They wanted to keep everyone on their proprietary platform instead of enabling their devices to be used on the wider internet / being a more open mobile platform.
As long as apple allows some AI integration, then I think they'll be fine- and in fact I trust their privacy and security model more than if I bought a Google device. (not to say I trust anyone's security model, but it's clear that Apple has a more vested interest in security and privacy than Google does)
It'll make the iPhone look like Blackberry.
And let's say that Apple wants to respond with their own AI-first phone. But wait, they don't have the model. They don't have the compute. Most of their employees only know the old way of doing things. It'll be like GM trying to compete against Tesla or BYD in EVs. Their whole workforce and skills are in ICE.
Just simply because interfaces need to be crafted, and they're a design language that you learn over time. And most likely everyone needs the same things 90% of the time anyways.
When I step into my car I don't need the heating button to move closer if it's cold. I just want to learn where it is once and use it when I need to for x number of months / time of day.
That also goes for things like films and music - most of the time we actually want to be seeing and hearing the same things as everyone else (for some different definitions of "everyone"), not something that's made for us.