How can a tech giant like Samsung sell more smartphones than usual and, at the same time, post a historic loss in its mobile division? The answer lies in the surge in component costs, particularly RAM and storage memory.
The South Korean company recently reported its results for the second fiscal quarter, revealing an atypical financial situation: the mobile division faces unprecedented losses, while the group as a whole posts record profits thanks to the production and sale of chips.
Samsung mobile, losses in the red for the smartphone sector
Despite solid sales volumes defined by company leadership, the DX division, which houses the Mobile eXperience (MX) segment, reported its first-ever loss, amounting to 800 billion won, or about 485.9 million euros.
Year-on-year revenue has actually grown, driven by the strong market reception of the Galaxy S26 lineup and the solid performance of the A series. However, operating profits were wiped out under the weight of generalized increases in component costs.
High-end devices, such as the Galaxy S26 Ultra and the series Galaxy Z Fold 8, maintained solid profitability. The cheaper smartphones, by contrast, failed to generate profits. The profit margins on low- and mid-range products, already extremely slim to begin with, were literally absorbed by memory costs.
Consequently, executives expect to focus their commercial efforts on high-value-added devices to try to revive growth in the coming months.
Implications for consumers and the triumph of semiconductors
This dynamic will directly affect users’ wallets. It is highly likely that consumers will soon face higher smartphone prices across all market segments, a trend that will affect the entire technology sector.
Inflation will hit those with limited budgets more severely: devices priced between 200 and 500 euros will likely endure the most pronounced percentage increases, precisely because manufacturers can no longer amortize the rising hardware costs.
Yet, the Asian company enjoys a huge competitive advantage over its rivals, being itself one of the world’s leading memory manufacturers that are challenging the mobile sector.
Precisely in this area, the company has achieved extraordinary results. The Device Solutions (DS) division posted a 56% increase in sales vs the previous quarter, setting historic highs for both quarterly revenues and operating profits.
On a consolidated basis, the company reached record revenues of 171.5 trillion won, equivalent to 103.8 billion euros, marking a 28% year-over-year increase.
Also operating profit hit an unprecedented peak of 89.5 trillion won, about 54.35 billion euros, with earnings per share up by 52%, placing it at the very top among global tech companies.
These robust cash flows please shareholders and ease pressure on the mobile division, ensuring financial stability for the entire group, at least until the artificial intelligence bubble continues to sustain global demand.
