Apple Unveils AI-Powered Siri, But Most iPhones Cannot Run It

What happened

At its Worldwide Developers Conference, Apple revealed Siri AI, a rebuilt version of its voice assistant that uses Google Gemini technology to understand on-screen content and personal device data while maintaining privacy. The new system offers a more conversational, ChatGPT-like experience and includes features such as customizable voices, a dedicated app, and integration with Apple Music. However, Morgan Stanley analysis highlighted that over 850 million iPhones currently in use cannot run basic Apple Intelligence functions, and more than 1.3 billion devices lack the hardware for advanced Siri capabilities. Only iPhone 15 Pro and newer models can fully support the upgraded AI, as they require newer chip architecture and at least 12 gigabytes of unified memory. The update is part of iOS 27, which will launch in beta later this year and become widely available in the fall.

Why it matters

For Lumentum Holdings, a key supplier of optical and photonic components to Apple, this announcement carries mixed implications. On the positive side, the hardware requirements for Siri AI could eventually drive a significant upgrade cycle among Apple's vast user base, potentially boosting demand for advanced components in newer iPhone models. However, the immediate challenge is that most existing iPhones cannot run these features, and analysts question whether AI alone will convince consumers to upgrade amid economic uncertainty and lengthening device replacement cycles. If upgrade rates remain weak in the near term, it could dampen demand for Lumentum's components. Additionally, Apple's reliance on Google Gemini technology rather than building a fully proprietary solution signals competitive pressure in the AI space, which could affect Apple's product roadmap and, by extension, supplier relationships. Lumentum's performance may hinge on whether Apple's AI vision translates into tangible device sales growth.

Bigger picture

Apple's move into generative AI reflects broader industry trends, as competitors like OpenAI, Google, and Anthropic have moved faster in deploying conversational AI tools. The technology sector is increasingly focused on on-device AI processing to balance performance with privacy, a shift that requires significant hardware upgrades across consumer electronics. For component suppliers like Lumentum, this transition creates both opportunity and risk: while next-generation devices demand more advanced photonics and optical solutions, the fragmented compatibility landscape means adoption may be slower than anticipated. The smartphone industry is also grappling with longer replacement cycles globally, which could delay the revenue benefits of AI-driven upgrades. Apple's strategy of emphasizing privacy and on-device processing differentiates it from cloud-heavy competitors, but whether consumers view these features as essential enough to justify purchasing a new device remains uncertain. The success of this rollout could set the tone for how quickly AI adoption accelerates across the entire smartphone supply chain.

What to watch

Investors should monitor iPhone upgrade rates and sales figures for the iPhone 15 Pro and newer models following the iOS 27 launch this fall. Early adoption metrics for Siri AI and user engagement with the new features will signal whether Apple's AI push can drive a meaningful hardware refresh cycle. Additionally, watch for any updates from Apple regarding component demand forecasts or supplier guidance, as these could directly impact Lumentum's near-term revenue outlook. Morgan Stanley and other analysts will likely track the percentage of Apple's installed base that upgrades, as well as consumer sentiment around AI as a purchase driver. Finally, keep an eye on competitive moves from Google, Samsung, and other smartphone makers, as their AI offerings could influence Apple's market position and indirectly affect supplier demand.