Samsung’s mobile division is grappling with significant challenges, not due to a lack of consumer interest in its phones, but because the cost of components, especially memory chips, has surged, eroding profit margins. Samsung Securities forecasts that the division may incur annual losses over the next three years, potentially reaching an operating loss of $3.85 billion in 2026 and escalating to $10 billion in 2027. By 2028, the cumulative losses could exceed $16 billion.
This financial strain is attributed to the steep rise in memory chip prices, driven by insatiable AI demand, which has seen these chips’ contribution to smartphone manufacturing costs jump from 14% in early 2025 to 40% by mid-2026. Other components such as chipsets, batteries, and displays have also become costlier, further squeezing the division’s profitability.
The memory chip shortage is expected to persist into 2027 and possibly 2028, limiting Samsung’s ability to offset costs without risking reduced sales due to higher device prices. Meanwhile, Samsung’s semiconductor division thrives, capitalizing on high memory chip prices and contributing significantly to the company’s robust financial performance, with substantial employee bonuses causing friction within the organization.
The mobile division’s struggle contrasts sharply with the semiconductor division’s success, highlighting the internal tensions as the company navigates this challenging landscape. The outlook remains uncertain, with hopes pinned on future memory supply improvements and demand stabilization beyond 2028.
