Rising Semiconductor Prices Threaten Chinese Mid-to-low-end Smartphone Makers, Potentially Benefiting Samsung’s Premium Market Strategy
Galaxy S26 Ultra, winner of the ‘Best in Show’ award at MWC26 held in Barcelona, Spain. (Photo provided by Samsung Electronics)
Amid expectations of weakening smartphone demand due to chipflation (rising semiconductor prices), observations suggest that Samsung Electronics may instead find an opportunity to expand its market share. As concerns mount that Chinese smartphone manufacturers, which focus primarily on mid-to-low-end products, may suffer greater damage in a price increase phase, analysis indicates that Samsung Electronics, which has been increasing its premium product ratio, could be positioned at a relative advantage.
According to multiple market research firms on March 16, global smartphone shipments this year are expected to decline significantly year-over-year. IDC forecasted that global smartphone shipments this year will decrease by 12.9% year-over-year, reaching only the 1.1 billion to 1.12 billion unit level, while Omdia also projected that global smartphone shipments this year will decline by approximately 7% year-over-year.
The outlook suggests that demand will sharply contract as smartphone manufacturers (OEMs) pass on the cost burden from memory price increases to consumers. Memory prices have risen significantly due to surging demand driven by the expansion of artificial intelligence (AI) servers. In particular, as memory manufacturers expand production of highly profitable AI server products, the supply capacity for general-purpose memory used in smartphones and other devices has relatively diminished.
Market observers believe that if the smartphone price increase phase continues, companies with premium product competitiveness could see their positions relatively strengthened. This is because flagship products have room to reflect cost increases in selling prices based on brand competitiveness, whereas mid-to-low-end products face a greater risk of demand erosion due to price increases. Analysis suggests that Chinese companies, which have high dependence on emerging markets and mid-to-low-end products, may be more significantly affected by demand contraction resulting from price increases.
In fact, shipments from premium manufacturers are showing a relatively increasing trend amid the smartphone price increase phase. According to IDC, the global smartphone average selling price (ASP) in the fourth quarter of last year rose by approximately 7.7% year-over-year. During the same period, shipments by Samsung Electronics and Apple increased by approximately 18% and 4.9% year-over-year, respectively. In contrast, Xiaomi and Transsion decreased by 11.4% and 0.4%, respectively.
Samsung Electronics has been reorganizing its smartphone business strategy over the past few years, demonstrating a focus on the premium segment. The company has placed its flagship and foldable lineup, including the Galaxy S Ultra and Z Fold/Z Flip, at the forefront to strengthen profitability and brand power, while simplifying its mid-to-low-end product lineup around the A Series such as the A15, A35, and A55.
Among these, the Ultra model plays a role in absorbing premium demand while maintaining a high-price policy by leveraging differentiated hardware and software, including high-performance cameras and AI features. In the recently launched Galaxy S26 series, the Ultra model also accounted for 70% of pre-order volumes. This represents the highest Ultra pre-order share in Samsung’s history.
However, the prevailing view is that if the slowdown in emerging markets becomes prolonged, Samsung will also find it difficult to remain completely unaffected. This is because a significant portion of Samsung’s smartphone shipments are still supported by the entry-level and mid-range Galaxy A Series lineup. Given the high proportion of A Series sales in emerging markets such as India and Southeast Asia, continued demand contraction could translate into shipment decline pressure. Counterpoint Research previously noted that Samsung’s global smartphone shipments last year increased by 5% year-over-year, driven by the strong performance of entry-level Galaxy A models.
An industry insider stated, “This trend is largely a form of spillover benefit arising from Chinese mid-to-low-end manufacturers facing cost increase pressure first, rather than Samsung’s smartphone competitiveness suddenly strengthening,” adding, “If chipflation becomes prolonged, Samsung may also reach a point where it needs to reassess the profit structure and pricing strategy for its entry-level lineup.”
Kim Eun-jin
pr@businesskorea.co.kr
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