AI integration drives consumer electronics shift, but upgrade hesitancy persists

Artificial intelligence has stopped being a feature bolted onto consumer electronics and has become the organizing principle of how devices work. Across China, tech companies are no longer competing primarily on processor speed or screen resolution. Instead, they are building what researchers call AI terminals—devices designed from the ground up to function as intelligent nodes woven through daily life and work, capable of understanding context and adapting to how people actually live.

This shift represents a fundamental recalibration of the entire consumer electronics industry. The China Academy of Information and Communications Technology released a report documenting how AI phones, smart wearables, humanoid robots, and connected vehicles are no longer isolated gadgets but integrated parts of a larger intelligent ecosystem. Wang Zhiqin, vice-president of CAICT, explained in September that large language models triggered this transition. The difference is not cosmetic. An AI terminal does not simply add AI capabilities to an existing product design. Instead, it rebuilds the product from the foundation up—rethinking how users interact with it, what it can do, and why someone would want it in the first place.

The commercial opportunity is substantial. IDC forecasts that China will ship 147 million AI-enabled smartphones in 2026, representing 53 percent of the total smartphone market. Global shipments of smart glasses are expected to exceed 23.7 million units that same year, with China accounting for 4.9 million. Counterpoint Research, another major market analyst, predicts that generative AI phones will make up 45 percent of global smartphone shipments by 2026. For manufacturers, these numbers represent the brightest growth prospect in a sector facing headwinds from rising component costs and consumers who see little reason to replace devices that still work.

Yet here sits the central tension: the technology is spreading rapidly, but the market adoption story is more complicated than shipment forecasts suggest. Tarun Pathak, a research director at Counterpoint, noted that generative AI has become standard on phones priced above $400 wholesale. It is no longer a luxury feature or a differentiator. It is expected. The problem is that having access to AI capabilities and actually using them regularly are two different things. Consumers have not yet developed a daily habit around these features. They own devices that can do remarkable things, but those capabilities have not yet solved problems they face or made their lives noticeably easier.

Wang Jiping, vice-president of International Data Corporation China, acknowledged this reality in comments published by the Securities Times. The old playbook—driving sales by making hardware faster, brighter, or more powerful—has exhausted itself. Component costs keep rising, and consumers are not convinced that the next phone is worth the money. The path forward, manufacturers believe, lies in designing products around what AI can actually do for users in real time. Not AI as a showcase feature, but AI as an agent that learns preferences, anticipates needs, and delivers practical value every single day.

Bridging that gap between capability and utility is the work ahead. Pathak was direct about what needs to happen: manufacturers must identify and develop everyday use cases that consistently deliver value. Until then, the installed base of existing devices will remain in people's pockets and bags, doing their jobs well enough. The transformation is real, the technology is spreading, and the market is growing. But the reason most people will upgrade remains unwritten.