I do think it makes some sense in limited capacity.

Have some half decent model integrated with OS's builtin image editing app so average user can do basic fixing of their vacation photos by some prompts

Have some local model with access to files automatically tag your photos, maybe even ask some questions and add tags based on that and then use that for search ("give me photo of that person from last year's vacation"

Similarly with chat records

But once you start throwing it in cloud... people get anxious about their data getting lost, or might not exactly see the value in subscription