Dec 28

Dec 28 Chip market to boost smartphones or vice-versa

Introduction

The emergence of AI-enabled smartphones is poised to become a significant growth driver for the semiconductor industry, potentially offsetting the impact of slowing data center investments. This trend is reshaping the chip market landscape in several key ways:

Market Projections and Growth

By 2028, over half of new smartphones are expected to feature generative AI capabilities. IDC forecasts that AI smartphone shipments will grow exponentially:

364% year-over-year increase in 2024, reaching 234.2 million units

912 million units by 2028, representing a 78.4% CAGR from 2023 to 2028

This rapid growth is outpacing the AI PC market, with AI smartphones expected to ship more units in 2024 than AI PCs will by 2027.

Impact on Chip Demand

The rise of AI smartphones is creating new demand for advanced semiconductors:

Bleeding-edge fabs may need to increase output by 25-35% between 2023 and 2026 to meet demand

This could require 4-5 additional bleeding-edge fabs, costing $40-75 billion

Major chip manufacturers are already developing specialized SoCs for AI smartphones, including:

Apple A17 Pro

MediaTek Dimensity 9300

Qualcomm Snapdragon 8 Gen 3

Samsung Exynos 2400

Industry Outlook

While the potential slowdown in data center spending poses risks, industry leaders see AI smartphones as a promising counterbalance:

Doug Lefever, CEO of Advantest (an Nvidia supplier), believes AI smartphones could help the semiconductor industry avoid a “vicious” recession

The shift towards AI phones is driving innovation and diversification in the chip sector

However, challenges remain

Current demand for AI smartphones is still relatively low

Existing AI features may not be sufficient to drive large-scale consumer upgrades

The mid-range and low-end smartphone segments continue to face stagnant demand

Broader Market Implications

The AI smartphone trend is having ripple effects across the tech industry:

Semiconductor companies like Marvell Technology, Micron, AMD, and TSMC have seen share price increases due to optimism surrounding AI chips

The global AI chips market is projected to grow by $389.25 billion from 2024 to 2028, with a CAGR of 68.13%

Conclusion

As the AI smartphone market evolves, it has the potential to sustain growth in the chip sector, even as data center investments fluctuate. However, the industry will need to navigate challenges in the mid-range and low-end segments while continuing to innovate in AI capabilities to fully capitalize on this emerging opportunity.

Antonio Bhardwaj

Antonio has a distinguished career that spans several decades. He has established himself as a leading authority in military theories, focusing on warfare's psychological and political aspects. His expertise encompasses global conspiracy theories, counterterrorism, and the historical analysis of World Wars I and II. As a futurist, Antonio offers valuable insights into the potential developments related to a hypothetical World War III.

Antonio has explored Middle Eastern and Western studies in his academic pursuits and holds a Ph.D. in theological studies. His educational credentials are further enhanced by a degree in Mechanical Engineering, a Master’s in International Business, and an Executive MBA. Moreover, he completed a six-week executive course in Artificial Intelligence at MIT.

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As a single parent, Antonio has dedicated much of his life to raising his now-adult daughter, and he treasures every opportunity to spend quality time with her.

His deep appreciation for nature reflects his awe of God's creation.

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