In a surprising turn of events, separate projections by financial giants Goldman Sachs and Morgan Stanley suggest that the smartphone industry is poised for a remarkable comeback starting in 2024. This optimistic outlook defies the prevailing warnings of a prolonged slump within the mobile sector.
According to Morgan Stanley’s report, global smartphone shipments are predicted to rebound by nearly 4% in 2024 and by an even more robust 4.4% in 2025. This resurgence is expected to surpass the multi-year downdrafts experienced by the PC industry. The driving force behind this revival is the emergence of new on-device AI capabilities, which are set to unlock fresh demand among consumers.
Morgan Stanley highlights the significant potential of edge AI in enabling advancements ranging from enhanced photography to speech recognition, all while safeguarding user privacy. Leading smartphone manufacturers like Apple, Vivo, Xiaomi, and Samsung have already expressed their enthusiasm for AI integration. For instance, Vivo’s new X100 featuring on-device AI has witnessed explosive sales, and Xiaomi reported a sixfold increase in volume for its AI-packed flagship model. Samsung, on the other hand, plans to incorporate generative AI in its 2024 models, aiming to offer features akin to ChatGPT that are processed directly on the device rather than relying on the cloud.
However, Morgan Stanley acknowledges that the biggest challenge is the uncertainty surrounding the timeline for the development of a “killer app” for Edge AI. They compare it to the emergence of groundbreaking applications in desktop and mobile internet technologies, which typically occurred 1-2 years after the initial breakthroughs. Nevertheless, they suggest that Microsoft’s CoPilot, a potential PC AI killer app, could set the foundation for popularizing AI at the edge. This, in turn, may give investors confidence that a similar, yet distinct, killer app for smartphones will eventually emerge.
According to Goldman Sachs, global smartphone volumes are expected to experience a 5% year-on-year dip in 2023, totaling 1.148 billion units. This marks a second consecutive annual decline following steeper falls in 2022. However, Goldman Sachs remains optimistic, anticipating a rebound in 2024 and 2025 driven by new product launches. They project a 3% increase in worldwide smartphone shipments to 1.186 billion units in 2024, followed by another 5% rise to 1.209 billion in 2025.
Goldman Sachs analysts attribute this positive outlook to factors such as the holiday season, continuous restocking, and improved guidance from the supply chain regarding market recovery. They do caution that while 2023-25 is expected to see growth, it will be in the low single digits, with global smartphone shipments gradually returning to 2022 levels by 2025.
This resurgence in the smartphone industry contradicts the prevailing consensus that maturing smartphones face similar challenges and threats as personal computers did over the last decade. Morgan Stanley emphasizes that the shorter replacement cycles and expanding use cases for smartphones continue to favor mobile phones, making them immune to substitution risks from emerging technologies like AR/VR. They predict that Edge AI will usher in a new wave of innovation, ensuring the enduring relevance of smartphones in our lives.