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Smartphone Vendors Look to AI to Differentiate Their Offerings

Many mobile vendors will look to promote the latest innovations during Mobile World Congress.

The smartphone industry experienced 1.5 billion handset sales last year, and while sales volume was high, vendors are trying to find ways to stand out in a crowded marketplace. Many mobile vendors will look to promote the latest innovations during Mobile World Congress.

Gartner research directors Roberta Cozza and Annette Zimmermann will be at this year’s event, and they have shared their views on what hardware improvements will garner attention, and what companies are likely to surface as the challengers and winners in the ongoing smartphone battle.

Q: Three Chinese vendors accounted for 19% of total smartphones sold in 2016. What does the future hold for them and other handset manufacturers?

A: The smartphone market has reached maturity with 1.5 billion smartphones sold in 2016, and it is clear that innovation is no longer limited to the market leaders alone. Smaller or new brands from China have aggressively invested in R&D, marketing, branding and channel reach, and have emerged as fierce competitors in the smartphone market. Chinese vendors, such as Oppo, Huawei and BBK are increasing their share in the worldwide smartphone market by offering high-performance smartphones that successfully appeal to consumers (see Figure 1).

devicewearables_infographic-01

 

The challenge for these Chinese smartphone vendors will be creating sustainable businesses and building new assets beyond hardware. The next era of smartphone competition will reside in new services, content and intelligent interactions that will provide richer experiences for users. Leading vendors such as Samsung are already building new user experiences through immersive technologies, such as virtual reality or investments in connected homes and artificial intelligence (AI).

New players such as HMD, and its recent acquisition of the Nokia brand, face many challenges in a highly commoditized market brimming with well-established brand ecosystems and Chinese players with cost advantages. HMD can count on an effective manufacturing partner, and, despite holding a well-recognized brand like Nokia, HMD’s experienced management team will not have an easy task rebuilding it and infusing it with new value.

Q: We are seeing hardware replacement fatigue, fewer app downloads and the rise of VPAs. Where do device vendors need to invest in order to compete in this changing environment?

A: AI, and how personal devices and services will benefit from it, will be prominently featured at this year’s MWC. The Huawei Mate 9 is the first Alexa-enabled phone, and this indicates a new battleground among device vendors.

There is no doubt that investing in, or partnering with, AI enablers will help smartphone vendors to differentiate their products and services. Gartner predicts by 2019, 20% of all smartphone interactions will be done via a virtual personal assistant (VPA). This means that the way we interact with our most personal devices (smartphones and wearables) will change over the next few years. While we will continue to use these devices, interactions will become more intuitive and also more efficient. VPAs will become more capable, and what is a pretty rudimentary conversation with Alexa and her ilk today will turn into intelligent systems that eventually act on the user’s behalf.

Q: Gartner forecasts that 335 million wearables will be shipped in 2017, but the market is not growing as fast as anticipated. How can the sector be revitalized? 

A: Our survey results show that adoption of both smartwatches and fitness bands grew significantly over the past 12 months, yet the results also show a high abandonment rate. The main issue is that vendors have not found a “killer app” for these devices, and there might not even be one. The core issue is that vendors have not been able to engage users enough with these devices, and after a while the wearable loses its appeal. We also expect wearables worn inside the ear, namely “hearables”, will be a key theme at MWC this year. Voice-interaction with this kind of device is key, and vendors are starting to add interesting capabilities to them. For example, in the sports and fitness sector, these devices can become an (supposedly) intelligent coach in your ear. However, making these devices truly intelligent via the use of AI is still a long way to go.

Nevertheless, we are witnessing a growing interest from organizations and insurance companies to sponsor fitness bands for employees. Gartner predicts that by 2019, 99% of multinational organizations will be sponsoring fitness trackers to improve corporate performance. These incentivized programs are growing in popularity, not only in the U.S. but also in other geographies. We also observe a growing interest in specific enterprise wearable solutions that help to implement better safety for remote workers. As an example, the use of head-mounted displays in enterprise is still emerging, however, we are seeing solutions being piloted and implemented in areas such as field services and manufacturing.

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Client Research
Gartner clients can read more from Ms. Cozza and Zimmermann in the report, Market Share: Final PCs, Ultramobiles and Mobile Phones, All Countries, 4Q16.

Source: gartner.com/smarterwithgartner

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