Source | Bohu Finance (bohuFN)

Recently, institutions have unveiled the latest battle reports on the global smartphone market.

In the first quarter of this year, smartphone shipments witnessed a decline both domestically and internationally. Counterpoint data reveals that the global smartphone market continued to face downward pressure in the first quarter of 2026, with shipments decreasing by 6% year-on-year, thus halting the upward trend observed over the past ten quarters. The domestic market followed suit, with IDC data indicating that smartphone shipments in the first quarter reached approximately 69.01 million units, marking a 3.3% year-on-year decrease.

A single grain of dust from the era can weigh heavily on manufacturers. Amidst the dual pressures of supply and demand, all top five global manufacturers, excluding Apple, experienced declines in the first quarter.

To compound the issue, challenges loom not only in the present but also in the foreseeable future.

Since last year, leading AI model developers have significantly accelerated the integration of AI applications. While different developers have explored various approaches to on-device AI, there is a rare consensus that AI-powered phones remain the optimal platform for implementing such technology.

ByteDance has emerged as the frontrunner. Following its collaboration with Nubia to launch the Doubao phone last year, blogger "Smart Chip Insider" revealed that the second-generation Doubao AI phone is expected to debut in the first half of 2026, featuring a core upgrade to the fifth-generation Snapdragon 8 Supreme Edition. Based on previous leaks, the second-generation Doubao AI phone will continue to be co-developed by ByteDance and Nubia. Nubia will handle the overall design, manufacturing, and supply chain, while ByteDance will focus on developing the "Doubao Phone Assistant 2.0," deeply integrating AI model capabilities into the operating system.

According to leaks from Tianfeng International Securities analyst Ming-Chi Kuo, OpenAI also plans to venture into the smartphone market, collaborating with MediaTek and Qualcomm on mobile processors, with Luxshare Precision serving as the exclusive designer and manufacturer for system integration. Mass production is anticipated in 2028.

While AI is not yet a primary driver of consumer purchasing decisions, it is poised to bring disruptive changes to human-computer interaction in the future, potentially reshaping the entire hardware landscape and traffic distribution logic.

Mobile phone manufacturers must swiftly introduce AI phones that offer genuine capabilities and an enhanced user experience.

01 What Defines an AI Phone?

Recently, official standards for artificial intelligence terminals, including smartphones, have been introduced.

Terminal intelligence is categorized into four levels: L1 (Responsive), L2 (Tool), L3 (Assistive), and L4 (Collaborative). L1 can only comprehend simple commands, L2 can execute simple multi-step operations, L3 can understand complex intentions and proactively serve users, while L4 (Collaborative) will be further refined in subsequent revisions based on industry advancements.

From a practical standpoint, the AI capabilities of most smartphone manufacturers currently fall within the L1-L2 range.

For instance, when the Honor ROBOT PHONE made its public debut late last year, the manufacturer emphasized its integration of autonomous interaction, action capabilities, and high-definition imaging. Similarly, when promoting the AI capabilities of its annual flagship Find X8 series, OPPO highlighted features like AI One-Touch Flash Notes, Memory Search, and Personalized Q&A.

So, how can we grasp the implications of the L3 definition? Here are two illustrative examples.

The first is the Doubao phone.

The technical preview version of the Doubao Phone Assistant is an AI assistant based on the Doubao AI model, developed in deep collaboration with smartphone manufacturers at the operating system level. It can truly understand and operate the phone to complete tasks, much like a human.

In demonstration videos, users can simply issue voice commands, and the phone automatically invokes different apps to perform a series of complex operations, such as price comparison, dining reservations, and itinerary planning. This bears a striking resemblance to the AI phone concept mentioned by the iPhone 16, or even surpasses it in capability.

Counterpoint analysis indicates that while the error rate remains relatively high for tasks involving multiple applications and complex semantics, the Doubao AI phone demonstrates advantages in understanding user intentions and coordinating cross-app tasks.

The second example is Xiaomi's Miclaw.

Following the popularity of AI assistants this year, Xiaomi also introduced a phone-related AI feature. As a smartphone manufacturer, Xiaomi's Miclaw is not a third-party software but operates as part of the operating system itself. Officially, it boasts API-level access to over 50 native system tools, enabling it to read and understand information on your phone to provide proactive services, akin to a "butler."

For instance, most people receive numerous text messages daily, some useful and others not. You can ask Miclaw to summarize important messages and unsubscribe from spam marketing texts. Similar to other AI assistants, it can also automatically generate news briefs.

