The integration of generative AI in smartphones is expected to spur “a new upgrade cycle” in 2024 after years of sluggish sales, according to Qualcomm (QCOM) CEO Cristiano Amon.
Speaking at CES 2024 in Las Vegas, Amon painted an optimistic outlook for the handset market, despite global smartphone sales hitting the lowest level in nearly a decade in 2023, according to data from Counterpoint Research.
“We’re starting to see as early as 2024 some very interesting use cases, even with flagship [smartphones],” Amon said about the role of artificial intelligence. “That could create a new upgrade cycle for phones, and that will, by definition, just increase the phone market.”
Smartphone correction 'is behind us'
A macroeconomic slowdown, component shortages, inventory build-up, and longer replacement cycles have all contributed to a global downturn in smartphones for more than two years.
While shipments bounced back in the last two quarters of 2023, annual sales dipped 3.5% from the previous year, according to IDC forecasts. That decline has been even more pronounced in the North American market, where the region recorded its worst quarterly performance in more than a decade in Q2 of last year, according to Canalys.
That sluggish demand has created major headwinds for Qualcomm, the largest chipmaker for handsets. The company reported a 24% decline in revenue in Q4 compared to the same period the previous year.
But Amon said new AI devices are likely to swing the pendulum back to growth.
“Most of that correction and the inventory in the channel is behind us right now, at least on the Android market,” he said.
While the use of generative AI has largely been limited to the cloud until now, device and chipmakers have touted the shift to devices as a “game changer,” leading to low latency, more personalized experiences, and enhanced security.
Early estimates back Amon’s comments. Shipments for generative AI smartphones are expected to reach over 100 million units in 2024, according to preliminary data from Counterpoint Research. That number is expected to reach 1 billion by 2027.
Samsung has already hinted that it will unveil its Galaxy AI phone at its Unpacked event next week, while Google (GOOG, GOOGL) has already incorporated its Gemini generative AI model into the Pixel 8 Pro. Apple has also reportedly been developing its own large language model to integrate into devices.
Even with that potential, Qualcomm has looked to diversify its resources beyond mobile under Amon, with a big push into auto chips.
The company has already reported a pipeline of more than $30 billion in design wins for its digital chassis platform. Amon said Qualcomm is ahead of its own projections to hit $9 billion in revenue by the end of the decade.
“There's so much excitement,” Amon said. “So many developers are bringing new applications. The car is going to be the next computing platform like your phone, like your PC. We're going to see a lot of use cases.”
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Akiko Fujita is an anchor and reporter for Yahoo Finance. Follow her on Twitter @AkikoFujita.
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