HUAXI Securities: With the background of AI smartphones entering the native stage, Apple leading the AI smartphone era will accelerate

According to the information from Zhitong Finance and Economics APP, Huaxi Securities released a research report stating that, according to Canlys statistics, the global penetration rate of AI smartphones is expected to reach 47% by 2027. By 2026, the cumulative global shipments of AI smartphones are expected to exceed 1 billion units, with a compound annual growth rate of 63% by 2028. Canlys also predicts that by 2025, the iOS operating system will account for 55% of global AI smartphone shipments. With the recovery in consumer electronics demand and the entry of AI smartphones into the native stage, the era of AI smartphones led by Apple will accelerate. On one hand, the upgrade of mobile chip components will drive the AI smartphone industry chain to rise in both quantity and price; on the other hand, the linkage with other AI intelligent terminals will bring a richer experience, and the synergistic effect will be more pronounced.

Beneficiary targets: Luxshare Precision Industry Co., Ltd. (002475.SZ), Pengding Holdings Co., Ltd. (002938.SZ), Dongshan Precision (002384.SZ), Lens Technology Co., Ltd. (300433.SZ), Lead Intelligent Manufacturing Co., Ltd. (002600.SZ), Crystal Optoelectronics Co., Ltd. (002273.SZ), BYD Electronics (00285), etc.

Key Points from Huaxi Securities:

Development of AI smartphones entering the native stage, penetration rate expected to exceed half by 2027

The AI transformation of mobile phones has gone through three stages: 1) AI APP stage: Installing large model APP products in mobile phones; 2) AI functionalization: Achieving initial artificial intelligence functions in existing applications on mobile phones; 3) AI nativization: Achieving AI experience in native service ecology, including multimodal end-side, large model access, etc. Apple's Apple Intelligence initiative is driving the landing of AI smartphones in the native stage, and Android phone manufacturers are also joining the layout of AI smartphones. The development ecosystem of AI smartphones is evident. According to Canlys statistics, the global penetration rate of AI smartphones is expected to reach 47% by 2027. By 2026, the cumulative global shipments of AI smartphones will exceed 1 billion units, with a compound annual growth rate of 63% by 2028. Huaxi Securities believes that with the improvement of AI processing capabilities, intelligent terminals such as PC/AR/VR/wearable devices/smart homes will also join the AI ecosystem layout, bringing consumers a richer artificial intelligence experience.

Apple Intelligence launch accelerates the arrival of a new era of phone upgrades

Apple has released the personalized intelligent system Apple Intelligence, which consists of various highly intelligent generative models, including 1) a device-side language model with 3 billion parameters and 2) a language model based on larger servers, running on Apple servers through private cloud computing, with overall performance superior to similar models. Apple's intelligent AI capabilities are deeply integrated with the underlying system, possessing system-level AI capabilities that provide users with a perfect AI interactive experience. Apple has been deeply cultivating in the field of AI for many years, continuously strengthening its AI capabilities through acquisitions and self-research, and its comprehensive layout is accelerating the landing of end-side AI. The complete hardware + system closed-loop ecosystem has built a competitive barrier for the era of AI smartphones HUAXI Securities believes that Apple's intelligence will become the leader of AI smartphones, driving the accelerated penetration of native intelligence. According to Canlys, by 2025, the iOS operating system is expected to account for 55% of global AI smartphone shipments.

The improvement of AI smartphone edge-side computing power will drive the upgrade and innovation of the industry chain components

HUAXI Securities believes that the improvement of edge-side computing power may drive the upgrade of mobile phone chips and components, such as 1) SoC chips: AI smartphones are becoming more intelligent with the combination of edge and cloud, further increasing the requirements for processors. Suppliers are also providing higher configurations, such as Snapdragon 8gen3, which can natively support 100 billion parameters; 2) Storage: AI smartphones require higher DRAM capacity to meet higher processing demands; and with the increase in parameter numbers, the memory required by LLM will also become larger; 3) Camera: AI smartphones involve multimodal interactions and will interact with other terminals in the future, requiring higher spatial awareness. Optical chips and components are expected to continue to upgrade; 4) PCB: With the upgrade of edge-side computing power, it is expected that the performance of PCB specifications will further improve; 5) Heat dissipation: AI smartphones have high data processing requirements, necessitating higher heat dissipation performance. The amount of graphite used may further increase, or it may switch to a graphite + VC heat dissipation method.

Risk Warning: Downstream demand may fall short of expectations, and technological research and development may fall short of expectations