Apple Vertical Integration Key to New iPhones (Especially the Duo), Wearables, and AI
I unironically used Google Gemini to make this title image
Positioning
The keynote kicked off with a recap of its approach to AI aimed at two audiences: regular consumers who might be thinking about AI gadgets and services from Open AI, Google, and others; and investors who have discounted Apple in the AI buildout because Apple isn’t developing its own foundational models. In a meeting with analysts afterwards, Apple noted that Siri isn’t built to be a companion with endless follo-up questions, keeping users engaged – and buying more tokens. Siri is aimed at securely using your personal data to get things done, while engaging with the app ecosystem that has powered iOS since the iPhone 3G. Apple’s AI story plays out differently based on geography and changing regulatory environments. In China, Apple is working on getting approvals. In the EU, regulators want Apple to open up its services in ways Apple believes are insecure, so some Siri AI features aren’t available.
With its “intelligent personal hub” positioning out of the way, Apple introduced the iPhone 18 Pro and Pro Max, with new Apple Silicon A20 Pro, its latest SoC built on TSMC’s 2nm process. It provides a boost in performance and significantly better battery life. The new phones get variable lens aperture for manual control in the main camera that most mainstream consumers won’t use, and, around front, a smaller camera cutout leaves room for three activities in the dynamic island – extremely welcome while traveling. There are also new colors. As phone upgrades go, these are relatively minor, but the iPhone is the best-selling phone in the world, and in many years the Pro models are actually the most popular variant.
Skipping ahead to the other phone Apple launched, the iPhone Duo is a passport-style wide foldable that is thicker and heavier than the Galaxy Z Fold8 but extremely polished in nearly every other way. The software experience looks great, the nano-textured display layer cuts down glare and minimizes the crease, and Apple is claiming good cameras and great battery life. There is no real telephoto; for that you still need an iPhone 18 Pro.
Apple would like you to believe that the iPhone Duo was designed to give consumers more choice with the option of the largest display of any iPhone. That’s undoubtedly true, but the iPhone Duo also addresses two issues for Apple: competition in China, where foldables are growing in popularity, and the need for a new, higher price point at the top of its line. Chinese customers are often more tied to WeChat than iOS, Android, or HarmonyOS, so users there are more open to switching than elsewhere. Android foldables have pulled more switchers from Apple than bar phones, but Apple's entry is more likely to grow the category significantly overall.
Apple began designing this phone years ago, before AI-driven component shortages were a thing. But having a super-premium addition to the line to take maximum advantage of the components you do have is an effective strategy. Apple will still aim to produce more attainably priced products like the new Mac mini M6, and AirPods 5, but it will also stretch things for those who can afford to invest in super-premium phones and Mac Studios with M5 Ultra.
The $2,000 iPhone Duo will be priced out of reach for many, but, in the West, there are a lot of people who have been waiting to buy a foldable that doesn’t force them to leave Apple's ecosystem. Leasing and financing programs – including Apple’s own and carrier options like this one from T-Mobile – break the huge cost down into smaller, manageable chunks without adding interest charges.
That $2,000 price is also highly competitive in the market, with most fold-larger phones coming in between $1800 and $2100. Samsung has a price advantage with the similarly shaped Galaxy Z Fold8, but that is not a big enough of a difference to be a purchase driver. Motorola's base razr, on the other hand, can be had for as low as $400. That puts it in a completely different price band than even a regular iPhone 18 Pro, never mind the iPhone Duo. Of course, that is a fold-smaller phone with less capable cameras and performance, but if what you're looking for is a foldable that is inexpensive and fun, the moto razr fits the bill and should be unaffected by Apple.
The industry-wide component shortage has come for iPhone pricing across the board. Everything in Apple’s lineup is $100 more expensive this year than last, and the iPhone 18 just doesn’t exist. The iPhone 17 was a big upgrade over the iPhone 16, so Apple didn’t have as much urgency to make a new version, and component shortages and pricing forced its hand. That does open up a small window for the base Samsung Galaxy S26 ($900) and Google Pixel 11 ($900) to compete with last year’s base iPhone. Still, data from Recon Analytics (link shared with permission) suggests that most consumers will either buy up to the iPhone Pro or iPhone Duo or just wait another year if they can.
Apple continues to position the Apple Watch as a health and fitness tool. While there are new sensors for heart monitoring and a readiness score, Apple didn't introduce radical new health tech with the new watches. Samsung, Google, and especially Huawei retain a lead in blood pressure monitoring. Google is claiming directional blood glucose tracking as well. However, Apple's new S11 chip enables new AI features with significant privacy protection (see below).
