AI Ascent Could Mean Gain for Smart Phones But Pain for PC’s

One Wall Street investment bank believes AI is a shot in the arm for the smartphone sector.

After a two-and-a-half-year slump, smartphone sales are making a comeback, and artificial intelligence might be a big reason why.

Overall worldwide smartphone sales grew by 5% on a year-to-year basis in October. It’s the sector’s first gain in 27 months, Counterpoint Research reported.

At first blush, it appears smartphone growth is regionally driven.

“The growth has been led by emerging markets with a continuous recovery in the Middle East and Africa, Huawei’s comeback in China and the onset of the holiday season in India,” the research firm said. “Developed markets with relatively higher smartphone saturation have been slower to recover.”

“Another growth factor has been the late launch of the iPhone 15 series compared to last year,” the report noted. “The one-week delay this year meant the full effect of the new iPhone sales was felt in October.”

AI-Driven Sales

On the horizon, the smartphone market is apparently getting a boost from a familiar source – artificial intelligence.

According to the investment giant Morgan Stanley, global smartphone sales will grow by 4% in 2024 and 4.4% in 2025. The firm cites emerging “on-device AI capabilities” are driving smartphone orders, including enhanced photography, more robust data privacy protection, and speech recognition, Tech Crunch reports.

Big smartphone manufacturers like Apple, Samsung, and Vivo are merging AI applications into their phones and are expecting stronger sales results in the next year or two, Morgan Stanley states.

“The largest pushback is that there is no visibility on when the ‘killer app’ will be developed,” the company noted in a research report this week. “If we take desktop Internet and mobile Internet as examples, the emergence of a new killer app usually comes 1-2 years after the initial breakthrough.”

“While there is no guarantee that the killer app in Edge AI will follow the same timetable, the emergence of Microsoft’s CoPilot as the potential PC AI killer app could set the early foundation for popularizing AI at the edge (implying AI features/function on the smartphone device, not relying on cloud), and help to give investors’ confidence that a similar, but different, killer app for the smartphone will also emerge,” Morgan Stanley adds.

AI-driven smartphone growth will likely cut into PC and laptop computer sales, as younger consumers opt for the smaller device over the larger one.

“Tablets and smartphones have been taking share from PCs since 2011,” Morgan Stanley noted. “ In other words, PC shipment declines have been caused by the emergence of new devices, not the disappearance of demand in general.”

“We do not see smartphones facing a similar substitution risk from technologies like AR/VR anytime soon,” the company added. “Smartphone replacement cycles are shorter because they are used more frequently and have smaller batteries. Use cases for smartphones are still expanding, with Edge AI set to unlock a new wave of innovation.”


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