In today's rapidly evolving technological era, artificial intelligence (AI) is infiltrating every aspect of our lives at an unprecedented pace. With the rapid development of generative AI technology, mobile phones, once merely communication tools, are gradually evolving into the optimal platform for AI applications, leading an unprecedented industrial revolution.

This article delves into the AI mobile phone revolution and the underlying economic logic from multiple dimensions, including the development trends of AI mobile phones, strategic transformations of traditional mobile phone manufacturers, the rise of large AI models, the emergence of AI agents, and the impact of this transformation on the media and internet industry.

01. AI Mobile Phones: The Optimal Platform for C-end Applications

In recent years, as generative AI technology has matured, AI applications have gradually expanded from the B-end market to the C-end market. However, the explosion of the C-end market relies on new platforms, and mobile phones, with their widespread adoption, intimate interactivity, and extended usage time, have emerged as the best choice for generative AI C-end applications. According to IDC projections, shipments of the new generation of AI mobile phones worldwide will reach 170 million units by 2024, with the market share rapidly climbing in the coming years. This trend not only reflects the rapid development of AI technology but also indicates that the deep integration of mobile phone hardware and AI technology will become the mainstream direction in the future.

The reason why AI mobile phones have become the optimal platform lies in their "cloud-terminal integration" advantage. While large cloud-based models provide users with high-quality content experiences, small terminal-side models handle data desensitization, compression, and other preprocessing tasks, ensuring user privacy and data security. This combination not only meets users' demands for efficient and convenient services but also balances data security and privacy protection, laying a solid foundation for the popularization of AI applications.

Faced with the wave of AI technology, traditional mobile phone manufacturers have embarked on strategic transformations, regarding self-built large models as the key to capturing traffic inlets. Industry giants like Apple and Huawei have made significant progress in this area. Apple's Apple Intelligence is deeply integrated into the iOS system, offering users comprehensive intelligent services through a combination of large and small models on both device and server ends. Domestic manufacturers like Huawei are also actively investing in AI technology research and application, striving to secure a favorable position in the new round of industrial transformation.

For traditional mobile phone manufacturers, self-building large models represents not only a technological breakthrough but also a reshaping of their business models. Large models will become the core of the new generation of operating systems, enabling manufacturers to grasp more user data and service scenarios through this inlet, thereby gaining an edge in future competition. This strategic transformation will not only enhance manufacturers' profitability but also drive the overall industry's transformation and upgrading.

02. The Rise of Large AI Models: The Birth of Super Traffic Inlets

As AI technology matures, large models are gradually becoming super traffic inlets in the AI era. Similar to how mini-programs are replacing traditional apps, large AI models will offer more convenient and efficient interaction methods, attracting a large user base. The more convenient the user experience, the fewer choices available, and the higher the satisfaction level, the greater the value of the traffic inlet. Consequently, large AI models will emerge as crucial resources in the future internet economy, generating substantial commercial value for mobile phone manufacturers and application developers.

For the media and internet industry, the rise of large AI models will reshape the application ecosystem and alter the competitive landscape. Traditional application forms will gradually be replaced by AI agents, while new application forms will more intelligently and conveniently meet user needs. This will spur continuous innovation and optimization of products and services within the industry to adapt to market changes and seize new development opportunities.

With the continuous development of AI technology, AI agents are gradually emerging as intelligent agents. Executing various tasks and functions through AI technology, AI agents interact with users in a more natural and seamless manner. This new application form not only enhances user experience but also introduces richer service scenarios and business models. For mobile phone manufacturers, AI agents will become vital tools for building intelligent application ecosystems; for application developers, they offer broader creative spaces and profitable channels.

Driven by AI agents, multi-agent collaboration will become the primary trend in future application ecosystems. Through multi-agent collaboration, mobile phone manufacturers and application developers can jointly create more intelligent and efficient service systems. This collaborative model will significantly propel the development and innovation of the media and internet industry.

In the AI era, data volume and supply granularity become crucial factors determining the disruptive potential of applications. Applications with larger data volumes and finer supply granularity are harder to disrupt; conversely, those with smaller data volumes and coarser supply granularity are more vulnerable to emerging technologies. This rule has been verified across multiple industries. For instance, the food delivery and e-commerce industries, due to their large data volumes and fine supply granularity, are difficult to disrupt easily by emerging applications. In contrast, the aviation and express delivery industries, characterized by smaller data volumes and coarser supply granularity, are more susceptible to the impact of emerging technologies.

Therefore, when planning AI applications, enterprises and developers must thoroughly consider factors such as data volume and supply granularity. By strengthening data collection and analysis capabilities and optimizing supply chains, they can enhance applications' competitiveness and disruptive potential.

Faced with the immense opportunities and challenges presented by the AI mobile phone revolution, Orient Securities believes investment opportunities lie in both hardware and applications:

In terms of hardware, mobile phone manufacturers that self-build large models regain control over traffic inlets. On the one hand, they can regain the initiative in competition with leading apps; on the other hand, they can expand the scope of "Apple tax" to trading platforms. Recommended: Xiaomi Group (01810.HK), Transsion Holdings (688036.SH).

Regarding applications, the application ecosystem is poised for a shake-up. The likelihood of disruption in tools, transactions, content, and other applications in the AI era shifts from high to low. Transactional applications with larger data volumes and finer supply granularity are less prone to disruption. Recommended: Ctrip (00780.HK), Bilibili (09626.HK), Kuaishou (01024.HK), Alibaba Group (09988.HK), JD.com (09618.HK), and Meituan (03690.HK).

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