Goldman Sachs, Morgan Stanley forecast smartphone comeback in 2024
By Kingsley Odii
Prominent investment banks Goldman Sachs and Morgan Stanley have projected a comeback for smartphone sales starting in 2024. Despite growing concerns about a prolonged slump in the mobile sector, both banks have expressed optimism about the future of smartphone shipments.
According to Morgan Stanley’s report, global smartphone shipments are expected to rebound by nearly 4% in 2024 and 4.4% in 2025, defying comparisons to the PC industry’s multi-year downdrafts. The investment bank attributes this expected turnaround to the new on-device AI capabilities that will unlock fresh demand. By enabling advancements such as enhanced photography and speech recognition while protecting user privacy, so-called edge AI has the potential to revolutionize the smartphone industry.
Leading smartphone manufacturers including Apple, Vivo, Xiaomi, and Samsung have already shown their bullishness on AI. Vivo’s new X100 with on-device AI has experienced explosive sales, while Xiaomi’s AI-packed flagship has generated six times the usual volume. Samsung, on the other hand, plans to incorporate generative AI into its 2024 models, aiming to provide ChatGPT-style features processed directly on phones rather than relying on the cloud.
However, Morgan Stanley acknowledges that the biggest hurdle is the lack of visibility on when the “killer app” for Edge AI will be developed. Drawing parallels with the breakthroughs in desktop and mobile internet, Morgan Stanley expects a killer app to emerge 1-2 years after the initial breakthrough. While there is no guarantee that the same timetable will apply to Edge AI, the emergence of Microsoft’s CoPilot as a potential PC AI killer app could set the early foundation for popularizing AI at the edge. This, in turn, could give investors confidence that a similar killer app for smartphones will also emerge.
In contrast, Goldman Sachs estimates a decline in global smartphone volumes in 2023, projecting a 5% year-on-year dip to 1.148 billion units compared to an estimated 1.206 billion phones shipped in the previous year. This decline would mark the second consecutive annual drop following steeper falls in 2022. However, Goldman Sachs believes that momentum will rebuild in 2024 and 2025, driven by new product launches. The investment bank forecasts worldwide smartphone shipments to rise by 3% to 1.186 billion in 2024 and another 5% to 1.209 billion in 2025.
Goldman Sachs analysts attribute this expected recovery to the holiday season, continuous restocking, and improved guidance from the supply chain regarding a market recovery. Although they anticipate low single-digit growth in 2024 and 2025, Goldman Sachs expects global smartphone shipments to gradually return to the 2022 levels by 2025.
This optimistic outlook for the mobile industry contradicts the consensus view that maturing smartphones face the same inertia and substitution threats as personal computers over the past decade. Morgan Stanley argues that replacement cycles and use cases still favor mobile phones over PCs.
The emergence of tablets and smartphones since 2011 has resulted in declines in PC shipments, driven by the availability of new devices rather than a disappearance of demand. Additionally, the shorter replacement cycles and expanding use cases for smartphones, coupled with the potential of Edge AI to unlock a new wave of innovation, indicate a promising future for the smartphone market.
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