Given that Chinese market currently does not promote phones that only support eSIM, these two models could face shipping momentum challenges unless their design is modified..
Although the ultra-thin iPhone 17 may ship in higher volumes than the iPhone Plus, it likely won’t significantly boost iPhone sales overall, partly due to downgraded components paired with a high price and a user experience similar to current models.
iPhone shipments are estimated at around 220 million units in 2024 and roughly 220–225 million in 2025, below the market consensus of 240 million or more.

In a Wired interview last month, Tim Cook stated that charging for Apple Intelligence has never been discussed internally (source). It implies that previous optimistic forecasts by some analysts and media about Apple Intelligence generating subscription revenue and driving services business in the foreseeable future were overly optimistic.
A previous survey shows that most iPhone users are not interested in Apple Intelligence (source), aligning with my latest supply chain survey indicating that Apple Intelligence has not boosted iPhone replacement demand.
Apple’s efforts to promote on-device AI face multiple structural challenges. For example, despite the initial buzz following Apple Intelligence’s debut at WWDC 2024, its appeal has significantly declined compared to cloud-based AI services, which have advanced rapidly in subsequent months.
I’m not bearish on Apple Intelligence’s long-term prospects; however, given the points discussed above, there is no evidence of Apple Intelligence’s ability to benefit hardware replacement cycles or service business. As such, it should be cautious of potential downside risks created by earlier market over-optimism.