Finally, the new AirPods 5 provide a lot of the audio and ANC capabilities of Apple’s AirPods Pro for people who don’t want eartips sealing their ear canals at a much lower price ($130 or $150 with extra quality-of-life features). I got ears-on with samples and this is definitely the best ANC in an on-ear design.
Software Polish
Perhaps the most impressive aspect of the iPhone Duo is how polished the user experience is. I’ve gotten hands-on with the iPhone Duo, and from a design perspective it does not look or feel like a 1.0 product. There’s an animation that plays when you open or close iPhone Duo where the inner display mirrors the outer one with a distortion transition effect that solidifies (or disappears) as you complete the physical action. It’s delightful.
The vertical app dock is well considered, other UI elements are also moved to the side, and multitasking is simple. The iPhone Duo’s hinge allows it to be held in tent mode, in laptop pose, or fully open and closed. The rear camera can be used for better quality selfies (this is a common trick on foldables, and extremely welcome here). All of Apple’s apps have been reconfigured to take advantage of the different aspect ratio and poses, and Apple’s APIs and pull with developers should mean that most third-party apps will be updated to support it as well over time.
Vertical Integration
Another through-line of this Apple Event was the integration between Apple’s hardware, software, and silicon teams to enable features and form factors as it needs them. Apple says that the A20 Pro allows for modern AI workloads – and gaming – that require higher sustained performance by changing how memory is packaged on the chip for better cooling.
The A20 Pro was also specifically designed to drive the iPhone Duo’s dual displays. Merchant silicon from MediaTek and Qualcomm can do this, too, but Apple’s control over its silicon meant that it wasn’t using die space for this specific capability on prior phones, allocating cost and space elsewhere. Apple’s control over the display engine on silicon also meant that it could choose the exact display size, resolution, and capabilities to meet its product design goals, not be forced into whatever choices Qualcomm or MediaTek made. (Apple is still somewhat constrained by Samsung Display, but it can exercise more control over that by placing enormous custom orders.)
Similarly, the new S11 chip in the new Apple Watch Series 12 and Apple Watch Ultra 4 has dedicated an NPU and secure exclave not just to enable Apple’s new AI features, but a very specific implementation. Like many AI assistants and AI note-taking tools, the Apple Watch can be in always listening mode. However, instead of always recording, it’s always transcribing. No audio is retained. This feature is opt-in and not on by default. The transcription happens entirely on-device, though not on the Watch; there’s a secure exclave on iPhone silicon since the iPhone 16, and the processing happens there in an environment that the OS, Apple, the user, or anyone else can access. Data is encrypted end-to-end during snyc with a new security pairing protocol that goes beyond just Bluetooth, and data in the secure exclave is automatically deleted. To reduce fears of bystanders being recorded, speakers are not identified, and even Siri Recap just provides a high level summary, not a transcript.
It remains to be seen if consumers love or object to this capability becoming widespread – some younger consumers are objecting to being recorded in any way without their consent, despite widespread security cameras and smartphones already in the environment today. Apple's approach is the best considered from a privacy/security perspective I've seen in the market so far, and it is enabled by closely coordinating between software, hardware, and silicon design teams. This approach to useful context for AI while maintaining a level of privacy and security could work for smart glasses as well; potentially even smart glasses with cameras if the images are immediately hashed and discarded.
Apple’s new C2 modem is another area where Apple has mostly wrested control over its direction from Qualcomm. All the new iPhones other than the U.S. iPhone 18 Pro Max use it – the first time Apple has deployed its own modem so prominently. The C2 supports mmWave in the U.S. and uses AI to better steer the signal in complex and edge of network situations. The most compelling differentiator for Apple engineers was a focus on efficiency; Apple claims that the C2 provides 15% better battery life than the C1. This transition from Qualcomm was widely expected – in fact, Apple is behind schedule – and Qualcomm has since diversified well beyond its start in mobile into PCs, IoT, automotive, and datacenter.
It’s not just the silicon: Apple software — and coordination with specific carriers — enable a new “handoff” feature that allows a single eSIM to control two separate iPhones. The feature launches with T-Mobile in the U.S. and Deutsche Telekom and is coming to Verizon and EE later this year. This will be a boon for gadget lovers, people using different form factors on weekdays and weekends, and device reviewers.
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