Smartphone Market Rebounds, AI Phones Shine: 2024 Smartphone Shipments to Exceed Expectations

Smartphone Market Rebounds, AI Phones Shine: 2024 Smartphone Shipments to Exceed ExpectationsRecently, international research firm IDC released its latest report, announcing an upward adjustment to its 2024 smartphone shipment forecast. It predicts a 5

Smartphone Market Rebounds, AI Phones Shine: 2024 Smartphone Shipments to Exceed Expectations

Recently, international research firm IDC released its latest report, announcing an upward adjustment to its 2024 smartphone shipment forecast. It predicts a 5.8% year-over-year increase in 2024 shipments, reaching an estimated 1.23 billion units, up from the previous forecast of 1.21 billion units, representing a 4% improvement. This news undoubtedly brings good tidings to major smartphone manufacturers. After experiencing a comprehensive decline in the smartphone market in 2023, 2024 finally marks a rebound.

Smartphone Sales Rebound, AI Phones Become the Core Driving Force

Data from the past two quarters suggests that the 2024 smartphone market recovery is happening faster than initial predictions at the beginning of the year. Counterpoint's first-quarter report reveals that global smartphone shipments reached 296.9 million units, marking a 6% year-over-year increase. The second-quarter report indicates global smartphone shipments of 289 million units. Although overall shipments saw a slight decrease compared to the first quarter, the year-over-year growth remained at 6.5%, exceeding the first quarter's rate. Consistent growth over multiple quarters instills confidence in the market regarding the future of smartphone sales.

IDC attributes the upward adjustment of its full-year smartphone shipment forecast to "robust growth in Android devices in China and emerging markets." Data shows that in the second quarter of 2024, the Chinese market alone shipped 7,158 units of smartphones, representing an 8.9% year-over-year increase, significantly exceeding the global market growth rate.

It's worth noting that IDC's forecast report highlights a considerably faster growth rate for Android devices compared to iOS devices, reaching 7.1% versus 0.8% for iOS, a difference of almost nine times. Historical data reveals that the slowdown in iOS growth primarily stems from its significantly reduced market share in China. In the second quarter of 2024, Apple's shipments amounted to only 9.5 million units, marking a 3.1% year-over-year decline, and its market share dropped to 13.8%, falling out of the top five positions in the Chinese market for the first time. In emerging markets, iOS devices, due to their high prices, lag behind Android devices in growth. With diminished support from these two primary growth markets, iOS device growth naturally falls short of expectations.

However, IDC remains optimistic about Apple's growth in 2025, predicting a 4% increase fueled by new features like AI. Beyond new features, the long-rumored iPhone SE4, featuring substantial upgrades and a lower price point, holds the potential to become a new driver of growth for iOS devices.

Furthermore, with major smartphone manufacturers integrating AI capabilities into their flagship models, AI phones have witnessed a notable increase in their overall sales share. IDC forecasts a 344% explosive growth in generative AI smartphones by the end of 2024, reaching a market share of 18%.

As a key selling point for this generation of smartphones, generative AI exhibits a distinct performance difference between older and newer devices. Older phones, constrained by their processors' limited AI computing power, typically rely on cloud-based AI to enable certain features. In contrast, the latest generation of AI phones boast sufficient local computing power, allowing them to deploy local AI models and access the phone's underlying functions.

While the difference may seem subtle, it translates to a significant disparity in actual user experience. Firstly, locally deployed AI models can provide personalized AI assistants tailored to user habits, offering customized service support. This level of personalization is challenging or cost-prohibitive for cloud-based AI models. Secondly, local AI models can integrate deeply with local system services, enabling users to quickly invoke various functions and services through voice commands, gestures, and other interactions. For instance, vivo XFold3 leverages its local AI large model's visual assistance to realize functions like controlling Douyin (a Chinese social media platform) through air gestures. While this feature is not entirely new, past implementations often required multiple sensing modules, whereas now, a single camera suffices.

By leveraging the processing capabilities of AI large models in areas like text and vision, the newest generation of AI phones can enable more convenient features without significantly increasing hardware costs. This allows smartphone manufacturers to offer AI phones with experiences distinct from traditional phones. With the innovations in user experience brought about by AI phones, they are poised to spark a wave of device upgrades over the next two years.

