AI Software Replaces Hardware in Major Smartphone Deal

OSLO, Norway – December 29, 2025

A landmark agreement between Norwegian tech firm Elliptic Labs and an unnamed top-five global smartphone manufacturer is set to accelerate an invisible revolution inside future mobile devices. The deal will see the manufacturer replace traditional physical sensors with Elliptic Labs’ AI-powered software in 20 or more smartphone models scheduled for launch throughout 2026 and 2027, signaling a profound industry shift toward software-defined hardware.

The multi-year contract expansion centers on the integration of the AI Virtual Proximity Sensor™ INNER BEAUTY®, a software-only solution that performs a critical function in every smartphone: detecting when a user holds the device to their ear during a call. This action triggers the screen to turn off, preventing accidental touches from a user's cheek and conserving precious battery life. By replacing a physical hardware component with intelligent algorithms, the manufacturer can reduce costs, simplify design, and mitigate supply chain risks, all while enabling sleeker, more modern aesthetics.

The Disappearing Sensor

For years, smartphone design has been constrained by the need for physical components. The proximity sensor, typically a small infrared (IR) unit, has traditionally required a cutout or a spot behind a bezel at the top of the device. Elliptic Labs’ technology makes that hardware obsolete. It uses proprietary deep neural networks and algorithms to interpret data from a phone’s existing speaker and microphone, creating a virtual sensor that reliably detects proximity without a dedicated physical part.

This software-first approach offers manufacturers newfound design freedom, facilitating the creation of phones with edge-to-edge displays free from notches or punch-hole cutouts. The benefits extend beyond aesthetics into manufacturing and logistics. Eliminating a physical component reduces the bill-of-materials cost for each device and removes a potential bottleneck in the global supply chain—a critical lesson learned by many OEMs during recent component shortages.

“This agreement reflects long-term confidence in our technology and our ability to deliver consistently in high-volume smartphone programs,” said Ola Sandstad, CEO of Elliptic Labs, in the company's announcement. “The shift toward AI in devices is real, but it needs to be dependable. Our embedded software-defined sensors are mature, they work in all user environments, and they help customers improve their phone design — model after model.”

A Strategic Win in a Competitive Market

While the partner in this deal remains confidential, Elliptic Labs has established relationships with several of the world’s largest smartphone makers, including Xiaomi, Vivo, and Transsion. Securing a multi-model, multi-year commitment from a player of this magnitude is a significant strategic victory, solidifying the company's position as a leader in the virtual sensor space.

The financial structure of the agreement, which includes a "guaranteed minimum license fee per model," provides Elliptic Labs with a stable and predictable revenue stream. This model is particularly powerful for a software company with zero cost of goods sold, as each new license contributes directly to high-margin revenue. The deal supports the company's strong financial trajectory, which saw a 50% year-over-year revenue increase in the third quarter of 2025, and reinforces its ambition to reach a NOK 500 million revenue milestone.

Elliptic Labs' competitive edge is sharpened by its robust intellectual property portfolio, which includes nearly 250 granted and pending patents. While other companies operate in the virtual sensor market, particularly in industrial and automotive sectors, Elliptic Labs claims to be the only entity to have successfully deployed pure software-based proximity sensors at such a massive scale in consumer electronics. This specialization has allowed it to effectively create and dominate its niche, turning potential hardware competitors into partners.

The Dawn of Software-Defined Hardware

This contract is more than just a single business deal; it’s a powerful illustration of a much broader industry trend: the move towards software-defined hardware (SDH). This paradigm shift involves replacing fixed-function physical components with flexible, intelligent software that can run on general-purpose processors. The SDH market is already valued at over USD 43 billion in 2024 and is projected to more than double, reaching nearly USD 115 billion by 2034.

In the world of consumer electronics, this means devices are becoming smarter not just through cloud-based features, but from their very engineering core. AI is no longer just an app; it is becoming an integral part of the device architecture itself. This allows for on-device processing that reduces latency, enhances privacy by keeping data local, and lowers the long-term costs associated with cloud computation. From smartphones and wearables to software-defined vehicles, AI-driven software is making hardware more adaptable, efficient, and powerful.

From Novelty to Mainstream Reliability

The journey of virtual sensors has not been without its challenges. When the technology first appeared in smartphones several years ago, some early user reviews noted inconsistencies compared to their hardware-based IR counterparts, leading to occasional "cheek-taps" or screens failing to deactivate properly during calls. This initial skepticism is common with any disruptive technology.

However, the scale of Elliptic Labs’ current deployment—now active on nearly 1 billion devices worldwide—tells a story of maturation and refinement. The continued and expanding adoption by top-tier OEMs, who stake their reputations on user experience, serves as a powerful testament to the technology's reliability. The company's claim that its sensors are "mature" and "work in all user environments" is backed by its vast market presence.

For consumers, this evolution translates into tangible benefits. The next phone they purchase is more likely to feature a clean, uninterrupted screen and a sleeker profile. Behind that improved design lies a sophisticated AI system that works silently and efficiently, ensuring core functions operate reliably while pushing the boundaries of what is possible in modern device engineering. The invisible sensor has become a key enabler of visible innovation.