Hoping AI Will Save Them, Yet Fearing AI's Disruption: Who Will Be the Next Nokia?
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ChatGPT has ignited a wildfire, and consumer electronics manufacturers are collectively turning their gaze towards AI.
Domestically, Lenovo, the world's largest PC manufacturer, has launched AI PCs; Xiaodu, Tmall Genie, and Xiao Ai are rekindling their romance with AI; vivo has integrated AI large models into smartphones, while Huawei, Xiaomi, and OPPO are exploring ways to merge hardware with AI.
Internationally, Google's newly launched Pixel 8 smartphone features AI as one of its main selling points; Apple spends millions daily on AI large model R&D, planning to integrate it into its products.
New models of PCs, smartphones, smart speakers, and other consumer electronics are emerging endlessly, yet they struggle to spark consumers' desire to upgrade. Consumer electronics are becoming more like durable goods, with the market shrinking year by year. Feeling the chill, consumer electronics manufacturers are pinning their hopes on AI, hoping it will add fuel to the industry's faint growth flame.
But this isn't the first time consumer electronics have played with AI concepts in hardware. Is this current trend just old wine in new bottles, or could it be the industry-disrupting 'iPhone moment'?
Launched in November last year, ChatGPT surpassed 1 million registered users within just five days, becoming the fastest product in history to reach 100 million users in under two months.
Smart speaker manufacturers, whose products feature AI conversational robots and are considered pioneers in AI hardware, were the first to recognize the enormous market potential behind AI.
In February this year, Baidu's Xiaodu announced plans to integrate capabilities from its ERNIE model to create 'Xiaodu Lingji,' an AI model tailored for smart device scenarios, to be applied across all Xiaodu products. Subsequently, Xiaodu released a series of AI model-based electronic products including the Tiantian Home Robot, Qinghe smartphone, and Tiantian Casa smart speaker.
At the April Alibaba Cloud Summit, Tmall Genie announced its integration with Tongyi Qianwen, becoming the first terminal product under Alibaba to incorporate a large AI model.
In August, Xiaomi CEO Lei Jun revealed during his fourth personal speech that the company's smart hardware products, including Xiao Ai Assistant and Xiaomi smartphones, would all be equipped with large AI models. Xiaomi formed its first visual AI team in 2016 and established a large model team in April this year. Currently, the company's AI team has grown to over 3,000 members.
Domestic smartphone manufacturers are competing to announce their hardware-AI integration plans. The first to materialize was vivo's X100 series, launched on November 13, which features the Blue Heart large model and is touted as 'China's first AI large model smartphone.'
The AI wave has now extended to the PC industry.
Lenovo, which holds 23.5% of the global PC market share, has unveiled its AI PC product plan. CEO Yang Yuanqing stated that the product will officially debut in September 2024.
HP CEO Enrique Lores previously stated in a media interview that artificial intelligence will fundamentally transform the PC industry, particularly his own company. HP is developing AI-enabled PCs that will allow customers to create spreadsheets and analyze data in a short time. These new models could hit the market as early as 2024.
From the currently available AI consumer electronics, AI capabilities are mainly reflected in upgraded imaging, AIGC, and enhanced comprehension.
For example, the Google Pixel 8 has gained AI computational photography capabilities, including night scene enhancement, AI face-swapping, and video enhancement. In group photo scenarios, users can later manually optimize expressions, ensuring everyone in the photo looks their best.
However, some Pixel 8 users have reported that the AI capabilities are not strongly noticeable, and the flagship AI computational photography features have limited practical applications.
AI imaging technology is not new. Smartphone manufacturers began using built-in NPU neural network units for image processing as early as six years ago. The first to apply this technology to terminal devices was Huawei with its Kirin 970 chip released in 2017.
Robin Li, CEO of Baidu, stated that in the past, AI was often referred to as "artificial stupidity" because it frequently failed to understand human speech. However, with the rapid development of artificial intelligence technology, AI now has a stronger ability to communicate with humans, sometimes even understanding users better than friends or colleagues.
Yet, how much market demand can be driven by merely "understanding human speech" remains uncertain. After all, the last consumer electronic product marketed as "understanding human speech" has long since faded into obscurity.
Many films and TV shows envision future AI hardware, such as the voice-controlled supercomputer in Star Trek or the AI butler "J.A.R.V.I.S." in Iron Man. Their common feature is the ability to engage in verbal communication with humans.
The first consumer electronics product with similar functionality labeled as artificial intelligence came from a retail company—Amazon.
In November 2014, Amazon launched its first voice-enabled hardware device—the Echo smart speaker—with AI voice assistant Alexa as its main selling point. By Christmas 2015, Amazon had sold over 1 million Echo devices.
Subsequently, Google, Apple, and others introduced their own smart speaker products, while Baidu, Alibaba, and Xiaomi successively launched XiaoDu Speaker, Tmall Genie, and XiaoAi around 2017.
The smart speaker experienced a brief moment in the spotlight after its introduction.
Amazon and Google are engaged in fierce competition overseas, while the domestic market has seen a 'Hundred Speakers War'. According to Strategy Analytics data, global smart speaker sales peaked in 2020, exceeding 150 million units annually, with Amazon, Google, Baidu, Alibaba, Apple, and Xiaomi occupying the top six market positions.
