Facing 'chipflation' and anticipated losses in its Mobile Experience (MX) division,$Samsung Electronics (005930.KR)$Samsung Electronics is evaluating the adoption of low-cost Chinese mobile DRAM in its mid-to-low-end Galaxy A series to reduce costs. This move aims to capitalize on the market gap left by competitors scaling back due to rising costs, thereby boosting profitability and regaining market share in China.
Amid the wave of 'chipflation,' Samsung Electronics is considering a counterintuitive strategic move.
According to Korea’s tech-focused media outlet Asia Times, $Samsung Electronics (005930.KR)$ Samsung is seriously assessing the feasibility of using domestically produced, low-cost Chinese mobile DRAM in its mid-to-low-end Galaxy A series smartphones to significantly lower overall manufacturing costs.
Samsung Electronics currently holds only about 0.6% of the smartphone market share in China. Analysts believe that if this strategy is implemented, it could help expand the overall revenue of its Mobile Experience (MX) division. However, the division is under severe profit pressure—several Korean securities firms forecast that Samsung’s MX division may report a loss in the second quarter of this year, ranging from KRW 200 billion to KRW 1 trillion. Samsung Electronics responded to these reports by stating it 'cannot confirm' the details.
'Chipflation' hits the mid-to-low-end market, forcing competitors to scale back
The surge in artificial intelligence data center construction has driven up prices for core components such as memory chips, placing significant pressure on the global smartphone supply chain, with the Chinese market bearing the brunt.
$Apple (AAPL.US)$ 、 $XIAOMI-W (01810.HK)$ Major smartphone manufacturers such as Xiaomi, OPPO, and vivo, unable to absorb the increased component costs, have successively raised prices for new models or reduced their full-year shipment targets by 15% to 20%. Apple raised MacBook and iPad prices by approximately USD 100 each in June, and the market widely expects the new iPhone to be launched this fall to carry a higher price tag as well.
Unlike Apple or Huawei, which enjoy strong brand premium power, Chinese brands such as Xiaomi, OPPO, vivo, and Honor have limited room to maneuver—unable to pass on cost increases to consumers, they face a scenario of 'the more they sell, the more they lose,' compelling them to proactively cut production volumes. Samsung Electronics sees this situation as a market gap it can exploit.
MX Division Under Pressure, China Strategy Seeks a Breakthrough
Samsung Electronics’ MX Division is experiencing an unusual profit slump, providing an urgent financial backdrop for the aforementioned strategy.
Several major South Korean brokerages have recently downgraded their full-year earnings forecasts for Samsung Electronics’ MX and Networks divisions, citing the possibility of a second-quarter loss. Estimated Q2 losses from various institutions are as follows: Hana Securities at KRW 200 billion,$Samsung Securities (016360.KR)$KRW 584.1 billion, Eugene Investment & Securities at KRW 1 trillion, and iM Securities at KRW 800 billion. Among these, Samsung Securities made the most significant revision—adjusting its full-year 2025 operating profit forecast for the MX division from a previously projected KRW 3.41 trillion to an operating loss of KRW 5.841 trillion.
Against this backdrop, incorporating lower-cost Chinese DRAM to compress material costs is seen as one potential avenue for Samsung to restore the MX division’s profitability.
Analysts: Strategy Is Practically Viable, with Strategic Significance in Product Placement
Industry experts have generally offered positive assessments of Samsung’s move.
Sim Woo-jung, an expert at the Korea Institute for Industrial Economics & Trade specializing in home appliances and digital transformation, noted that as Chinese companies continue to expand their demand for domestically produced DRAM, international manufacturers such as Apple and Samsung may also consider adopting Chinese-made DRAM due to cost pressures. He added that if Samsung expands supply of lower-priced models like the Galaxy A series, “it would be substantively meaningful for boosting market share.”
Sim Woo-jung also pointed out that given market expectations of a second-quarter loss for Samsung’s MX division, the urgency and attention surrounding this strategy will further intensify.
Given the current situation, Samsung's approximately 0.6% market share in China's smartphone market places it in a marginal position. If Samsung can leverage competitors' retreat and its cost advantage to re-enter the mid-to-low price segment, this move would serve as both defense and offense—helping stabilize shipment volumes for its MX business while offering a practical pathway to rebuild its presence in the Chinese market.
Editor/Rocky