The AI Smartphone Revolution: Industry Lifesaver or Passing Fad?

With the rapid development of artificial intelligence (AI), the smart terminal sector has also ushered in a new wave of excitement. Smartphones, which have long been criticized for their lack of innovation, have finally found a rare topic of hype: AI

With the rapid development of artificial intelligence (AI), the smart terminal sector has also ushered in a new wave of excitement. Smartphones, which have long been criticized for their lack of innovation, have finally found a rare topic of hype: AI. Major smartphone manufacturers have announced that they are "all in on AI" and have launched a series of new products that claim to be "AI phones". However, how are these "AI phones" performing in the sales market? How do consumers view the AI wave in smartphones? Can "AI phones" bring new variables to the industry chain?

Are "AI Phones" AI Enough?

The so-called "AI phones" focus their AI attributes mainly on functions such as image processing, voice assistants, and text generation. However, consumers are not very enthusiastic about these features, with some even saying that "you can achieve the same thing with third-party apps". Feedback from sales staff indicates that "AI features" are not getting much attention overall, with few people actively asking about them, and AI is not a major selling point for phones.

The stark contrast between industry hype and market indifference underscores the fact that the smartphone market has bid farewell to high-speed growth. IDC statistics show that in 2023, China's smartphone market shipped approximately 271 million units, a year-on-year decrease of 5.0%, the lowest annual shipment volume in nearly 10 years.

Turning Point Approaching? Far Water May Not Quench Present Thirst

The continued downturn in the smartphone market has made it difficult for upstream and downstream companies in the industry chain to gain favor with investors in the secondary market. Benefiting from the recent boom in new energy vehicles, upstream consumer electronics manufacturers have flocked to the intelligent vehicle track in search of new growth paths. Xiaomi has even gone so far as to "jump into the sea" by manufacturing cars, with Lei Jun calling it his last entrepreneurial endeavor.

Against this backdrop, the AI wave has stirred up ripples in the smartphone industry. Major research and analysis reports have declared that AI phones are "changing the form of mobile phones", "the market turning point has arrived", and "a new era of smartphones has begun". In the secondary market, "AI phone concept stocks" have been frequently.

However, the reality is not so optimistic. In addition to consumers' weak perception of AI phones, many industry practitioners have also given the judgment that "AI phones are the trend", but the extent to which AI phones can bring performance "increments" to these companies remains to be tested by the subsequent market.

Industry Chain Needs to Mature

In the long run, whether AI phones can provide substantial support to the industry depends on the continuous maturity of the industry chain. AI phone development requires more design optimization, such as hardware architecture optimization, energy efficiency and heat dissipation design optimization, and the incorporation of more security features into the design, such as encryption protection and privacy protection mechanisms. The Vice Chairman of the Information and Communication Industry Association of China's Two-Integration Committee, Wu Gaobin, said that "the main changes in the hardware design of AI phones are reflected in the demand for AI processing units and the use of more advanced AI processing chips".

At the same time, AI applications require higher computing performance support. Siquan New Materials and FIRONA (300602.SZ) both stated that this will place higher demands on heat dissipation solutions. The staff of Zhongshi Technology (300684.SZ) Securities Department said that the demand for AI has increased the requirements for heat dissipation materials, "In the past, simple materials could be used, but now some metal heat sinks are needed".

In addition, a person from the Securities Department of Xidhi Micro told a reporter who called as an investor that the company's charging management products can provide long battery life for AI phone devices. In a previous response to an institutional survey, the company stated that the operation of AI phone large models will further increase the performance index requirements of power management chips.

However, market analysts believe that the rise of core component manufacturers in computing power, algorithms, optical modules, OLEDs, etc. is the key to the future breakthrough of AI phones. Zhu Keli, a member of the Standing Committee of the China Information Industry Association and the founding dean of the National Institute of New Economics, told the reporter that AI phones incorporate more powerful processors, dedicated AI chips, and optimized sensor arrays to improve the efficiency and accuracy of tasks such as image recognition and speech recognition. The operating system is more intelligent, able to learn user habits, provide personalized services, and smart assistant functions. These changes have a significant impact on the industrial chain links such as chip manufacturing, sensor manufacturing, and software development.