Apple’s Distribution Moat: Why a So-So AI Strategy Doesn’t Sink Them (Yet)

On the 9th of September 2025, Apple will hold its annual iPhone event and unveil its next generation of iPhones along with a bunch of other hardware including watches, AirPods and more. But the conversation for much of last year has been around Apple’s AI misfires. While I think Apple’s AI strategy has been a miss thus far, I also believe they are remarkably insulated due to their incredible distribution moat. Some thoughts.

Lets get the easy bit out of the way. Siri is awful. It sucks at simple things, let alone being a sophisticated AI assistant. It feels like it is frozen in time continuing to be just as bad as it was 10 years ago while competition from Amazon and Google have improved significantly and new assistants like ChatGPT are running laps around it. Siri still trips over simple requests while Google has been demoing and shipping jaw-dropping features on Android. Gemini is so far ahead of Siri that it would be unfair to call Siri competition. Yet, Apple continues to sell a record number of iPhones. No one is moving from iOS to Android and the state of smartphone wars seems to be no different than it was a few years ago. Why?

Distribution matters

Here’s what those takes miss: distribution moats buy time. When you sit on roughly two billion active devices, you don’t need to be first—you need to be everywhere. Apple’s superpower is its ability to drop a “good enough” feature into iOS and have hundreds of millions of people meet it by Tuesday. The App Store moves staggering sums, not just as revenue, but as leverage over the entire mobile ecosystem.

Why People Don’t Switch (Even When They Say They Might and Even when the competition is better)

Friends agonize over leaving iMessage groups, unpairing AirPods, and re-buying apps. These aren’t technical moats so much as behavioral ones. The cost to switch is social, habitual, and a little emotional. That stickiness gives Apple something precious: strategic patience.

The internet loves shiny stuff. But most buyers love phones that feel familiar, don’t break, and play nicely with their stuff. iPhone dominance wasn’t built on cutting-edge technology; it was built on familiarity and convenience. That said, Apple’s AI gaps are real. Siri’s stagnation is a bad look for a company that made talking to your phone feel normal. And the on-device-only posture sometimes reads as stubborn. These are legit critiques, just not fatal.

The Time Advantage (And Its Expiration Date)

Distribution buys Apple time that pure-play AI companies don’t have. Leaving iOS means leaving your apps, accessories, and workflows. That’s hard. But the clock is ticking. If AI becomes the primary interface—less “feature inside your phone,” more “assistant across everything”—then owning the phone matters less. Apple’s bet is that AI enhances mobile experiences rather than replacing them. If they’re right, integration beats iteration. If they’re wrong, the moat gets shallower. And competitors like OpenAI with their recent acquisition of LoveFrom are nipping at the heels.

Familiarity is comforting. For now.

Apple’s AI strategy deserves skepticism; their distribution moat deserves respect. The question isn’t “Can Apple catch up in AI?” It is “Will AI change behaviors and convince people to shift away, before Apple finishes integrating it?” Moats don’t excuse complacency, but they do let you perfect instead of pioneer.

Apple can ship a good enough AI experience and sustain its leadership. Its unfortunate because a fully integrated Gemini experience is a joy to behold. And with Apple holding the keys to the kingdom tightly, iPhone users might just have to settle for spending $20 on ChatGPT, Gemini or Claude on their phones while even the core Android experience is increasingly infused with cutting-edge AI.

When you are the default, its a luxury to be just “good enough” versus having to be great.