Exclusive: The road to AI — How it will transform our relationship with technology

IDC forecasts a significant surge in GenAI-enabled smartphone shipments, projecting over 370 million in 2025 and 500 million in 2026, signaling AI's mainstream adoption and growing consumer demand for AI-powered features. This trend is set to fundamentally disrupt traditional app-centric business models, compelling device manufacturers and service providers to deeply integrate with AI platforms, as AI becomes the primary user interface and "gatekeeper" for task completion across a broader ecosystem of devices. The shift implies evolving monetization strategies for AI, likely through subscriptions, and a future where the AI experience, rather than device form factor, dictates consumer engagement and purchase decisions.

Analysis

The financial landscape of the mobile technology sector is poised for a significant transformation, driven by the accelerating integration of Artificial Intelligence (AI) into devices and user experiences. IDC forecasts a substantial increase in GenAI-enabled smartphone shipments, projecting over 370 million units in 2025, a 62.5% year-over-year growth from 230 million in 2024, with volumes expected to exceed 500 million in 2026. This surge indicates AI's transition from premium devices to mainstream adoption, fueled by growing consumer interest, as evidenced by 47.1% of non-AI smartphone owners considering a future purchase.

This shift will fundamentally disrupt traditional app-centric business models, compelling device manufacturers and service providers to evolve. AI is set to become the primary interface and a 'gatekeeper' for task completion, necessitating strategic partnerships and API-first integration for app developers to remain relevant. While the average selling price of AI smartphones is projected to decrease from $1053 in 2024 to $786 in 2026, monetization strategies for AI itself are expected to lean towards subscriptions and advertising.

Key players like Google (GOOGL), Qualcomm (QCOM), and Motorola are actively showcasing agentic AI capabilities, with Google's Pixel 10 marketing heavily emphasizing Gemini Live. Despite strong consumer interest in AI features (63.5% in Asia Pacific), price, brand, and user-friendliness continue to be primary purchase drivers, suggesting that AI must be marketed through tangible, problem-solving experiences, such as Google Pixel's Magic Eraser, rather than as a standalone concept. The challenge for vendors lies in translating AI into everyday user value to drive adoption.

Key Decisions for Investors

• Investors should closely monitor companies demonstrating strong AI integration capabilities and strategic partnerships, as these entities are best positioned to capitalize on the shift from app-centric to AI-driven user experiences.
• Evaluate the long-term monetization strategies of AI platform providers, focusing on those with clear pathways to generate revenue through subscriptions, advertising, or value-added services, especially as device average selling prices are expected to decline.
• Assess companies' ability to translate AI into tangible, problem-solving features that resonate with consumers, rather than just marketing 'AI phones,' as this will be crucial for driving adoption and market share.