Samsung executives are bracing for a potential financial setback in the smartphone market, according to reports. In an era where smartphones have become mature products, competition has intensified, and profits thin. The company’s mobile experience head TM Roh has flagged concerns about a possible net loss on smartphones, a first in Samsung’s history. Despite strong sales of the Galaxy S26, rising component costs are threatening to erode margins.

The rise of AI has shifted the balance of power in smartphone manufacturing. Components like DRAM and NAND flash memory, essential for AI capabilities, have seen their prices skyrocket. These components now account for a significant portion of the cost of production, particularly in budget devices where they can make up more than one-third of costs by mid-2026.

The shift is so profound that even high-end devices are seeing their memory and storage costs rise significantly. A single server could contain as much RAM as 4,600 Galaxy S26 Ultra devices, highlighting just how crucial these components have become in the modern smartphone landscape. With AI becoming a key differentiator, Samsung and its competitors are caught between the need for advanced capabilities and the reality of rising costs.

While this downturn is concerning for Samsung, it’s indicative of broader shifts in the tech industry. As the race to integrate more sophisticated AI into devices intensifies, companies will need to navigate a complex landscape where profits could be squeezed by escalating component prices. The future of smartphones may depend on their ability to balance innovation with cost control.

The increasing importance of these components has far-reaching implications beyond just Samsung’s bottom line. It signals the growing reliance on AI in our daily lives and the challenges that come with it, from ensuring data privacy to managing costs in a competitive market.