Samsung's mobile division chief TM Roh has warned company leadership that the South Korean tech giant could record its first-ever net loss in the smartphone business in 2026, as surging demand for memory chips driven by artificial intelligence infrastructure threatens to squeeze margins even as Galaxy S26 handsets sell strongly.
Samsung, the world's largest smartphone maker by volume, may be approaching an unprecedented milestone — and not a welcome one. TM Roh, head of the company's Mobile Experience (MX) division, has reportedly cautioned senior executives that 2026 could mark the first year in Samsung's history that its smartphone business posts a net loss, according to South Korean financial outlet Money Today.
The warning is striking given the resilience Samsung's mobile unit has shown over the decades. The division remained profitable through the 2008 global financial crisis, the COVID-19 pandemic's supply chain disruptions, and multiple cycles of smartphone market saturation. What may finally tip the balance is a structural shift in the global memory chip market driven by the AI arms race.
The Memory Crunch
The core problem is the skyrocketing cost of LPDDR5x DRAM and NAND flash storage — the same components found in premium smartphones — which are increasingly being diverted to AI server infrastructure. Nvidia's upcoming Vera AI CPU, set to replace its Grace chip later in 2026, will support up to 1.5 terabytes of LPDDR5x memory per unit. A single rack-scale AI platform using 36 Vera CPUs alongside 72 Rubin GPUs would consume enough RAM to fill roughly 4,600 Galaxy S26 Ultra handsets, each of which carries 12GB.
That kind of demand from hyperscalers and AI companies is compressing supply for consumer devices and driving prices higher across the board. The shortages have already affected consumer laptops and enterprise servers, and smartphones are the latest casualty.
Strong Sales, Shrinking Margins
The situation is particularly frustrating for Samsung because it is not a demand problem. Reviews of the Galaxy S26 series have been largely positive, and sales appear strong. The issue is that selling more phones at higher component costs may simply not be enough to stay in the black.
Samsung occupies a unique and awkward position in this landscape: it is simultaneously a leading manufacturer of the very memory chips that are now eating into its handset margins. Its semiconductor division has benefited enormously from AI-driven chip demand, but that gain does not fully offset losses elsewhere in the business when reported at the division level.
The broader smartphone industry has been consolidating for years. Many mid-tier and regional manufacturers have exited the market, leaving Samsung, Apple, and a handful of Chinese brands to compete for a relatively flat pool of consumers who upgrade every two to three years rather than annually.
Samsung has not publicly confirmed Roh's reported internal warning, and the company's overall profitability will depend on how memory prices move through the remainder of the year.
Analysis
Why This Matters
- Samsung's smartphone division is a bellwether for the broader consumer electronics industry; a loss there signals that AI infrastructure spending is now structurally reshaping component markets in ways that hurt everyday device makers and, eventually, consumers through higher prices.
- The episode illustrates a growing tension within diversified tech conglomerates: Samsung's chip business profits from AI demand while its handset business suffers from the same trend.
- If Samsung is squeezed, smaller smartphone manufacturers with less vertical integration face even greater pressure, potentially accelerating consolidation in the global handset market.
Background
Samsung's MX division has been one of the most durable profit engines in consumer electronics, weathering recessions, trade wars, and the COVID-19 supply crunch without ever posting an annual loss. The company has long benefited from vertical integration — making many of the components that go into its own phones — which historically gave it a cost advantage over rivals.
However, the AI investment supercycle that began accelerating in 2023 has fundamentally altered the economics of memory production. Cloud providers and AI companies have committed hundreds of billions of dollars to building out server infrastructure, and the LPDDR5x and HBM memory required for those systems competes directly with supply destined for consumer devices. By 2025, memory prices for consumer-grade DRAM had risen sharply from their 2023 lows, reversing what had been a prolonged oversupply period.
Nvidia's roadmap has further intensified this dynamic. Its Vera CPU, announced for a 2026 launch, is designed around massive pools of LPDDR5x memory — the same standard used in flagship smartphones — creating a direct supply-side conflict between the AI and mobile markets that did not exist at this scale even two years ago.
Key Perspectives
Samsung MX Division: Facing a margin crisis despite healthy sales volumes, the division is caught between component cost inflation it cannot fully pass on to consumers in a competitive handset market and internal transfer pricing from its semiconductor arm.
Samsung Semiconductor Division: Benefits directly from elevated memory prices and strong AI chip demand, creating an internal tension where the company's own chip unit is, in effect, competing with its phone unit for supply at advantageous prices.
Critics/Skeptics: Some analysts may question whether the internal warning reflects genuine long-term structural risk or is a negotiating position ahead of internal resource allocation discussions. Memory price cycles have historically been volatile, and a correction in DRAM pricing — possible if AI capex slows — could quickly restore smartphone margins.
What to Watch
- Global DRAM and NAND spot prices through Q2 and Q3 2026 — a sustained decline would relieve pressure on Samsung's handset margins.
- Samsung's Q2 2026 earnings disclosure, which will offer the first hard financial data on whether MX division profitability is deteriorating as feared.
- Any moves by Samsung to raise Galaxy handset prices or trim component specifications, which would signal the company is passing costs on to consumers rather than absorbing them internally.