Digital appliances are displayed for sale at a store in Seoul on June 1.YONHAP
While the AI boom has been a boon for memory chipmakers, for smartphone manufacturers, soaring chip demand means rising parts costs.
Global smartphone shipments plunged an estimated 20 percent year on year in the third quarter. It marked the weakest third quarter performance since 2012, according to preliminary figures from Counterpoint Research released on Oct. 13.
Surging memory prices and shortages of key components were the main culprits. Smartphone makers have passed the higher costs on to consumers, which pushed global retail prices up roughly 20 percent this year.
Korea is seeing a similar wave of price hikes. On Oct. 1, Samsung Electronics raised prices for its Galaxy S26 series just seven months after launch. The entry-level 256GB model jumped around 150,000 won ($111) to 1.404 million won from 1.25 million won, while the 1TB Ultra model became roughly 270,000 won more expensive.
Apple followed suit last month. The company set higher launch prices for its iPhone 18 Pro series than for its predecessor and raised retail prices for the iPhone 17 lineup in Korea.
Smartphone prices are rising in part because AI servers are consuming more of the world's memory chip supply. Chipmakers have increased their output of lucrative high bandwidth memory and server dynamic random-access memory (DRAM), cutting into the capacity for smartphone memory.
The demand has meant that some AI servers are even using low-power DRAM, LPDDR5X, a chip commonly found in smartphones. Data center demand is also driving up NAND flash prices.An increase of eight to 13 percent in smartphone DRAM prices is expected in the third quarter, according to market tracker TrendForce.
Global investment bank HSBC expects cost pressures on smartphone makers to intensify as their stockpiles of memory chips purchased before the price surge gradually run out.
Budget and midrange smartphones are bearing the brunt of soaring memory prices. Their slim margins and price-sensitive customers leave manufacturers little room to pass on higher costs. Price hikes risk driving away buyers, while keeping prices unchanged eats into profits.
Chinese smartphone maker Xiaomi saw shipments plunge more than 30 percent in the third quarter from a year earlier. China's Oppo and Vivo each posted declines of more than 20 percent.
Shareholders of Samsung Electronics view high bandwidth memory product at a meeting held in Suwon, Gyeonggi, on March 18.NEWS1
Samsung Electronics and Apple relatively held up better. The Korean phonemaker's shipments fell just 3 percent, supported by strong early sales of the Galaxy Z Fold8 and steady component supplies for its Galaxy A series. Samsung led global smartphone shipments with a 23 percent market share, narrowly ahead of Apple's 22 percent.
In response, manufacturers such as Xiaomi are scaling back their budget phone offerings and shifting their focus to premium models. Consumers, meanwhile, are either paying more for high-end devices or delaying upgrades in favor of used and refurbished phones.
Counterpoint Research forecasts that annual shipments of smartphones priced below $200 will fall about 40 percent by 2030 from 2025 levels, while the premium segment will grow at an average annual rate of 7 percent.
But rising memory prices are a double-edged sword even for Samsung, which has weathered the shipment downturn better than its rivals.
Higher memory prices are a boon for the conglomerate's Device Solutions (DS) division but a cost burden for its Device eXperience (DX) division, which oversees smartphones, TVs and home appliances. In the second quarter, the DS division posted an operating profit of 89.2 trillion won, while the DX division recorded an operating loss of 800 billion won.
Analysts expect Samsung's DX division to have posted a wider operating loss in the third quarter. Hana Securities estimates a loss of 2.1 trillion won, while Eugene Investment and Shinhan Securities each forecast a loss of 1.8 trillion won.
This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.
