AI is the new currency in the smartphone race; but is it cool enough to woo you?

AI is emerging as the latest selling point in the smartphone battle, but its influence on purchase decisions remains debatable.

In the world of premium smartphones, where bezels shrink and price tags swell, there's a new buzzword in town- AI. It's plastered across billboards, whispered in hushed tones at tech conventions, and now, it's the golden ticket to your wallet. Or is it?

Apple has sauntered onto the AI scene with its iPhone 16 lineup, fashionably late as always. Their big reveal? "Apple Intelligence". It promises to rewrite your emails, generate custom emojis (for when words fail you), and a significantly upgraded Siri. Apple's approach is focused on on-device AI, processing data locally rather than in the cloud. 

However, the AI-led smartphone race kicked off in earnest at the dawn of 2024, with tech giants tripping over each other to showcase their latest AI-powered marvels. Let's take a stroll down memory lane, shall we?

Samsung: The early bird

Samsung, ever the eager beaver, was first out of the gate. In January, they unveiled their Galaxy S24 series, going all in with "Galaxy AI". Some of their AI features had us all hyped, like live translation for phone calls, Generative Edit, Sketch to Image, among others. They also boasted about turning any video into slow motion, perfect for those who find life moving a tad too quickly.

But the big sell was Circle to Search- a feature (powered by Google) that lets you long-press the home button and circle anything on your screen to search for it.

Google pulls up with Gemini

Not to be outdone, Google pushed out its Pixel 9 series in August, with Gemini AI as the star of the launch show. Google's AI party tricks included a souped-up voice assistant, courtesy of models like Gemini 1.5 Flash. They promised faster, smarter responses with fewer "oops" moments. They also threw in more extensions, allowing Gemini to play nice with apps like Keep, Tasks, and Google Calendar. It's like having a very efficient, never-sleeping personal assistant - minus the coffee runs, of course.

With all these tech giants engaged in a game of AI one-upmanship, each vying to be the smartest kid in the smartphone playground, one burning question remains- if AI is truly the new marketing currency for smartphone brands, is this strategy paying any dividends?

Experts talk

AI: More marketing than magic?

Navkendar Singh, associate vice president of Devices Research at IDC, offers a circumspect perspective on the current state of AI in smartphones. "AI is currently a marketing currency, but for now, it's mostly limited to that," he states. "It's certainly an innovation, but from a consumer's perspective, we haven't yet reached a point where it's transformative. That time isn't here yet."

"On other devices, like laptops, there's more going on, with companies like Microsoft and Qualcomm leading innovation. But for smartphones, it's mostly marketing for now," Singh elaborates. This discrepancy can be attributed to the power and thermal constraints inherent in mobile devices, which limit the complexity of AI models that can be run efficiently on-device.

Market implications and consumer adoption

The introduction of AI as a key differentiator in the smartphone market has notable implications for industry dynamics and consumer behavior. Singh observes, "Of course, this also helps these brands differentiate themselves from Chinese competitors. But the key will be in marketing—how effectively these companies communicate AI's value."

This differentiation strategy is particularly crucial in the premium segment, where profit margins are higher and brand perception plays a significant role in consumer decision-making. However, Singh cautions against overestimating the impact of AI on consumer purchasing decisions. "I don't think this will drive premiumisation. Consumers aren't going to buy the iPhone 16 just because of AI. Someone who already has the iPhone 14 or 15 isn't going to upgrade simply because of this feature," he says.

The challenge for smartphone manufacturers lies in translating technical AI capabilities into tangible consumer benefits. Singh predicts, "We're not going to see premiumisation based solely on AI until brands like Apple can effectively market its real consumer benefits. That probably won't happen until the first half of next year. By then, we'll have a clearer picture, particularly with the launch of Samsung's S25."

The Indian Perspective

Tarun Pathak, research director at Counterpoint Research, paints a slightly different picture for the Indian market. "Premiumisation is definitely taking hold in India," he notes. "The average selling price (ASP) of smartphones is increasing, and in 2024, we might even cross $300 (Rs 25,178) for the first time."

With Generative AI growing in popularity, Pathak is of the opinion that the integration of this new tech into more and more smartphones can inevitably lead to more premiumisation in the Indian smartphone market. 

He says, "Generative AI could further accelerate premiumisation, especially if brands customise devices for India's diversity, such as its many languages and dialects."

The Evolution of Smartphone AI

Pathak provides some historical context: "AI has been around in smartphones for about a decade now, but what's changed is the strength of device components. This allows brands to pack advanced technology into smaller devices."

He points out that the real game-changer was the introduction of dedicated NPUs (Neural Processing Units). It's like smartphones went from having a calculator to having a mini supercomputer in their silicon brains.

FYI: A neural processing unit (NPU) is a processor that mimics the human brain's neural network to accelerate AI and machine learning tasks.

Interestingly, each brand is taking a different approach to AI. Pathak explains, "Apple is trying to make sense of the data on your device itself, while companies like Google use the cloud for processing. Samsung takes a hybrid approach, mixing on-device processing with cloud capabilities."

It's like choosing between a very smart house cat (Apple), a wise owl that flies off to consult its forest friends (Google), or a clever border collie that sometimes needs to phone a friend (Samsung).

The Future: AI or artificial hype?

As for the future, both experts agree that the real AI revolution is still on the horizon. "By mid-next year, when developers start building more around Apple Intelligence, we'll begin to see clearer consumer use cases," Singh predicts.

Pathak echoes this sentiment, adding a dash of optimism: "Generative AI, in particular, is expected to personalise phones based on individual needs and preferences, rather than requiring users to adapt to their devices."

So, while your current smartphone might not be a pocket-sized Einstein just yet, the future could be bright. Or at least, artificially intelligent.