Samsung's MX division, responsible for its smartphone manufacturing, may experience its first-ever annual loss. In contrast, the Device Solutions division, which oversees memory production, has projected record-breaking performance for Q1. These divergent outcomes are primarily due to a single factor: the skyrocketing prices of DRAM and NAND memory, which are significantly impacting profit margins.
Analysts at Counterpoint estimate that the bill of materials (BoM) for flagship smartphones, priced over $800, could increase by $100 to $150. Memory alone accounts for a notable portion of this cost, with 23% allocated to RAM and 18% to storage.
Industry sources reveal that TM Roh, head of Samsung's DX and MX divisions, has cautioned executives about the potential for annual losses within the mobile division.
Proportion of DRAM Price in Smartphone Costs by Price Range: blue = sub-$200, purple = $400-$600, orange = $800+ (chart by Lee Ji-hye)Despite these challenges, the flagship Galaxy S26 series is performing exceptionally well, breaking pre-order records in Korea and achieving a 25% increase in pre-orders compared to the S25 series in the U.S., along with a 20% rise in Europe. Notably, sales are heavily tilted towards the Galaxy S26 Ultra, the costliest model.
Additionally, IDC reported that Samsung secured its position as the top smartphone vendor in Q1, shipping 62.8 million units—a 3.6% increase year-over-year, despite a 4% contraction in the overall market.
LPDDR5X is twice as fast as LPDDR4XUnder normal circumstances, such achievements would warrant celebration. However, a report from the Korean publication Money Today provides a sobering context: the Galaxy S26 Ultra's base model features 12GB of LPDDR5X RAM, a quantity that a typical AI supercomputer requires equivalent to building 4,600 smartphones.
Low Power DDR technology has traditionally been used in smartphones, tablets, and laptops, but with AI cloud infrastructure's electricity and cooling costs being significant, servers are increasingly utilizing LPDDR as well.
This leads to a dual-edged situation—either a major challenge or a significant profit opportunity, depending on the perspective. To address increasing demand, Samsung is phasing out its LPDDR4 production lines in order to boost LPDDR5 output.
Smartphone Memory Cost Share Estimation in Different Price Segments (source)To complicate matters further, the market is currently grappling with multiple issues: AI hyperscalers placing large chip orders, limited capacity from TSMC, and rising semiconductor prices. These challenges may have led Qualcomm to consider utilizing Samsung's fabrication facilities for the upcoming Snapdragon 8 Elite Gen 6. Counterpoint also underscores that the prices for flagship chipsets are increasing, adding to the difficulties faced by premium smartphone models.
Source (in Korean) | Via
