Apple has effectively acknowledged allegations of false advertising over its iPhone artificial intelligence features by agreeing to pay hundreds of billions of won in compensation. As industry criticism and consumer complaints mount over the iPhone's AI capabilities lagging behind rivals, Samsung Electronics (005930) is aggressively targeting AI phone demand in a bid to gain market share this year.
Reuters reported on the 5th (local time) that Apple has agreed to pay a total of $250 million (about 360 billion won) to settle a class-action lawsuit filed by U.S. iPhone consumers over its "Apple Intelligence" and next-generation "Siri" features. The settlement effectively acknowledges the false and exaggerated advertising claims U.S. consumers made in a damages suit filed in a California federal court in 2024.
At the Worldwide Developers Conference (WWDC) 2024, Apple unveiled Apple Intelligence, its in-house generative AI feature for iPhones, and announced plans to upgrade Siri into an AI voice assistant. Consumers purchased the "iPhone 16" series, released shortly after WWDC 2024, in anticipation of the first "AI iPhone." However, key feature updates, including the Siri upgrade, have been delayed for nearly two years — until this year — contrary to the company's initial promise of a phased rollout. Growing consumer frustration eventually led to the lawsuit.
The plaintiffs argued that "Apple deceived investors and consumers through false advertising without even having a working prototype." Industry observers have criticized Apple, saying the company is displaying "a textbook case of moral hazard by resorting to marketing lies to close the AI gap with rivals such as Google and OpenAI."
Consumer demands for compensation could extend beyond the United States to other major markets. Under Apple's structure, delays in U.S. feature rollouts push back update schedules for non-English-speaking regions as well. In South Korea, the Seoul YMCA filed a complaint against Apple with the Fair Trade Commission last year over alleged violations of the Act on Fair Labeling and Advertising, and authorities are currently investigating.
Facing the limits of its in-house AI technology, Apple is shifting from its traditional closed-ecosystem strategy to an open-ecosystem approach by integrating rival AI agents such as ChatGPT and Gemini into the iPhone. Apple said, "Resolving this matter allows us to focus on delivering the most innovative products and services to our users," still expressing confidence in its technology. Apple also maintained that the settlement does not constitute an admission of false or exaggerated advertising.
Analysts say the situation presents an opportunity for Samsung Electronics. Because Apple still dominates the premium smartphone market, Samsung can aggressively court consumers dissatisfied with the iPhone's AI features. According to Counterpoint Research, Apple held a 48% revenue share in the first-quarter smartphone market this year, far ahead of Samsung Electronics' 18%. The gap widened by 5 percentage points from a year earlier. While both companies tied at 21% in shipments, the figures indicate Apple holds a significant lead in premium phone sales.
In response, Samsung Electronics plans to soon extend its "One UI 8.5" operating system — containing the AI phone features first introduced in the Galaxy S26 series in March — to older models, starting with the Galaxy S25. The centerpiece is the Galaxy series' first multi-AI agent capability, which supports a range of AI agents including Gemini, the "AI search powerhouse" Perplexity, and Samsung's upgraded Bixby to maximize performance. The feature allows users to hail a taxi through apps such as Uber or Kakao T using simple voice commands. Samsung also signaled a major upgrade in AI features for its new foldable phone, the "Galaxy Z8" series, to be unveiled in July, which will be the first to run "One UI 9."
