Samsung's Smartphone Division Posts Another Loss... "Difficult Conditions Expected in Q4 Too" (Roundup)

Third-quarter loss of 600 billion won... loss narrowed, but
"High memory prices to keep business conditions challenging in Q4"
"Target year-end peak-season demand and continue form-factor innovation"

Samsung Electronics posted quarterly operating profit of more than 100 trillion won for the first time among South Korean companies in the third quarter of this year, while its Mobile eXperience (MX) business remained in the red. The Galaxy Z8 series was a hit, but a sharp rise in key component prices eroded profitability. Expecting this trend to continue, Samsung Electronics plans to strengthen its sales strategy focused on premium models to shore up profitability.

Samsung Electronics' Galaxy Z Fold8 Ultra, Fold8, and Flip8. Courtesy of Samsung Electronics.

Samsung Electronics said in its third-quarter earnings announcement on October 29 that its MX and Networks businesses posted an operating loss of 600 billion won, turning to a loss from the 3.6 trillion won in operating profit recorded in the same period a year earlier. Revenue for the businesses rose 11% to 37.7 trillion won from 34.1 trillion won a year earlier, but the increase did not translate into higher operating profit. However, the operating loss narrowed by 100 billion won from the previous quarter.

Despite the strong performance of the foldable Z8 series unveiled in the second half of the year, Samsung struggled to improve profitability. The Galaxy Z Fold8 Ultra, Fold8, and Flip8, launched in August, drew 1.44 million preorders in South Korea alone, setting a record for the most preorders for any Galaxy smartphone. However, neither the increase in sales volume nor the higher product prices offset the burden of rising component costs. The benefit to earnings was limited as higher memory chip prices began to be fully reflected in smartphone manufacturing costs.

Daniel Araujo, an executive at Samsung Electronics' MX Division, said on an earnings conference call that day, "Mobile memory supplies began to tighten in the fourth quarter of last year, and prices have continued to rise, affecting profitability in the third quarter." He added, "High memory prices are expected to make the business environment difficult across the industry in the fourth quarter as well."

According to market research firm TrendForce, contract prices for LPDDR5X, a low-power DRAM used in smartphones, surged 78-83% in the second quarter of this year from the previous quarter. Prices were forecast to rise by a further 8-13% in the third quarter. Since there is a time lag between component contracts and the actual production and sale of products, quarterly increases in memory prices are reflected in costs later. Price pressures are expected to persist for the time being, driven by rising demand for artificial intelligence (AI) and the expansion of AI data centers.

Samsung Electronics said it had expanded its foldable lineup in a timely manner this year, including the Fold8, helping attract more younger customers. Going forward, it will strengthen the competitiveness of its foldables by emphasizing portability and differentiated user experiences. The company also plans to ease the cost of purchases through various financing programs and attract more premium customers.

However, Samsung expects revenue from its MX business to decline in the fourth quarter from the previous quarter. To capitalize on year-end peak-season demand, it will seek to boost sales of the Galaxy S26 series and new foldable and wearable products, while defending profitability through process improvements. The launch of intelligent eyewear will also broaden the range of AI device experiences. In 2027, the company will continue to improve its product mix with a focus on flagship models, innovate in hardware performance and form factors, respond quickly to the market, and improve operational efficiency.

Executive Araujo emphasized, "A decline in profit is inevitable given the challenging business environment. We will maintain our focus on expanding flagship sales and minimize profitability risks through business efficiency improvements." Regarding Apple's entry into the foldable market, he said the company intends to view it as an opportunity to expand the market. "Intensifying competition and broader structural changes are unavoidable," Araujo said, "but we will use them as an opportunity to grow sales in line with market expansion."

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