Memory prices surge: Samsung's mobile business may face its first-ever net loss

Samsung MX division head warns: The mobile division may face its first-ever net loss. The reason is not poor phone sales (Galaxy S26 sales are strong), but the massive demand for memory from AI servers, which has driven up DRAM and NAND prices. As a result, memory now accounts for over 20% of a flagship phone's component costs and is still rising. (Context: GPU computing power shortage repeats: OpenAI, Anthropic, and other major players consume supply, leaving AI startups waiting until the end of the year) (Background: Lawyer Lin Shang-lun's article: Still doubting AI? Top lawyers have long been using it like "water and electricity") According to reports, TM Roh, head of Samsung's MX (Mobile eXperience) division, has warned company executives that the mobile business could face its first annual net loss in history. The anomaly in this warning, as noted by Money Today, is that the actual sales performance of the Galaxy S26 has not collapsed. In every historical crisis Samsung has faced—the 2008 financial crisis and the 2020 pandemic supply chain disruption—the mobile division maintained profitability. This is not a volume problem; it is a cost problem. - In 2025, the MX division's profit margin was approximately 11%, corresponding to an annual operating profit of about 12.9 trillion KRW (approx. 8.7 billion USD). - According to analyst estimates, the full-year profit for 2026 could fall to 5 trillion KRW (approx. 3.3 billion USD), with profit margins compressed to around 3%. Some more pessimistic forecasts even suggest that maintaining a 1% gross margin will be difficult. Meanwhile, Samsung's global mobile market share fell from 24.6% at the end of 2023 to 19% in September 2025, hitting a 10-year low. In Q4 2025, Samsung lost its position as the world's top smartphone shipper to Apple and had not reclaimed it by Q1 2026. The logic of doubling memory costs The Application Processor (AP), the "brain" of a smartphone, has historically been the most expensive component. The AI era has broken this formula. Counterpoint Research data shows that by mid-2026, memory and storage combined will account for more than one-third of the build cost for budget models, and even for flagship models, memory costs exceed 20% of the total bill of materials. Memory costs have been promoted from a supporting role to the lead, and they continue to rise. The root cause is that the supply-demand structure has been rewritten by AI. LPDDR5x (low-power, high-speed memory) used in phones is now being snapped up in bulk by AI servers. A single Nvidia Vera AI processor can be equipped with up to 1.5 TB of LPDDR5x; the memory configuration of one server chip is 128 times that of a flagship phone. And this demand is not for just one or two units. An AI platform at the scale of a single rack (36 Vera CPUs plus 72 Rubin GPUs) consumes a total amount of LPDDR5x equivalent to stripping down 4,600 Galaxy S26 Ultra units (each equipped with 12 GB of memory). When AI data centers are deployed at this scale, the capacity of memory chip manufacturers is naturally pulled upstream. Market pricing for DRAM and NAND is no longer dictated by smartphone shipment volumes, but by Nvidia's shipment plans. In this battle for resources, Samsung's mobile division is losing not to Apple, but to its own business line. A structural problem, not a cyclical fluctuation IDC predicts that global smartphone shipments will decline by 0.9% in 2026, with rising memory costs being a primary reason. Samsung's DX division (which includes MX) has been asked to cut operating costs by 30%. The problem is that this is not a cyclical issue that can be solved by waiting for memory prices to fall. There is no sign of a slowdown in AI server construction, and the types of memory AI demands—high bandwidth, large capacity, and low latency—highly overlap with the specifications required by phones. Both are eyeing the same wafer fab capacity. Samsung's predicament is: the better the phones sell, the more memory needs to be purchased, and the pricing power in this market is no longer in its hands. Samsung's own memory division (DS division) is the world's largest manufacturer of DRAM and NAND, and in theory, it could schedule internally. However, if internal transfer pricing is lower than market rates, it is equivalent to moving losses from one pocket