Samsung sets 'austerity' as memory prices rise... From withdrawing Exynos to workforce efficiency measures
-Galaxy S27 Ultra to feature Snapdragon exclusively... Amid supply shortages and inventory burden
-DX division ordered to cut FTE by 20% via AX... Home appliances division also soliciting improvement plans
The DX (Device eXperience) division of Samsung Electronics has shifted its product strategy and launched workforce efficiency measures as the cost burden from the sharp rise in memory semiconductor (hereinafter "memory") prices persists. The company has withdrawn its decision to equip the Ultra, the top-tier model of the Galaxy S27, with its in-house application processor (AP), and is also promoting work efficiency through artificial intelligence transformation (AX).
According to electronics industry sources on the 15th, Samsung Electronics recently reversed its decision to apply its in-house AP, Exynos 2700, to the Galaxy S27 Ultra. The top-tier model will now feature Qualcomm's Snapdragon chip exclusively.
Initially, the Galaxy S27 Ultra was developed on the premise of exclusive Snapdragon adoption. However, due to errors in Qualcomm's next-generation chip and the fact that Exynos 2700 performance exceeded expectations, Samsung Electronics had decided to equip both APs simultaneously.
In this process, production volume shortages and increased additional costs held back Exynos 2700. In reality, while production volume increased by more than 10% compared to the previous model (Exynos 2600), it became difficult to meet the additional allocation for the Ultra. Samsung Electronics reportedly considered a plan to increase the proportion of Snapdragon in the standard and Plus models and divert Exynos to the Ultra, but concerns were high that existing components could remain as inventory and that new parts would need to be secured for the Ultra.
The surge in memory prices, which increased the cost burden on the DX division, also had an impact. According to market research firm TrendForce, contract prices for low-power DRAM (LPDDR5X) for smartphones surged 78% to 83% in the second quarter of this year compared to the previous quarter. It is estimated that the average selling price (ASP) of DRAM will rise by an additional 8% to 13% in the third quarter as well. Industry views suggest that it was difficult to change the AP supply configuration for the Ultra while bearing such additional costs.
Ultimately, the System LSI division missed the opportunity to expand its in-house AP supply to top-tier smartphones. Despite performance improvements in Exynos 2700, the final decision changed due to the cost burden on the DX division.
The DX division is also accelerating workforce operational efficiency. It is known that the MX (Mobile eXperience) division recently received an order to reduce full-time equivalent (FTE) staff by 20% through AX. FTE is a metric that converts work input into full-time working personnel, distinct from actual employee layoffs.
Previously, the DX division conducted an "L7" survey, asking employees to write down their assigned tasks in detail down to specific work sequences, in order to find tasks that could be automated with AI (artificial intelligence). It was reported that there was a target of reducing workforce by approximately 15% at the time, but the survey was halted after employees protested over layoff concerns. The DA (Home Appliance) division has also been running "DAgenius," a survival-style solicitation of employee ideas for solving internal and external challenges, since last August.
Domino effect of surging memory prices hits 'directly'... From PC and smartphones to the component industry
-Q3 PC shipments down 20% as Samsung and Apple smartphone component orders shrink... Responding with AI-driven efficiency and cost reduction
The boom in the memory semiconductor (hereinafter "memory") industry has arrived as a shadow of recession for the electronics industry, including PCs, smartphones, and displays. As finished product prices rise due to surging memory prices and consumer demand contracts, component order volumes are also decreasing. Finished product manufacturers and component companies are responding by promoting work efficiency using AI (artificial intelligence) and reducing costs.
According to market research firm IDC on the 15th, global PC shipments in the third quarter of this year were 62.7 million units, a decrease of 20.1% compared to the same period last year. They also fell by 9.1% compared to the previous quarter. Typically, the third quarter is a period when PC shipments increase from the second quarter due to demand ahead of the year-end peak season, but this year saw negative growth instead.
The main reason for the freezing PC market is the sharp rise in memory prices. As memory purchase costs increased and PC prices rose significantly, consumers are delaying purchases. Apple raised MacBook prices by up to 300 dollars in July last month, citing rising memory prices. Additionally, early purchases by consumers concerned about further price increases pulled demand forward, which also affected recent market contraction.
The smartphone market also failed to escape the shock of rising memory prices. Counterpoint Research forecasts that shipments of smartphones under 200 dollars in 2030 will decrease by more than 230 million units (approximately 40%) compared to 2025. The analysis suggests that the market will collapse starting with low-priced products, which have a relatively high proportion of memory costs.
High-end product lines such as Samsung Electronics' Galaxy series and Apple's iPhone series are also not immune to market contraction. Samsung Electronics' MX (Mobile eXperience) division recently requested partners to reduce component supply volumes by 20% to 30%. According to Nikkei Asia, Apple has also reduced orders for some components used in the recently released iPhone 18 Pro and other models by 15% to 20%.
The domestic retail price of the iPhone 18 Pro, released last month, is 1.99 million won for the 256th gigabyte (GB) model, an increase of 200,000 won from the previous model. The foldable phone "iPhone Duo" was priced at 3.29 million won for the 256GB model. Samsung Electronics also raised the retail prices of the Galaxy S26 series across the board in early this month. Price increases appear to be directly affecting demand.
◆ Display and component industries also affected... Responding with high-value-added products and cost reduction
The decrease in shipments by finished product companies is also affecting the component supply chain. In addition to reduced order volumes, it is a burden that finished product companies are demanding price cuts for other components to offset increased memory purchase costs.
Decreased production of PCs and smartphones is also bad news for panel makers such as Samsung Display and LG Display. According to UBI Research, in the global smartphone OLED (organic light-emitting diode) panel market in the third quarter of this year, Samsung Display and LG Display held shipment-based market shares of 46.9% and 11.8%, respectively.
The shock is greater given that the importance of panel businesses for PCs, tablets, and smartphones has grown due to sluggishness in the TV market. Samsung Display and LG Display are pursuing a strategy to defend profitability by expanding the proportion of high-value-added OLED products. Camera modules and 3D (dimension) sensing modules supplied by LG Innotek and Samsung Electro-Mechanics are also within the impact zone of decreased smartphone demand.
Finished product manufacturers and component companies are focusing on internal cost reduction and productivity improvement rather than memory prices or customer order volumes, which are difficult to control directly. In particular, they are accelerating efficiency by shortening research and development periods through AX (artificial intelligence transformation) and replacing simple repetitive tasks with AI.
Samsung Electronics is also focusing on work efficiency through AX. It is reported that some departments in the DX (Device eXperience) division, which handles set businesses, have been ordered to reduce FTE (full-time equivalent staff) by 20%. FTE is a metric that converts total working hours invested in specific tasks into employee numbers, among other factors. Internally, concerns are emerging that this may be a measure for workforce structural efficiency.
A source at an electronic component company said, "During recent volume negotiations with finished product customers, there were talks about reducing order volumes," adding, "Demand contraction due to rising memory prices is hitting the entire electronics product supply chain directly."
[The bright and dark sides of the memory super-boom] (Part 2)
Chinese DRAM air raid? Spot prices rose... Combined profit of Samsung Electronics and SK Hynix next year forecast at 96.4 trillion won
in INDUSTRY