Additionally, Miclaw can integrate with Xiaomi's ecosystem, extending the phone's capabilities physically. For example, you can directly use Miclaw to control smart home devices. Miclaw can also monitor and manage these devices, making real-time decisions based on the current context.

While it's challenging to predict the mature form of AI phones, based on current market products, they are expected to have at least the following characteristics:

First, a system-level GUI Agent that understands human intentions and solves problems;

Second, the ability to possess global memory based on on-device models, providing personalized services through self-learning;

Third, multimodal perception capabilities for proactive service delivery;

Fourth, a powerful on-device model as support, efficiently utilizing computing power.

02 Is It Inability or Unwillingness?

While the emergence of Doubao phones is often attributed to the inaction of smartphone manufacturers, it must be acknowledged that manufacturers face genuine challenges in this regard.

AI model developers venture into the smartphone market primarily out of their own needs. For instance, in the current environment, smartphones are the most important and largest-scale mobile terminals, capable of providing comprehensive intelligent services.

However, for the entire mobile internet, the approach of AI model developers entering the smartphone market is seen as disruptive.

A prime example is cross-app invocation, which is highly sensitive to app developers. For the latter, user data, traffic entry points, and content ecosystems are fundamental to their business models. Once these elements are reduced to mere "data," not only will the commercial moats of large companies be disrupted but also the entire platform-centric internet order.

Consequently, Doubao phones quickly faced bans from app developers.

Moreover, while AI represents the future, it is not currently a primary factor influencing user purchasing decisions. Counterpoint reports indicate that in 2025, over 30% of global smartphone shipments will support GenAI, up from 20% in 2024, primarily in high-end models. It wasn't until March this year that similar AI capabilities were extended to mid-range phones.

For smartphone manufacturers, ensuring consumer experience and data security remains paramount. Apple's CEO-designate, Ternus, explicitly stated that Apple does not consider simply "releasing technology" but focuses on how to leverage technology to deliver outstanding products, features, and experiences to users.

Therefore, manufacturers tend to progress more cautiously in product development.

Beyond ecosystems and scenarios, manufacturers also face significant disadvantages in model capabilities. Model developers can invest without regard to cost to compete for SOTA (State-of-the-Art), but smartphone manufacturers lack the resources to do so. The success of Doubao phones not only stems from its collaboration with Nubia but also from its substantial investment in AI models and computing power to create benchmark scenarios.

In April this year, Google released the open-source Gemma 4 series, significantly lowering the barrier to on-device AI deployment through architectural innovation, aiming to better apply AI capabilities in smartphone scenarios.

When it comes to advancing AI phones, smartphone manufacturers are largely "not unwilling but unable."

03 Conclusion

In the first quarter of this year, structural differentiation in the smartphone market has become increasingly pronounced.

After storage manufacturers prioritized capacity for AI, smartphone memory supply tightened, leading to price hikes in terminal devices. Nabila Popal pointed out, "In several emerging markets, phone prices have surged by as much as 40%-50%, severely dampening demand in price-sensitive regions."

The result is a market where Apple thrives while others struggle.

For the industry, AI agent functionality is a crucial tool for breaking the deadlock. For smartphone manufacturers, it may represent a matter of survival in the long run.

Some manufacturers are also investing in AI model research and development, attempting to leverage AI to accelerate ecosystem interconnection. A notable example is Xiaomi.

This year, Xiaomi has increased its activities in AI models. In late May, Xiaomi officially announced the open-sourcing of the Xiaomi MiMo-V2.5 series AI models and launched the "Trillion Token Creator Incentive Program," offering a total of 100 trillion token rights and interests to developers worldwide free of charge for 30 days.

Miclaw represents Xiaomi's significant attempt in the AI phone space.

On the other hand, collaborating with Doubao has become an option for some major smartphone manufacturers.

According to leaks, the second-generation Doubao phone may reach agreements with some mainstream app developers, significantly improving product completeness and compatibility. Blogger @Digital Chat Station mentioned in a leak that "Honor is in talks with Doubao, and vivo is also in talks with Doubao. In addition to these two, other top 5 domestic manufacturers are also in discussions, with a wave of AI OS and Doubao AI phones on the horizon..."

Regardless of the approach, this means we may see more AI phone products released this year.

Reference Sources:

1. Smart Emergence: Exclusive Interview with Honor AI Expert Li Xiangdong: On-Device AI Direction Has Not Converged, but AI Phones Are the Best Carrier

2. Jiemian News: Is OpenAI Making a Phone?

3. 21st Century Business Herald: Smartphone Sales Slump, Global Smartphone Shipments End 10-Quarter Growth Streak

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