The AI phone is about to kill your smartphone, just like your smartphone killed the “dumbphone”

The AI phone is about to kill your smartphone, just like your smartphone killed the “dumbphone”
It’s Friday and today, we’re having some nice, easygoing, digestible prose about Wall Street, market capitalization, international economic feuds, and more. We’ve got to start with some financial news, but fret not – this is still PhoneArena and we’ll talk about phones in a moment.

So, a quick scan through some recent Reuters headlines:

  • Nvidia replaces Alphabet as Wall St's third most valuable company
  • Nvidia's scorching shares drew hedge funds in Q4, filings show
  • Arm shares soar as AI-fueled boom brightens growth prospects
  • Hunt for ‘next Nvidia’ draws options traders to Arm’s soaring stock
  • Google to set up new artificial intelligence (AI) hub in France
  • Microsoft to invest 3.2 bln eur in Germany in AI push

What does this mean?

All of the above means that AI is very, very hot right now. And whoever makes AI chips (hint: Nvidia, Arm) will also be very, very hot right now.

I don't have an economics degree, but I can put two and two together and make a fairly justifiable prognosis about the phone industry’s future based on current Wall Street trends.

So, in short, in mid-February 2024, Nvidia is the talk of the town. The technology company that specializes in graphics processing units (GPUs), application programming interfaces (APIs) for data science and high-performance computing, as well as system on chip units (SoC) for mobile devices has been insanely successful in recent times thanks to its AI pursuits.

If you’ve bought Nvidia shares, you’re richer. If you’ve bought them way back in time, you’re way richer: solely in 2024, Nvidia’s stocks got up by nearly 50%. 2023 was a blessing from above for Nvidia. With brutal gains of 240%, it was the best-performing S&P 500 stock in 2023. Arm Holdings' shares (another chip-making company that has been AI-oriented lately) also saw an incredible jump of 80% in recent days – that’s what high demand for AI chips does.

It was just the other day that Nvidia eclipsed Alphabet (think Google) as the third most valuable US company. Ahead of Nvidia are only Microsoft (currently numero uno) and the silver medalist Apple. Is it possible that Microsoft’s overtake is due to the company’s AI commitment in recent months? Could it be that Apple’s fall from the top is because of the Cupertino giant’s lagging behind in the AI race? According to experts and analysts – “yes” and “yes”.

Wait, where’s China in all of this?

Upon saying it out loud, every other mention of the word “chips” in the last few years summons its complement – a certain rooster-shaped country in the Far East. “China!”. The US-China economic clash (sanctions) often manifests itself over chips and cutting-edge technology.

That’s why the emergence of the Huawei Mate 60 Pro was such a shock for US officials – it obtained technological capabilities it wasn’t supposed to. What do you call something that shouldn’t exist, yet it does? Good luck with trying to keep technology exclusive to yourself…

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Now that Huawei is mentioned, we’re arriving at this article’s most important station stop: the fact that after reportedly selling 30 million Mate 60 phones, Huawei is slowing down production for a reason. The reason is – you guessed it – AI.

Huawei decided to prioritize the manufacturing of its Ascend AI chips over its premium Mate 60 phones.

See, Huawei uses the same facility that produces both its Ascend AI chips and the Kirin chips that power the Mate 60 Pro and, according to insiders, the output has been crippled by a low yield rate. The yield is the percentage of acceptable chips produced compared to the maximum chip count on one wafer.

Since US sanctions in 2019 that cut access to advanced chipmaking tools (on national security grounds) and the smartphone industry took a blow, Chinese customers have turned to domestic alternatives. Huawei’s Ascend AI chips are the answer to the US giant Nvidia’s AI chips and the Ascend 910B is widely considered the most competitive non-Nvidia AI chip available in China.

Huawei has prioritized production of those exact Ascend chips over the Kirin chips for the Mate 60 so the phones’ manufacturing has been slowed down.

Fewer phones produced = fewer phones available. Fewer phones available + a high demand = higher prices.

Wait, is that why Google and Samsung are now offering longer years of software support!?

It’s a(I) party

It’s a brave new mobile world out there, and everyone seems to want a bite of AI. The Galaxy S24 line announcement was just a pretext for Samsung to unveil their Galaxy AI feature pack. The Pixel 8 duo from 2023 was also heavy on the AI side of things.

Apple, as we said, is a little late to the party, but the upcoming WWDC 2024 will introduce the biggest Apple update ever with the AI-laden iOS 18.

My humble opinion is that AI in phones will become mandatory on all devices – the mid-rangers will get to do cloud-backed AI tasks, while flagships will strive to complete them on-device as much as possible.

All of this – the need for cutting-edge AI chips both on some remote servers and in our phones – is set to stir the market, as I’m sure things will not go smoothly right from the start and until things settle down, there’ll be obstacles in the process. You know the “Fewer phones produced…” formula already.

Say goodbye to your smartphone (here's your AI-phone)

What the smartphone did to the “dumbphone” will happen again with the “AI-phone” and the smartphone.

I’m not saying that the smartphone killed the phone – I’m saying the smartphone killed the computer for many people.

When the large touchscreen and decently fast mobile internet speeds became widespread and cheap enough, many people simply forgot to power on their computers the next day and have been using their phones as a computer exclusively ever since.

I wonder what the “AI-phone” will kill.

Anyway, until we get an answer to this, we can expect pricier and harder-to-come-by phones (and especially flagships) because of AI.

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