The global smartphone market is entering an era of transformation as Generative AI (GenAI) begins to shape the next wave of innovation. According to the International Data Corporation (IDC), smartphone shipments are forecast to grow nearly 6% in 2024, rebounding to 1.23 billion units. This renewed optimism is driven by the rapid adoption of affordable Android devices in emerging markets and the rising prominence of GenAI features in premium smartphones.
What is GenAI, and Why Does it Matter?
Generative AI represents a paradigm shift in smartphone technology. By leveraging advanced machine learning models, GenAI enables devices to create, adapt, and personalise content in real time. From AI-enhanced photography and dynamic voice assistants to on-device language processing and augmented reality (AR) applications, GenAI is redefining how we interact with our phones. For premium brands, these features are not just value additions but critical differentiators in a crowded market.
IDC projects that by the end of 2024, GenAI-capable smartphones will capture 18% of the global market, with an astounding 344% year-on-year growth. However, this rapid rise comes at a cost. The average selling price (ASP) of GenAI smartphones is currently more than double that of non-GenAI devices, reinforcing the ongoing trend of premiumisation.
The Premiumisation of the Smartphone Market
The integration of GenAI is most evident in flagship devices like Apple’s upcoming iPhone 16 and Samsung’s Galaxy S24 series. These devices promise advanced on-device AI features, such as real-time video editing, adaptive user interfaces, and personalised voice synthesis. While these innovations justify higher price points, they also signal a shift in consumer priorities. Buyers are increasingly willing to invest in devices that offer transformative experiences rather than incremental hardware upgrades.
Anthony Scarsella, Research Director at IDC, notes, “Premium flagships adopting GenAI features will help them stand out in an otherwise commoditised market.” This sentiment is echoed in Apple’s strategy to enhance its iOS ecosystem with localised AI partnerships in China, a move that could significantly boost its competitive position in a key market.
The Mass Market: Affordable Android’s Role
While GenAI captures headlines, the mass market remains a critical growth driver. Affordable Android smartphones are expected to grow 7.1% in 2024, far outpacing iOS at 0.8%. Emerging markets in Latin America, Africa, and Southeast Asia are leading this resurgence, as brands like Xiaomi, Oppo, and TRANSSION introduce 5G-enabled devices with advanced features at accessible price points.
For instance, TRANSSION’s brands—Tecno, Infinix, and iTel—have been instrumental in democratising smartphone access, particularly in Africa and South Asia. Their focus on value-for-money propositions aligns well with the needs of budget-conscious consumers, allowing these brands to make significant inroads in previously underserved regions.
Challenges and Opportunities
The rise of GenAI and the growth of affordable smartphones come with their own set of challenges. Supply chain constraints, particularly for components like 5G chipsets, continue to impact production timelines. Additionally, as GenAI adoption scales, questions around data privacy, energy consumption, and ethical AI usage will demand industry-wide attention.
However, the opportunities are immense. Vendors that successfully integrate GenAI while maintaining affordability could redefine their market positions. For example, Samsung’s long-term strategy includes leveraging generative AI across both its premium and mid-range portfolios, a move that could consolidate its leadership in multiple segments.
Looking Ahead
As the smartphone market stabilises and begins its recovery, GenAI stands out as the defining technology of the decade. Its potential to personalise and enrich user experiences is set to transform not just how we use smartphones but also how we perceive their value in our lives.
For Australian consumers, this evolution offers exciting possibilities. From Apple’s anticipated AI-enabled iPhone 16 to the increasing availability of affordable GenAI-powered Android devices, 2024 is shaping up to be a landmark year for smartphone innovation. Whether you’re a tech enthusiast chasing the latest features or a budget-conscious buyer looking for value, the integration of GenAI ensures there’s something for everyone in this rapidly evolving landscape.