The integration of artificial intelligence (AI) is driving significant transformation in the consumer electronics sector, as technology companies increasingly focus on intelligent ecosystems rather than hardware specifications. In China, next-generation smart terminals are moving beyond isolated devices to become interconnected nodes embedded in various aspects of daily life and work, fundamentally altering human-machine interaction, according to a recent report by the China Academy of Information and Communications Technology (CAICT).

This shift encompasses a wide range of products, including AI phones, AI personal computers, smart wearables, humanoid robots, and intelligent connected vehicles. These AI-enhanced devices are seen as central to a new wave of technological innovation and industrial change. Wang Zhiqin, vice president of CAICT, highlighted that the emergence of large AI models has sparked a paradigm shift from traditional smart devices to AI terminals. Rather than simply adding AI features, these terminals are redesigning product architecture, interaction logic, and value propositions based on the capabilities of advanced AI models, extending beyond conventional phones and PCs to a broader array of devices.

Despite the promising outlook, companies face challenges in encouraging consumers to upgrade their devices amid rising component costs and a weakening willingness to replace existing hardware. Wang Jiping, vice president of market research firm International Data Corporation (IDC) in China, noted that the era of competing on hardware performance alone is waning. Instead, growth will come from user-centered AI products that serve as intelligent agents, providing more personalized and practical functionality.

Market forecasts reflect this trend. IDC predicts that shipments of next-generation AI smartphones in China will reach 147 million units by 2026, representing 53 percent of the market. Globally, smart glasses shipments are expected to surpass 23.7 million units the same year, with China accounting for nearly 5 million units. Similarly, Counterpoint Research anticipates that generative AI-enabled phones will make up 45 percent of global smartphone shipments by 2026.

However, while generative AI has become a standard feature on smartphones priced above $400 at wholesale, it has not yet provided a compelling incentive for many consumers to upgrade their devices, according to Tarun Pathak, research director at Counterpoint Research. He pointed out there is a notable gap between owning AI-capable devices and actively using their AI functions regularly. Closing this gap, Pathak said, will depend on the development of everyday use cases that deliver consistent, tangible benefits to users.

Overall, the AI integration is poised to reshape consumer electronics significantly, but the pace at which this translates into widespread consumer upgrades will hinge on the technology’s ability to demonstrate clear, practical value in daily usage.