OpenAI is getting ready to shake up the smartphone market with a phone that replaces traditional apps with AI agents, according to master prognosticator Ming-Chi Kuo.
Kuo is known for his accurate predictions about Apple products, but in a posting on X Sunday, the TF International Securities analyst took a detour from Cupertino to Mission Bay.
He wrote that OpenAI is working with MediaTek and Qualcomm to develop smartphone processors.
Luxshare is the exclusive system co-design and manufacturing partner, he added, with mass production expected in 2028.
“Only by fully controlling both the operating system and hardware can OpenAI deliver a comprehensive AI agent service,” he wrote.
“Right now, there’s no dataset of how people use their phones,” explained Noah Kenney, founder and principal consultant at Digital 520, a technology advisory and services firm in Atlanta.
“What having a device does is give you that data,” he told TechNewsWorld. “Then OpenAI will be able to more effectively create AI models that help people use their devices without having to control them with their hands or voices.”
AI-First Phone Model
The biggest benefit to OpenAI and consumers is the vertical integration of AI into the device itself, maintained Siddardha Vangala, a senior AI systems engineer at MasTec, an infrastructure engineering and construction company in Coral Gables, Fla.
“Today, smartphones treat AI as an add-on feature,” he told TechNewsWorld. “If OpenAI builds its own phone, it could redesign the user experience around intelligence rather than apps.”
“That would enable things like persistent memory across tasks, deeper personalization, and faster on-device reasoning,” he explained. “Instead of launching separate apps, users would interact with a single intelligent interface that can coordinate services in the background.”
“From an engineering standpoint,” he continued, “owning the hardware also allows optimization of AI workloads at the silicon and operating-system level, similar to how Apple optimized iPhones for machine learning.”
OpenAI benefits in another way, too. “Right now, if you use ChatGPT on your iPhone, Apple is still in control,” said Sunil Manjunath, co-founder of Techhoor, a platform focused on technology insights, digital innovation, and emerging tech trends.
“OpenAI plays by Apple’s fees, and can only do what Apple allows,” he told TechNewsWorld. “A phone changes all of that.”
“If OpenAI builds its own device, it controls everything from the chip to the screen to the AI running underneath,” he continued. “You get a phone where the intelligence isn’t an add-on. It’s built into everything. OpenAI gets to talk directly to you, without anyone in the middle taking a cut.”
Barriers to Entry
Breaking into the smartphone market won’t be easy — just ask Amazon, Meta, and Microsoft.
“OpenAI is not a hardware company and must prove its phone performs well against the competition in terms of memory, camera quality, size, weight, screen responsiveness — all of that can be a challenge for an organization without a hardware background,” noted Jennifer Kent, senior vice president and principal analyst at Parks Associates, a market research and consulting company specializing in consumer technology products, in Dallas.
She also pointed out that OpenAI’s strategy is to have an agent set on top of various apps and dominate interactions with end users. “Many developers will see that as an existential threat,” she told TechNewsWorld. “OpenAI will have to work to prove that app developers will thrive in an OpenAI operating system.”
“iOS and Android dominate the smartphone market, particularly in the U.S.,” she said. “Apple customers are particularly loyal, and all current players develop experiences that are better across device types and family members, if you stick within an ecosystem. This is a major barrier to consumers switching to a new OS.”
“Smartphone users have incredible brand loyalty, and most people have years of their personal data backed up in their chosen ecosystem,” observed Max McCaskill, a staff writer for WhistleOut, a search engine for cell phone and internet services.
“It’s hard enough for companies to convince consumers to switch between Android and Apple, whose systems have been around for over a decade now,” he told TechNewsWorld. “A new, untested system from OpenAI will automatically face skepticism from average users who are not tech-savvy or who do not trust AI.”
Kent added that consumer concerns about AI are very high. “ChatGPT’s user satisfaction rates, as measured by our Net Promoter Score, are low,” she explained. “OpenAI will need massive marketing to create consumer demand for an OpenAI smartphone.”
Privacy and Security Concerns
Security and privacy will be top concerns for an AI phone. “Since the AI agent acts on behalf of the user, it will access messages, apps, and personal data, plus it will track all activity across the device,” noted Zbynek Sopuch, CTO of Safetica, an intelligent data security solutions provider headquartered in Prague.
“These very broad permissions are a slippery slope of both far too much data being collected and almost no visibility into what is even being collected,” he told TechNewsWorld.
“Ultimately, users won’t know what the AI itself is doing and what data it is using. We’ve already seen examples of how AI has been exploited by bad actors,” he said, “so imagine an even worse scenario now where a compromised device means an attacker can gain access to multiple systems at once.”
The privacy and security concerns are where it gets genuinely scary, maintained Harry Maugans, CEO of Privacy Bee, a data protection company in Atlanta. “An AI-first phone, by design, needs to see everything you do to be useful,” he told TechNewsWorld. “Kuo says the phone would ‘continuously understand users’ context,’ which is a polite way of saying constant on-device surveillance.”
“The security model for agentic systems with that level of access just doesn’t exist yet,” he said.
Make the Phone Feel Outdated?
For now, OpenAI’s smartphone plans appear more speculative than substantive. “I’m sure that OpenAI has considered producing a smartphone; whether it will is another matter,” observed Greg Sterling, co-founder of Near Media, a market research firm in San Francisco.
“I think OpenAI will release some sort of device next year,” he told TechNewsWorld. “It won’t be a phone, but they will wait and see what the reception is and, based on that, determine whether to go forward with a phone.”
OpenAI’s potential smartphone plans are a clear admission that a wearable isn’t good enough for capturing the user experience and that people will continue using phones even as AI wearables become a thing, contended Anshel Sag, a senior analyst for mobility, 5G & XR at Moor Insights & Strategy, a technology analyst and advisory firm based in Austin, Texas.
“Phones are still connectivity and compute hubs and will likely be for the foreseeable future,” he told TechNewsWorld.
The real question is not whether OpenAI can build a phone, but if it can make the phone feel outdated, noted Mark N. Vena, president and principal analyst at SmartTech Research, a technology advisory firm in Las Vegas.
“If OpenAI ships just another glass slab with a smarter chatbot, Apple, Samsung, and Google will box it in quickly,” he told TechNewsWorld. “But if it creates a device where agents actually reduce friction, replace app-hopping, protect privacy, and get everyday tasks done better, it could become the first serious rethink of the smartphone in years.”
“If this move is successful, it could arguably be the most significant shift in personal computing since the iPhone launch, or the PC launch,” added Rob Enderle, president and principal analyst at the Enderle Group, an advisory services firm in Bend, Ore.
“It could even easily displace the need for PCs,” he told TechNewsWorld, “if it were focused on that segment initially, because there are far fewer application dependencies and the PC form factor has arguably been obsolete since the launch of agentic AI.”
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