However, this wave of excitement driven by 'AI + hardware' didn't last long.
Former Sogou CEO Wang Xiaochuan predicted in 2019 that smart speakers weren't future products and would lose their appeal within years. By 2022, global smart speaker sales had shrunk to 120 million units. According to Guolian Securities research, domestic smart speaker sales in 2022 were approximately 24.01 million units, a year-on-year decline of nearly 32%.
Amazon CEO Jeff Bezos once envisioned smart speakers becoming terminal devices as ubiquitous as smartphones. But compared to smartphones' annual shipments exceeding 1 billion units, smart speakers have clearly become a continuously shrinking niche market.
In 2023, the long-stagnant consumer electronics industry has been reignited by AI. The spark has spread from the previous wave of smart speakers to more mainstream categories like smartphones and PCs, broadening the market significantly.
More importantly, AI technology has evolved dramatically.
One of the main reasons smart speakers initially soared but later declined was their lack of true intelligence. For example, they couldn't sustain continuous conversations, understand context, or handle complex commands. AI technologies based on large language models can now address many of these pain points to some extent.
But will these smarter consumer electronics actually spark consumers' desire to purchase?
When everyone already owns a smartphone, smart speakers lack irreplaceability and haven't created new usage scenarios. Similarly, consumer electronics with built-in large language models, except for a few offline scenarios, don't offer indispensable functionality either.
Moreover, most AI hardware currently remains at the "PPT" stage.
According to a CICC research report, from the beginning of this year to the end of June, the price-to-earnings ratio of the A-share and Hong Kong stock electronics sector rose by 64.5%, with valuation levels continuing to recover. Horizontally, the electronics sector ranked sixth in performance among 31 sub-sectors, primarily due to the catalytic effect of the AI trend.
However, the consumer electronics segment within the electronics sector remains pessimistic. As of the end of June this year, the price-to-earnings ratio of A-share and H-share mobile phone supply chain companies was 24.08 times, significantly lower than both the overall valuation level of the electronics sector and the median valuation level since 2017. CICC believes this reflects market concerns about weak global consumer electronics demand and ongoing inventory adjustments in the mobile phone market.
Whether this round of AI enthusiasm can reverse the declining demand in consumer electronics remains uncertain, as secondary market capital reflecting market expectations continues to adopt a wait-and-see approach.
Capital is still on the sidelines, but consumer electronics manufacturers must act quickly to reverse the downturn.
In recent years, consumer electronics such as PCs, smartphones, and smart speakers have proliferated, yet their market sizes have continued to shrink.
According to IDC's PC industry report, global PC shipments are expected to reach 252 million units this year, a 13.7% year-on-year decline, and 261 million units in 2024, a 3.7% year-on-year increase. Both figures are below 2019 levels.
Data from market research firm Counterpoint Research shows that global smartphone sales in Q3 2023 fell by 8% year-on-year, marking the ninth consecutive quarter of decline. The agency also predicts that 2023 will see the lowest global smartphone sales in nearly a decade. Counterpoint data indicates that the average smartphone replacement cycle had already reached 43 months by 2022.
This is partly attributed to the much-criticized lack of innovation by consumers. Beyond making incremental hardware improvements—competing on cameras, chips, screens, and batteries—phone manufacturers have failed to deliver more compelling innovations that excite consumers.
The advent of AI large models has given consumer electronics manufacturers a lifeline.
Consumer electronics naturally align with AI. They serve as the primary devices for using AI applications like ChatGPT, Midjourney, and Wenxin Yiyan, which operate in the cloud but are delivered to users through consumer electronics.
With the rapid advancement in computing power of consumer electronics chips, embedding large models into terminal devices for local processing is not difficult—this forms the preliminary concept of AI Phones and AI PCs. However, no manufacturer has yet provided a clear answer on what truly AI-powered consumer electronics will ultimately look like.
As Yang Yuanqing said, the initial launch of AI PCs won't be the most perfect product; it will require optimization over generations. What people see and imagine today as AI-powered PCs may not be the same as the true "AI PC" of the future.
Beyond attempting to leverage AI to stimulate consumer demand for device upgrades and reverse market downturns, AI holds another significant implication for the consumer electronics industry.
In 2005, Apple's star product was still the iPod, with global sales reaching 20 million units that year—four times the previous year's figure—contributing nearly half of Apple's revenue. That same year, global mobile phone sales exceeded 825 million units, representing an even larger market.
At the time, Apple CEO Steve Jobs believed that phones would cannibalize the iPod market. As phones began incorporating cameras, leading to a sharp decline in digital camera demand, Jobs foresaw that if phone manufacturers integrated music players into phones, the same fate would befall the iPod.
Based on this idea, Apple created the iPhone and颠覆ed the traditional mobile phone industry.
Kevin Kelly, founding editor of Wired magazine, recently stated in an interview that the current phase is not AI's 'iPhone moment' but rather its 'BlackBerry moment.' The 'BlackBerry moment' refers to a roughly 10-year window before the industry is truly颠覆ed.
Will current consumer electronics be killed by AI? One thing is certain: no one wants to sit idle and become the next 'Nokia.'
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