According to recent findings from Counterpoint Research, generative AI is set to become a prominent feature in the smartphone market, with estimates indicating that around 45% of global smartphone shipments this year will include this technology. This figure is expected to rise to 52% next year, marking a significant shift in the industry.
Last year, the share of smartphones equipped with generative AI was only 36%, showcasing rapid growth in this area. However, the overall smartphone market is facing challenges, with a projected decline in shipments by 13.9% this year due to memory shortages, resulting in an estimated 1.08 billion units, the lowest level recorded.
As generative AI features become more standard, leading manufacturers like Apple and Samsung are poised to dominate this segment, leveraging their engineering capabilities to enhance user experience. While smartphones priced over $400 are increasingly incorporating generative AI, this feature has yet to significantly drive consumer purchasing decisions as many users remain hesitant to fully embrace AI functionalities.
The trend is shifting as manufacturers begin to transition computational tasks related to AI from the cloud to local device resources. Counterpoint Research notes that updated versions of Siri are already providing a more satisfying user experience, particularly when handling contextual and daily tasks. If a fully functional voice interface for Siri is integrated into iOS 27, the upcoming iPhone models could see a notable increase in demand this fall.
The competition among smartphone manufacturers is also influenced by the large language models they utilize. For instance, Google Gemini powers both Apple's Siri and Samsung's Galaxy AI, while Chinese smartphone brands are increasingly relying on local AI solutions. The manner in which manufacturers configure their devices' interactions with third-party AI platforms will significantly affect user experience and consumer choices, making this a critical battleground for competitors.
In addition to the advancements in AI, smartphones with enhanced AI capabilities are primarily targeting the premium market segment. With memory shortages impacting production, affordable smartphones are losing popularity due to rising prices. This year, even high-end smartphone buyers will find themselves paying more for less, as increased memory costs are eroding profit margins, leaving limited room for other feature improvements. Conversely, the market for refurbished smartphones is likely to gain traction in this environment.
As generative AI becomes more prevalent, it signals a transformative phase for the smartphone market, compelling competitors to innovate and adapt to maintain relevance.
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