Smartphone Innovators Pivot to AI and Personalisation for Growth

In an evolving market landscape, smartphone brands are now betting on innovative software experiences—including generative AI and custom personalisation—to drive growth despite longer device replacement cycles and subdued consumer pull. As 5G becomes a standard feature across price segments, companies are transitioning from hardware-centric value propositions to a focus on enhanced user engagement.

A New Era of Differentiation

With 5G now ubiquitous, the traditional competitive edge in network technology has faded. Instead, brands are reinventing themselves by:

• Enhancing Software Experiences: Leveraging generative AI to offer smarter, more intuitive interfaces.
• Boosting Personalisation: Tailoring device aesthetics and functionalities to individual user preferences.
• Fostering Channel-Based Incentives: Encouraging smartphone upgrades through strategic partnerships and distributor incentives to counteract the tepid consumer upgrade cycle.

Market analysts note that despite anticipated increases in disposable income spurred by government tax relief measures and favourable repo rate adjustments by the RBI, inflation and improved device durability have lengthened the average replacement cycle from 2.5 years pre-pandemic to four years by the end of 2024.

Consumer Upgrade Trends and Market Projections

A comprehensive survey by Canalys reveals noteworthy insights about upgrade behaviours:

• Pandemic Influence: Nearly 89% of users who purchased devices between 2020 and 2021 have either already upgraded or plan to do so within the coming year.
• Economic Constraints: A segment of consumers is refraining from upgrades due to ongoing macroeconomic pressures.
• Market Impact: As upgrades tend to focus on high-end models, the lower segment may witness only single-digit growth in 2025.

Industry forecasts remain cautiously optimistic:

• Canalys projects a 2-3% growth to 160 million units in 2025.
• Counterpoint Research anticipates a 4% growth from 153 million units recorded in 2024.

The 5G Factor and Future Differentiators

High 5G penetration is no longer a distinct selling point. Expectations indicate that 5G smartphone shipments will reach 85-90% in 2025, a natural progression given the proliferation of affordable entry-level 5G models. As a result, brands are now shifting their focus towards other avenues of distinction:

• Experiential Upgrades: Emphasis on stellar audio-visual enhancements, refined design elements, and AI-driven features that enrich the user's interaction with their device.
• Expanding Offline Presence: Enhanced outreach to smaller cities and towns through channel expansion and offline distributor networks.

Analysts like Sanyam Chaurasia from Canalys and Shilpi Jain from Counterpoint Research underline this strategic pivot. They argue that while technology like 5G has leveled across all segments, it now requires brands to invest in personalisation and unique software experiences to capture consumer interest.

Conclusion

In a marketplace where incremental hardware improvements can no longer guarantee growth, smartphone brands are compelled to innovate through AI and personalisation. The shift from a hardware-driven race to a software-centred battle for differentiation marks a significant transformation in the industry, one that is likely to redefine consumer expectations and brand value in the coming years.