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Samsung Galaxy S26 smartphones and other models. /Yonhap

Samsung Electronics' smartphone business is approaching its reported annual revenue target of 130 trillion won, driven by strong sales of the Galaxy S26 and Galaxy Z Fold8. However, surging memory chip prices amid the artificial intelligence (AI) boom have made restoring profitability an urgent challenge. The company plans to minimize the impact on earnings by focusing on premium smartphones and new products.

According to industry sources Friday, Samsung Electronics' Mobile eXperience (MX) Business recorded cumulative revenue of 107.1 trillion won in the first three quarters of this year, up 9.1% from 98.2 trillion won during the same period last year.

Quarterly revenue stood at 37.5 trillion won in the first quarter, 32.3 trillion won in the second and 37.3 trillion won in the third.

The figures have fueled expectations that the MX Business will achieve its reported annual revenue target of 130 trillion won. Industry observers say the target appears within reach, considering that the division generated 28.3 trillion won in revenue in the fourth quarter of last year.

Much of the growth was driven by the Galaxy Z Fold8, which was launched in the second half of the year. Released in August, the Galaxy Z8 series set a new domestic preorder record with 1.44 million units sold.

According to market research firm Counterpoint Research, Samsung Electronics ranked first in global smartphone shipments in the third quarter, with a market share of 22%. Its smartphone revenue also increased 14% from a year earlier.

During its earnings announcement last month, Samsung attributed the revenue growth to the launch of new products, including the Galaxy Z Fold8, and a rise in average selling prices (ASPs) resulting from a greater share of premium models in its sales mix. 

The problem, however, is that rising memory chip prices have significantly eroded profitability.

The combined operating profit of Samsung Electronics' MX and Networks Businesses totaled 1.5 trillion won in the first three quarters of this year, down a staggering 86.4% from 11 trillion won during the same period last year.

The operating profit margin also fell from 11.0% to 1.4%. In other words, while revenue grew on the back of stronger sales of high-end devices, profitability deteriorated.

On a quarterly basis, the businesses posted an operating profit of 2.8 trillion won in the first quarter, followed by an operating loss of 700 billion won in the second quarter and another operating loss of 600 billion won in the third.

More concerning is the possibility that these difficulties could persist for some time.

In a report released Oct. 30, market research firm TrendForce projected that contract prices for mobile dynamic random-access memory (DRAM) would remain flat or rise slightly in the fourth quarter.

The outlook reflects continued tight supplies of mobile DRAM as memory manufacturers prioritize production capacity for more profitable AI server products. 

To ease cost pressures during the peak year-end shopping season, Samsung plans to expand sales of premium products, including the Galaxy S26 series and foldable smartphones. It also intends to protect profitability by increasing sales of new wearable devices.

                                                                                                               Choi In-gyu