While Samsung Electronics posted record results in the first quarter, operating profit at the Mobile eXperience (MX) and Networks divisions, which handle the company's smartphones and telecom equipment, is estimated to have been cut in half from a year earlier. The industry worries that rising cost pressures will hit the MX and Networks divisions harder this year.
On the 7th, a compilation of forecasts from eight securities firms, including Heungkuk securities, Shinhan Investment securities, and KB securities, estimated Samsung Electronics' first-quarter operating profit for the MX and Networks divisions at 2.5727 trillion won. That would be a plunge of about 40% compared with operating profit of 4.3 trillion won a year earlier.
That day, Samsung Electronics said its preliminary first-quarter results came to sales of 133 trillion won and operating profit of 57.2 trillion won. From a year earlier, sales jumped 68.06% and operating profit surged 755.01%. But the MX and Networks divisions' operating profit remained in the 0% range of the total. That contrasts with the first quarter last year, when operating profit at the MX and Networks divisions (4.3 trillion won) accounted for 65% of the total (operating profit of 6.6 trillion won), leading overall results. At the time, the semiconductor institutional sector posted a loss while the Galaxy S25 series was a hit.
The industry cited cost pressures as the reason for the MX and Networks divisions' weak first-quarter performance. In the age of artificial intelligence (AI), big tech corporations have been buying not only high-bandwidth memory (HBM) but also commodity DRAM to secure the memory needed to run servers, tightening supply relative to demand and pushing up DRAM prices. Shinhan Investment securities analyzed that the average selling price (ASP) of DRAM rose 66% in the first quarter from the previous quarter. Memory accounts for 20% of smartphone manufacturing costs.
Cost pressures are expected to grow. Kim Dong-Won, a KB securities analyst, said, "Memory prices beat expectations in the first quarter, and the rising trend will continue in the second quarter and intensify toward the second half." Market research firm TrendForce analyzed that DRAM prices could jump 58% to 63% in the second quarter from the previous quarter.
Under mounting cost pressures, Samsung Electronics has raised the factory price of some products starting this month. Samsung Electronics increased the factory price of the Galaxy Z Flip7, released in July last year, from 1,643,400 won to 1,738,000 won, and the Galaxy Z Fold7 512GB model from 2,537,700 won to 2,632,300 won. The hikes focused on high-capacity models. Higher factory prices can dampen consumer sentiment. According to market research firm Counterpoint Research, smartphone shipments this year are expected to fall 12.4% from a year earlier.
Lee Eun-hee, a professor of consumer studies at Inha University, said, "If the timing of price increases is abrupt, consumer loyalty to Samsung Electronics' mobile products could fall and hurt future revenue." A smartphone industry official said, "Because costs have risen so much, profitability in the smartphone business has declined. Demand for high-end smartphones is also slowing," adding, "There is no factor to improve industry conditions across the board this year."