Samsung's Chip Division Made a Record Profit. Its Phone Division Lost Money for the First Time. Same Quarter, Same Cause

Samsung Electronics reported record quarterly results on 30 July: consolidated revenue of KRW 171.5 trillion and operating profit of KRW 89.5 trillion, both all-time highs for the company.

Inside the same set of accounts, the division that makes Galaxy phones posted an operating loss of KRW 0.7 trillion, about $480 million. The two outcomes are not a coincidence. They are the same fact, entered twice.

One company, two directions

The chip division alone produced 99.7 per cent of group operating profit. The phone division subtracted from that total, and the display and audio businesses made up the difference.

Why one cause pushes in both directions

Samsung is unusual in being both the largest seller of memory and one of the largest buyers of it. When memory prices rise, one half of the company books the gain and the other half books the cost.

While the Device Solutions division set records by "proactively addressing AI demand" for servers, the handset division was pushed into a loss by "elevated component cost pressures" despite "solid sales of the Galaxy S26 series and strong Galaxy A series momentum".

That is a phone business selling well and losing money anyway, because the parts cost more than the price sheet assumed.

A second increase is already scheduled

The pressure is not coming from memory alone. Qualcomm has told customers it will raise chip prices from 1 September, saying it has exhausted its ability to absorb higher costs from its own suppliers as AI data-centre construction consumes capacity at TSMC.

The two increases land on the same devices. A flagship Android phone shipping this autumn will contain memory from the supercycle Samsung just profited from, plus a processor subject to the September increase.

The market had already marked it down

When Samsung published preliminary figures on 7 July, the market's reaction was not celebratory. On 7 July, when Samsung published preliminary figures for the quarter, the stock fell 6.9 per cent by the close after trading down as much as 10 per cent during the Seoul session.

Reporting attributed the fall to two factors: the result was already priced in after a 150 per cent rally over the year, and investors doubted how long the underlying demand could last. Albert Yong, quoted in that coverage, said investors "remain concerned about the sustainability of the AI boom and the risk of slower AI infrastructure spending by major U.S. technology firms". Morgan Stanley warned the pullback in chipmaker shares was not over, citing expectations of tighter capital-spending controls at the large cloud operators.

That is the same question we found in the hyperscalers' own quarter, where the two companies that raised future spending guidance were the two the market marked down. Samsung sits at the other end of that trade: its record depends on those capital budgets staying large.

The preliminary coverage put operating profit at about $58.4 billion. That came on revenue that had more than doubled from KRW 74.6 trillion a year earlier, producing roughly nineteen times the prior-year operating profit.

What Samsung expects next

Samsung's own outlook does not describe a squeeze that ends soon. The memory business anticipates "robust demand centered on servers stemming from continued AI infrastructure capex", with market undersupply expected to persist even as it sees "partial demand moderation in mobile and PCs".

The company expects to keep selling memory into AI data centres faster than it can make it, while demand for the phones that need that same memory softens — a scenario where the profitable half of the problem continues and the unprofitable half gets no relief.

Where this reaches a buyer

We reported last week that Google has confirmed price rises across the Pixel range, citing memory costs, with RAM up more than fourfold a gigabyte and leaked specifications pointing to less memory in the next flagship rather than more.

Samsung's accounts are the same story from the manufacturer's side, and they show what happens when a maker absorbs the increase instead of passing it on: the division goes into loss. There are only two ways out of that, and one of them is the price on the box.

The caveats

• The figures are in Korean won and we have not converted them. A conversion is only as reliable as the rate chosen, and the company reports in won.
• "First-ever" comes from secondary reporting, not from Samsung's release, which states the loss without characterising it as unprecedented.
• The year-on-year comparison is not in the primary release, which gives quarter-on-quarter changes. Reported year-on-year figures come from coverage.
• Divisional margins are our arithmetic, not published margins, and segment reporting involves internal transfers between divisions that a simple margin does not capture.
• The Qualcomm increase is reported, not published. Two outlets describe its size differently, and the company has issued no rate card.
• Samsung announced this quarter twice. Preliminary figures came on 7 July and the detailed divisional release on 30 July. The share-price move belongs to the preliminary announcement, not to the divisional detail this article is built on.
• This is market reporting, not investment advice.

Key takeaways

• Group results were all-time highs, with KRW 171.5tn in revenue and KRW 89.5tn in operating profit.
• The chip division ran a 70.0% operating margin and produced 99.7% of group operating profit.
• The phone division lost KRW 0.7tn despite what Samsung describes as solid Galaxy S26 sales.
• A second component increase lands 1 September, when Qualcomm raises chip prices.
• Samsung expects memory undersupply to continue while mobile demand moderates.