To me the almost unsolvable problem Apple has is wanting to do as much as possible on device, but also have been historically very stingy with RAM (on iOS and Mac devices - iOS more understandably, given it doesn't really need huge amounts of RAM until LLMs came along). This gives them a real real problem, having to use very small models which hallucinate a lot more than giant cloud hosted ones.
Even if they did manage to get 16GB of RAM on their new iPhones that is still only going to be able to fit a 7b param model at a push (leaving 8GB for 'system' use).
In my experience even the best open source 7B local models are close to unusable. They'd have been mindblowning a few years ago but when you are used to "full size" cutting edge models it feels like an enormous downgrade. And I assume this to always be the case; while small models are always improving, so are the full size ones, so there will always be a big delta between them, and people are already used to the large ones.
So I think Apple probably needs to shift to using cloud services more like their Private Compute idea, but they have an issue there in so much that they have 1b+ users and it is not trivial at all to be able to handle that level of cloud usage for core iOS/Mac features (I suspect this is why virtually nothing uses Private Compute at the moment). Even if each iOS user only did 10 "cloud LLM" requests a day, that's over 10b/requests a day (10x the scale that OpenAI currently handles). And in reality it'd ideally be orders of magnitude more than that given how many possible integration options they are for mobile devices alone.