Incoming Call: AI Takes Center Stage As Smartphone Makers Look To Stand Out Despite Rising Hardware Costs
As smartphone hardware becomes increasingly expensive and innovation plateaus, artificial intelligence is emerging as the key factor that could set devices apart in 2026. Brands are now betting heavily on AI-powered features, supported by new flagship chipsets optimised for on-device generative AI. Capabilities such as smart summarisation, image generation, and offline AI assistants are expected to take centre stage as companies seek software-led differentiation.
AI-Ready Smartphones Gain Momentum In India
India is fast becoming a major growth market for AI-capable smartphones. Shipments of such devices more than doubled year-on-year in the third quarter of 2025 and are projected to grow at a similar pace in 2026. According to market research firm Omdia, around 12% of India’s annual smartphone shipments in 2025 are expected to be AI-capable, signalling early but strong adoption.
Falling AI Phone Prices Offer Some Relief
The average selling price of AI-enabled smartphones has shown a downward trend, largely due to the arrival of mid-tier chipsets that can handle AI workloads. Omdia noted that AI phone ASPs declined from $1,141 in Q1 2024 to $967 in Q3 2025. This drop has made AI features more accessible, though the segment remains largely premium-driven.
Premium Devices To Carry Heavier AI Load
Despite lower average prices, AI-capable phones are expected to remain an expensive niche. Market trackers point to rising memory prices as a major concern, predicting overall smartphone ASPs to rise by 6–8% in 2026. To manage costs, brands are likely to focus AI-heavy features on mid-premium and flagship models, while keeping entry-level devices relatively basic.
Software Innovation Takes Priority
With hardware differences narrowing across brands, the focus has shifted to meaningful GenAI applications that can push users to upgrade. As Counterpoint Research noted, "The smartphone industry is now focused on developing breakthrough GenAI use cases that offer clear user benefits and drive upgrades, as most current devices provide nearly identical features."
One Billion AI Phones Milestone Approaches
On a global scale, AI smartphones are on track to cross a significant milestone. Counterpoint Research expects cumulative shipments to surpass one billion units by Q3 2026, with the next 500 million devices shipping in nearly half the time it took to reach the first. This rapid acceleration reflects growing industry confidence in AI-driven experiences.
Samsung Emphasises Privacy And Ecosystem AI
Samsung, one of the earliest adopters of AI in smartphones, plans to prioritise privacy and affordability as it expands AI across its ecosystem of devices, including handsets, TVs, and home appliances. The company is gearing up for major announcements at the Consumer Electronics Show in January, aimed at building a tightly connected AI ecosystem.
Addressing concerns around data security, JB Park, CEO, Samsung Southwest Region, said, "Because of AI, your personal information can be exposed to the public if not controlled in a very stringent mechanism. Samsung's first priority is the privacy of every individual. Nobody should have access to it and use it for targeted marketing."
High Awareness, Mixed Consumer Sentiment
Industry analysts say consumer awareness of AI smartphones is already high, particularly in India, where major brands have rapidly rolled out AI features across devices. Even older smartphones have received updates enabling limited AI capabilities.
An Omdia retailer survey conducted in October found that 63% of respondents consider AI features very important when choosing their next smartphone. At the same time, many consumers remain cautious, citing privacy concerns and fears of becoming overly dependent on AI tools.
Rising Memory Costs Pose A Key Challenge
One of the biggest hurdles for AI smartphone growth lies beyond the handset industry itself. Massive global investments in AI data centres have led to a sharp spike in RAM prices, with costs rising over 30% in Q4 2025 and a further 40% increase expected in 2026.
Omdia analyst Sanyam Chaurasia noted that brands will have limited room to increase memory capacity due to high prices and supply constraints. As a result, companies are expected to rely more heavily on software-based innovation, cloud-powered AI features, and new use cases to attract buyers.
Cloud AI And Branding Take Centre Stage
According to Counterpoint Research analyst Karn Chauhan, consumer demand for AI features remains muted. "There is currently no significant consumer pull for AI features. Users are generally indifferent. They are happy if the features exist but do not view them as a necessity," he said.
Chauhan added that most Android brands continue to depend on common third-party AI models such as Google’s Gemini rather than building their own from scratch. Instead, brands are focusing on proprietary branding, custom interfaces, and select hero features an approach expected to intensify in 2026.
