In the year 2024, the smartphone market is experiencing a long-awaited resurgence after several years of stagnationAccording to research firm Canalys, global smartphone shipments are estimated to reach 1.22 billion units this year, marking a 6% increase compared to the previous yearThis growth is particularly noteworthy given the extensive challenges faced by the mobile industry in recent times, with a significant number of new devices set to make their debut in December.

On December 23, Honor announced the launch of its Magic7 series, featuring an upgraded "King of Images" technology that enhances picture quality through an advanced AI-based computational photography system known as the AI Light Control EngineJust a week prior, Honor restarted its foray into the internet smartphone raceThe following day saw the introduction of the OPPO A5 Pro, and OnePlus Ace 5 series is scheduled for a December 26 release

From the start to the end of the year, domestic manufacturers in China have ramped up their device announcements, attempting to solidify their product offerings across various price brackets.

Analyst Zhong Xiaolei from Canalys explained that the swift rebound in emerging markets plays a crucial role in this growthWith global inflation easing, there has been a wave of replacement demand, primarily driven by low-end devicesHowever, this revival does not encompass all sectors of the smartphone marketThe foldable phone segment, for instance, has begun to show signs of cooling down, while generative AI technologies are gaining momentum, positioning themselves as key areas for companies looking to the future.

While 2024 promises to be a year of recovery, experts predict that the smartphone market will struggle to maintain high growth rates over the long termZhong anticipates that starting in 2025, the industry’s growth will begin to decline, with Canalys predicting a compound annual growth rate of merely 1% from 2024 to 2028 as the smartphone market reaches a plateau.

The competition among the top industry players has become fierce, with every single percentage point of market share fiercely contested

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Leading manufacturers such as Apple, Samsung, Huawei, Honor, OPPO, Vivo, Xiaomi, and Transsion are continuously reshaping the market landscape, engaging in a quarter-by-quarter battle for the top positions.

According to Canalys data, in the global smartphone market, Samsung, Apple, and Xiaomi are the top three in shipment volume for the first three quarters of 2024, with OPPO, Vivo, and Transsion vying for the fourth and fifth spotsThe Chinese market shows even more volatile rankings this yearIn the first quarter, Huawei, OPPO, Honor, Vivo, and Apple occupied the top five spots, all hovering around the 15% to 17% market share rangeBy the second quarter, however, OPPO led the rankings, pushing Apple down to sixth place, and in the third quarter, it was OPPO again falling to sixth.

This year’s shifting competitive landscape reflects the dynamic state of the smartphone market

The return of Huawei serves as a major variable, particularly with the commercial launch of its native HarmonyOS, establishing a triad competition among Android, iOS, and HarmonyOS, adding pressure to both Apple and the broader Android ecosystem.

Analysis from Counterpoint reveals that Huawei’s smartphone sales surged by 51% in the first three quarters of 2024 compared to 2023, with over 90% of these sales occurring in ChinaTheir Mate 70 series is projected to be another flagship success with anticipated shipments exceeding ten million unitsAs Huawei recovers lost ground, Apple has intensified its interactions with the Chinese supply chain, emphasizing continued investments in China and strategies to stabilize market share through price adjustmentsHonor, Vivo, and Xiaomi have been rapidly expanding their presence across various price segments, creating unique selling propositions related to imaging and AI.

An emerging trend among manufacturers is the pursuit of incremental growth through high-end, global, and diversified strategies

In response to increasing competition, many smartphone companies are pivoting towards the high-end market, seeking greater profit marginsXiaomi's financial reports indicate that in Q3 2024, the average selling price (ASP) of their smartphones increased by 10.6% year-on-year, attributed to their successful premium strategy in ChinaAlthough, this rise comes with challenges as the rising cost of components pressures profitability, with Xiaomi's smartphone business reflecting a gross margin decline from 16.6% in Q3 2023 to 11.7% in Q3 2024.

Simultaneously, companies are actively exploring new growth avenues in overseas emerging marketsCounterpoint’s analysis has shown that companies like Xiaomi and OPPO have long seen their international sales outpace those in ChinaIn the first half of 2024, Xiaomi's international sales accounted for 75%, OPPO 58%, Vivo 48%, and Honor 32% of their total sales.

Honor’s CEO Zhao Ming conveyed to reporters the importance of overseas growth, emphasizing the necessity for increased investments in international markets, which are seen as critical for future sales growth

Regardless of whether the strategy is about structural growth or new market exploration, the significance of product quality remains paramount.

