Samsung Memory Soars, but Galaxy Struggles [Samsung Electronics Posts Record-Breaking Results]

Samsung Electronics said the Mobile eXperience (MX) Business continued to underperform in the second quarter, even as the company posted record-high sales and operating profit for the third straight quarter.
As the chipflation driven by shortages of DRAM and NAND flash memory pushed production costs sharply higher, two securities firms said the company could post its first-ever quarterly loss. The more Samsung passes on higher costs to product prices, the more demand weakens, trapping the business in a vicious cycle in which even sold products leave almost no margin.
According to industry sources on the 7th, Meritz Securities and Daishin Securities both projected that Samsung Electronics' combined preliminary operating profit for the MX and Network business divisions in the second quarter would fall into negative territory. Samsung Electronics does not disclose detailed results by business division in its preliminary earnings release.
Meritz Securities estimated an operating loss of 150 billion won for the MX and Network business divisions, widening its previous estimate of a 100 billion won loss by 50 billion won. Daishin Securities also projected that the MX Business posted an operating loss of 150.5 billion won in the second quarter. If that forecast proves correct, the MX Business would record a quarterly loss for the first time.
While the Samsung Semiconductor Business Division delivered record results on surging demand for high-bandwidth memory (HBM) for AI data centers and DRAM for servers, the MX Business is struggling as procurement costs for key components rise sharply. According to Counterpoint Research, memory accounted for about 14% of the manufacturing cost of an $800 smartphone in the first quarter of last year, but that share has recently climbed to as much as 40%. The launch effect from new products, including the Samsung Galaxy S26 series released in February, has also faded. Kim Sun-woo, a researcher at Meritz Securities, said, "As investment becomes concentrated on AI, B2C device demand based on purchasing power is inevitably facing limits to price increases."
Samsung Electronics has responded by raising product prices, including increasing the prices of the 512GB models of the Samsung Galaxy Z Fold7 and Samsung Galaxy Z Flip7 by 94,600 won each in April. It has even resorted to the painful step of raising product prices within a year of launch for the first time in about four years, since the Samsung Galaxy Tab S8 series in 2022, but it is not easy to offset the deterioration in profitability.
With the AI-led semiconductor supercycle expected to continue at least through next year, a recovery in earnings is likely to face headwinds.
Samsung Electronics is aiming for a rebound in the third quarter, banking on the success of its eighth-generation foldable phones, which are set to be unveiled in July. It is also accelerating efforts to strengthen self-reliance in application processors, the brains of IT devices, by increasing the share of Samsung Exynos chips. The goal is to reduce dependence on Qualcomm and ease the burden of AP procurement costs.
mkchang@fnnews.com Jang Min-kwon Reporter