Galaxy S26 Squeezed in Pricing Vise Between Apple and Chinese Brands

[Korea Financial Times, Gwak Horyung] While securities firms are raising their 2026 Samsung Electronics earnings forecasts daily following confirmation of the memory semiconductor boom, most projections for the MX division responsible for smartphones remain negative. For example, Kiwoom Securities' recent Samsung Electronics corporate brief forecasts the MX (Network) division's operating profit to decline approximately 40 percent from KRW 13.01 trillion this year (10.2 percent operating margin) to KRW 7.83 trillion next year (5.9 percent). Samsung Electronics' smartphone business has consistently generated KRW 10 trillion to KRW 15 trillion in annual operating profit even after Chinese smartphone makers launched their low-price offensive in earnest in 2015.

This backdrop stems from negative smartphone demand growth due to economic recession. While companies typically respond to stimulate demand by freezing product prices, even this is difficult for the flagship Galaxy S series. Component cost burdens are growing due to surging DRAM prices.

The Galaxy S25 released early this year was already priced identically to its predecessor. According to the industry on Dec. 22, the Galaxy S25 Ultra's component cost breakdown is estimated at: AP chip (37 percent), display (18 percent), memory (15 percent), and camera (11 percent). Though cost burden increased 20 to 30 percent compared to one to two years ago due to using Qualcomm's Snapdragon exclusively instead of the in-house Exynos for AP chips, the analysis suggests Samsung matched the launch price by reducing costs in display, memory, and camera components. At the Galaxy S25 launch event, Roh Tae-moon, President and Head of Samsung Electronics' DX Division and MX Business, said, "We made a very difficult decision (on the price freeze)."

Such aggressive pricing policy is expected to be challenging for the Galaxy S26, due around February next year.

Rising memory prices are the primary problem. DRAM prices this year have quadrupled from their February low to December based on DDR5 16Gb. The shortage of general-purpose DRAM due to High Bandwidth Memory (HBM) is expected to continue next year. According to some reports, Samsung Electronics' semiconductor (DS) division reportedly rejected the MX division's request for a one-year or longer semiconductor supply contract and decided to proceed with quarterly contracts instead.

Cost increases from camera upgrades are also anticipated. At the third-quarter earnings call in late October, Samsung Electronics stated, "The Galaxy S26 series will revolutionize user experience through new camera sensors." The Galaxy S series has made virtually no changes to camera specifications for three years since the S23. There have been consistent calls for camera upgrades to differentiate from Chinese smartphones like Xiaomi.

However, given that competitor Apple froze prices for the iPhone 17 base model released in September in the U.S., observations suggest the Galaxy S26 will have no choice but to exercise maximum price restraint.

The key is the in-house AP chip "Exynos 2600." Samsung Electronics is known to use both Exynos 2600 and Qualcomm's latest chip in parallel for the S26 series. While the specific policy has not been confirmed, they are expected to be deployed separately by model and sales region.

Exynos 2600 is designed by Samsung Electronics' System LSI and mass-produced by Samsung Foundry. It will be the first to apply the cutting-edge Gate-All-Around (GAA)-based 2-nanometer process. According to content Samsung Electronics revealed on Dec. 19, Exynos 2600 shows up to 39 percent improvement in CPU computational performance and 113 percent improvement in NPU AI processing performance compared to its predecessor.

Gwak Horyung (horr@fntimes.com)