Samsung Cuts Budget Phone Production Amid Rising Chip Costs

Samsung Electronics is reducing production of its budget-friendly Galaxy A smartphone range by approximately 20% in the fourth quarter of 2026. This decision may result in 10 million fewer units this year, with the company considering an additional production cut of over 10% in 2027.

The move is driven by skyrocketing memory chip prices, which now account for more than half the total production cost of some budget devices. Suppliers are increasingly prioritizing lucrative AI hardware, a trend analysts call chipflation. To protect profit margins, Samsung is redirecting limited components toward its higher-margin Galaxy S and Galaxy Z flagship series.

Because the Galaxy A series represents roughly 70% of Samsung's smartphone shipments, the reduction could impact its competition with Apple for the global sales lead. Industry sources warn that budget buyers may face higher launch prices, fewer choices, or downgraded hardware specifications for displays and cameras. Omdia estimates that shipments of phones priced under $400 could drop by more than 22% this year. Executives from Samsung and Micron Technology indicate that market conditions may not normalize until 2028.