Samsung turns to artificial intelligence to revive stagnant smartphone market

Samsung Electronics has unveiled smartphones capable of running generative artificial intelligence features “on-device”, as handset makers hope the cutting-edge technology will revive a market that suffered its worst year in a decade in 2023.

The South Korean tech group launched the 2024 versions of its flagship Galaxy smartphone series at a Silicon Valley event on Wednesday. The devices feature the latest AI-capable Snapdragon processor from US chipmaker Qualcomm and its own Galaxy AI software and services.

The S24 Android phones appear to give Samsung a technological edge over its main rival Apple, which has taken its usual cautious approach to adopting new advances. Their January launch also provides about a nine-month lead before the release of the next iPhone.

“[Android developer] Google has a big leg-up in AI, given all of its data and experience in this space, but Apple has been noticeably quiet about its efforts here, so this is an opportunity for Samsung to differentiate itself from its arch-rival,” said Bryan Ma, analyst at the IDC research group.

Samsung’s 12-year reign as the world’s top smartphone maker by units sold ended in 2023, according to IDC, as Apple took its place, helped by consumers trading up to higher-priced premium handsets.

The popularisation of generative AI through OpenAI’s ChatGPT has led to mobile-phone makers exploring the potential of running AI features through the device. This will require reductions in the size of the large language models that power AI, as well as higher-performance processors.

Cracking these technological challenges will allow AI chatbots and apps to run on the phone’s own hardware and software rather than be powered by cloud services in data centres. It also means faster response times, greater security and more personalisation for users, as well as lower costs for AI providers.

Google has been developing on-device AI for its Pixel smartphones while Samsung announced its Gauss model for phones and other devices in November. Several Chinese handset makers, including Honor, Oppo and Xiaomi, are following the trend.

On Wednesday, Samsung introduced a suite of AI-enabled features to three new phones, including live phone call translations, transcription of voice recordings, video search and photo editing. The S24, S24 Plus and S24 Ultra will be priced between $800 and $1,300 in the US.

“[The] Galaxy S24 series introduces mobile AI in a truly meaningful way that no other phone has yet delivered,” said TM Roh, head of Samsung’s mobile division. “Our ambition is to demonstrate the benefits of mobile AI and provide Galaxy users with mobile experiences that will transform everyday life.”

“Generative AI is integral to Samsung’s long-term product strategy, especially in the premium and flagship segments,” Sheng Win Chow, analyst at Canalys, wrote in a recent note. “Samsung must seek a new way to compete with Apple and extend its market leadership in the Android ecosystem through product innovation and business models beyond just hardware.”

Canalys expects 5 per cent of smartphones shipped this year to be AI-capable before reaching 635mn units, or 45 per cent of the total smartphone market, in 2027. Counterpoint Research expects Samsung to control nearly half of the AI-powered phone market in the next couple of years.

IDC predicts the global smartphone market will grow 3.2 per cent this year after shrinking 4 per cent to a decade-low last year, but Ma noted that the rebound would have more to do with the improving economic outlook than AI specifically.

Analysts said some AI functionality had already been included in most smartphones, and they doubted Samsung’s new features would drive a replacement cycle.

“I don’t think the added AI features are compelling enough,” said Park Kang-ho, analyst at Daishin Securities. “But they can increase demand for IT devices in general if AI-capable phones are connected to other devices like cars, home appliances and PCs.”