MoonFox Analysis | Distribution and Interaction Transformation: AI Smartphones Enter a New Era

About us: Aurora Mobile (NASDAQ: JG) established in 2011, is a leading customer engagement and marketing technology service provider in China. Its business includes notification services, marketing growth, development tools, and data products. As its sub-brand, MoonFox Data is a leading expert in data insights and analysis services across all scenarios, aiming to help companies gain market insights and empower precise decision-making.

SHENZHEN, China, Aug. 27, 2024 /PRNewswire/ --

Introduction

Since the second half of 2024, the focus in the generative AI industry has noticeably shifted from technology and models to applications and services. A range of usable AI applications in niche fields has entered the market. Beyond application-level directions like search and education, service-level directions such as AI robots and AI smartphones have also emerged as promising development areas. In this context, the pace of development for AI smartphones has significantly accelerated recently, with AI features becoming key selling points for mainstream smartphones. Based on our observations of the AI phone industry layout, AI smartphones are expected to offer users different effects and values compared to various AI applications. Then, how will AI integrate with smartphones? And what are current user evaluations? This article focuses on the AI phone sector, revealing the latest changes and potential value of the industry from key perspectives such as industry competition, typical enterprises, empowerment value, and market evaluation.

I.    Industry Competition: "AI+" Becomes a New Appeal for Smartphones, with Accelerated Industry Upgrades

The smartphone industry may be entering a new replacement cycle, accelerating its recovery. Although the smartphone industry is currently in a mature development and replacement stage, policies promoting device upgrades and high-quality product designs (such as foldable screens) from domestic manufacturers continue to drive user replacements. According to data from the China Academy of Information and Communications Technology (CAICT), in 2023, Chinese smartphone shipments totaled 289 million units, increased by 6.5% YoY. Entering 2024, the smartphone industry has continued to perform well, with shipments of 147 million units in the first half of 2024, marking a 13.2% YoY increase (according to the data from CAICT), indicating an accelerated recovery trend.

"AI+" has become a core selling point for mainstream smartphones, resonating with the industry's recovery drivers. Currently, the generative AI industry is accelerating its development towards mobile devices such as smartphones. Due to smartphones' close connection with users and their strong entry-point characteristics, they have attracted significant attention in the AI field. With reduced costs and improved capabilities of cloud-based large models, as well as ongoing development of edge models and small models, the effective deployment of AI smartphones has become feasible. Data shows that leading domestic smartphone brands and companies like SAMSUNG and China Telecom have all entered the AI phone market. System-level AI assistants have become the main application scenarios, with ongoing penetration at the user end. According to MoonFox Data, VIVO's AI assistant "Blue V" has close to 200,000 monthly active users, while HONOR's AI assistant "YOYO" has nearly 900,000 monthly active users. AI capabilities are becoming an appealing selling point that users find compelling, and they are expected to drive a new emotional experience for the smartphone market.

The AI phone market continues to see widespread implementation of AI capabilities, with major Chinese smartphone manufacturers now positioning AI as a key selling point.
Brand	AI Assistant	AI Large Model	Supported Phone Models
OPPO	Breeno	AndesGPT	Find7 Series, Find N3 Series, Reno12 Series, OnePlus 12 Series, etc.
VIVO	Blue V	Blue LM	X100 Series, X Fold3, X80 Series, S17 Series, etc.
HUAWEI	Celia	PanguLM	Mate60 Series, Nova Series, etc.
HONOR	YOYO	Magic Large Model	HONOR Magic6 Series, HONOR 90 Series, HONOR Magic V2 Series, etc.
XIAOMI	Xiaoai	XIAOMI Large Model	Xiaomi 14 Series
China Telecom	Xingchen AI	Xingchen AI Large Model	MVMOM 30
SAMSUNG	Galaxy AI	ERNIE Bot, Doubao Large Model	Galaxy S24 Series, etc.

Data Source: Public information, compiled by MoonFox Research Institute Data Cycle: August 2024

The usage rate of AI assistant applications from mainstream smartphone brands has been steadily increasing, and these AI phone assistants have begun to gain visibility among users
Brand	MAU of VIVO AI Assistant "Blue V" (Unit: 10K)	MAU of HONOR AI Assistant "YOYO" (Unit: 10K)
2023.12	0.8	32.0
2024.01	3.9	28.3
2024.02	5.5	22.5
2024.03	6.9	28.2
2024.04	9.2	41.6
2024.05	13.6	44.5
2024.06	18.8	85.5

Data Source: MoonFox iApp; Data Cycle: December 2023 - June 2024

II. Value Generated by the Industry: With the Empowerment of AI Smartphones, Information Distribution and Interactive Actions May Undergo a Transformation

The transformation of smartphones under the empowerment of generative AI extends far beyond just enhancing interaction experience. Currently, the new value that generative AI brings to smartphones is already beginning to emerge. Firstly, in terms of interaction experience, the previous generation of smartphone interaction primarily relied on touch-based clicks, requiring users to perform each step manually. However, with the integration of technologies such as generative AI Agent, automated interaction becomes possible. Interaction actions and paths can be restructured, potentially allowing a single device to offer a multifaceted experience interaction model. On the other hand, we believe that AI smartphones offer more than just an interaction revolution - they significantly enhance overall user efficiency. We can analyze the efficiency boundaries of different generations of smartphones from two dimensions: information distribution and operational efficiency.

