Financial Report: AI Success and Failure! Samsung Semiconductor Booms While Mobile Division Reports First-Ever Loss

Fueled by explosive and sustained demand for AI memory, Samsung Electronics (KR005930) delivered its best-ever quarterly performance in Q2 2024. Revenue reached 171.5 trillion KRW and operating profit hit 89.5 trillion KRW—both record highs. The operating profit surged 1,813.8% year-on-year, setting a new single-quarter profit record for global tech firms. However, the smartphone business incurred its first quarterly loss since inception due to sharply rising memory prices increasing production costs, underscoring a stark divergence in Samsung’s business units amid the AI surge.

Semiconductor Division Drives Nearly All Profits

By business segment, semiconductors remained the absolute profit engine this quarter. Financial reports show that the Device Solutions (DS) division generated 127.5 trillion KRW in revenue and 89.2 trillion KRW in operating profit—accounting for 99.7% of the company’s total operating profit.

Samsung noted that continued investment in AI data centers has rapidly increased demand for DRAM and High Bandwidth Memory (HBM), driving up memory prices across the board. DRAM and other memory products rose over 80% in Q1 compared to the previous quarter, and surged another 50% in Q2, maintaining strong upward momentum.

With global demand for high-value products like server DRAM and HBM continuing to grow, memory prices across all categories have risen in tandem, becoming the primary driver of the semiconductor division’s massive profit growth.

However, Samsung stated that its Foundry and System LSI divisions remained in loss during Q2, indicating that non-memory businesses have yet to fully overcome operational pressures.

Memory Price Surge Backfires: Mobile Division Posts First Loss in 17 Years

In stark contrast to semiconductors is the Device Experience (DX) business unit, which includes smartphones, home appliances, and TVs—where profitability has clearly deteriorated. The mobile division posted an operating loss of 700 billion KRW in Q2, marking the first quarterly loss in the history of Samsung’s mobile business and the first time since the 2009 global financial crisis that its mobile operations have fallen into the red.

Samsung attributed the loss primarily to sharp increases in the prices of core components such as DRAM and NAND flash memory, which significantly raised smartphone manufacturing costs. The financial report aggregates MX (Mobile Experience) and network businesses, with MX accounting for approximately 96% to 98% of the segment’s revenue, making smartphones the primary driver of overall performance.

Looking back at Samsung’s smartphone journey, since launching the Omnia series in 2008 and the Galaxy S series in 2010, the MX business has consistently remained profitable despite challenges such as the rise of Chinese brands, the Galaxy Note 7 battery incident, and pandemic-related disruptions.

This first-ever loss stems not only from soaring memory costs but also from dual competitive pressures: Chinese brands aggressively capturing market share with high-value products and Apple maintaining dominance in the premium smartphone segment.

Outlook for Product Businesses Remains Uncertain

Beyond smartphones, Samsung’s home appliance and TV businesses also returned to losses after one profitable quarter, impacted by weak global demand and rising raw material costs due to Middle East conflicts.

Looking ahead, the report notes that Samsung Securities downgraded its full-year profit forecast for the MX and network businesses on July 8. The original projection of 3.41 trillion KRW in profit was revised sharply to a 5.841 trillion KRW loss. It further forecasts losses will widen to 15.209 trillion KRW in 2025—exceeding the annual loss size of the DS division during the 2023 semiconductor downturn.

Samsung Securities also expects the MX and network businesses to remain in the red through 2028, with cumulative losses from 2026 to 2028 potentially reaching 24.287 trillion KRW. This indicates that even as the semiconductor division continues to benefit from the AI wave, Samsung’s product businesses still face significant challenges.