AI smartphones have gained popularity among consumers, becoming a major driving force behind the overall mobile phone shipments in 2024. However, persistently stagnant demand for midrange and low-end models has significantly impacted subsequent supply and demand for smartphones and the operations of upstream component suppliers.
As the sales of Samsung Electronics' Galaxy S24 series and other models have exceeded expectations, many market research firms have raised their estimates for AI smartphone shipments this year. For instance, IDC has increased its forecast for 2024 shipments of smartphones with generative AI capabilities to 234 million units, representing a year-on-year increase of 364% and accounting for nearly 19% of total global handset shipments.
IDC also estimates that the compound annual growth rate (CAGR) for generative AI smartphones will reach nearly 78% from 2025 to 2028. This optimism is based mainly on the increasing number of AI smartphone models launched by brands and their impressive sales performance.
IDC believes that smartphones with generative AI capabilities require a System-on-a-Chip (SoC) as the computing core and the ability to utilize a Neural Processing Unit (NPU) using the int-8 data type to achieve a computing performance of over 30 trillion operations per second (TOPS) for generative AI computations on smartphones.
The AI theme has supported the smartphone market, allowing shipments to return to a positive growth trajectory in 2024, with an estimated year-on-year increase of 1-3%. However, some industry players have recently indicated that demand for midrange and low-end smartphones has not improved, potentially impacting the operations of related supply chain players this year. It remains to be seen whether the actual growth of smartphone shipments will be affected as a result.
Smartphone vendors attributed the sluggish demand for lower-end models to a combination of factors. In addition to external challenges like inflation and geopolitical instability, the market is experiencing slower growth due to mature product lines, lengthening replacement cycles, and rising costs for certain smartphone components.
Some brands have recently tried to stimulate demand for lower-end smartphones by incorporating AI features, but the insufficient computing power of processors and other components in these devices has hindered their ability to provide users with a comprehensive and superior AI experience.
Consumers purchasing mid-to-low-end smartphones primarily focus on price and core hardware specifications, including processor speed, battery life, charging speed, camera quality, and screen size, placing a lower priority on AI features. Additionally, the absence of significant hardware advancements in mid-range and low-end smartphones in recent years has dampened consumer enthusiasm for upgrades, negatively impacting overall smartphone shipments.
