A shockwave has rocked both the AI and investment circles: OpenAI is set to collaborate with Luxshare Precision to produce AI devices.
According to The Information, OpenAI is poaching hardware talent from Apple and partnering with its contract manufacturing chain to develop its own AI terminals. LinkedIn data shows that Sam Altman has recruited multiple core teams from Apple, including design, manufacturing, supply chain, and AI research. Meanwhile, OpenAI has signed an agreement with Luxshare Precision, the primary contract manufacturer for iPhones and AirPods, to assemble its first device; concurrently, it is in talks with Goertek to secure acoustic and core components for future products.
This means that following the disruption of software by ChatGPT, OpenAI will integrate generative AI into its own hardware, directly entering the consumer electronics battlefield. However, from various perspectives, this collaboration’s prospects are fraught with uncertainties, making it difficult to be optimistic.
In reality, many startups have already explored various forms of AI hardware, particularly Chinese AI startups, which are full of creativity. For example, Xiaomi’s AI glasses and ByteDance and iFlytek’s AI headphones have already achieved AI model-based interactions, and some hundred-dollar AI headphones are even selling well on major e-commerce platforms. This indicates that in the AI hardware field, the market has already seen extensive exploration and practice, with competition already being fierce.
OpenAI’s first AI hardware is likely to be a “screenless, pocket-sized, always-on” voice-first terminal, which can be compared to fitting ChatGPT into a wearable pin or mini smart speaker that can be awakened at any time, and then expanding from this center to forms such as glasses, headphones, and recorders. Such product forms are not unique, and similar concepts and attempts have already emerged in the market.
Although OpenAI has high hopes for AI hardware, it is actually facing many obstacles.
Giving up the Chinese market brings huge losses
Chinese users being unable to use ChatGPT means its products are basically disconnected from the Chinese market. Based on the sales share of Apple iPhone, this is equivalent to actively giving up a quarter of the global market. The actual situation may be worse, as Chinese people’s acceptance of AI large models is far higher than in other countries. Losing China, one of the world’s largest and most dynamic consumer markets, restricts OpenAI’s AI hardware products in terms of user scale and market expansion, significantly lowering its revenue ceiling.
Technology and products are easily imitated and surpassed
Unlike smartphones, it is almost effortless for startups to imitate and surpass OpenAI’s AI hardware. According to U.S. media reports, 80% of AI startups in Silicon Valley are using China’s open-source large models. This means that other companies can outsource AI hardware production to Chinese companies and integrate China’s open-source large models, significantly reducing costs and even enabling them to quickly imitate or even surpass OpenAI’s AI hardware. OpenAI struggles to establish a strong competitive advantage in the market due to technological barriers, as latecomers can launch similar or even better products at lower costs and faster speeds, capturing market share.
Intense competition in the AI hardware market, with numerous lessons learned
From the perspective of market competition dynamics, the level of competition in the AI hardware field is beyond imagination. Previously, Humane’s AI Pin and Rabbit R1 both faced market rejection. The former’s shipping volume reached only one-tenth of expectations, while the latter, though more practical in function, ultimately failed to break through the existing smartphone usage scenarios. OpenAI’s entry into the AI hardware market at this time means it must face competition from traditional consumer electronics giants like Apple and Samsung, which possess mature supply chain systems, vast user bases, and strong brand influence. It also needs to contend with numerous emerging AI hardware startups, which are agile and adept at capturing new market demands. OpenAI faces extremely high difficulty in breaking through such a competitive environment.
Ecosystem construction is challenging
The essence of hardware competition is a battle of ecosystems, and in this regard, Apple and Google have absolute advantages that cannot be Compensate for solely by poaching talent. OpenAI wants to build a complete and competitive AI hardware ecosystem, which requires efforts in software services, developer support, application scenario expansion, and more. However, it has just begun in the hardware field, with an ecosystem that is nearly blank. Compared to Apple and Google, who have Deep cultivation ecosystem construction for many years, the gap is obvious. Building an ecosystem that can attract users, developers, and partners requires a long time, massive investment, and continuous innovative operations. OpenAI has a long way to go in this regard, and the uncertainty of success is extremely high.
Linxin Precision itself has hidden risks
Although Linxin Precision is a leader in consumer electronics contract manufacturing, it also faces numerous problems itself. As an Apple supply chain enterprise, it has a high dependence on Apple, and the elimination rate of Apple supply chain enterprises is as high as 30% or more, facing the risk of being abandoned by Apple at any time. Moreover, Linxin Precision’s gross margin has been declining year by year, and it now mainly relies on economies of scale and process optimization to maintain. Under the heavy asset operation model, the company’s total short-term and long-term debt exceeds 90 billion yuan, with a fragile capital chain and high pressure on free cash flow. Cooperating with OpenAI to produce AI hardware, Linxin Precision may not be able to commit fully, and if the revenue of the cooperation project does not meet expectations, it may deal a heavy blow to Linxin Precision’s already fragile financial condition.
