Artificial Intelligence Next Key Growth Area for Smartphones

Differentiation through hardware will become even more difficult

Artificial Intelligence (AI) is one of the next big growth areas for the mobile industry according to a white paper released by IHS Markit ahead of Mobile World Congress.

“We see AI making smart devices even smarter with improved user experiences,” said Ian Fogg, Director of Mobile and Telecom Analysis at IHS Markit, “Existing AI agents like Apple’s Siri and Google Assistant will expand across the industry, complemented by embedded AI in all parts of mobile devices from cameras, to audio, to machine.”

“Smartphones will both be the interface for consumer AI and deliver the vast amount of data technology companies need to train AI systems,” Fogg said.

Software investments and partnerships are critical for hardware companies to create smarter AI-enabled experiences, said the IHS Markit white paper. Vendors such as Google, Apple, Sony, Microsoft and Samsung have heavily invested in the development of their own AI and voice-assistant capabilities. In order to compete, smaller players with less in-house software expertise and resources will be looking to partner-up.

“As Amazon’s Alexa makes its way onto other devices, Google must and will increase the reach of its own Assistant to all Android smartphones – reducing the differentiation for Google’s Pixel smartphone,” Fogg said, “Over five years since Apple’s Siri first launched, Apple must offer new AI-powered capabilities to remain competitive.”

By 2020, over six billion smartphones and $74 billion in app spend

The AI opportunity comes at a time when the global smartphone installed base is still growing, the white paper said. By 2020, the smartphone-installed base will exceed six billion units, up from four billion in 2016, with revenues totaling $355 billion.

“Spending on mobile apps shows no sign of slowing down,” said Jack Kent, Research Director at IHS Markit, “Consumer spending on mobile apps will reach $74 billion in 2020, up from $54 billion in 2016. Major companies are increasingly trying to use the fast-maturing mobile apps and services market as part of a wider platform strategy to tie consumers into ecosystems. The combination of consumer apps, communications, advertising, commerce and payments will drive new growth opportunities.”

The number of addressable smartphones for device-based payment services, such as Apple Pay and Android Pay, will rise to more than five billion units by 2020, up from 2.7 billion in 2016.

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