Samsung is losing half a billion dollars over Galaxy phones despite a 250-fold jump in chip profit

Yes, the new Galaxy Z Fold 8 is really popular, but can a single foldable—a niche device, at the end of the day—save Samsung's whole mobile division?

Breaking records both ways

So, while Samsung's chip business continues to break records, the same soaring memory prices are hurting its smartphone division, which reported a 700 billion won operating loss for the quarter. Analysts say Samsung is becoming increasingly dependent on strong memory chip demand, especially from companies building AI data centers.

Even so, Samsung earned more this quarter than it did over the previous three years combined, helping boost its cash reserves.

Don't bet on 2027 to be the year when we go back to the old normal

The global chip shortage situation won't end soon—not in 2027, at least. The RAMpocalypse, as many call it, could extend well into 2028 over insatiable AI projects and data center players that are virtually black holes for memory and storage chips.

While this sounds great for Samsung's chip division, some investors are starting to question what'll happen in the not-so-distant future. Could heavy AI spending curb growth? Well, certainly.

According to market analyst Kim Seok-hwan, the chip narrative has "weakened" and investors wonder how much longer these record-high margins could be sustainable.

Securing long-term contracts with customers

Many of the world's biggest data center players are customers of Samsung and pay handsomely for their chips. Five other major companies are in talks with the Korean giant and will soon sign contracts with it but are not yet identified.

What many of them are requesting are multi-year supply contracts, highlights Jaejune Kim, executive vice president of Samsung's memory division.

These deals usually last five years and include upfront payments plus floor pricing, because Samsung doesn't want to get hurt if prices suddenly crash.

Samsung's moves come as investors have grown worried that AI infrastructure is becoming too expensive and that rising competition from China could hurt chipmakers' profits. Recent results from Meta and Alphabet have added to those concerns, as both companies saw their cash flow take a hit after heavy AI spending.

Despite that, Samsung's chip business had a record quarter, with operating profit jumping more than 250 times year over year to $61.7 billion. Overall, the company doubled its revenue.

Heated rivalry

Samsung said it is making steady progress in the AI memory market, gaining ground on SK Hynix with its HBM chips used in AI processors.

The company expects HBM revenue to more than triple next quarter, helped by demand from customers including Nvidia and AMD. Samsung also said its contract chip manufacturing business is expected to recover soon as factory utilization and chip prices improve.

Meanwhile, its new chip plant in Texas remains on track to begin operations later this year.