Samsung Banks On AI To Drive Best Flagship Phone Sales In Years

(Bloomberg) -- Samsung Electronics Co. is targeting double-digit growth for its latest flagship smartphone series, powered with an array of new artificial intelligence features.

South Korea’s largest company on Wednesday unveiled the Galaxy S24 product family, the latest iteration of its most direct iPhone rival. The devices include built-in live translation of calls and a new search tool that lets users circle an image on the phone to get related information, tapping the AI suites of Samsung and Alphabet Inc.’s Google. Samsung also sprung a surprise by previewing the Galaxy Ring, an upcoming health-tracking gadget.

Samsung, which last year lost its top spot in global smartphone shipments to Apple Inc., is trying to secure an early lead in the race to integrate AI. It’s set itself the ambitious target of increasing sales of the flagship substantially, and is taking a hybrid approach of combining its own AI technologies with those of Google, according to TM Roh, head of Samsung’s mobile business.

“What ultimately matters is the user experience,” Roh said in an interview with Bloomberg News in San Jose, California. “We are always open to collaboration with our partners on new areas of the mobile industry.”

Shares were mostly unchanged in Seoul early on Thursday, following the showcase event.

Read More: Samsung Bets on Google-Powered AI Features in Smartphone Revamp

Partnerships will be a major element in Samsung’s push. The company has worked closely with OpenAI backer Microsoft Corp. in the past and has a longstanding pact with Google around its Android operating system. Samsung and Google started the year by announcing they’ll reduce duplication in competing with Apple’s AirDrop by uniting around a single Android Quick Share feature.

The Korean tech company, also the world’s largest memory chipmaker, spent 2023 digesting insights from its users and tailoring new AI features and additions to enhance the appeal of its latest device generation. While AI and machine learning have long been used on phones, the rise of tools like OpenAI’s ChatGPT has triggered a rush to deliver more sophisticated services directly on people’s devices.

“The AI-related features can really bring convenience and could encourage consumers to switch their phones,” said Lee Changmin, an analyst at KB Securities. Some small-cap AI-related stocks in Korea already saw some gains before the S24 was unveiled and may move again after the launch, with the deciding factor being the quality of Samsung’s new added features. KB Securities analysts including Lee estimate that Samsung may see its best Galaxy S sales in eight years with its new generation.

Samsung’s plans are not limited to the new handsets, as the company plans to roll out AI features to some of its earlier models in the Galaxy S series in the first half of this year, 55-year-old Roh said. The company recorded double-digit growth between its Galaxy S22 and last year’s S23 generation, giving it confidence it can repeat the feat.

But the global smartphone market has been in the doldrums for years and was again down last year. Samsung’s own shipments declined by 13.6% in 2023, according to IDC estimates. Roh expects both to rebound in 2024, as the advent of AI injects some much-needed excitement into the category. Many consumers are also due for upgrades following a sales boom in 2021, with the typical upgrade cycle now being roughly three years, he added. 

Roh, like some market estimates, expects the global smartphone shipments to expand by around 5% to 6% this year, though he hopes to outperform the consensus with Samsung’s new devices. 

After ceding ground to Apple last year, Samsung sees room to regain its position. That’s because AI — even while it risks consumer fatigue with excessive hype — is not a fad, Roh said. Like the era of the internet and smartphones, AI signals a seismic shift in our relationship with technology, which may reorganize the industry’s leadership, he said.

“The S24 marks just the beginning of a new era when AI technologies go mainstream,” Roh said. “Hopefully it will help revitalize the global mobile industry.”  

--With assistance from Youkyung Lee.

(Updates with shares and analyst reaction)

More stories like this are available on bloomberg.com

©2024 Bloomberg L.P.