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Technology
Can smart wireless earphones + voice-enabled AI reshape human-machine interaction and daily life? We analyze the technology and its application potential
Reshaping of human-machine interaction could lead to sales of 1bn units/year
Sales of smart wireless earphones have been accelerating since 2016, and we believe global smart wireless earphones annual sales could reach 1 billion units by 2030E. In this report, we analyze two trends we see enabling smart wireless earphones to reshape human-machine interaction:
In our base case we forecast the smart wireless earphones market size to reach US$152bn by 2030E, with a rough 40/60 hardware/software split. In the longer term, we think related revenue could grow by 5-10x across the value chain, impacting the smartphone OEM, hardware/semi, software, internet, healthcare, and financial services sectors.
Potentially a key enabler of a trillion-dollar voice-based AI market
Deployment of voice-based AI technology has accelerated over the past 5-6 years, but real-life applications still face a variety of challenges that hinder the development of "killer apps". Many investors are watching for improvements in AI algorithms and silicon capability, but we believe that hardware system intelligence and specifications also play a critical role in facilitating AI applications. Our deep dive reveals that smart wireless earphones have the potential to: materially improve voice-recognition accuracy; collect consumer biometric data that can be used for high-end AI algorithm training and inference; and broaden the range of applications. Additionally, we think OEMs producing both smartphones and smart wireless earphones could carve out an even larger share of total AI assistant devices than now, potentially disrupting the AI competitive landscape, which is currently dominated by a few internet giants.
The total addressable market of AI-related revenue from smart earphones to reach US$94bn by 2030E
We simplify AI applications on smart wireless earphones into 3 categories: voice search, media consumption and eCommerce. Our base case assumes AI technology evolves gradually and most consumers frequently use smart wireless earphones as an interface in mobile to interact with AI. We estimate AI-related applications developed for smart wireless earphones could generate incremental revenue of US$94bn in 2030E.