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Cost pressures intensify for electronics manufacturers due to memory prices, Middle East tensions

Published: 17 Mar. 2026, 16:36 Updated: 17 Mar. 2026, 19:50

A Samsung Electronics flag flies in front of the company's building in Seocho District, southern Seoul, on Jan. 29. [YONHAP]

Electronics manufacturers are experiencing cost pressure as the trifecta of higher memory prices, rising logistics costs tied to Middle East tensions and union wage demands converge. The profitability of products, namely smartphones and laptops, is being squeezed for companies such as Samsung Electronics.

Last year, Samsung Electronics, excluding Samsung Display, spent 99.95 trillion won ($67.12 billion) on purchasing raw materials, 8.8 percent or 8 trillion won more than the previous year, according to the company's 2025 business report released on March 10.

In particular, the Device eXperience (DX) division, which oversees smartphones, televisions and home appliances, recorded raw material purchases of 74.57 trillion won. The amount rose by roughly 7 trillion won from the year before and accounted for most of the company’s overall cost increase.

As a result, Samsung Electronics has shifted to belt-tightening centered on the DX division. Cost reduction targets were also set at a recent meeting of chief financial officers, according to industry insiders.

Additionally, the DX division is reportedly pushing a measure requiring executives such as vice presidents — excluding the president — to fly economy class when on flights shorter than 10 hours for business trips. This measure could take effect as early as next week.

One of the main drivers of rising costs in the electronics industry is the increase in semiconductor prices. Prices of personal computer dynamic random-access memory, or DRAM, in the first quarter of this year are projected to rise to more than double those of the previous quarter, according to the market research firm TrendForce.

Samsung Electronics' Galaxy S26 series smartphones are on display at a product exhibition in San Francisco on Feb. 25. [YONHAP]

As memory prices continue to climb alongside manufacturing costs, some smartphones and laptops have already seen their retail prices raised.

Such cost increases are expected to affect major business divisions.

Securities firms are already adjusting their forecasts accordingly. While raising earnings projections for the Device Solutions (DS) division — which handles Samsung Electronics’ semiconductor business — based on expectations of a semiconductor supercycle, analysts are lowering estimates for the DX division.

Within the DX division, the Mobile eXperience unit — responsible for smartphone and other mobile businesses — recorded an operating profit of 12.9 trillion won last year. However, some forecasts now predict that this year’s operating profit could drop to around 5 trillion won.

LG Electronics faces a similar situation as rising memory prices combined with slowing demand continue to pressure profitability in the home appliance and television businesses, according to analysts. A cost-cutting stance by the company is expected amid uncertainty over a recovery in demand.

LG Electronics' booth at the CSUN Assistive Technology Conference in Anaheim, California, is seen on March 9. [LG ELECTRONICS]

Another factor increasing cost pressure for electronics companies is the possibility that oil prices and logistics expenses could continue rising due to the instability in the Middle East. If tensions in the region persist for a prolonged period, both maritime freight rates and air cargo rates may climb, increasing companies’ production costs.

For LG Electronics, logistics costs surged in 2021 — when the global supply chain crisis triggered by the Covid-19 pandemic disrupted shipping worldwide — to reach about 4.7 trillion won. The figure marked a 60 percent increase from the previous year’s 2.9 trillion won and weighed on profitability.

Along with external factors, labor issues are emerging as a burden for the electronics industry. The boom in AI memory centered on high bandwidth memory, or HBM, chips could push operating profit in Samsung Electronics’ DS division to as much as 150 trillion won this year.

As expectations for performance rise, demands for larger bonuses are also intensifying.

Pedestrians walk by a sign displaying fuel prices in front of a gas station in Seoul on March 17 as prices soar amid the tension in the Middle East. [YONHAP]

A joint strike headquarters of three unions — the Samsung Electronics chapter of the Samsung Group United Union, the conglomerate’s cross-affiliate union; the National Samsung Electronics Union; and the Samsung Electronics Labor Union — has been conducting a vote since March 9 on whether to launch a general strike.

If approved, the confederation of the three unions plans to begin a general strike lasting up to 18 days starting on May 21.

“Rising semiconductor prices and logistics costs are already weighing on set manufacturers, and additional labor costs combined with slowing information technology demand could further increase the burden on the industry,” said Lee Jong-woo, a professor of distribution marketing at Namseoul University.

BY PARK YOUNG-WOO [[email protected]]