The iPhone’s Reign Is Coming to an End. What’s Next?

January 4, 2019 3oliver

Smart speakers still aren’t nearly as useful, nor as essential, as smartphones. But smartphones were once written off by some for the same reason.

Photo illustration by Slate. Photos by Amazon and Apple.

On Wednesday morning, a FedEx delivery man knocked on my door. His face bore a broad grin, his hands a svelte cardboard box. “Will?” he said brightly. “Are you Will?” I nodded sleepily, and he thrust the box into my hands. “Your new iPhone is here!” he said, still smiling, evidently in anticipation of my own excitement.

“Hey, thanks,” I said, trying to match his enthusiasm, if only out of reciprocal politeness. A new iPhone once felt like a big deal to me—a passport to the latest version of the future. But now it feels more like a costly necessity, one whose exorbitant price tag is thinly justified by superfluities like face recognition, wireless charging, and a snazzier camera. I was not upgrading my trusty iPhone 6—a four-year-old device—for any of those features, but because its screen and battery were faltering. My iPhone has steadily become less of a toy and more of a utility.

It was coincidence that my new iPhone XR arrived on the same day that Apple CEO Tim Cook issued a landmark warning about a shortfall in global iPhone revenue, triggering a slide in not only Apple’s shares but the wider stock market. Cook chalked up the shorn sales outlook to challenges in China, a market Apple depends on for growth—not an abatement of ardor among Americans. He mostly blamed China’s macroeconomy, though it’s clear that Apple also has more specific problems in that critical country, where it’s losing market share to local rivals. Stratechery’s Ben Thompson penned a prescient analysis of Apple’s China problem last year that’s worth reading in light of the latest developments.

No doubt Cook is telling the truth that China is the primary driver of the downturn. But his letter to investors included ominous hints that the iPhone’s problems run deeper and wider. In some developed markets, he disclosed, “iPhone upgrades also were not as strong as we thought they would be.”

That isn’t just a matter of macroeconomics or Trump’s trade wars. He also cited Apple’s improved battery replacement practices and the decline of smartphone subsidies by wireless carriers as reasons customers are replacing their phones at a slower clip. That’s tantamount to admitting that the iPhone’s spectacular success depended partly on slick pricing schemes and planned obsolescence. And while Cook didn’t say this, it seems fair to assume that the unnamed “other factors” involved in lengthier upgrade cycles include diminished customer excitement about each successive round of phones.

These problems have long been predicted—and they’re illustrated by numerous anecdotes like mine from techies and others who find that the thrill of regular iPhone upgrades (and, perhaps more importantly, their necessity and affordability) is gone.

To be clear, the iPhone isn’t going away anytime soon. (Look out for the first pundit who declares the iPhone “dead,” and resolve to ignore them from now on.) The most successful product of the 21^st century is more popular than ever, as measured by the number of iPhones in use around the world, which Apple says has increased by 100 million in the past year.

But if the iPhone isn’t yet a thing of the past, it also no longer feels like a harbinger of the future. It has embedded itself deeply into so many people’s lives, but it’s no longer the source of magic and delight that it once was. Which raises the question: What’s next?

There is probably no direct successor, because there is no single device or category of devices that promises to play quite so pivotal a role in the next decade of computing as smartphones did in the last one. Certainly there is no hardware on the horizon that promises to be as lucrative.

But there is a technology that’s developing and gaining traction in ways that suggest a revolution on the order of the personal computing or mobile revolutions of previous decades. It’s voice-powered artificial intelligence (A.I.)—think Alexa, Google Assistant, Siri, Cortana, Bixby—and its multifarious array of associated gizmos, from smart speakers and smart displays to wearables, in-car entertainment systems, and smart-home appliances.

You’ve probably heard before that A.I. and voice are the future. That’s still on track to be true, even though it hasn’t happened overnight. (The future rarely does.) It’s coming first in the form of speakers such as Amazon’s Echo and Google’s Home, with Apple’s HomePod and others playing catch-up. While the big tech companies don’t yet report sales figures for these devices, studies show the market expanding rapidly, with nearly a quarter of U.S. households owning one as of last fall, according to Nielsen. Some analysts predict that figure will top 50 percent by 2022.

Meanwhile, the sector is growing at rates reminiscent of smartphones’ early days. A report by Strategy Analytics estimated that Amazon’s Echo business grew 64 percent from 2017 to 2018, while Google’s Home sales boomed 420 percent. That’s before we even start counting all the other devices that are being sold with Alexa, Google Assistant, or other voice AI services built in, or the many more that are voice-compatible.

That’s tantamount to admitting that the iPhone’s spectacular success depended partly on slick pricing schemes and planned obsolescence.

Apple, for its part, said that its Apple Watch and AirPods were “wildly popular” with holiday shoppers in 2018, with sales up 50 percent over the same quarter in 2017. Both lean heavily on Siri for their controls.

2017 saw the birth of a new category, the smart display—basically a smart speaker with a touchscreen attached—starting with Amazon’s Echo Show. It was followed in 2018 by smart displays from Facebook, Google, JBL, Lenovo, and others. These devices essentially resemble giant smartphones that sit on a table instead of in your pocket. And they’re capable of being the command hub for your home life in much the same way that a smartphone is for your digital life.

The speakers and displays themselves lack the sparkle of an iPhone, let alone the profit margin. At between $30 and a few hundred dollars each, depending mostly on sound quality, they will probably never represent a hardware business comparable to the smartphone sector. But the software is at that precipitous early stage of the growth curve where it’s starting to do some things that seem as magical as browsing the Web or playing a game on a phone once did. The Google Assistant has gotten smart enough that I feel free to ask it any question that I would normally ask Google—which is to say, basically any question. It won’t always understand me, let alone get the answers right, but it does so often enough that it makes it fun to try. Amazon’s Alexa fell behind in general intelligence, but it’s making a huge effort to regain the edge, and the competition is healthy for both.

It’s true that smart speakers still aren’t nearly as useful, nor as essential, as smartphones. But smartphones were written off by some for the same reason in their early years. The key here is that the excitement surrounding a new technology—and its potential for growth—is proportional not to the utility it offers today, but to its rate of progress toward utility. Once a device does most of what you need it to, it ceases to be the next big thing. This happened to PCs earlier in the decade. And soon it will happen to smartphones.

The voice AI revolution is not a certainty. Well-founded privacy fears could hinder its advance, or the technology could hit roadblocks on the path to conversational fluency. But it’s better positioned than any other fledgling platform to take on the sort of central role in our lives that the smartphone has. A new Google Home Hub may never light up the FedEx courier’s face the way a new iPhone did. But have you seen the face of someone who asks it a question for the first time, and hears its perfect reply?