Samsung may be bracing for first-ever annual loss in smartphone business

The smartphone market, once a goldmine for manufacturers, is undergoing a significant transformation. As the technology matures, the demand dynamics have shifted, compelling major players like Samsung to adapt to a new reality where selling smartphones isn't as straightforward as it once was. In a surprising turn of events, TM Roh, the head of Samsung's Mobile Experience division, has alerted company executives that they may be on the brink of their first annual loss in smartphone sales. This potential setback comes despite the robust sales of the Galaxy S26, which have been strong even in challenging economic conditions. The culprit behind this unexpected forecast? A surge in the prices of essential components like DRAM and NAND memory, which have historically been manageable even during turbulent market conditions. As the race to develop advanced AI capabilities intensifies, the cost of these critical components has skyrocketed, putting pressure on Samsung's bottom line. Notably, the LPDDR5x memory, vital for modern smartphones, has become increasingly expensive. In the evolving landscape of AI, where devices require more advanced processing power, the cost structure of smartphones is being radically altered. For instance, Nvidia is set to introduce its Vera AI CPU in 2026, which will demand a staggering amount of LPDDR5x memory—enough to power thousands of Galaxy S26 Ultra devices simultaneously. Traditionally, the most costly components in smartphones were the application processors and displays. However, the advent of the AI era has dramatically changed this equation, with memory and storage costs now constituting a significant portion of overall manufacturing expenses. According to insights from Counterpoint Research, by mid-2026, RAM alone could represent over a third of the cost of producing an entry-level smartphone. This shift poses a daunting challenge for Samsung and other manufacturers trying to balance innovation with profitability.