Smartphone makers are dreaming of a ‘supercycle’ driven by AI. Analysts disagree
Samsung Electronics’ flagship smartphones Galaxy S24 series are displayed during their unveiling ceremony in Seoul, South Korea, January 15, 2024.
Kim Hong-ji | Reuters
BARCELONA – Smartphone makers are talking a big game about artificial intelligence this year.
And they’re so confident about features they’re cramming into their phones that they think it’ll drive a new “supercycle” for the industry.
Samsung, Google, and Chinese firm Honor are among the names that are beefing up their latest handsets with AI-powered features for translating and summarizing conversations and taking and editing photos with the power of generative AI algorithms.
These are algorithms that are baked into the devices’ chips themselves, rather than accessed via the cloud.
Samsung has gone big on generative AI with its Galaxy S24 Ultra smartphone.
Google, too, has integrated AI directly into its latest Pixel phones.
Apple, meanwhile, is also reportedly exploring the addition of on-device AI features to the next iPhone, per the Financial Times.
This is all coming at a time when Mobile World Congress, the mobile technology industry’s biggest trade show of the year, is kicking off.
Major device makers like Samsung, Huawei, Honor, and Oppo, plus chip companies like Qualcomm and MediaTek, are expected to talk a big game about how much AI is transforming our personal devices.
When was the last smartphone supercycle?
Smartphone makers have been dreaming of a “supercycle” in their industry, driven by AI, after a bruising few years that saw device sales slow aggressively.
In 2023, smartphone sales fell to 1.16 billion units, the lowest point for unit shipments in a decade.
The last “supercycle” in smartphones happened between 2010 and 2015, where in five years the market grew fivefold from roughly 300 million units sold per year to 1.5 billion units, according to IDC data.
That came at a time when smartphones were just starting to become mainstream thanks to the emergence of widely used applications: Facebook, Instagram, WhatsApp, Uber, Snapchat, Twitter, and Candy Crush Saga, to name a few.
“The growth happened not just because Apple launched the iPhone, or because Google launched Android,” Francisco Jeronimo, vice president of data and analytics at research firm IDC, told CNBC.
“What really made it successful, that supercycle, was the fact that people were able to get the internet in their pocket,” Jeronimo said, in a phone interview with CNBC.
Other things were happening at the time, including the ability to make video calls over the internet with 3G, and the transition to 4G which meant faster speeds.
“We saw very popular operating systems not just the browser, but a world of applications that brought so many services and so much content through the phone,” Jeronimo said.
Ben Wood, chief analyst of CCS Insight, pinpoints the unveiling of the iPhone as the last “seismic disruption” that took place in the industry.
“Everything since then has been less disruptive,” Wood told CNBC.
‘AI phone era’
Major smartphone players are betting that a supercycle is about to happen thanks to AI.
Samsung, which launched the Galaxy S24 Ultra earlier this year, thinks that there’s a strong chance that AI will drive a new dawn that can breathe fresh life into the industry.
James Kitto, Samsung’s head of mobile experience division in the U.K., told CNBC the mobile industry is at the start of a new era of hypergrowth driven by AI.
“There’s every expectation that will be the case. We’re seeing some really, really high demand,” Kitto told CNBC from Samsung’s European headquarters in Chertsey, England.
The Galaxy S24 came with the ability to circle an object on your camera and pull up Google Search results for it, as well as live translation of phone calls to people speaking in foreign languages.
“We’re right now at the dawning of an entirely new era, an AI phone era,” Kitto said.
Brian Rakowski, vice president of product management for Google’s Pixel phone unit, said he expects AI to drive renewed interest around mobile technology.
Google has been working on integrating AI into its devices for years, most notably with the addition of Tensor line of smartphone processors.
“We already saw that AI was going to be the differentiator and the next wave of innovation across all technology but especially mobile,” Rakowski told CNBC. “It is so key to everything all our computing lives and computing platform.”
Google recently made it possible for its Tensor Processing Units, or TPUs, to run its Gemini nano AI system. This is a smaller version of its family of large language models which come under the umbrella name Gemini.
Google is expecting it will launch more advanced versions of Gemini on Android next year, according to Rakowski.
“We’ve placed a lot of bets and have really close collaboration with the research team at [AI lab] DeepMind to make sure Pixel is the best way to showcase and surface what’s coming down the pipe,” Rakowski said.
“No one knew that LLMs would be the thing. But we expected breakthroughs in the space,” he added.
Why a supercycle is unlikely
Analysts say a supercycle is unlikely to occur within the next few years as there’s not enough going on in the market in terms of novel features and innovation that will convince people holding their aging smartphones to upgrade.
Sales are expected to see growth this year, according to IDC, with smartphone shipments expected to climb 2.4% this year to 1.19 billion units in 2024. But that’s coming off a low base, and overall represents lackluster growth for an industry.
Growth is expected to remain stagnant from there in the coming years, with IDC forecasting incremental year-over-year increases of between 2% and 3% from 2025 to 2028.
Consumers remain wary about the prospect of upgrading their smartphones today as the prices for upgrading are still elevated.
Plus, much of the latest models that are coming out are still only touting incremental improvements on what came before.
“Much as the potential of AI on smartphones is an exciting prospect, I don’t believe the technology will contribute to a new supercycle for smartphone sales,” Wood told CNBC via email.
