The year 2024 marks a pivotal moment for edge AI, a term that refers to the deployment of lightweight AI models on end-user devicesThis year is being touted as the “year of edge AI” as industry experts anticipate unprecedented growth in this segment, with a projection by Meta AI scientists predicting a market size expansion to approximately $143.6 billion within eight years and a tenfold increase in a decade.

Edge AI fundamentally transforms our interaction with technology across various spheres of daily lifeFrom AI-enabled smartphones and laptops to AI glasses and various wearable devices, its influence is pervasiveThe transition to edge computing means that sophisticated machine learning capabilities are increasingly available right at our fingertips, without the need for constant cloud connectivity.

China, well-known for its prowess in hardware manufacturing, is at the forefront of producing devices capable of this technological leap

Take smartphones as an example; of the top ten global smartphone brands, eight are Chinese, half of which are headquartered in Shenzhen, a city recognized as a cradle for hardware innovationShenzhen's unique position enables its manufacturers to capitalize on this edge AI boom, showcasing its advantage in global markets.

In a city where every tenth person is an entrepreneur, Shenzhen is leveraging its AI boom to catapult electronic exports worldwideAs the "first city of foreign trade" in China, Shenzhen has witnessed transformative success stories in AI hardware exports, driven by entrepreneurial spirit and innovation.

The landscape for AI hardware startups can be broadly categorized into two types: “AI + hardware” and “hardware + AI”. The former begins with software, utilizing hardware as a vehicle to infuse AI capabilities into everyday life, while the latter enhances existing hardware with advanced AI functionalities.

Regardless of the approach taken, most entrepreneurs are acknowledging that overseas markets present larger opportunities for monetization

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One entrepreneur noted that foreign customers generally exhibit higher purchasing power, allowing products to be priced significantly higher than their Chinese counterpartsFor instance, while the exploratory price for tech gadgets may range from $99 to $199 for international customers, the equivalent in China tends to be between 100 to 300 RMB.

Moreover, the success of software monetization, particularly in the SaaS (Software as a Service) market in North America and Europe, has allowed hardware companies to explore subscription-based revenue models more activelySuch models offer enticing opportunities for data-sharing and revenue-sharing agreements when collaborating with larger AI models, a strategy less accessible to hardware firms in China, where consumer payment behavior remains conservative.

This shift in market strategy has led to significant changes in product development

Many entrepreneurs are prioritizing ergonomic design and user preferences that align with Western standardsAs a result, startups are increasingly opting to launch their products in Western markets first before considering a return to the domestic scene in China.

With this “greater risks yield greater rewards” outlook, many AI hardware teams in China are setting their sights on international marketsThey aim to “plant seeds” abroad before evaluating their potential back home in China.

Shenzhen’s status as a hub of innovation is further evidenced by its impressive statistics: the city contributes to one-seventh of the world's smartphone production, one-eighth of the new energy vehicle output, and a staggering 70% of consumer drone production.

In 2021, within the AI entrepreneurial hotbed of Nanshan District, a startup named Smart Link Technology Co., Ltd

emergedBy June 2023, this team of fewer than 70 employees successfully launched a ChatGPT-enabled AI voice recorder that sold over 300,000 units within a year, generating close to $50 million in revenue.

Smart Link’s founding members hail from prominent companies, including Sogou, DJI, Anker, and Insta360. During interviews, we discovered several other AI hardware startups concentrated in the West Lake area of Nanshan, home to major players like DJI and Anker, illustrating how established companies successfully penetrated international markets first.

In addition to these startups, Shenzhen's leading smartphone manufacturers are also riding the wave of new AI devices slated for release in the latter half of the yearAccording to Shenzhen Customs, the city exported 118 million smartphones in the first eight months of this year, reflecting an astonishing year-on-year growth of 46.6%. Furthermore, not only has the export volume surged, but the average price per device has also increased

Data show that in August, the average export price of smartphones from Shenzhen rose by 16.5% from the previous year, driving a 51.8% increase in overall export value, marking a record growth rate for a single month this year.

As the trend of AI hardware exports gains momentum, it bolsters Shenzhen’s sustained dominance in foreign trade, maintaining a 31-month streak of leading China's export industryThe vibrant city continues to witness the birth of new AI hardware products daily, shattering previous records across different categories.

In response to the expanding AI sector, Shenzhen has recently launched substantial policies aimed at reinforcing its commitment to developing a leading AI ecosystem.

The city is set to distribute up to 500 million RMB worth of "training vouchers," 50 million RMB in "data vouchers," and 100 million RMB in "model vouchers" annually, thereby motivating innovation within the local AI industry.

Suzhou's support extends to AI devices, including AI computers, smartphones, smart wearables, virtual reality equipment, and intelligent home appliances

Notably, for successful products that achieve significant sales volumes, companies could receive rewards of up to 3 million RMB for annual best-sellers.

However, some founders of companies that produce AI headphones express concerns regarding the actual utility of these AI vouchersDespite the apparent abundance, the financial assistance available is limited in a city bubbling with startupsTaking the 500 million RMB in training vouchers as a case study, each qualifying company would only receive, on average, about 300,000 RMB—insufficient for a startup with an annual training expense exceeding 800,000 RMB.

Moreover, both the training and model vouchers are currently restricted to regional partners, including China Mobile, China Unicom, Huawei Cloud, and a select few others that qualify under Shenzhen's technological guidelinesAs a result, many startups focused on international collaborations find themselves excluded from potential subsidies if their products are developed in conjunction with overseas AI models

This has led entrepreneurs to call for expanded support from the Shenzhen government specifically targeting AI hardware exports.

The introduction of these "AI vouchers" demonstrates Shenzhen’s determination to emerge as a frontrunner in AI innovationStill, the implementation faces challenges in terms of limited resources and usage restrictionsHowever, key officials in Shenzhen recognize the vital role that intelligent terminals play in the city’s industrial development, viewing them as a hidden asset for future AI growth.

Additionally, Shenzhen’s ambitions extend to an even broader canvas with the domestically developed Harmony OS, aiming to integrate everything into a smarter ecosystemAs the city gradually refines its policies regarding international cooperation and subsidy distribution, these initiatives may more effectively benefit the local AI industry, positioning Shenzhen as the next global leader in AI hardware innovation.