AI-washing has infiltrated the consumer tech industry, with numerous internet-connected devices now being marketed as utilizing artificial intelligence. Among the plethora of AI-infused products such as grills and mattress toppers, one particular gadget has captured significant attention—a smartphone alternative resembling a Playmobil toy.
Priced at \(199, the R1 stands out as an AI "pocket companion," boasting over 40,000 units sold through pre-orders in the past week. Developed by Rabbit, a company that has secured \)30 million in investments, the R1 is positioned as a cutting-edge device transcending traditional smartphones. Rabbit asserts that its “large action model” has been trained on familiar interfaces like apps, enabling the voice-activated device to perform tasks, such as booking train tickets, on behalf of users.
While smartphones have been sluggish in incorporating generative AI capabilities, a lack of innovative ideas has contributed to a decrease in unit sales over the past year. According to IDC data, shipments from the top five companies experienced a 3% decline in 2023, reaching a decade-low total of 1.17 billion units. The potential market value for AI gadgets, even if capturing just 0.1% of global smartphone sales, could amount to half a billion dollars. However, established smartphone manufacturers are determined to prevent this scenario from unfolding.
Recognizing an opportunity, startups are venturing into the AI landscape, which stands as the most favored investment area for venture capital. PitchBook reports VC deals exceeding $80 billion in AI and machine learning last year, comprising 23% of all deals—the highest among any sector.
One such startup, Humane, hailing from San Francisco and founded by ex-Apple employees, has secured over \(100 million for its AI lapel pin. Priced at \)699 with a $24 monthly subscription accessing T-Mobile’s network, the pin offers functionalities akin to making calls, listening to music, and responding to queries. Despite the substantial investment, recent layoffs at the company hint at underwhelming pre-order figures.
The primary drawback of both the R1 and Humane products lies in their proximity to existing devices, as features like voice activation and basic communication capabilities are already prevalent in the market.
Research from Precedence Research anticipates the telecommunications sector to emerge as the primary market for AI hardware. Established smartphone giants are poised to defend this territory by swiftly integrating AI features into new handsets, potentially stifling demand for products from newcomers like Humane and Rabbit.
Recent announcements by Samsung introducing AI-enabled functionalities in new phones, such as live call translation, signal a competitive landscape where incumbents like Apple are expected to follow suit. In the realm of AI hardware, the adaptation of established technologies is likely to outshine early entrant hype.
