TL;DR:
- Smartphone sales are expected to rebound in 2024 and 2025, defying previous industry forecasts.
- On-device AI capabilities are driving the resurgence, offering enhanced photography and speech recognition.
- Leading smartphone manufacturers like Apple, Vivo, Xiaomi, and Samsung are embracing AI with remarkable sales results.
- Morgan Stanley highlights the uncertainty around the emergence of the next “killer app” in Edge AI.
- Goldman Sachs predicts a temporary dip in global smartphone volumes for 2023 but anticipates growth in 2024 and 2025.
- Smartphones are poised to maintain relevance with shorter replacement cycles and expanding use cases.
Main AI News:
In the ever-evolving landscape of the mobile industry, a beacon of hope emerges as we venture into 2024 and beyond. Morgan Stanley’s latest report, in conjunction with Goldman Sachs, suggests that smartphone sales are poised for a remarkable comeback, defying the somber predictions of a prolonged slump in the mobile sector. This renaissance is underpinned by the relentless march of Artificial Intelligence (AI) into the realm of mobile devices, propelling growth and innovation.
According to Morgan Stanley’s projections, global smartphone shipments are set to surge by nearly 4% in 2024, with an even more impressive 4.4% increase anticipated for 2025. These numbers stand in stark contrast to the multi-year downturns witnessed in the PC industry. The driving force behind this resurgence is the integration of cutting-edge on-device AI capabilities, heralding a new era of smartphone functionality.
AI’s transformative potential in smartphones is nothing short of astounding. It promises to unlock fresh demand by enhancing photography, enabling speech recognition, and safeguarding user privacy. Leading smartphone manufacturers such as Apple, Vivo, Xiaomi, and Samsung have already begun to embrace AI as a game-changer.
For instance, Vivo’s introduction of the X100 with on-device AI resulted in explosive sales, while Xiaomi’s AI-packed flagship witnessed a sixfold increase in sales volume. Samsung, not one to be left behind, is gearing up to incorporate generative AI into its 2024 models, aiming to provide features akin to ChatGPT directly on the device, without relying on the cloud.
Morgan Stanley acknowledges the skepticism surrounding the timing of the next “killer app” in Edge AI, drawing parallels to the evolution of desktop and mobile internet. However, they also point to Microsoft’s CoPilot as a potential harbinger, paving the way for the popularization of AI at the edge, implying AI features and functions residing on the device itself. This development instills confidence that a unique, smartphone-oriented killer app will inevitably emerge.
Goldman Sachs, in their estimates for 2023, predicts a 5% year-on-year dip in global smartphone volumes, resulting in 1.148 billion units, a slight decline from the previous year’s 1.206 billion phones shipped. However, Goldman anticipates a resurgence in momentum for 2024 and 2025, driven by exciting product launches. Their forecast paints a picture of global smartphone shipments rising by 3% to 1.186 billion in 2024, with another 5% increase projected for 2025, reaching 1.209 billion.
As we approach the holiday season and witness continuous restocking, coupled with more precise guidance from the supply chain regarding market recovery, Goldman Sachs foresees an upward trajectory for smartphone shipments in the coming years. They emphasize the expectation of low single-digit growth in 2024-25, eventually bringing global smartphone shipments back to the levels seen in 2022 by 2025.
The optimism surrounding the mobile industry stands in stark contrast to the prevailing consensus, which likens smartphones to personal computers facing inertia and substitution threats over the last decade. However, Morgan Stanley counters this viewpoint, asserting that replacement cycles and expanding use cases continue to favor mobile phones over other devices.
In the ever-evolving landscape of mobile technology, smartphones are not merely maintaining their relevance but are poised for a resurgence, fueled by the promise of AI-driven innovation. Tablets and smartphones have consistently chipped away at the dominance of PCs since 2011, demonstrating that new devices are the cause of PC shipment declines rather than a waning demand.
Conclusion:
The integration of AI into smartphones is poised to revitalize the market, with Morgan Stanley and Goldman Sachs projecting significant growth in the coming years. This shift underscores the enduring relevance of smartphones, driven by innovation and evolving consumer demands. The industry’s focus on on-device AI capabilities is likely to reshape the competitive landscape, creating opportunities for both manufacturers and investors.
