Samsung’s smartphone business could be heading for its first annual loss as surging memory prices – fuelled by global demand for AI – erode profitability despite strong device sales.

According to reports out of Korea, Samsung’s Mobile eXperience (MX) division head, TM Roh, has warned executives that the unit may post a full-year deficit in 2026.

If confirmed, it would mark the first loss for a division that has long been a cornerstone of Samsung’s profits.

Roh (pictured) warned back at this year’s CES that surging chip demand from AI could push up prices not just for smartphones, but also TVs and other consumer electronics throughout the year.

The pressure stems from a sharp rise in the cost of DRAM and NAND memory, key components in modern smartphones. Analysts estimate the bill of materials for premium devices has increased by A$155–A$230, with memory alone accounting for more than 40% of total component costs in flagship models.

The spike is being driven largely by AI infrastructure. Cloud providers and hyperscalers are snapping up mobile-grade LPDDR memory for data centres, where energy-efficient chips are increasingly preferred. The scale is significant – one AI supercomputer can consume as much memory as roughly 4,600 high-end smartphones.

This has created a supply crunch, pushing prices sharply higher and forcing smartphone makers into a difficult position of either absorbing the costs or pass them on to consumers.

Samsung has already raised prices across parts of its lineup, but that hasn’t been enough to offset margin pressure. Even strong performance from the Galaxy S26 series – recording double-digit pre-order growth in several markets – has failed to counter the rising costs.

Ironically, Samsung’s semiconductor arm is benefiting from the same trend, posting record profits on the back of booming memory demand. The company is also shifting production toward newer LPDDR5 variants to capitalise on higher margins.

The broader smartphone market isn’t helping. Global shipments declined in early 2026, meaning manufacturers are paying more to build devices in a cooling market.

With chipset prices also rising and supply constraints tightening, the industry faces what analysts are calling a “double squeeze”, and Samsung’s mobile division is right in the middle of it.