It can also be useful for basic "AI assistants" that process the data locally, so you get some extra privacy. For instance, you could get better image search on the device, without ever putting the photos in the cloud.
I also don't think any of those AI assistants that Google and Facebook are pushing with their messengers actually need to exist in the cloud. But of course Google and Facebook will continue to prefer doing it over the cloud because they actually want that data for themselves.
I think Huawei is also pushing for "smart notification management" to save battery life using such AI, although so far Huawei's solution has been pretty dumb. But I can see how this could improve in the future.
There should be at least a few more use cases where this is useful, and I think we'll see more smartphone makers take advantage of this.
Until we are surrounded by recording devices that have autoencoder-based speaker fingerprinting and audio transcription, combined with some NLP to make sure that if you say "Hello, I'm Tom Walker", it'll remember and fill that in in the transcriptions. Instead of having vague videos and maybe some confusing sounds that can be deciphered by the police if there's enough reason to put in the effort and personnel we'll now have direct audio transcriptions of everything we say and do everywhere available to a number of companies.
And the worst part of it is. This is useful. For security, for remembering things, for automated secretary, for ... People will want this, and the features it can bring, so it'll happen, and privacy will be eroded until it's entirely gone.