The world is about to meet Apple’s new CEO. Here are his biggest challenges

By Lisa Eadicicco, CNN

(CNN) — When Apple holds its annual iPhone event on September 9, it’ll be the first time in more than a decade that Tim Cook won’t introduce the company’s latest products.

Instead, John Ternus will debut as Apple’s new chief executive during the company’s most important event of the year.

Expectations are high. Ternus takes over as Apple faces pressure to evolve its products for the AI era. In July, the iPhone maker became the second company in history to reach a $5 trillion market capitalization, raising the bar for what analysts and investors expect from product advancements and financial performance.

Ternus’ background in hardware engineering led many to believe his tenure is likely to usher in a new age of innovation for Apple. Many will be watching for signals of Ternus’ vision this week, especially as the company is expected to follow rivals into a new product category with a foldable iPhone.

Ternus will need to quickly cement his direction for Apple beyond the fanfare of this week’s event. The company faces a string of pressing challenges, including regulatory obstacles in Europe and a memory shortage.

Apple’s AI troubles

Ternus’s engineering experience could be a big advantage for Apple, which has suffered criticism over its approach for the last two years.

Last year, the company delayed a new version of Siri that is now set to launch this fall.

“It was a huge miss,” Gene Munster, managing partner for tech investment firm Deepwater Asset Management. “Thankfully, they’re on the right path, but it could have been so much bigger of a win for them.”

Apple often tailors its devices and chips for its own services and software, and Ternus’ deep background in hardware could be critical in designing new devices that are optimized for AI.

In the near term, Apple is banking on Siri to help gain ground in the AI race. The revamped AI assistant will leverage data – like text messages and photos – from a user’s iPhone to answer questions in a personalized way. For example, you could ask Siri to reference your text messages to find your upcoming doctor’s appointment or dinner reservation.

Apple says the new Siri will be able to complete tasks in certain apps and answer questions about what’s shown on screen, a feature that could help it catch up to Google’s Gemini.

Nabila Popal, a senior director for tech market research firm International Data Corporation, told CNN that two things could give Apple an edge: its traditional focus on user privacy as well as the way it incorporates AI directly into iOS tools like the camera and messages apps.

“(Consumers) just want a device that makes their life easier and takes it to the next level, and I think that’s what Apple will do,” Popal said.

Pressure to deliver hit products

More than anything else, all eyes will be on Ternus to deliver a new blockbuster hit.

Cook will be remembered for scaling the iPhone to a business that rakes in hundreds of billions of dollars every year. By launching a web of services and accessories, such as Apple Music, the Apple Card, the Apple Watch and AirPods, Cook made the iPhone feel essential to everyday life.

Yet investors and analysts are hopeful that Ternus’ will bring a fresh push into new products, such as the foldable iPhone. The IDC projects that Apple will capture 40% of the market for foldable phones by 2027, despite being years behind rivals Samsung and Chinese smartphone giant Huawei.

“Apple’s entry into the foldable market has done more than reignite growth in a category that was losing momentum,” Popal wrote in a recent IDC report, ahead of the foldable iPhone’s release. “It has fundamentally altered the market’s trajectory.”

Memory shortage

The tech industry has been rattled by an ongoing shortage of memory, critical hardware that devices need to quickly retrieve stored information. Data centers have led to a surge in demand for these components, making them significantly more expensive.

That’s caused tech companies like Apple, Nintendo and Microsoft to raise prices of their products. Apple in July increased prices for iPads, Macs and other devices but left iPhone price tags unchanged.

“We’re in what I would characterize as a 100-year flood on memory pricing, with exponential increases in memory prices,” Cook said during his last earnings call as CEO in July.

Consumers should brace for higher iPhone prices, some analysts say.

Mike Howard, vice president of memory coverage at research firm TechInsights. estimates Apple would likely have to increase its smartphone prices by about $250 to $300 to maintain margins.

“We should start thinking about a $1,500 iPhone instead of a $1,000 (or) $1,200 iPhone,” he told CNN in July.

European regulation

Apple likely has more obstacles ahead in the European Union’s crackdown on Big Tech.

The company recently announced changes to its App Store’s business terms to comply with EU regulations. And it won’t launch the new version of Siri on iPhones and iPads in the European Union because of the European Commission’s rules. Europe is Apple’s second-largest market after the United States.

The EC wants Apple and Google to give third-party AI assistants more access to iOS and Android systems. But Apple and Google have both argued that doing so would raise privacy concerns.

And experts agree that consumers should be careful about giving AI agents broad access to content stored on their phones and computers.

An AI agent “could exercise the user’s delegated authority to do other things that maybe the user might not have wanted it to happen,” Michael Stokes, senior vice president of emerging technologies at Veilant, a company that sells secure infrastructure and communications products, previously told CNN.

But the EC allows companies like Apple to “implement appropriate privacy, security and integrity safeguards,” a spokesperson previously told CNN.

Ultimately, Ternus will have to navigate these challenges while living up to the larger-than-life valuation Apple reached in the Cook era.

“Apple is already so large, profitable, and deeply embedded in its customers’ lives that incremental excellence may no longer be enough to redefine the company,” Bank of America analyst Wamsi Mohan wrote in an August research note. “Ternus’s challenge will be to preserve the profitable machine Cook built while restoring a stronger sense of technological surprise.”

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