Samsung's mobile experience division head TM Roh has warned company leadership that the smartphone business could report a net loss in 2026, which would be a first in Samsung's history, according to Korean outlet Money Today.
The warning comes despite strong sales of the Galaxy S26, as rising DRAM and NAND prices driven by demand for AI infrastructure are cutting into smartphone margins to an unprecedented extent.
Why Rising Memory Costs Are Squeezing Smartphone Margins
The LPDDR5x memory used in most modern smartphones is currently in high demand for AI server applications. A single Nvidia rack-scale AI platform requires enough RAM to outfit more than 4,600 Galaxy S26 Ultra devices. Memory manufacturers are focusing on high-margin, AI-related components, which has led to a reduced supply for the consumer electronics market.
According to Counterpoint Research, by mid-2026, RAM is expected to make up more than a third of the cost to build a budget smartphone. In premium devices, memory still accounts for over 20% of the total component cost. Until recently, the application processor was typically the most expensive part of smartphones, with memory costs being much lower.
Although the mobile division is experiencing losses, Samsung Semiconductor reported an estimated $38 billion in profit for the first quarter of 2026, more than seven times its net income from the same period in 2025. The ongoing memory shortage affecting Samsung's phone business is also benefiting its chip manufacturing operations.
Supply Outlook and Price Increases Already Underway
Samsung has started raising prices across its lineup due to increasing component costs. The Galaxy A37 and A57 mid-range devices now cost $50 more than their predecessors.
The Galaxy Z Flip 7 512GB and Z Fold 7 512GB and 1TB models saw price increases of $80. The Galaxy Tab S11's price rose by $100. Motorola has also increased the prices of its Moto G budget phones by up to 50% for similar reasons.
Samsung, Micron, and SK Hynix are all increasing their memory production capacity. Samsung has started reducing LPDDR4 production to boost LPDDR5 output. Nikkei Asia estimates that even with the best possible improvements in production, DRAM supply in 2027 could fall approximately 40 percent short of expected demand. No significant easing of supply constraints is expected as AI infrastructure investment continues at current levels.
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