Samsung Electronics' smartphone business likely lost between 900 billion won and 1.9 trillion won in the third quarter, even as the company booked a record profit on memory chips, The Korea Herald reported Thursday, citing brokerage estimates. The rising memory prices that lifted Samsung's chip division also drove up the cost of building its own Galaxy phones.

What Happened

Samsung's preliminary results, which The Primary Wire covered earlier this week, put third-quarter operating profit at a record 107.4 trillion won, driven mainly by memory chip sales. The preliminary release does not break out results by division, and brokerages estimate the mobile and networks business lost between 900 billion won and 1.9 trillion won (roughly $670 million to $1.4 billion) in the quarter. The unit had already reported a 700 billion won operating loss in the second quarter.

Memory is the main source of cost pressure. Industry estimates from Counterpoint Research put memory at 43% of the component cost of a representative premium smartphone in the third quarter, up from 14% a year earlier. Volume was not the issue: Daishin Securities estimates Samsung's smartphone shipments were little changed from a year earlier, with average selling prices up nearly 3%.

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Samsung chose not to pass all of the increase on to buyers. Co-CEO Roh Tae-moon told reporters in London in July, when he unveiled the latest Galaxy foldables, that the company would not pass the full cost increase on to consumers. By October, Samsung was raising prices on the Galaxy S26, seven months after its launch, by nearly 150,000 won ($112) in Korea and by $100 to $200 in the U.S.

Why It Matters

The split shows how the AI server boom cuts both ways for Samsung. Demand for AI data centers has pushed up DRAM and NAND flash prices, which swells profits in its semiconductor business but raises costs for every phone it builds.

Analysts said the strategy was deliberate. Son In-jun of Eugene Investment & Securities said Samsung focused on protecting market share by holding back price increases, and that not passing on the full cost deepened the third-quarter loss. Kim Rok-ho of Hana Securities said persistently high memory prices are bound to weigh on a company that relies on low- and mid-priced models to defend volume.

Consumers are already reacting. Tarun Pathak, a director at Counterpoint Research, told the Herald that buyers are delaying upgrades, timing purchases around big sales events or turning to the used-phone market as prices rise.

The Outlook

Meritz Securities expects the mobile and networks business to return to an operating profit of about 1 trillion won in the first quarter of 2027, helped by seasonal demand and new product launches. Without relief on memory prices, it forecasts losses of 600 billion to 900 billion won in each of the following quarters.

What to Watch

Samsung's full third-quarter earnings later this month will show the actual division breakdown and whether the brokers' estimates hold. Beyond that, watch for further price increases or specification cuts on Galaxy models, and how Samsung prices its next flagship phones early next year if memory prices stay elevated.