Samsung has just recorded the highest profit quarter in history even though the phone division is at a loss, is the company able to use money from memory chips to force Chinese competitors into an unfair price war?
Samsung Electronics announced its business results for the second quarter of 2026 with consolidated revenue of 171.5 trillion won and operating profit of 89.5 trillion won. Revenue increased 28 percent compared to the previous quarter, while profits reached the highest level in the company's history. However, behind the record results is an unprecedented divergence between Samsung's two most important pillars.
The Device Solutions division in charge of semiconductors achieved revenue of 127.5 trillion won and operating profit of 89.2 trillion won. In contrast, the Mobile eXperience and Networks division in charge of phones and network equipment recorded revenue of 33.2 trillion won but an operating loss of 0.7 trillion won. Samsung confirmed a decline in mobile segment profits due to pressure on rising component costs across the industry. (Samsung Global Newsroom)
Samsung Division Q2 2026 Revenue Operating Profit Estimated Profit Margin
Device Solutions 127.5 trillion won 89.2 trillion won About 70 percent
Mobile eXperience and Networks 33.2 trillion won Negative 0.7 trillion won About negative 2.1 percent
Samsung Display 7.5 trillion won 0.7 trillion won About 9.3 percent
All Samsung Electronics 171.5 trillion won 89.5 trillion won About 52.2 percent
The notable point is not only that Samsung phones fell into a loss for the first time according to published departmental data. What's more important is that this loss appeared right at a time when the group's memory chip production activities achieved record high profits.
The same component is producing two completely opposite results. In the semiconductor division, DRAM, NAND and HBM are products sold at high prices. For the phone department, memory is a required input cost to produce Galaxy S, Galaxy Z, Galaxy A and devices belonging to the Galaxy ecosystem.
Samsung said its memory operations achieved the highest quarterly revenue and profit in history thanks to prioritizing the need for artificial intelligence, especially server products. Due to limited production capacity, the company focuses more on high-value products such as HBM4, DDR5, SOCAMM2, enterprise storage drives and data center solutions. (Samsung Global Newsroom)
This shift brings huge profits to the semiconductor segment but at the same time puts more strain on the memory supply for phones and personal computers. Samsung forecasts that demand for servers, server DRAM, enterprise storage drives and HBM will continue to increase in the second half of 2026. The company also admits that the market is likely to continue to be undersupplied even though demand for phones and personal computers may cool down somewhat. (Samsung Global Newsroom)
TrendForce estimates that DRAM contract prices have increased sharply in the second quarter of 2026 and the upward trend will continue into the third and fourth quarters. Conventional DRAM alone is forecast to increase by about 58 to 63 percent in the second quarter due to low supplier inventories and customers having to accept higher prices to keep their purchasing limits. (TrendForce)
This is where Samsung's phone losses become bad news for Xiaomi, OPPO, Vivo, Honor and Transsion.
Samsung may lose money selling phones but still makes a big profit from the price level of components that is putting pressure on the mobile industry. The phone segment's loss of 0.7 trillion won is only equivalent to about 0.8 percent of the group's consolidated operating profit. Judging by the scale of its 89.5 trillion won profit, Samsung can afford to endure several quarters of underperformance in its phone business without significantly weakening its balance sheet.
Xiaomi, OPPO, Vivo, Honor and Transsion do not have a similar structure. These companies must buy most of the memory from Samsung Electronics, SK Hynix, Micron or other suppliers. As DRAM and NAND prices increase, their costs increase directly, but there is hardly a large enough semiconductor division to recover that cost.
The problem is especially serious in the popular and near-high-end segments. This is where Chinese companies often compete with large RAM capacity, high internal memory, strong configuration and low selling price. As memory costs rise sharply, the advantage that once helped them expand their market share may become irrelevanta burden.
A phone model with 12 GB RAM and 512 GB memory has a larger cost impact than an 8 GB model with 256 GB memory. If manufacturers continue to maintain high configurations, they must accept lower profit margins. If RAM or storage capacity is reduced, the product loses its competitive advantage. If selling prices are increased, purchasing power among price-sensitive customer groups may decline.
Response plan Impact on Xiaomi, OPPO, Vivo, Honor and Transsion Samsung's relative advantage
Increasing selling prices There is a risk of reducing output in the popular segment. There is a support source of semiconductor profits
Reduce RAM or memory Weaken the configuration advantage on the selling price Have a strong ecosystem, brand and distribution channel
Accepting low margins puts pressure on cash flow and marketing budgets Mobile losses are offset by chip profits
Moving to the high-end segment Must compete directly with Samsung and Apple Samsung has a strong position in high-end phones
Narrow production Reduce scale and bargaining power with suppliers. Samsung can still maintain market coverage
Apple also buys memory from outside but is affected differently. High profit margins, large order scale and sales proportion concentrated in the high-end segment help Apple have the ability to absorb costs better than many Android brands. Xiaomi, OPPO, Vivo, Honor and Transsion rely more on the mass market, where even a small change in price can strongly influence purchasing decisions.
Samsung therefore possesses a rare strategic advantage. Firmis both a direct competitor in the phone market and one of the industry's most important component suppliers. When memory prices increase, Chinese phone companies have to pay more for inputs, while part of that cash flow can flow to Samsung itself.
This does not mean Samsung intentionally raised chip prices to make things difficult for its competitors. Memory prices are influenced by data center demand, artificial intelligence investment, capacity limitations, product mix and industry-wide supply and demand cycles. However, the integrated business structure helps Samsung benefit better in the current cycle.
The second half of 2026 plan shows that Samsung has no intention of being defensive in the mobile market. The company will drive growth based on the Galaxy Z8 and Galaxy S26 lines, increase the proportion of premium products in the Galaxy ecosystem, expand artificial intelligence experiences and prepare to launch a smart glasses device called Intelligent Eyewear. Samsung also implemented efficiency measures to limit the impact of component costs. (Samsung Global Newsroom)
That creates a competitive disadvantage for Chinese firms. Samsung can continue to invest in research, advertising, price subsidies, exchange old phones, expand distribution and maintain output even when phone profits are temporarily low. A business that only sells equipment will find it difficult to pursue a long-term war if each phone sold brings too little profit.
However, Samsung's advantage is not permanent. Memory industryoperates in cycles. When supply exceeds demand and DRAM or NAND prices plummet, semiconductor profits can shrink very quickly. Samsung once went through a period of losing money in the chip segment when the memory market weakened. In that situation, a healthy phone division will return to the role of balancing profits for the group.
The second risk lies in over-prioritizing servers. If Samsung devotes most of its advanced capacity to HBM and data center storage, its own phone operations also face high costs or limited supply. The integrated structure helps the group benefit at the consolidated level but does not eliminate the difficulties of each business unit.
Q2 2026 results show that phone competition has gone beyond design, cameras, processors and software. Access to storage, long-term contracts, security of supply and tolerance of low profit margins are becoming the deciding factors.
Samsung has proven that a corporation can let the phone segment lose 0.7 trillion won and still achieve a record operating profit of 89.5 trillion won. Xiaomi, OPPO, Vivo, Honor and Transsion don't have a comparable financial cushion from memory manufacturing.
One party has to buy components while prices increase. One side both produces phones and sells the main components, which are increasing in price. Samsung's phone losses are therefore not simply a sign of weakness. It shows that the Korean group is likely to accept short-term losses in the equipment market to protect market share, while semiconductor profitscontinue to strengthen financial strength.
In the current memory cycle, the most dangerous question for Chinese firms is no longer who can offer the highest configurations. The real question is who has enough supply, enough money and enough ability to absorb losses to continue selling phones at prices consumers are willing to pay.
