Why Is Samsung Preparing to Cut Smartphone Production by 30%?
Samsung, one of the world’s leading smartphone manufacturers, is facing mounting challenges in 2026 despite overtaking Apple to reclaim the top position in the global smartphone market.
According to a report cited by PhoneArena, Samsung’s Mobile eXperience (MX) division, which oversees its Galaxy smartphones, recorded its first-ever quarterly loss in the second quarter of this year.
In an effort to limit further losses during the final quarter, the company is reportedly planning to cut smartphone production by as much as 30%. The move comes amid a sharp increase in random-access memory (RAM) prices, which has placed growing pressure on smartphone manufacturing costs.
Rising RAM Prices Put Pressure on Samsung’s Profitability
The report attributes the crisis to a global memory supply shortage that has driven prices up by between 70% and 100% since the beginning of 2026.
During the first quarter alone, prices for LPDDR5X memory modules used in smartphones rose by approximately 60%, followed by a further increase of 89% in the second quarter.
The scale of the increase is illustrated by a 12GB LPDDR5X memory module. At the beginning of the year, the component cost between $25 and $70, but its price reached $146 in the second quarter.
According to the report’s projections, the price could climb to between $180 and $206 during the third quarter.
These rising costs are forcing smartphone manufacturers to consider difficult options, including accepting lower profit margins, increasing retail prices, or reducing specifications in selected models. Such measures could ultimately affect consumers in the coming months.
Samsung’s Memory and Smartphone Divisions Face Conflicting Priorities
Samsung’s ownership of a dedicated memory chip business, known as its Device Solutions (DS) division, might appear to offer some protection against rising component prices.
However, the report explains that Samsung operates its divisions as independent profit centers. As a result, its memory business may sell components to the smartphone division at prices designed to maximize its own returns, even though both units belong to the same company.
Consequently, Samsung’s smartphone business does not automatically benefit from lower memory costs simply because the company manufactures these components internally. Internal supply prices remain an important factor in determining each division’s profitability.
The situation highlights a challenge facing vertically integrated companies: their business units may have separate financial objectives despite relying on one another for essential products and components.
How Artificial Intelligence Is Contributing to the Memory Shortage
The increase in memory prices is partly linked to the rapid expansion of artificial intelligence data centers, which require fast access to enormous volumes of data.
These facilities use high-bandwidth memory (HBM), a technology that delivers higher data transfer rates than conventional memory solutions in advanced computing applications.
Unlike traditional memory modules mounted on circuit boards, HBM chips are stacked vertically and connected to processors through wide communication pathways. This design allows larger amounts of data to move efficiently while consuming less power than some conventional alternatives.
The technology also helps address the so-called “memory wall,” a bottleneck that occurs when memory cannot supply data to high-speed processors quickly enough.
As demand for HBM increases, memory manufacturers, including Samsung, SK hynix and Micron, have allocated more production capacity to these chips because of strong demand and their higher profit margins, according to the report.
This shift has reduced the available supply of certain conventional memory products, including those used in smartphones. The resulting shortage has contributed to higher prices and increased manufacturing costs across the mobile industry.
Could the RAM Crisis Continue Until 2028 or 2030?
The effects of the memory shortage may extend beyond higher smartphone production costs, potentially influencing retail prices and the memory capacities offered in some devices.
The report suggests that the shortage could continue until 2028, while some analysts expect the situation to persist until 2030, with prices remaining elevated throughout the period.
However, market conditions could gradually change as new manufacturing facilities begin operating. Additional production capacity could increase supply and help restore a better balance between supply and demand.