When evaluating the current state of smartphone technology, the most pronounced variable is undoubtedly AIThe industry is eagerly anticipating how generative AI could propel new growth in mobile devicesZhong indicates that this year’s flagship offerings demonstrate a noticeable demand increase driven by generative AI features; however, the overall demand impact will depend on how well AI functionalities are integrated into mid-tier and entry-level models.

As premier smartphones, from those produced in China to the latest iPhone, are increasingly integrated with AI technologies, the competitive race intensified following Apple’s October announcement of its new operating system supporting "Apple Intelligence." Within this AI tech wave, Android brands were quick to seize the initiative, but Apple, leveraging its ecosystem, is staging a vigorous counter-offensive

Nonetheless, only select Apple products and regions currently have access to experiences derived from Apple Intelligence.

IDCs research manager Guo Tianxiang shared that while Apple is primarily focusing on promoting edge-side model utilization, Chinese Android manufacturers are also implementing similar strategies with AI agentsThe deployment of these AI features is expected to positively influence sales for the iPhone 16 and possibly even the iPhone 15 Pro/Pro Max, albeit with a waiting period before these functions launch in China, thus limiting immediate sales impacts.

Facing stiff competition in the AI vertical, Chinese manufacturers have intensified their announcements related to AI operating system upgradesFrom Huawei's Harmony to Honor's MagicOS 9.0 and AI agents, to Vivo's “PhoneGPT,” there’s a notable trend of innovation in generative AI functionalities.

Zhao Ming expressed Honor’s strategy to prioritize imaging and AI as core components of development

Enhancing system interactions through AI enables a fresh experience based on intent recognitionIn the future, both self-development and partnerships will play significant roles in selecting large models.

According to Canalys forecasts, the penetration rate of AI in smartphones is expected to hit 17% in 2024. As generative AI technologies advance, the penetration rate is anticipated to drastically increase, reaching 32% by 2025, equating to approximately 400 million units shippedThis surge will be fueled by the rollout of second-generation AI flagship models from Android manufacturers and iterations of model algorithms, all aiming to establish an open AI service ecosystem.

Through the combined efforts of leading industry players, more developers will be encouraged to create AI applications and services for mobile devices, densifying the current embryonic landscape of AI applications in smartphones

As generative AI reshapes the global smartphone landscape, AI-enabled devices are set to deliver breakthroughs not just in edge-side modeling and interaction experience but will also aim to develop a more comprehensive AI application ecosystem with a wider array of partnerships.

Despite initial underwhelming performance, the smartphone market remains optimistic about future incremental growth in foldable devicesAlthough considered once as innovation “saviors,” foldable smartphones are now encountering growth challengesCanalys projects that the total shipments of foldable phones may only achieve a mere 13% year-over-year increase in 2024, while 2025 may see a significant declineWhile the initial excitement surrounding foldable designs has waned, essential factors such as product value points and durability must still be addressed to secure continued demandNonetheless, the influx of new entrants and clearer product positioning could spark a revival in the foldable segment by 2026.

Indeed, the foldable phone market currently stands at a pivotal juncture, transitioning from a niche to the mainstream

Yet, multiple constraints hinder its market expansion, resulting in subdued growthCounterpoint’s report corroborates this trajectory, citing a downturn in foldable smartphone shipments in Q3 2024 for the first time, with an anticipated ongoing decline into 2025. The currently low adoption rates can be largely attributed to the high market concentration of Samsung and the gradual withdrawal of local Chinese brands from this category, as well as a dominant market presence of Huawei and Samsung.

As we look towards the coming year, many smartphone manufacturers are showing restraint in their strategies, opting to streamline their offeringsSamsung plans to launch a competitively priced flip-style foldable device and a larger book-style format in 2025. Meanwhile, Huawei intends to reduce its product launches, including scaling back its flip-style offeringSimilarly, many other brands signal intentions to pare back on models available, projecting only 32 different foldable smartphones will debut in 2025, a decrease from 41 in 2024.

In China, even growth in the foldable market is slowing

Counterpoint forecasts suggest that foldable smartphone shipments will reach approximately 9.1 million units in 2024, a marginal 2% growth percentage compared to prior years, significantly lagging behind earlier triple-digit growth figuresThe book-style foldables are gaining better traction in the market compared to flip modelsOPPO and Vivo have ceased offering flip-style phones, while Xiaomi has bucked the trend with its newly launched Mix Flip, which has received a favorable responseMeanwhile, Huawei maintains a substantial foothold, capturing half of the foldable market share in China with its Mate X6 and the introduction of a triple-fold screen variant.

Despite the current underperformance, the foldable phone segment remains an exciting prospect for future growth, especially as industry expectations rise around Apple’s potential entry into foldables by late 2026, which could potentially invigorate the market.