AI Empowers Consumer Electronics, AI Phones Become Mainstream in Smartphone Industry
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The trend of AI empowering consumer electronics is clear.
The consumer electronics industry (referred to as CE), driven by innovation, is highly sensitive to cutting-edge technologies and changes in consumer preferences, serving as a barometer for the awakening of China's consumer market. Currently, the trend of AI empowering consumer electronics is evident, with valuation restructuring logic gradually being validated, drawing attention to the inflection point in the CE sector.
Domestic large models are flourishing, and smartphone manufacturers are joining the fray. On November 16, OPPO announced at its developer conference that its self-developed ColorOS has surpassed 600 million monthly active users globally, officially launching its self-trained large model, AndesGPT.
Currently, Honor, Huawei, Xiaomi, and vivo have invested heavily in large models, each following different R&D and ecosystem strategies.
This year, multiple smartphone giants have reported breakthroughs in running large models on devices. Earlier this month, vivo released five large model matrices and launched the world's first smartphone capable of running a 10-billion-parameter large model locally on November 13. Xiaomi founder Lei Jun recently stated that Xiaomi's latest 1.3-billion-parameter AI model has successfully run locally on smartphones. In August, Huawei's HarmonyOS 4 also announced integration with large models. Companies are accelerating large model deployments, engaging in a covert competition.
AI phones are the inevitable trend in the smartphone industry.
IDC predicts that by 2026, nearly 50% of terminal device processors in China will feature AI engines, indicating vast potential for AI adoption. AI phones represent the future of the smartphone industry. Everbright Securities believes that AI phones and other smart devices may become the direction of transformation for the consumer electronics industry.
It is understood that smartphone manufacturers are adopting two main approaches to large models: Honor and Xiaomi focus on on-device computing, while vivo pursues both on-device and cloud-based paths.
With tech giants frequently releasing new products and smartphones selling well, the global consumer electronics industry is entering a recovery cycle.
The consumer electronics industry is a vital part of the electronics and information sector and one of China's strategic development industries. With technological advancements and diverse consumer demands, the CE industry is characterized by rapid development and active innovation, contributing significantly to economic growth and social progress.
The CE industry covers a wide range of products, including smartphones, tablets, TVs, audio devices, and gaming consoles. These products not only meet daily consumer needs but also represent the latest in fashion and technology. In developed countries, CE products have become indispensable. In developing countries, rising incomes and purchasing power are driving rapid market growth.
The CE industry's upstream includes chips, semiconductors, sensors, displays, non-ferrous metals, and plastics. Midstream comprises products like smartphones, tablets, laptops, and wearables. Downstream involves online and offline sales channels reaching end consumers.
CE products are now integral to modern life, with sales continually rising. Smartphones, digital products, and home appliances remain the fastest-growing segments, while tablets and laptops are maturing quickly. The emergence of smart wearables marks a new height in CE product intelligence.
According to Tmall's 2023 Consumer Electronics Industry Trends White Paper, China's CE consumers are primarily aged 20-40, accounting for over 80% of the market, with Gen Z making up more than 30%. Niche products like small appliances, with low price points and fast-moving consumer goods characteristics, are seen as new growth opportunities in the CE industry.
A report by China Research Institute indicates that China leads the world in CE production and sales, serving as a global manufacturing hub. Major global electronics manufacturers and OEMs have established production and R&D centers in China.
Recently, multiple CE companies reported increased product shipments.
Meanwhile, with new device launches from Huawei, Apple, and Xiaomi, the CE sector has seen a rally in secondary markets. Data shows that as of November 13, the CE index rose 1.34% monthly, with stocks like OFILM, Tianlong, Chaoyang, and Ruima hitting multiple daily limits.
Canalys data reveals improved smartphone inventory in Q2 2023, with new product launches in Q3. Global smartphone shipments declined only 1% YoY in Q3, while PC shipments fell 7% YoY but grew 8% QoQ.
Signs of recovery in multiple downstream consumer markets, including mobile phones, have been further confirmed in the Q3 2023 financial reports of several consumer electronics companies. According to the recently released Q3 2023 results from MediaTek and Qualcomm, both exceeded expectations. MediaTek's mobile business revenue increased by 19% quarter-over-quarter, while Qualcomm, a leading mobile chip manufacturer, reported mobile business revenue surpassing its earlier guidance. Both companies expect further acceleration in mobile business revenue growth in Q4 2023.
With the expanding markets in emerging fields such as 5G communications, sensors, wearable devices, the Internet of Things (IoT), industrial robots, VR/AR, and artificial intelligence, the demand for chip performance, technology, and energy efficiency will continue to drive the development of ultra-low-power AI processor chips. Wrist-worn wearable devices like smartwatches (including children's watches) and smart bands, health-focused TWS wireless Bluetooth earbuds, smart home and elderly care devices such as smart toilets, and intelligent travel systems like smart car cockpits will all see better development opportunities.