“At best it will help sustain sales and add a little bit of extra interest in smartphones at a time when the hardware is becoming increasingly boring.”
Today, there’s not enough excitement about smartphones on a broader level to justify a sales boom of the kind many companies are dreaming up.
That will change in the coming years, according to Jeronimo — but only once artificial intelligence starts becoming useful for consumers.
“If there’s anything that could make [a supercycle] happen, it would be AI,” Jeronimo said. “But with AI, there’s this question mark of how much the phone will become intelligent.”
Smartphones today “are not intelligent,” he added.
“If you see a billboard of the latest Tarantino or ‘Mission Impossible’ movie, what do you do? You need to open an app, book tickets in that app, send texts to your wife, text where she needs to go, go into your calendar app, check when is the best day to go to the movie, and so on.”
Plenty of companies are working on tech that can do exactly this.
For example, Humane has its AI Pin, a compact, square-shaped device that users can speak with to ask it to do certain tasks like setting reminders. It uses OpenAI’s large language models to do so.
Another startup, Rabbit, has a similar device. Geely-owned firm Meizu, meanwhile, recently said it’s giving up on making Android smartphones in favor of creating an AI-focused hardware product.
Technology
Tesla accused by NLRB of creating policies to chill workers’ unionizing efforts in Buffalo
Elon Musk, co-founder of Tesla and SpaceX and owner of X Holdings Corp., speaks at the Milken Institute’s Global Conference at the Beverly Hilton Hotel,on May 6, 2024 in Beverly Hills, California.
Apu Gomes | Getty Images
Tesla is being accused of taking steps to keep employees in Buffalo, New York, from unionizing, according to a complaint from the National Labor Relations Board.
On Tuesday, the NLRB’s regional director for Buffalo, Linda Leslie, filed the complaint. In it, she said Tesla “promulgated and maintained,” an acceptable use policy for workplace technology in 2023 that was meant to “discourage its employees from forming, joining, or assisting the Union or engaging in other concerted activities,” after allegations were raised by members of Workers United.
CNBC obtained a copy of the complaint through a Freedom of Information Act request.
The policy restricted Tesla workers from “recording, unauthorized solicitating [sic] or promoting,” and “creating channels and distribution lists,” among other things, the complaint said.
The NLRB also claims the policy had the effect of “interfering with, restraining, and coercing employees in the exercise of rights guaranteed” under the National Labor Relations Act, which generally protects workers’ rights to discuss organizing, join a union and collectively negotiate for better pay and working conditions.
The Tesla Buffalo plant was supposed to manufacture solar panels, but has been used more recently to assemble electric vehicle charging equipment, and to house a team of AI software data labelers.
Last month, the Buffalo plant was home to a number of job cuts put in place as part of a broader restructuring at the electric vehicle company. According to a WARN notice filed in the state, Tesla is laying off 285 employees in the state of New York, mostly at the Buffalo factory. The company is eliminating thousands of jobs worldwide after declining EV sales in the first quarter.
Tesla and CEO Elon Musk have clashed with union proponents for years and were found to have engaged in union busting. In 2021, the NLRB decided that Tesla violated labor laws when it fired a union activist, and when Musk wrote on Twitter in 2018: “Nothing stopping Tesla team at our car plant from voting union. Could do so tmrw if they wanted. But why pay union dues & give up stock options for nothing?”
An administrative court ordered the CEO to remove the post. Tesla challenged the order but its petition for review was denied. The post in question remains on Musk’s X account, where he has 182.7 million listed followers.
Tesla has also faced workers’ rights challenges in Europe. Last year, Swedish service technicians began a strike that continues today, with the labor group allowing for some authorized work to take place at times. The employees in Sweden, where a majority of the workplace is involved in unions, are seeking a collective bargaining agreement with Tesla.
Tesla didn’t immediately respond to a request for comment.
Read the complaint here:
The TikTok logo is pictured outside the company’s U.S. head office in Culver City, California, U.S., September 15, 2020.
Mike Blake | Reuters
TikTok is starting to automatically label videos and images made with artificial intelligence, the company said on Thursday.
AI-generated content on the app will now be tagged with “Content Credentials,” a digital watermarking technology from the Coalition for Content Provenance and Authenticity, TikTok said in a press release.
“Content Credentials attach metadata to content, which we can use to instantly recognize and label [AI-generated content],” TikTok said. “This capability started rolling out today on images and videos, and will be coming to audio-only content soon.”
TikTok already labels content made with its in-app AI effects and requires creators to label any content they produce containing realistic AI. This latest move will expand automatic labeling to AI-generated content uploaded from other platforms.
The update comes as lawmakers and experts warn of the threat AI could pose in the upcoming 2024 election, fearing a rise in deepfakes and misinformation.
TikTok also announced it will join the Content Authenticity Initiative, an Adobe-led group focused on establishing standards to make the digital production of an image, video or audio clip transparent and traceable across the industry.
In February, TikTok was one of 20 leading tech companies that committed to combat AI misinformation in this year’s election cycle. Microsoft, Meta, Google, Amazon and OpenAI also signed the pact.
TikTok’s future in the U.S. is uncertain after President Joe Biden signed legislation in April that gives parent company ByteDance nine months to sell the app or face a ban in the U.S. TikTok has since sued the U.S. government, arguing the law violates the First Amendment.
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