Samsung Electronics' consumer electronics division is experiencing a continuous deterioration in profitability due to soaring memory chip prices and intensified market competition. The mobile business unit responsible for Galaxy AI smartphones may even record its first operating loss since establishment.
According to industry reports from South Korea on the 12th, Samsung's Device Experience (DX) division, which oversees smartphones, TVs, and home appliances, has initiated multiple austerity measures under the leadership of the Chief Financial Officer. These measures include mandating that vice presidents and lower-level executives switch to economy class for international business trips.
Concurrently, there is widespread expectation that the DX division's first-quarter performance will hit a record low. Some analysts even suggest that the Mobile Experience (MX) business unit, responsible for Galaxy phones, might incur its first operating loss since the company's founding.
The sharp increase in memory chip prices represents the core pressure on the DX division's profitability. Reports indicate that Samsung's semiconductor division (DS) has doubled the price of LPDDR5X memory supplied for Apple's iPhone 17 series. Subsequently, it adopted a similar price increase stance toward its internal mobile division, creating significant cost challenges.
Although the Galaxy S26 series launch included a slight price hike, industry observers generally believe this measure is insufficient to fully offset the rising cost pressures.
The adjustment to executive travel standards stands as the most symbolic among the current cost-cutting initiatives.
Under existing regulations, vice presidents and below in the DX division were permitted to travel business class or higher for international trips. The new policy will uniformly require economy class travel instead.
Analysts note that for a company with annual revenue reaching hundreds of billions of dollars, direct savings from airline seat classes are relatively limited. However, this move signals both internally and externally that cost control has escalated to an unprecedented level. The CFO's direct involvement in formulating these measures further indicates that this austerity drive is not merely procedural.
Beyond travel expense reductions, sources within Samsung and the industry reveal that the DX division is considering relaxing application conditions for voluntary resignation programs. Specific methods include expanding eligibility and increasing severance packages to accelerate workforce optimization.
Notably, Samsung Electronics overall—including its semiconductor business—is projected to achieve operating profits exceeding 40 trillion won in the first quarter, potentially setting a new record. However, this strong performance will be primarily driven by the semiconductor division, masking the challenges faced by the Device Experience division.
The memory cost surge creates a mixed situation within Samsung's different business units.
During negotiations with Apple for memory supply for the iPhone 17 series, Samsung's semiconductor division initially planned a 60% price increase for LPDDR5X, starting with a 100% hike to allow room for negotiation. Surprisingly, Apple accepted the higher quotation immediately. Apple subsequently held an emergency meeting with the semiconductor division to discuss supply volumes for the first half of the year.
This response confirmed the semiconductor division's pricing power in the memory market, leading it to apply similar price increases to internal transactions. Although the price hike for the mobile division was lower than that applied to Apple, it still represented a significant increase compared to previous procurement cycles.
This outcome proves costly for Samsung's mobile division. Memory chips being core components of smartphones, their rapid price increase directly elevates production costs for the mobile business unit.
Some analysts point out that the division responsible for Galaxy AI smartphones might report an operating loss in the first quarter, which would be the first in its history.
Simultaneously, in the TV and home appliance markets, competitive pressure from rival manufacturers continues to squeeze profit margins, making it difficult for the division to pass on cost increases through price adjustments.
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