Rising Component Costs Hamper Samsung Mobile's Q1 Operating Profit Growth

First-Quarter Operating Profit for MX and Network Divisions Estimated at Around 2 Trillion Won
Half of Last Year’s Level
Burden from Rising DRAM Prices

Samsung Electronics achieved record-breaking results in the first quarter of this year, driven by favorable conditions in the semiconductor market. However, profitability in its Mobile Experience (MX) division, including smartphones, appears to have weakened due to rising component prices.

The Galaxy S26 series is displayed at the Samsung Gangnam store in Seocho-gu, Seoul. Photo by Yonhap News

On April 7, Samsung Electronics announced its preliminary consolidated results for the first quarter, reporting sales of 133 trillion won and operating profit of 57.2 trillion won. Compared to the same period last year, sales surged by 68.06%, and operating profit skyrocketed by 755.01%.

Although performance by business segment was not disclosed, the market expects the semiconductor (DS) division to have led the results, while the MX division likely underperformed. This marks a reversal from a year ago when the MX division had driven the company's overall performance thanks to the success of the Galaxy S25 series.

The main reason for the weaker performance is the increased cost burden. As demand for memory surged in the age of artificial intelligence (AI), supply shortages pushed up DRAM prices. Due to chipflation, the launch price of the Galaxy S26 series increased by up to 295,900 won compared to the previous model.

Securities firms estimate that the operating profit of Samsung Electronics' MX and Network (NW) business divisions in the first quarter will be in the 2 trillion won range, about half of last year's 4.3 trillion won for the same period.

Hyungtae Kim and Hyesoo Song, analysts at Shinhan Investment Corp., forecast first-quarter operating profit for the MX division at approximately 2.1 trillion won. They projected that the average selling price (ASP) of DRAM and NAND flash would rise by 66% and 69%, respectively.

Injun Son, an analyst at Heungkuk Securities, also stated in a report that "a downturn in the mobile market is inevitable due to the sharp rise in memory prices," and predicted that the annual operating margin would plummet to as low as 2% as cost burdens rise significantly going forward.

Some analysts hold a relatively positive outlook. Sunwoo Kim, an analyst at Meritz Securities, stated, "Despite concerns over rising costs, strong operating profit will be achieved thanks to smartphone shipments of about 59.5 million units, cost optimization efforts, and the cost benefits of pre-secured components." The operating profit is projected to be around 4 trillion won.

This content was produced with the assistance of AI translation services.