Even before President Trump's tariffs threatened to overturn Apple's manufacturing in China, the company's struggle to create new products has led some people within its gorgeous Silicon Valley headquarters to wonder if the company has somehow lost its magic.
The tariffs introduced on April 2nd have lost $773 billion in market capitalization in four days, temporarily losing its position as the world's most valuable public company. However, investors were already beginning to get sour at the company, dropping the stock by 8% in the first four months of the year, doubling the S&P 500's decline.
Apple wanted to revive its fortune from the past year with virtual reality headsets, Vision Pro, and artificial intelligence systems called Apple Intelligence. However, the headset sales have been disappointing and the AI system's signature capabilities have been postponed as they weren't functioning as much as the company had hoped for.
The company's issues underscore that its reputation for innovation, once considered a fundamental component of the brand, has encouraged it to promote anxiety and customer dissatisfaction among employees. And company insiders worry that Apple is often plagued by political civil war, penny pinch and draining talent, despite years of gravitational interests, and the like.
Apple declined to comment.
It's been 10 years since Apple's latest commercial success release: Apple Watch and Airpods. Services like Apple TV+ and Fitness+, introduced in 2019, are lagging behind their subscription rivals. Half of sales come from the iPhone, an 18-year-old product that is gradually improving almost every year.
Although Vision Pro's sales are disappointing, Apple's issues with Apple Intelligence exposed dysfunction within the organization.
In a nearly two-hour video presentation last summer, Apple showed how AI products can summarise notifications and provide writing tools to improve email and messaging. We also revealed an improved SIRI virtual assistant that can combine messages about someone's travel itinerary, such as flight arrival times, with information on the web.
The AI feature was not available when the new iPhone was shipped. They arrived about a month late in October and soon came into trouble. A notification summary misrepresents a news report and leads Apple to disable its functionality. Then last month, the company postponed the spring release of the improved SIRI. Because internal testing was found to be inaccurate in nearly a third of requests, three people familiar with the project they spoke anonymously said.
After the delay, Apple's software chief Craig Federighi told employees that the company will rebuild the executive and remove responsibility for developing new Siri from AI head John Giannandrea, and provide it to Vision Pro Headset Microcwell.
“We've seen a lot of money on Apple's product marketer,” said Michael Gartenberg, a technology analyst who previously worked as Apple's product marketer. “If there is an example of a lack of boundaries that is not overly estimated, it's Apple Intelligence.” It was the first time in years that Apple has not shipped a product that it announced.
Details and challenges of the changes to Apple's SIRI team have been previously reported by Bloomberg and Information.
AI Stumble began moving in early 2023. Giannandrea, who oversees the efforts, is five people with knowledge of the request to purchase a graphics processing unit, or AI chip known as a GPU, seeking approval from the company's CEO Tim Cook. Chips that can perform hundreds of calculations simultaneously are important for building neural networks for AI systems such as Chatbots that can answer questions and write software code.
At the time, Apple's data centers had around 50,000 GPUs over five years ago. These people said that this is far less than the hundreds of thousands of chips AI leaders like Microsoft, Amazon, Google and Meta were buying at the time.
Cook approved a plan to double the team's chip budget, but people said that Apple's finance chief Luca Maestri has reduced that increase to less than half. Maestri encouraged the team to make more efficient chips.
The lack of GPU meant that teams developing AI systems had to negotiate the computing power of their data centers from providers such as Google and Amazon. The main chip created by Nvidia was the requirement that Apple used an alternative chip created by Google as part of its AI development.
At the same time, the leaders of two Apple software teams were fighting those at the forefront of the deployment of Siri's new capabilities, said the three who worked on the effort. Robby Walker, who overseen Siri, and Sebastien Marineau-Mes, a senior executive at the software team, struggled with those responsible for several aspects of the project. Both have become part of the project.
The civil war followed the broader talent escape from Apple. In 2019, the company's chief designer, Jony Ive, left to launch his own design company, poaching more than a dozen essential Apple designers and engineers. And Dan Riccio, the company's longtime product design head who worked on the Apple Watch, retired last year.
Instead, Apple remains with old and new leaders with little experience in product development. Giannandrea, who joined the company in 2019 from Google, has never led the launch of high-profile products like the improved Siri. And Federigi, his counterpart supervision software, never led the creation of a new operating system like his predecessor in the role.
Cook, 64, with an operating background, has been reluctant to provide clear and direct guidance on product development for many years.
“This is clearly a breakdown of leadership and communication and internal processes,” said Benedict Evans, an independent analyst who previously worked as a venture capitalist at Andreessen Horowitz.
Apple has not cancelled the improved Siri. The company plans to release a virtual assistant in the fall. You can edit or send photos to friends on request.
Some Apple leaders don't think delays are an issue as Apple's rivals like Google and Meta don't understand AI yet. They believe there is a time to get it right.
When the watch clicks with fixing Siri, Apple defends the current shortcomings of the assistant. Last month, customers filed a federal lawsuit accusing Apple of fake advertising. Since then, commercials about Siri have been dark.
Brian X. Chen contributed the report.
