Original title: Could AI Become the New Value Lever in India's Premium Smartphone Market?
Author: Sanyam Chaurasia
Source: Omdia New Consumer Ecosystem Research (formerly Canalys)
Cover image source | pexels
The rapid adoption of AI technology in India and its surging popularity are laying the groundwork for the next phase of smartphone differentiation. As basic AI features move toward standardization, the competitive advantage will increasingly shift toward integrated, personalized, and agentic experiences—but greater AI autonomy will also raise consumer demands for trust, transparency, and control.
AI plays a more important role in the premiumization of India's smartphone market
India's smartphone market is steadily climbing up the value chain, with average selling prices rising from $171 in the first half of 2020 to $316 in the first half of 2026, a compound annual growth rate of 11%. More complete financial support, broader channel coverage, and increasingly intense product competition have made higher price tiers more accessible, driving the continued premiumization of the market. But as this transformation matures, and more consumers already own increasingly capable devices, sustaining the premiumization trend requires manufacturers to create more compelling reasons for consumers to aspire, upgrade, and pay a higher premium for their next smartphone. AI can become an important new lever in this equation, expanding innovation from standalone hardware into experiences that become more useful, more personalized, and more differentiated throughout the usage lifecycle.
For consumers, this shift has already begun. Today's AI mainly makes familiar tasks such as search, photography, communication, and productivity easier; over time, as more contextual and agentic experiences emerge, it can evolve from "help me do" to "do it for me." For manufacturers, the opportunity lies in turning these AI experiences into stronger differentiation and more compelling value propositions, especially in the premium segment. Omdia's Smartphone User Innovation Readiness research shows that Indian consumers are already cultivating these AI usage habits. The core question now is how the industry translates this engagement into higher smartphone value, stronger differentiation, and new reasons to upgrade.
AI has entered purchase decisions but has not replaced traditional factors
Indian consumers still rely primarily on familiar basic factors when buying smartphones, such as price, camera, battery, performance, and durability. However, as the marginal benefits of hardware improvements diminish, homogenization pressure is affecting hardware design, and differentiation is shifting toward the overall experience a smartphone can provide. A smartphone's AI capabilities and features have not replaced these traditional purchase criteria. But it has become a key factor with rising status in the decision hierarchy. For smartphone manufacturers, the focus is on leveraging AI to improve the existing user experience and create stronger layers of differentiation through the interface.
This foundation is already taking shape. India has rapidly become a major market for AI application adoption, providing an important signal: consumers are already ready to use new AI tools and eventually adapt to more agentic experiences. As of September 2026, ChatGPT's monthly active smartphone users had exceeded 227 million, equivalent to about 32% of India's smartphone installed base, while Gemini had surpassed 153 million, about 21%. This scale of user numbers shows that manufacturers do not need to build consumer awareness of AI from scratch—the opportunity increasingly lies in converting this familiarity into differentiated AI experiences on smartphones.
However, user interaction is currently still largely driven by standalone apps and is relatively independent of the smartphone brand consumers own. As chatbot interfaces and large language model capabilities integrate more deeply into smartphone operating systems, how this interaction model evolves will be the next key question.
Figure 1: AI is already deeply integrated into Indian consumers' smartphone usage behavior
Today, consumers mainly experience AI through familiar activities such as creating and editing content, information discovery, search, writing, and translation, reflecting a combination of standalone AI apps and built-in smartphone features. In Omdia's research, the maturity of CREATE, DISCOVER, and ASSIST is far higher than ACT, indicating that today's smartphone AI is still mainly in the "help me do" experience stage.
The next phase may change where this value lands. The shift toward agentic experiences will require AI to better understand users' context, interact across apps and services, and reliably execute actions on users' behalf. This will embed devices, operating systems, and the broader ecosystem more deeply into the AI experience. Therefore, as AI becomes more agentic, smartphones can evolve from primarily serving as access points for AI services into active participants in how these services are orchestrated and delivered, creating greater space for AI to differentiate smartphone brands and their ecosystems.
AI differentiation will increasingly move from features to experiences
As AI becomes more familiar to Indian consumers, its role in the smartphone value proposition will evolve from utility toward value creation. Omdia's User Innovation Readiness research shows early signs of this shift. 43% of consumers expect their smartphone's AI capabilities to improve through software updates, while nearly four in ten say useful AI could make them willing to pay more for their smartphone. What is needed, therefore, is more than adding AI to the spec sheet—it is making smartphone AI progressively more useful throughout the usage lifecycle.
The challenge is that individual AI features may become increasingly difficult to differentiate. Search, translation, summarization, image editing, and content creation are already spreading across brands and price tiers. As these capabilities become ubiquitous, basic AI utility will increasingly become an expectation rather than a differentiator. Therefore, the opportunity in the premium segment will shift toward more integrated experiences—combining personalization, user context, and intelligence across apps, services, and connected devices.
Figure 2: The opportunity for AI in India's smartphone market lies in value, not just features
The longer-term opportunity lies in integrating AI more deeply into the smartphone ecosystem. An AI experience that understands the consumer, learns preferences through continued use, and works seamlessly across devices and apps will be much harder to replicate with a single feature or standalone AI app. Therefore, differentiation shifts from having AI to how well the smartphone understands its user and how effectively it can act for the user. If manufacturers can combine this capability with deeper personalization and ecosystem integration, AI has the potential to enhance brand differentiation, give consumers a stronger reason to stay within a particular smartphone ecosystem, and ultimately upgrade within that ecosystem.
AI agents raise execution requirements for smartphone manufacturers
The shift from assistive AI to executive AI will require consumers to grant more permissions—from sharing personal context and granting cross-app access to allowing AI to perform tasks on their behalf. Omdia's research shows that the current challenge is not convincing Indian consumers that AI is useful—only 4% consider lack of utility an AI limitation. Instead, half of consumers cite privacy and security concerns, and 40% worry about becoming overly dependent on AI. Therefore, the challenge has shifted from "convincing consumers to use AI" to "winning their trust so they are willing to grant AI more permissions."
Figure 3: As AI moves from assistance to execution, trust and control become the next usage barriers
For smartphone manufacturers, this requires investing more effort in privacy, transparency, reliability, and user control. Agentic experiences will require clear permissions, predictable outcomes, and visibility into what AI can access and do, without creating friction in daily use. Therefore, the next phase of smartphone AI will be defined not only by the capabilities of agents, but also by the extent to which consumers feel comfortable authorizing AI. Manufacturers that can expand AI autonomy while preserving consumer control will be better positioned to turn agentic AI from a technical capability into daily consumer value.
