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

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

In short, in mid-February 2024, Nvidia is making headlines. The technology company specializing in graphics processing units (GPUs), application programming interfaces (APIs) for data science and high-performance computing, and systems-on-chip (SoCs) for mobile devices, has has enjoyed tremendous success in recent times thanks to its AI activities.

If you bought Nvidia stock, you are richer. If you bought them a long time ago, you're a lot richer: In 2024 alone, Nvidia shares are up almost 50%. 2023 was a blessing from above for Nvidia. With brutal gains of 240%, it was the best performing stock in the S&P 500 in 2023. Shares of Arm Holdings (another chip manufacturing company that has recently moved into AI) have also seen an incredible 80% jump in recent days – this is driven by the high demand for AI chips.

The other day, Nvidia eclipsed Alphabet (think Google) as the third most valuable American company. Ahead of Nvidia are only Microsoft (currently number one) and silver medalist Apple. Is it possible that Microsoft's overtaking is due to the company's commitment to AI over the past few months? Could it be that Apple's fall is due to the Cupertino giant falling behind in the AI ​​race? According to experts and analysts – “yes” and “yes”.

Wait, where is China in all this?

Saying it out loud, any mention of the word “chips” in recent years brings to mind its complement: a certain rooster-shaped country in the Far East. “China!”. The economic conflict (sanctions) between the United States and China often manifests itself over chips and advanced technologies.

That's why the emergence of the Huawei Mate 60 Pro was such a shock to US officials: it got technological capabilities it wasn't supposed to get. What do you call something that shouldn't exist and yet it does? Good luck trying to keep the technology exclusive to yourself…

Now that Huawei is mentioned, we come to the most important point of this article: the fact that after selling 30 million Mate 60 phones, Huawei is slowing down production for a reason. The reason is – you guessed it – AI.

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

You 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, production has been crippled by a low yield rate. Yield is the percentage of acceptable chips produced relative to the maximum number of chips on a wafer.

Since 2019 U.S. sanctions reduced access to advanced chipmaking tools (for national security reasons) and the smartphone industry took a major hit, Chinese customers have turned to domestic alternatives . Huawei's Ascend AI chips are the answer to US giant Nvidia's AI chips and the Ascend 910B is widely considered the most competitive non-Nvidia AI chip available in China.

Huawei prioritized production of these Ascend chips over Kirin chips for the Mate 60, slowing down phone manufacturing.

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

Wait, is this why Google and Samsung now offer longer years of software support!?

It is a party

We live in a new mobile world and everyone seems to want a taste of AI. The announcement of the Galaxy S24 lineup was just an excuse for Samsung to unveil its Galaxy AI feature pack. The 2023 Pixel 8 duo was also heavy on the AI ​​side. Apple, as we said, is a little late to the party, but the upcoming WWDC 2024 will introduce Apple's biggest update ever with the AI-laden iOS 18.

My humble opinion is that AI in phones will become mandatory on all devices – middlemen will be able to perform cloud-based AI tasks, while flagships will strive to do them on-device as much as possible .

All of this – the need for cutting-edge AI chips, both in some remote servers and in our phones – is about to shake up the market, because I'm sure things won't go well from the start and up until things stabilize, there will be problems. there will be obstacles in the process. You already know the phrase “Fewer phones produced…”.

Say goodbye to your smartphone (here comes your AI phone)

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

I'm not saying the smartphone killed the phone – I'm saying the smartphone killed the computer for several people.

When the large touchscreen and fairly fast mobile Internet speeds became widespread and cheap enough, many people simply forgot to turn on their computers the next day and have used their phones exclusively as a computer ever since.

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

Either way, until we get an answer to this question, we can expect more expensive and harder to find phones (and especially flagships) because of AI.