The global smartphone market had a banner year in 2024. While the Covid-era economic downturn had caused two consecutive years of declining shipments, the market grew by 7% in 2024 to 1.22 billion units, according to a Canalys report.
The industry is currently projected to reach US$520.7 billion in revenue by 2030. However, smartphone companies could face additional pressures from the artificial intelligence arms race, United States tariffs, and even new devices intended to challenge phone use.
The AI arms race
Smartphone makers have overwhelmingly moved to implement artificial intelligence into their devices, often with a focus on AI assistant apps, photo and text editing, and personalisation.
“As the technology evolves, people will expect their smartphones to act as intelligent assistants that understand and adapt to their needs as individuals — in an integrated and personalised way,” according to Samsung’s VP of Mobile eXperience for Southeast Asia and Oceania Carl Nordenberg.
Samsung is reportedly in talks to partner with AI search company Perplexity AI, which would see Perplexity’s app added to new Samsung devices and its search functions included in Samsung’s web browser. Perplexity reached a deal for its app to be pre-installed on Motorola devices in April.
A number of Chinese phone companies have also moved to integrate DeepSeek’s AI models into their devices. Huawei, Vivo, and Honor will include the DeepSeek-R1 model in their phones’ AI assistants, while Oppo will add R1’s features to its Find N5 foldable phone.
Meanwhile, Apple has found it difficult to compete. After Apple announced its Apple Intelligence models last year, they were not released until more than one month after the iPhone 16 launched.
The company was sued by shareholders earlier this month, who alleged Apple had misled them about the time needed to integrate AI into its Siri assistant. It is now reportedly weighing adding AI technology from OpenAI or Anthropic to Siri.
Its AI efforts have also been stymied by China’s regulators. While Apple Intelligence is supported by OpenAI’s ChatGPT in other markets, ChatGPT has not been approved by China’s government, requiring Apple to partner with Alibaba for the use of its Qwen models in the country instead.
A new challenger emerges?
A series of new devices have also aimed to challenge the smartphone, particularly those powered by AI.
The Rabbit r1 and Humane Ai Pin, both AI wearables released in 2024, were intended to replace smartphone usage with their ChatGPT-based information-finding. However, both devices were roundly panned for errors in their AI results and a lack of features. Humane’s assets were acquired by HP for US$116 million in February, with its pins ceasing to function after the purchase.
OpenAI fully acquired former Apple design chief Jony Ive’s startup now known as io for US$5 billion in May, with the goal of producing AI consumer devices meant to work alongside computers and smartphones.
The company has yet to reveal what these devices could be. OpenAI CEO Sam Altman has said that they will not be in-ear or wearable products, although court filings related to a trademark complaint by AI earpiece company iyO revealed OpenAI has been researching potential in-ear devices.
“Our intent with this collaboration was, and is, to create products that go beyond traditional products and interfaces. We want to create new ways for people to input their requests and new ways for them to receive helpful outputs, powered by AI,” Altman said in court documents. OpenAI and io hope to launch their product in 2026.
In contrast, new “dumb phones” are also being released at a rapid pace. These devices are typically only intended for calling and texting, with some adding extra features like music or maps. The Light Phone 3, for example, is due to launch in August, and does not include a web browser.
Global tariff pressures
The smartphone market stands to be heavily impacted by the United States’ tariff policies. The price of smartphones could rise by 31% under the Trump administration’s proposed tariffs, a May report by the Consumer Technology Association found.
In particular, Apple could be harshly affected, as around 90% of iPhone production was China-based in April. Tariffs on goods from China stand at 55%, though the U.S. and China have finalised a trade agreement that could see some export restrictions rolled back.
Apple CEO Tim Cook said in May that most iPhones sold in the U.S. would be produced in India in the June quarter.
Tariffs on other phone components could also worsen these companies’ outlooks. While the Trump administration has repeatedly said that it will impose up to 25% tariffs on semiconductors, these measures have not yet been implemented, and chipmakers like TSMC and Intel have recommended against them.
“Global trade policies and tariffs carry significant implications for the digital and telecommunications sectors, particularly in terms of supply chains, investment, and cross-border collaboration,” a spokesperson for mobile industry body GSMA told Azzet.
“Any trade restrictions impacting critical technologies, infrastructure, or services could slow down progress, increase costs, and hinder innovation. We encourage constructive dialogue between policymakers to ensure regulatory approaches support economic growth and digital transformation, without creating unnecessary barriers for businesses and consumers worldwide.”