Domestic Brands Double Down on 'Sea of Phones' Strategy, Overseas Share Grows Significantly

Since the beginning of this year, Chinese smartphone brands have noticeably ramped up their product releases, and simultaneously, manufacturers like Xiaomi, vivo, and OPPO have witnessed a significant increase in their overseas market share. According to Counterpoint Research, Xiaomi has climbed to third place in the European market, trailing only Apple and Samsung, signifying the best performance ever achieved by a Chinese manufacturer in the European and American markets. Among them, the Xiaomi 14 series has garnered positive reviews from numerous overseas tech websites, and coupled with the overseas versions of models like Redmi K70, it has achieved significant growth in Western Europe.

As Xiaomi's annual flagship digital series, Xiaomi 14 has not only secured a substantial number of orders for Xiaomi overseas but has also excelled domestically, ranking among the top performers in terms of market share and sales volume in the flagship segment. From a product perspective, the Xiaomi 14 series' success hinges on two key factors: First, the standard version exhibits virtually no weaknesses in terms of hardware specifications. Second, as the only small-screen straight-screen phone in the flagship market, it has garnered favor from a large number of female users.

Some argue that the Xiaomi 14 series, with its small-screen straight-screen design, has snatched away a considerable portion of the market share previously held by iPhones, while simultaneously alerting smartphone manufacturers to the demand for small-screen straight-screen phones. Consequently, several upcoming flagship smartphone models, including those from OPPO and vivo, have embraced this design, incorporating small-screen versions into their new series.

Although Xiaomi leads the flagship phone market in terms of sales volume, its performance in the mid-to-low-end market has been slightly less impressive. The reputation of the Redmi K70 series has slightly declined compared to previous years, and coupled with the 'sea of phones' strategy launched by brands like vivo, iQOO, and realme in this price segment, it has experienced a loss of market share. The battle in the mid-to-low-end market this year is arguably more intense than ever before.

vivo, which topped shipment figures in the Q2 quarter, has released at least five new products in the past three months alone, strategically introducing new models across various price points from 1,000 to 3,000 yuan. Additionally, it launched the vivo X100Ultra in May, bolstering its flagship product line and contributing to a significantly higher Q2 shipment volume compared to other brands.

vivo's 'sea of phones' strategy has yielded notable results, prompting other brands to follow suit. Rumors circulating on Weibo suggest that realme is planning 10 different products for release in the fourth quarter of this year and the first and second quarters of next year. If true, this would make realme the second brand to join the 'sea of phones' battle.

Offering consumers a broader product range catering to their specific requirements is a strategy that never goes out of style. If the mid-to-low-end market share continues to shift towards brands like vivo, brands like Xiaomi might consider joining the fray.

For consumers, this intense competition among manufacturers provides a wider array of choices, allowing them to select products best suited to their functional needs. Furthermore, as competition intensifies in the mid-to-low-end market, the average price of high-performance phones has noticeably decreased. For instance, Redmi's previously released Redmi Turbo3, equipped with the third-generation Snapdragon 8s chip, boasts performance comparable to the second-generation Snapdragon 8, and its accompanying hardware specifications are quite impressive. The current price has dropped to around 1,500 yuan, significantly lower than the price of sub-flagship phones featuring the second-generation Snapdragon 8.

Based on current trends, the mid-to-low-end market competition next year might be even fiercer than this year, and Redmi will undoubtedly not stand idly by as its market share is eroded by other brands. As the product performance of mid-to-low-end market phones improves, it is likely to entice more users to upgrade their devices, providing further impetus for the smartphone market rebound next year.

Summary

Overall, the global smartphone market is undergoing a significant rebound in 2024, particularly propelled by growth in China and emerging markets. The emergence of AI phones stands out as a highlight of this recovery, with major manufacturers vying to introduce smartphones equipped with generative AI technology, offering users a more personalized and intelligent experience while stimulating their desire to upgrade. As AI technology matures, the market share of AI phones is poised for a substantial increase in the future.