Samsung is reportedly making 30% fewer phones because selling them isn’t paying off anymore

Samsung is about to make a lot fewer phones, and the reason has nothing to do with demand. According to a report by Money Today, the company’s Mobile eXperience (MX) division has started scaling back smartphone output for the last three months of the year, and the cut could be as deep as 30%.

Sources in the industry say Samsung has told its suppliers to ship 20% to 30% fewer components. That’s far more aggressive than what IDC had in mind. The research firm expected Samsung’s output to slip from 59 million phones in the third quarter to 52 million in the fourth, which works out to a dip of roughly 12%.

Why is Samsung making fewer phones?

The end of the year is rarely Samsung’s busiest season. New Galaxy flagship smartphones arrive in January and February, and plenty of shoppers would rather wait a few weeks than buy last year’s model. Students heading back to school or college also do most of their phone shopping early in the year.

This time, however, there’s a bigger villain in the story, and it’s memory chips. TrendForce data shows that 12GB of the LPDDR5X memory used in smartphones sold for $145 to $146 in the second quarter, nearly triple what it cost a year earlier. AI companies are snapping up every memory chip they can find, and smartphone DRAM prices could rise another 20% this quarter to as much as $180.

One industry source put it bluntly, saying, “Due to rising memory and semiconductor prices, Samsung Electronics smartphones currently yield no profit at all when sold.” So, if every phone barely breaks even, building fewer of them keeps the company’s overall numbers healthy.

What does this mean for Samsung?

Thanks to strong sellers like the Galaxy Z Fold 8, Samsung was on track to ship as many as 270 million phones this year. After this cut, it will probably end up somewhere just above 200 million.

Analyst consensus puts the company’s operating profit at 106.64 trillion KRW, yet one securities firm believes the mobile division alone could be 19 trillion KRW in the red. It’s a strange spot to be in, where AI is boosting Samsung’s bottom line thanks to its memory business while squeezing its phone division.

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