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His rationale? The new phone’s big selling pitch, Apple Intelligence, felt like a gimmick to him, one that did not serve much purpose.
“Coupled with all the offers at hand, I could easily save enough to add two accessories for the new phone. The AI features seemed superfluous, and not something that I would miss,” Kargupta said.
He is not alone.
Across the country, buyers are now coming to realize that brands’ push for AI features in smartphones is, indeed, more gimmicky than substantial. While this realization may not change the direction in which smartphone marketing is headed for at least another year, brands now face a challenge of convincing users that generative AI is really useful—a factor that could hinder the potential growth of an already-lukewarm market.
In 2022, Google introduced generative AI features in the Pixel 7 smartphone lineup, even though its 2023 edition of the Pixel 8 was touted as the first big ‘AI phone’. Hot on its heels, Korean electronics major Samsung showcased the Galaxy S24 lineup, touting it as “the world’s first AI phone.” In June, Apple showcased generative AI features as its core offering for this year during the Worldwide Developer Conference.
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With this, three of the world’s biggest technology companies clearly put their bets on the buzz around AI’s newest subset, which itself rose to prominence driven by ChatGPT’s popularity.
However, in its first full year of mainstream consumer presence, AI seems to be far from all-pervasive.
Despite the obvious cold response to AI features in smartphones, makers have been betting big on them, and could unveil subscription services once these features are substantially integrated in devices, potentially making it more difficult to sell such gadgets to customers.
Since the launch of its AI-first Galaxy S24 flagship smartphone lineup, Samsung’s sales in India in the first six months of this year were 16% lower than in the first half of 2023, according to data from market researcher International Data Corporation (IDC) India.
For Apple and Google, the market dynamics have been different. Apple, so far, has been estimated to have seen its iPhone sales grow 30% year-on-year in the first nine months of the year to over 8 million units, from around 6.2 million iPhones sold last year between January and September.
This growth, however, has come without any help from AI features. While its new iPhones went on sale on 20 September, most retailers told Mint that consumers were upgrading based on the financing offers and discounts available, and not due to AI.
“The Apple Intelligence features are not coming to India until at least the first half of 2025—and buyers aren’t considering putting off their upgrade purchases because of it. In fact, by far the biggest factor that is contributing to iPhone sales right now is that most retailers are offering very easy access to 24-month, no-interest credit, which brings the cost of new iPhones down to as low as around ₹2,500 per month,” said a top executive at one of India’s top multi-brand electronics retailer chains, requesting anonymity citing Apple’s non-disclosure agreements.
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Google has a negligible 0.3% share in India’s smartphone market, which is expected to swell to $45 billion this year, up from $39 billion in the year prior. Vivo, Xiaomi, Samsung, Oppo and Apple had respectively 16.5%, 13.5%, 12.9%, 12.6% and 6.7% market share by volume in India as of June this year, according to IDC India.
This is a considerable pain point for brands that have been betting on AI across all smartphone segments. In June this year, China-headquartered Oppo said that it will bring “over 100″ generative AI features to smartphones across its entire portfolio. In late September, fellow Chinese brand Xiaomi showcased its integration with Google Gemini generative AI tool in global markets.
Analysts and industry consultants said that consumer interest in generative AI is understandably low. Jaspreet Bindra, co-founder of technology consultancy firm AI&Beyond, said that the key factor affecting demand for generative AI “lies in the fact that generative AI is still a technology—not a product.”
Google has a negligible 0.3% share in India’s smartphone market, which is expected to swell to $45 billion this year, up from $39 billion in the year prior.
“Generative AI won’t attract customers until it becomes a product. So far, Meta is the only company that is succeeding in showcasing generative AI as a consumer product—by plugging it directly into WhatsApp and Instagram. But, most of the current suite of features available in smartphones is surplus at best, and there’s nothing substantial in it,” Bindra said.
Navkendar Singh, associate vice-president at IDC India, agreed. “The impact of all the AI features haven’t been too evident.”
Both Bindra and Singh highlighted Samsung’s drop in smartphone sales in India as a clear indicator.
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To deal with this conundrum, brands are working on a tighter integration of features. A senior executive at a top smartphone company, who requested anonymity, said that there have been “boardroom discussions, pretty much at most phone companies, to integrate generative AI tighter into voice interfaces.”
“In India, voice as a primary interface will take time to grow, but this is where engineering teams are seeing the real value addition from companies,” the executive said.
Both Bindra and Singh shared pretty much the same view, underlining the multimodal GPT-4o’s voice performance from OpenAI as a key example of what generative AI with voice can do. While Singh said that integrating voice LLMs into wearable earbuds could be a key factor, Bindra highlighted that effectively drafting email responses through voice-based generative AI interfaces would be a greater value addition “than sporadic wallpaper generators.”
Industry experts believe that while generative AI has few takers right now, the advent of substantial features integrated into smartphones will also draw subscription plans from brands.
“A freemium model is the most likely, since AI is the next clear revenue model for smartphone companies worldwide. Sourcing user data to train models is only an interim need, so subscription plans alongside extensive AI features is obvious,” IDC’s Singh said.
Bindra added that another clear reason for which subscription services will come up is because “advanced AI features may tap models on the cloud, and running the technology is expensive.”
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When contacted about plans to introduce AI subscriptions and early signs of demand for the feature, Xiaomi declined to comment, while Oppo had yet to respond till press time. Samsung and Vivo didn’t respond to Mint’s queries.
As such, companies continue to evaluate the right way forward. The industry executive cited earlier said that while subscription plan discussions have already happened, “a concrete plan will likely not come up until at least 2026.”
To be sure, Samsung said in its Galaxy S24 user agreement that AI features “will remain free until end-2025″, but did not clarify if there will be paid tiers unveiled thereafter.
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