Samsung Cuts Smartphone Production Amid Rising Memory Costs

Samsung Electronics is reducing smartphone production by 20% to 30% in the fourth quarter of 2026 to mitigate significant operating losses. The move follows a surge in DRAM and storage costs driven by AI data center demand, which squeezed profit margins and led the mobile division to report its first-ever quarterly loss of approximately $476 million in the second quarter of 2026.

Brokerages estimate the mobile and networks business lost between 900 billion won and 1.9 trillion won in the third quarter. To counter these costs, the company raised prices for the Galaxy S26 in South Korea and the United States, though analysts say these increases have not kept pace with component expenses. Co-CEO Roh Tae-moon stated that the company "will not pass the full (cost) increase on to consumers."

These production cuts may lower Samsung's total 2026 output from an estimated 270 million units to approximately 200 million. Paradoxically, the company's memory chip business is generating record profits, with a projected third-quarter operating profit of 107.4 trillion won, or roughly $80.17 billion.