Samsung Electronics’ smartphone business is caught in a double bind. On one side, memory prices are skyrocketing and eating into costs; on the other, Apple is signaling its entry into the foldable phone market, threatening both profitability and market share.
According to industry sources on the 2nd, Samsung Electronics’ operating profit from its mobile experience (MX) business in the first quarter of this year came to 2.8 trillion won. That was down 35% from the same period a year earlier.
Even though sales rose 3% on the back of the Galaxy S26’s strong performance, profitability went in the opposite direction and collapsed. Securities analysts believe full-year operating profit from the MX business will be only 4 trillion to 7 trillion won this year, about half of last year’s 12.9 trillion won.
At first glance, the results are puzzling. The Galaxy S26 set a record for preorders in South Korea after its launch on the 11th of last month, and in the U.S. sales over the first three weeks after launch were up 29% from the previous model. The premium Galaxy S26 Ultra’s share also rose from 61% to 71%, shifting the product mix toward higher profitability. Yet operating profit still fell. The answer lies in component costs.
Memory prices jump nearly ninefold in a year, weighing on smartphones
So-called “chipflation” has become a reality as memory prices have soared at an abnormal pace. According to DRAMeXchange, standard prices for DRAM and NAND stood at $16 and $24.16, respectively, as of April 30. That was up another 20% to 30% in just one month, and compared with a year earlier, they were up 9.7 times and 8.7 times, respectively. It is a surge rarely seen in memory market history.
The cause is artificial intelligence. As big tech companies pour everything into building AI servers, demand for high bandwidth memory (HBM) and server DRAM has exploded.
Samsung Electronics and SK Hynix have concentrated production on the more profitable server segment, and as a result, supply of general-purpose memory for PCs and smartphones has begun to dry up. SK Hynix’s 2026 output is already sold out. It is a seller’s market.
For smartphone makers, there is nowhere to hide. According to Counterpoint Research, the combined DRAM and NAND cost share in flagship smartphones reached 30% in the first quarter of this year, up 1.5 times from 20% in the previous quarter. It is expected to rise to 41% in the second quarter. A single component is approaching half of the finished product’s cost structure.
The irony is striking. Samsung Electronics’ semiconductor division, which makes memory, is enjoying a boom, while the company’s smartphone division must buy that same memory at inflated prices. As profits tilt toward one side within the group, the overall balance is being shaken.
The last remaining stronghold for Samsung is also trembling
Amid cost pressure, the one area Samsung could lean on was foldables. Memory accounts for a relatively smaller share there, so the impact of rising prices is less severe, and the market is an ultra-premium segment with thicker margins.
Counterpoint Research expects the global foldable phone market to grow 20% from last year. While the overall smartphone market is shrinking, this is nearly the only segment expected to post double-digit growth.
The problem is that Apple is entering that market. According to Counterpoint Research’s forecast, Apple is expected to grab 28% of the global foldable market this year with the release of its first foldable iPhone in September.
Samsung Electronics’ share is projected to fall from 40% last year to 31%, down 9 percentage points. Huawei’s share is also expected to drop from 30% to 23%. The arrival of one latecomer is set to erode the two leading players’ market shares at once.
The change is even more dramatic in North America. A market that was split last year between Samsung Electronics at 51% and Motorola at 44% could be reshaped into Apple at 46%, Samsung at 29%, and Motorola at 23%. In other words, the lead may effectively shift in Apple’s home market.
“2026 will mark the transition from an Android-led early market to ecosystem-centered competition,” said Liz Lee, research director at Counterpoint Research, in a company report.
Apple’s advantage is not just brand loyalty. Its experience optimizing large-screen software through iPadOS is seen as directly transferable to foldables. It is a late entrant in hardware, but in terms of user experience, it is already well prepared.
There is even speculation that the book-style foldable, long regarded as experimental, could be elevated to a productivity-focused flagship category once Apple enters the market.
Samsung looks to ‘Galaxy Z Fold8 Wide’ for a way out
Samsung is not standing still. It plans to hold its Galaxy Unpacked event in London, U.K., in July and unveil a new foldable lineup. The key product is a new form factor called the Galaxy Z Fold8 Wide. With a wider display than previous models, it is Samsung’s direct answer to Apple’s book-style foldable.
The lineup strategy has also changed. The company will replace the existing Flip Fan Edition model with a Fold model featuring a wider screen ratio. It is shifting the center of gravity from the clamshell-style Flip to the book-style device that unfolds like a book. Since the market is moving toward productivity, Samsung intends to steer its lineup in that direction as well.
Samsung Electronics said in its presentation materials that it will “strengthen the push for flagship expansion and upselling, and respond to diverse user needs through more advanced foldable development,” adding that “although cost burdens are expected to increase, we will strive to minimize any decline in profitability by securing cost competitiveness.”
One interesting point is that Samsung Display will supply the first foldable display for Apple. According to industry sources, Samsung Display has secured orders for up to 20 million foldable OLED panels for the iPhone Fold, with mass production reportedly set to begin in May.
That creates a dual structure: competing with Apple in the finished-device market while serving as a key supplier in components. The better Apple sells, the more money Samsung Display earns, while Samsung Electronics’ MX division loses market share.
What the chipflation era means for the smartphone industry
This situation delivers two major messages. First, in the AI era, the interests of components and finished products can diverge. The old formula in which a memory boom automatically lifted smartphones no longer holds.
Even within the same group, profits and pain are now distributed unevenly by business unit. Second, the limits of a strategy dependent on a single category are becoming clear. Samsung’s once-dominant position in foldables is being shaken by Apple’s entry, underscoring the need for market diversification.
The implications for consumers are also clear. Until memory prices normalize, smartphone prices are likely to rise. TrendForce expects global smartphone shipments to fall by about 10% this year because of the memory price surge. Buying immediately after a new product launch or waiting for prices to stabilize may become two distinct consumer patterns.
Large-scale expansion in memory supply is not expected until the second half of 2027 or sometime in 2028. Until then, Samsung’s weapon will ultimately be differentiated form factors and operating system experience. The market response to the Galaxy Z Fold8 Wide is expected to serve as a barometer for the fate of Samsung’s smartphone business over the next two to three years.