Apple has invested in industrial design and hardware technology for many years, offering improved cameras and stronger materials to encourage consumers to upgrade their devices. In recent years, however, the pace of hardware innovation has slowed considerably. Despite the iPhone 15 Pro’s new titanium body, its overall design remains similar to the iPhone 12 of four years ago. The upcoming third-generation Apple Watch Ultra will largely resemble the original, while other watch models have maintained the same design since the Series 4 line, which was released in 2018, insider Mark Gurman of Bloomberg writes.

Similarly, the MacBook Pro will keep its basic form factor from 2021, and a new design is not expected until 2025 or 2026. The MacBook Air was refreshed in 2022, but further changes are likely to come in a few years. The iPad Pro has recently received a significant design change with an ultra-thin body that took six years to implement.

This slowdown in hardware innovation is making it harder for Apple to convince consumers to upgrade their devices regularly. Economic factors, such as inflation and the declining value of used devices, are also forcing consumers to hold onto their money.

At the same time, Apple focuses on the durability of its devices. The company’s efforts are aimed at extending the life of its devices through new manufacturing technologies, software support, and comprehensive repair services. Apple devices released in 2017 can still run the current iOS, iPadOS, and macOS operating systems, which counteracts criticism of planned obsolescence and encourages long-term investment in Apple products.

However, this change has created a less reliable growth engine for Apple, as reflected in its recent financial performance. Sales have declined in five of the last six quarters, highlighting the need for new sources of revenue.

At a time when new design and hardware features are no longer driving sales as much, the integration of AI and advanced software offers a new way to attract and retain customers.

For example, the upcoming iPhone 16 line won’t have a lot of changes in design or features, but customers will need the latest model if they want to use the new Apple Intelligence AI features.

New software improvements may also push Mac and iPad users to upgrade. While Macs from seven years ago will still run the next version of macOS Sequoia, features like iPhone Mirroring and Game Mode require newer hardware.

Apple’s intelligent capabilities, including the updated version of Siri, will be the biggest test of whether software can drive hardware sales. These features are likely to be a centerpiece of Apple’s marketing campaign for the iPhone 16, just as advertising the original Siri helped boost sales of the iPhone 4s in 2011.

Mac users, meanwhile, will need to have a model with an Apple Silicon processor to take advantage of the new AI features. And the M4 chip-based Mac update that the company plans to roll out over the next 12 months will likely focus on how well the new models work with Apple Intelligence.

The slowdown in hardware refresh rates will also force Apple to rely more on service fees and subscriptions. That’s why Apple is fighting so hard to keep every penny in the App Store – despite the scrutiny of EU regulators – because its own store is so important to the company’s future revenue.

There is an opportunity to turn AI features and other software into paid services, but it will take time. While Apple Intelligence will be free to begin with, the long-term plan is to make money from these capabilities. Over time, the company may launch something like Apple Intelligence+ with additional features that users will pay a monthly fee for, just like iCloud. In addition, Apple will receive a part of the subscription revenue from each AI partner it engages in cooperation.

If all this works out, Apple could be in a strong position in a few years. The company will be less dependent on hardware capabilities to grow its business and will actually make money from AI, which is what everyone in Silicon Valley is hoping for.