Focusing on Terminal Applications and AI Software: The Core Driving Force of the New Consumer Electronics Cycle

Keywords: AI PC, AI Phone, Apple Supply Chain, Consumer Electronics, Terminal Applications, AI Software

Introduction

Currently, artificial intelligence technology is penetrating from the cloud to the edge at an unprecedented speed. The intelligence of terminal devices is no longer a distant vision but an ongoing industrial revolution. With the lightweighting of large models, the improvement of chip computing power, and the integration of native AI into operating systems, AI PCs and AI phones have become the hottest directions in the consumer electronics industry. At the same time, Apple's Apple Intelligence strategy released at WWDC 2024 and its deep layout in on-device AI have once again pushed the "Apple supply chain" industry to the forefront. This article will deeply analyze the core logic of this round of industrial transformation from three dimensions: terminal applications, AI software, and consumer electronics, exploring which areas will deeply benefit from the continuous positive impacts of AI PCs, AI phones, and the Apple supply chain.

1. Terminal Applications: The Value Anchor of AI Moving from Cloud to Edge

In the past few years, the development of large models has mainly focused on cloud training and inference. However, high computing costs, network latency, and privacy security issues have prompted the industry to turn its attention to on-device AI. The core value of terminal applications lies in completing inference locally on the device, achieving real-time response, offline availability, and ensuring user data privacy.

Taking AI PCs as an example, chip manufacturers such as Intel, AMD, and Qualcomm have successively launched processors integrating NPUs (Neural Processing Units), while Microsoft has deeply embedded on-device AI capabilities into the Windows system through Copilot+. Users can run AI assistants, real-time translation, image generation, and video conference background blurring locally. The maturity of these application scenarios has directly driven the demand for terminal hardware computing power. According to IDC forecasts, global AI PC shipments will exceed 150 million units by 2027, with penetration rates approaching 60%.

In terms of AI phones, flagship chips such as Qualcomm Snapdragon 8 Gen 3 and MediaTek Dimensity 9300 have all integrated AI engines, supporting on-device large model operation. The Samsung Galaxy S24 series, with its Galaxy AI, has achieved differentiated features such as real-time call translation and AI note summarization, receiving strong market response. Although Apple started later, the release of Apple Intelligence marks its official entry into on-device AI, balancing cloud-device collaboration through Private Cloud Compute. This trend means that terminal applications are no longer simple tools but have reconstructed the human-computer interaction method, becoming the first point of contact between users and the AI world.


Figure: Typical application scenarios of AI PCs and AI phones, covering real-time translation, AI assistants, image generation, etc.

2. AI Software Ecosystem: Empowering Hardware and Reshaping User Experience

Hardware upgrades are only the foundation; the ecological construction of AI software is the key to determining the differentiation of terminal experience. Currently, AI software is mainly divided into two layers: underlying operating system-level AI capabilities and upper-layer application-level AI services.

At the operating system level, Microsoft Windows 11's Copilot+, Apple iOS 18's Apple Intelligence, and Google Android 15's Gemini Nano all regard AI as a native capability rather than an add-on function. For example, Apple Intelligence supports cross-application operations, allowing users to control multiple apps through Siri to complete complex tasks without manually switching interfaces. This deep integration not only improves efficiency but also builds ecological barriers.

Application-level AI software is flourishing in various fields. In the productivity field, tools such as Microsoft Office 365 Copilot, Adobe Firefly, and Notion AI have significantly lowered the threshold for creation; in the entertainment and social field, platforms such as Douyin, Kuaishou, and Xiaohongshu use on-device AI to achieve real-time beautification, special effects generation, and video editing; vertical industries such as healthcare, education, and finance are also seeing the emergence of AI assistants and intelligent applications. For the consumer electronics industry chain, the popularization of AI software has directly driven the demand for device replacement — when users find that a new phone or PC can provide a completely different intelligent experience, their willingness to upgrade is significantly enhanced.

It is worth noting that AI software also inversely defines hardware specifications. For example, on-device large model inference requires high-bandwidth memory (such as LPDDR5X), high-speed storage (such as PCIe 5.0 SSDs), and efficient heat dissipation solutions, driving upgrade demands in sub-segments such as memory, storage, and thermal modules. At the same time, AI software imposes higher requirements on input devices such as sensors, cameras, and microphones, benefiting related component suppliers.

3. New Consumer Electronics Cycle: The Dual Engine of AI PCs and AI Phones

2024 is called the "Year Zero of AI Terminals." AI PCs and AI phones together form the dual engine of a new round of growth in the consumer electronics industry. From the perspective of industrial evolution laws, every major technological change gives rise to a new replacement cycle. Smartphones evolved from feature phones to smart phones, PCs from traditional computing to cloud collaboration, and AI terminals represent the arrival of the "proactive intelligence" era.

AI PC: Redefining Productivity Tools

Traditional PCs mainly handle tasks such as document processing, web browsing, and entertainment. AI PCs, by integrating NPUs and high-performance GPUs, achieve local AI inference capabilities. This allows users to perform operations such as real-time background blur, automatic meeting minutes generation, and intelligent code completion without being connected to the internet. For business professionals, creative workers, and student groups, AI PCs are not just efficiency boosters but platforms for productivity reconstruction. According to Canalys statistics, global AI PC shipments exceeded 5 million units in Q1 2024, and it is expected to account for over 40% of total PC shipments by 2025.