• Feature Phone Era: Information distribution primarily involved manual filtering, leading to a uniform experience for users, with interactions mainly through self-operation & retrieval, which was a huge amount of work. Its typical applications included portal websites
• Smartphone Era: Information distribution shifted to discrimination-based and recommendation algorithms, achieving a personalized experience but still requiring user judgment for long-tail items, such as in food delivery and short video applications.
• AI Phone Era: Information distribution can directly reach users through generative algorithms, reducing user input to voice commands and AI operations, such as intelligent ticket booking and intelligent meeting scheduling.

AI smartphones can activate innovative human-computer interaction methods system-wide, achieving a new round of upgrades from user interaction to multifaceted experience. (Evolution of PC and Smartphone Interaction Experience)
Interaction Era	Time	Carrier	Experience
Command Line Interaction Experience	1960s - 1980s	DOS OS	Early DOS OS was designed for professional developers, with operations requiring complex command-line inputs
GUI Interaction  Experience (Keyboard & Mouse)	1980s - 2010s	Win OS/Mac OS, etc.	Interaction evolved to task-oriented operations using keyboard and mouse, facilitating a new interaction method
Touch-based Interaction Experience (Screen)	2010s - 2022	iOS/Android OS, etc.	Interaction primarily relied on GUI, transitioning from keyboard and mouse to touch-based experiences, with some voice interactions
Multifaceted Experience	2023 - Future	AI OS	Generative AI enables multifaceted experience combining touch, voice, gestures, etc. Understanding the future implications for niche user groups (such as the elderly or mobile office workers) will be significant

Data Source: Public data, Gartner, MoonFox Research Institute Note: The concept of Multifaceted Experience refers to interactions across digital touchpoints (e.g., web, mobile apps, chatbots, AR/VR, wearables) using various interaction methods (e.g., touch, voice, visual, gestures) as proposed by Gartner

Examining the evolution of smartphone usage efficiency from the perspectives of information distribution and user actions, smartsmartphones in the AI era will enhance user efficiency through the overall improvement of algorithm generation and machine actions
Era	User Action Efficiency	Information Distribution Efficiency	Typical Cases
Feature Phone Era	User-driven actions	Manual content recommendations	Portal websites, IM applications, etc.
Mobile Internet Phone Era	AI-assisted actions	Discriminative algorithm recommendations	Facial recognition, voice operations, big data recommendations, etc.
AI phone Era	AI-driven actions	Generative AI algorithm generation	Intelligent searching, intelligent meeting scheduling, intelligent ticket booking, etc.

Data Source: Independently prepared by MoonFox Research Institute

We believe that in the era of generative AI algorithms, the efficiency of AI smartphones is expected to significantly improve. AI applications will become more widespread and versatile, with information distribution more closely aligned with personalized user needs and specific scenarios. Furthermore, user actions are likely to be further liberated, enabling AI to autonomously handle more complex, multi-step tasks.

III.        User Perception: AI Smartphones Infuse the Market with Positive Emotions, Users Show Strong Excitement and Willingness to Try

AI smartphones have introduced novelty to the market with flagship models, generating positive emotions among users. We believe that whether a product or technology ultimately translates into changes in user purchasing behavior, whether in the realm of efficiency tools or lifestyle & entertainment products, it will ultimately be reflected in the level of feedback on user experience and emotions. Thus, the ability to evoke sustained curiosity, excitement, and exploratory emotions is a crucial directive indicator.

Our analysis of social media data regarding user reviews of AI phone shows that current market sentiment on AI phone topics is predominantly positive, with nearly 90% of the feedback being favorable. A significant portion of users have expressed their appreciation for AI phone and the interesting experiences discovered during use. This positive user sentiment is expected to further spread in the future, leading to effective secondary recommendation and promotion.

AI phone User Social Media Comment Sentiment Data Analysis
User Comment Sentiment Type	Percentage of User Comment
Positive Sentiment	89.5 %
Negative Sentiment	10.5 %
AI phone User Social Media Comment Excerpts
Comment	Source
"Breeno is really smart, and the cheesy pick-up lines are indeed cheesy , hahaha. See the details in the picture, it's so funny!"	From the Xiaohongshu user "一个好**你"("A Good ** You")'s comment on July 18
"The AI on my new phone is really the Next Level. I took photos when eating in a restaurant near Nanjing Eye Footbridge, and even though it was just a regular photo, I tried out the AI feature that was the main highlight, and it truly amazed me."	From the Xiaohongshu user "仅有**心"("Only Have ** Heart")'s comment on July 28
"The OS version of the OPPO Find X6 Pro I bought for my mom was updated. And its AIGC is so impressive! She is very satisfied with it. Hope the Master Mode could be updated via OTA very soon."	From the Xiaohongshu user "镜*音"("Mirror * Sound")'s comment on February 12

Data Source: MoonFox Big Data Monitor; Data Cycle: August 2024

The development of AI smartphones is in its early stages, with future prospects for phone replacement and content ecosystems likely to flourish. Smartphone manufacturers have established a foundation for AI phone applications, with increasing user penetration rates. This infusion of novelty into user experiences is driving market users towards upgrading devices. From the perspectives of information distribution and user actions, AI smartphones are expected to significantly enhance overall efficiency in the next generation, with broader and more practical AI applications. The development of AI smartphones is worth long-term attention.

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