The Paradox of the Semiconductor Boom: Samsung DX Division Pressured by 'Chipflation', Seeks Breakthrough Through Market Share Expansion

Samsung Electronics' DX (Device Experience) division is launching an aggressive campaign to expand its market share despite the 'chipflation (chip + inflation)' situation. The strategy involves capitalizing on competitors raising prices and reducing production volumes due to cost pressures, thereby increasing sales and strengthening market leadership. Meanwhile, regarding performance bonuses, it adheres strictly to the principle of "rewards where results are achieved."

According to industry sources on the 19th, Samsung Electronics held a management briefing for employees at the R5 Research Institute in Suwon, Gyeonggi Province, chaired by Noh Tae-mun (President), head of the DX division. It was reported that key strategies for the second half of this year include expanding market share, improving business fundamentals, and preparing innovative products for next year.

The main factor behind the deterioration in profitability of the DX division has been identified as a sharp rise in memory semiconductor (hereinafter referred to as "memory") prices. Although revenue from the DX division increased by approximately 2% compared to the same period last year, it failed to keep pace with overall market growth. Operating profit for the same period stood at 2.1 trillion won, plummeting to just one-quarter of the 8th trillion won recorded in the same period last year. Analysts suggest that even with cost reductions and efficiency improvements, this was insufficient to offset the impact of memory prices rising more than fourfold compared to last year.

Samsung Electronics has focused on the fact that this high-cost structure applies equally to competitors. With memory price hikes forcing rivals to raise product prices or cut production and orders for entry-level models, Samsung plans to instead expand sales of flagship products such as the Galaxy S26 and Galaxy Z Fold8, thereby boosting its market share. This amounts to a kind of "smartphone chicken game," prioritizing expansion of market dominance over immediate profitability.

The background behind why the semiconductor boom translates into cost burdens for Samsung Electronics' DX division lies in the company's unique "cost structure." The DX division, responsible for finished product operations, and the DS (Device Solutions) division, responsible for semiconductor production, operate as virtually separate entities, with personnel, finance, accounting, profit-and-loss statements, and even bonus funding fully separated. Most importantly, while rising memory prices lead to improved profitability for the DS division, they are passed on as cost burdens to the DX division.

In this process, internal dissatisfaction within the DX division has also grown. The Donghaeng Union, led primarily by DX division employees, is demanding a blank-slate wage agreement and compensation equivalent to approximately 1,000 shares of company stock per employee. On the 21st, the union plans to hold another rally in front of Samsung Electronics' Seocho office building in Seoul's Seocho-gu district, calling for improvements to the compensation system. The union maintains that during this year's wage negotiations, the DX division was excluded from compensation benefits.

If the union's demands are realized, the financial burden will be substantial. Based on Samsung Electronics' closing price of 247,500 won on this day, distributing 1,000 shares of company stock per employee to DX division staff would require approximately 12.4 trillion won. For the DX division, which must simultaneously pursue market share expansion and profitability recovery amid prolonged chipflation, adding large-scale additional compensation would inevitably increase its burden even further.

Nevertheless, Samsung Electronics maintains its stance of upholding the existing performance-based principle. Under the principle of "rewards where results are achieved," business performance will be directly linked to compensation. An industry insider stated, "Separating the compensation systems between the DS and DX divisions has served as a driving force in enhancing each division's global competitiveness." He added, "Providing rewards unrelated to performance could lead to moral hazard within the organization and even undermine morale and motivation among high-performing teams."