AI Phone: From Communication Tool to Personal AI Assistant

The core difference of AI phones lies in their ability to provide proactive and personalized services based on user behavior data. For example, the phone can automatically identify the object the user is photographing and recommend relevant information, or automatically adjust Do Not Disturb mode and navigation routes according to the schedule. Apple Intelligence goes a step further by enabling "cross-app operations" through on-device large models. For instance, a user can say, "Help me find that photo taken at the restaurant last Tuesday and send it to Mom," and the phone will automatically complete a series of actions including searching, filtering, and sending. This qualitative change in experience is sufficient to stimulate a large number of existing users to replace their devices.


Figure: Global AI PC and AI phone shipment forecast from 2024 to 2027 (unit: million units)

4. Apple Supply Chain: A Definite Opportunity Deeply Benefiting from Apple's AI Strategy

Apple, with its closed software and hardware ecosystem, powerful chip self-development capabilities, and vast user base, has unique advantages in the AI terminal field. The launch of Apple Intelligence not only brings new features to iPhones, iPads, and Macs but will also significantly enhance user stickiness and replacement motivation. For companies in the "Apple supply chain," this is an extremely definite industrial opportunity.

Analysis of Key Benefiting Segments:

1. Chip and Computing Power Field: Apple's A18 Pro and M4 series chips integrate more powerful NPUs, driving demand for advanced packaging (such as TSMC CoWoS) and high-speed interconnects (such as PCIe 5.0). Domestic packaging and testing companies such as JCET and Tongfu Microelectronics are expected to receive more orders.

2. Storage and Memory Field: On-device AI inference has extremely high requirements for memory bandwidth, and the penetration rate of LPDDR5X is rapidly increasing. At the same time, AI model storage requires larger capacity NAND Flash, driving both volume and price increases for storage chips. Original manufacturers such as SK Hynix, Micron, and Samsung have already benefited first, but domestic module manufacturers such as Longsys and Biwin Storage are also ushering in development opportunities.

3. Optics and Sensing Field: AI applications rely on input devices such as multi-cameras, 3D sensors, and LiDAR. Apple continues to promote upgrades of periscope lenses and ToF sensors, benefiting companies in the supply chain such as Sunny Optical, Crystal Optoelectronics, and Goertek.

4. Thermal and Structural Parts Field: The increased power consumption of AI chips imposes higher requirements on thermal solutions, driving strong demand for VC vapor chambers and graphene thermal films. At the same time, high-end structural parts such as titanium alloy frames and stainless steel frames benefit from Apple's flagship model upgrades.

5. Assembly and ODM Field: Assembly plants such as Luxshare Precision, Hon Hai (Foxconn), and Pegatron will directly benefit from the ramp-up of AI terminals, and the increasing complexity of AI functions will raise the per-unit value.

It is worth noting that Apple's "de-risking" strategy for its supply chain is driving some production capacity to move to India and Vietnam. However, mainland Chinese companies still have irreplaceable advantages in precision manufacturing, cost control, and rapid response. In the long term, high-quality Apple supply chain companies are expected to gain a larger share in the AI wave.

5. Investment Perspective: Grasping the Core Value of Terminal Applications and Software

From an investment perspective, the core driving force behind this round of consumer electronics recovery is not a simple cyclical rebound but a structural upgrade driven by AI technology. Investors should focus on the following three main lines:

Main Line 1: AI Software and Ecosystem Platform Companies. These companies control user entry points and data, enabling high-margin, high-stickiness business models through AI services. Typical representatives include Microsoft, Apple, Google, as well as domestic companies such as Xiaomi, Huawei (unlisted), and Tencent.

Main Line 2: Semiconductor Companies with On-Device AI Chip Design Capabilities. Qualcomm, MediaTek, Apple (self-developed), and HiSilicon (returning) are direct beneficiaries. Meanwhile, domestic AI chip startups such as Cambricon and Horizon are also laying out in the on-device inference field.

Main Line 3: High-Barrier Component Suppliers in the Apple Supply Chain. Against the backdrop of volume and price increases for AI terminals, Apple supply chain companies with leading technology and stable customer relationships are expected to consistently exceed expectations. Focus on sub-segments such as storage modules, optical lenses, thermal solutions, and functional structural parts.

Conclusion

AI technology is profoundly reshaping the underlying logic of the consumer electronics industry. Terminal applications have evolved from passive tools to proactive intelligence; the AI software ecosystem has become the core moat for hardware differentiation; and the dual engine of AI PCs and AI phones has started a new replacement cycle. With its powerful ecosystem and chip capabilities, Apple makes the "Apple supply chain" the most definite beneficiary. In this trend, only companies that can deeply integrate terminal applications, AI software, and hardware innovation will seize the first-mover advantage in the new cycle. Over the next three years, the consumer electronics industry will usher in transformation dividends, and both investors and practitioners need to actively embrace this historic opportunity.