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Apple Bets on Hardware While AI Race Accelerates
Apple is choosing to improve its devices instead of trying to win every AI competition.
Its new foldable iPhone arrived years after similar phones from rivals.
The company believes it can wait until a product feels polished before entering a market.
Apple earns a lot of money from iPhones and services such as its digital ecosystem.
This gives it money and time to build AI itself, work with partners or wait.
Apple is also developing smaller AI systems that can run on devices and private cloud computers.
However, Siri has fallen behind newer assistants and AI tools.
If people begin using AI agents instead of apps, Apple’s control of the phone may become less valuable.
The company’s success depends on whether consumers value its trusted hardware interface more than whoever owns the smartest AI.
John Ternus introduced Apple’s $1,999 iPhone Duo foldable phone seven years after Samsung’s first Galaxy Fold.
Apple has emphasized on-device models, private cloud computing and partnerships instead of building a ChatGPT- or Gemini-style rival.
The company’s June 2026 quarter generated $109.4 billion in revenue, including $54.3 billion from iPhone and $30.7 billion from Services.
Apple’s services business had a 75.6% gross margin, compared with 40.1% for products, helping fund future technology choices.
The strategy could preserve Apple’s ecosystem advantage, but Siri’s stagnation and dependence on outside AI providers expose significant risks.
- Who
- Apple, led by chief executive John Ternus, along with technology companies including Google, Nvidia and Samsung.
- What
- Apple launched the $1,999 iPhone Duo while pursuing a cautious AI strategy based on on-device models, private cloud computing and partnerships.
- Where
- The strategy concerns Apple’s global consumer-technology business; the iPhone Duo starts at Rs 2,99,900 in India.
- When
- The foldable phone was introduced this year; the article also cites Apple’s June 2026 quarter and a January 2026 Google Gemini agreement.
- Why
- Apple is relying on its hardware, software, services ecosystem and control of the consumer interface rather than competing directly in every AI infrastructure and model race.
Apple’s Long-Game Strategy
Apple Lost the AI Race
Entering technology markets late
Apple’s Long-Game Strategy
Apple deliberately allows rivals to develop categories, then enters later with a more polished and integrated product, as it did with the foldable iPhone.
Apple Lost the AI Race
The seven-year delay may show that Apple is reacting to competitors rather than leading the next major technology category.
AI investment model
Apple’s Long-Game Strategy
Apple can use its cash, installed base, on-device models and partnerships to avoid the enormous infrastructure spending required by companies centered on AI.
Apple Lost the AI Race
Apple’s reliance on Google and Nvidia for parts of its AI stack may indicate that it has ceded a strategically important layer of computing.
The future of the interface
Apple’s Long-Game Strategy
If AI becomes widely available, Apple could still benefit by controlling the trusted hardware and software interface through which consumers access different models.
Apple Lost the AI Race
If consumers move from apps to AI agents, owning the traditional smartphone interface may become less valuable, weakening Apple’s hardware moat.
Key facts
- Foldable phone
- The iPhone Duo starts at $1,999 and Rs 2,99,900 in India.
- Launch gap
- Samsung launched its first Galaxy Fold in 2019; Apple’s foldable arrived seven years later.
- June 2026 revenue
- Apple reported $109.4 billion in quarterly revenue.
- Services revenue
- Services generated $30.7 billion in the cited quarter and carried a 75.6% gross margin.
- Product margin
- Apple’s products had a 40.1% gross margin, while blended gross margin was 50.1%.
- Cash and securities
- Apple held roughly $146 billion in cash and securities at June 2026.
- AI partnership
- Apple agreed to run its next Foundation Models on Google’s Gemini, according to the article.
Quotes
John Ternus
Apple’s chief executive and former hardware engineer
“the most transformational change to iPhone since the original”
NDTV
Sources
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