How AI Could Spark a New Wave of Smartphone Demand

Smartphone makers are betting big on artificial intelligence (AI) to revive the sluggish smartphone market and trigger a new wave of demand. Samsung, Google, and other players are introducing new devices that feature AI capabilities, such as generative image creation, real-time translation, and smart photography.

AI is the technology that enables machines to perform tasks that normally require human intelligence, such as understanding language, recognizing images, and learning from data. AI has been advancing rapidly in recent years, thanks to the availability of large amounts of data, powerful computing resources, and sophisticated algorithms.

Smartphone makers are keen to leverage AI to enhance their devices and offer new experiences to their users. They are embedding AI chips and models into their smartphones, which allow them to process data locally, without relying on the cloud. This enables faster and more reliable performance, as well as better privacy and security.

Some of the AI features that smartphone makers are offering include:

  • Generative image creation: This is the ability to create realistic and novel images of people or objects based on textual or verbal prompts. For example, Samsung’s Galaxy S24 Ultra smartphone uses its Samsung Gauss AI model to generate images of people based on descriptions, such as “a medieval knight” or “a famous singer”. Google’s Pixel 6 smartphone also uses its Tensor AI chip to create images of people based on their names, such as “Barack Obama” or “Taylor Swift”.
  • Real-time translation: This is the ability to translate speech or text from one language to another in real-time. For example, Google’s Pixel 6 smartphone uses its Live Translate feature to translate conversations between different languages, such as English and Spanish, and display them on the screen. Samsung’s Galaxy S24 Ultra smartphone also uses its Bixby Vision feature to translate text from images, such as signs or menus, and overlay them on the screen.
  • Smart photography: This is the ability to enhance the quality and creativity of photos and videos taken with the smartphone camera. For example, Samsung’s Galaxy S24 Ultra smartphone uses its Scene Optimizer feature to automatically adjust the camera settings based on the scene, such as landscape, food, or portrait. Google’s Pixel 6 smartphone also uses its Magic Eraser feature to remove unwanted objects or people from the photos, such as power lines or photobombers.

AI: The Hope for a Smartphone Supercycle

Smartphone makers are hoping that AI will drive a new wave of demand for their devices, after a period of stagnation and decline in the smartphone market. According to IDC, smartphone sales fell to 1.16 billion units in 2023, the lowest point for unit shipments in a decade. The main reasons for the slowdown were the saturation of the market, the lack of innovation, and the impact of the Covid-19 pandemic.

However, smartphone makers are optimistic that AI will change the game and spark a new “supercycle” of smartphone upgrades and purchases. A supercycle is a term used to describe a period of rapid and sustained growth in the smartphone market, driven by a major technological shift or innovation. The last supercycle happened between 2010 and 2015, when the smartphone market grew fivefold from 300 million to 1.5 billion units, thanks to the emergence of popular apps and services, such as Facebook, Instagram, WhatsApp, Uber, and Snapchat.

Smartphone makers believe that AI will be the next catalyst for a supercycle, as it will offer new and exciting features and functionalities that will entice users to upgrade their devices or switch to new ones. They also believe that AI will enable new use cases and applications for smartphones, such as education, entertainment, health, and gaming, that will expand the market and attract new customers.

AI: The Challenge for Smartphone Makers

However, not everyone is convinced that AI will be the magic bullet for the smartphone industry. Some analysts and experts are skeptical that AI will be enough to revive the smartphone market and trigger a supercycle. They argue that AI is not a new or unique technology, but rather an incremental improvement that is already available on many devices and platforms. They also point out that AI is not a user-driven demand, but rather a supply-driven push by smartphone makers to differentiate themselves and justify higher prices.

Some of the challenges that smartphone makers face in making AI a success include:

  • Competition: Smartphone makers are not the only ones who are investing in AI and offering AI features on their devices. Other players, such as Apple, Huawei, and Xiaomi, are also developing their own AI chips and models, and competing for the same customers and markets. Moreover, AI is not limited to smartphones, but also available on other devices and platforms, such as smart speakers, laptops, and cloud services, which could reduce the appeal and value of smartphones.
  • Regulation: Smartphone makers are also facing increasing scrutiny and regulation from governments and authorities over their use of AI and its impact on society and individuals. Some of the issues that AI raises include privacy, security, ethics, bias, and misinformation. For example, in the European Union, the proposed Artificial Intelligence Act aims to regulate the development and use of AI systems, and impose fines and sanctions for non-compliance. In the United States, the Federal Trade Commission has issued guidelines and warnings for companies that use AI and machine learning, and urged them to be transparent and accountable for their practices.
  • Education: Smartphone makers are also facing the challenge of educating and convincing their users and customers about the benefits and value of AI and its features. Many users may not be aware of or interested in AI, or may not trust or understand how it works or what it does. Smartphone makers need to communicate clearly and effectively how AI can enhance their user experience and solve their problems, and also address their concerns and questions about AI.

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