Outlook For 2026
While AI may not yet be a decisive buying factor for most consumers, it has become the smartphone industry’s most promising path forward. As hardware costs rise and differentiation becomes harder, 2026 is shaping up to be the year when software intelligence not specs alone defines the next wave of smartphones.
AI-Ready Smartphones Gain Momentum In India
India is fast becoming a major growth market for AI-capable smartphones. Shipments of such devices more than doubled year-on-year in the third quarter of 2025 and are projected to grow at a similar pace in 2026. According to market research firm Omdia, around 12% of India’s annual smartphone shipments in 2025 are expected to be AI-capable, signalling early but strong adoption.
Falling AI Phone Prices Offer Some Relief
The average selling price of AI-enabled smartphones has shown a downward trend, largely due to the arrival of mid-tier chipsets that can handle AI workloads. Omdia noted that AI phone ASPs declined from $1,141 in Q1 2024 to $967 in Q3 2025. This drop has made AI features more accessible, though the segment remains largely premium-driven.
Premium Devices To Carry Heavier AI Load
Despite lower average prices, AI-capable phones are expected to remain an expensive niche. Market trackers point to rising memory prices as a major concern, predicting overall smartphone ASPs to rise by 6–8% in 2026. To manage costs, brands are likely to focus AI-heavy features on mid-premium and flagship models, while keeping entry-level devices relatively basic.
Software Innovation Takes Priority
With hardware differences narrowing across brands, the focus has shifted to meaningful GenAI applications that can push users to upgrade. As Counterpoint Research noted, "The smartphone industry is now focused on developing breakthrough GenAI use cases that offer clear user benefits and drive upgrades, as most current devices provide nearly identical features."
One Billion AI Phones Milestone Approaches
On a global scale, AI smartphones are on track to cross a significant milestone. Counterpoint Research expects cumulative shipments to surpass one billion units by Q3 2026, with the next 500 million devices shipping in nearly half the time it took to reach the first. This rapid acceleration reflects growing industry confidence in AI-driven experiences.
Samsung Emphasises Privacy And Ecosystem AI
Samsung, one of the earliest adopters of AI in smartphones, plans to prioritise privacy and affordability as it expands AI across its ecosystem of devices, including handsets, TVs, and home appliances. The company is gearing up for major announcements at the Consumer Electronics Show in January, aimed at building a tightly connected AI ecosystem.
Addressing concerns around data security, JB Park, CEO, Samsung Southwest Region, said, "Because of AI, your personal information can be exposed to the public if not controlled in a very stringent mechanism. Samsung's first priority is the privacy of every individual. Nobody should have access to it and use it for targeted marketing."
High Awareness, Mixed Consumer Sentiment
Industry analysts say consumer awareness of AI smartphones is already high, particularly in India, where major brands have rapidly rolled out AI features across devices. Even older smartphones have received updates enabling limited AI capabilities.
An Omdia retailer survey conducted in October found that 63% of respondents consider AI features very important when choosing their next smartphone. At the same time, many consumers remain cautious, citing privacy concerns and fears of becoming overly dependent on AI tools.
Rising Memory Costs Pose A Key Challenge
One of the biggest hurdles for AI smartphone growth lies beyond the handset industry itself. Massive global investments in AI data centres have led to a sharp spike in RAM prices, with costs rising over 30% in Q4 2025 and a further 40% increase expected in 2026.
Omdia analyst Sanyam Chaurasia noted that brands will have limited room to increase memory capacity due to high prices and supply constraints. As a result, companies are expected to rely more heavily on software-based innovation, cloud-powered AI features, and new use cases to attract buyers.
Cloud AI And Branding Take Centre Stage
According to Counterpoint Research analyst Karn Chauhan, consumer demand for AI features remains muted. "There is currently no significant consumer pull for AI features. Users are generally indifferent. They are happy if the features exist but do not view them as a necessity," he said.
Chauhan added that most Android brands continue to depend on common third-party AI models such as Google’s Gemini rather than building their own from scratch. Instead, brands are focusing on proprietary branding, custom interfaces, and select hero features an approach expected to intensify in 2026.
Outlook For 2026
While AI may not yet be a decisive buying factor for most consumers, it has become the smartphone industry’s most promising path forward. As hardware costs rise and differentiation becomes harder, 2026 is shaping up to be the year when software intelligence not specs alone defines the next wave of smartphones.
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