How Samsung makes money: The phone giant now living off AI memory chips

Samsung is in more pockets and living rooms than almost any brand on earth. The Galaxy phone in your hand, the television on the wall, the washing machine in the basement, even the screen on many iPhones. Those products are how most people know Samsung.

In Q3 2026, Samsung booked about $146 billion of revenue and $80 billion of operating profit. That single quarter earned more than Samsung's previous three full years combined. In the same quarter, the division that makes Galaxy phones lost money.

Today, though, Samsung makes most of its money from something consumers never see: the memory chips inside AI data centers. In this breakdown, we'll unpack exactly how Samsung makes money: which of its businesses carry the profit, what the company spends to run them, who it competes with, and whether a boom this large can last.

Samsung Electronics was founded in 1969 as part of the Samsung Group, the conglomerate Lee Byung-chul started in 1938 as a trading company. His grandson, Lee Jae-yong, has been chairman since 2022. The founding family still controls it through group cross-holdings, as our look at Samsung's ownership structure explains.

Today Samsung Electronics is based in Suwon, South Korea, and employs about 259,000 people in 76 countries. It reports four businesses:

What makes Samsung unusual is that it sits on both sides of the electronics industry. It sells parts, memory chips and screens, to companies like Apple and Nvidia. It also builds finished products that compete with those same customers and use those same parts.

That structure explains 2026.

When memory prices soar, the chip side earns more on every wafer. The device side pays more for every phone it builds, because its own memory division charges market prices. One half of Samsung is profiting from the shortage that the other half is paying for.

Samsung leads in a remarkable number of markets. It has shipped more smartphones than any other brand for 15 years, has sold more televisions than anyone for 20, and holds 38% of the global DRAM market. None of those leads matters as much to the bottom line as the last one.

Samsung still looks like a consumer electronics company on the revenue line. Phones, TVs, and appliances brought in more than half of its sales as recently as 2025.

Profit tells a different story. In the first nine months of 2026, the chip division produced about 98% of Samsung's operating profit, and memory alone made up roughly two-thirds of total revenue.

Segment sales include sales between Samsung's own businesses, so they add up to more than the company's total.

Samsung's memory business makes three kinds of chips. DRAM is the working memory inside every phone, PC, and server.

HBM, or high-bandwidth memory, is DRAM stacked into towers and packed right next to an AI processor such as an Nvidia GPU. NAND flash is the storage inside SSDs.

The customers are the companies building AI infrastructure: Nvidia's data center business, AMD, and the cloud giants racing to fill new data centers. AI servers need far more memory than ordinary ones, and the three companies able to make advanced DRAM at scale could not build factories fast enough to keep up.

This boom is driven by price, not volume. In the third quarter of 2026, Samsung's DRAM prices rose about 20% from the previous quarter, while the number of bits it shipped grew only by low single digits.

Customers are paying far more for roughly the same amount of memory. That is why the chip division now keeps about 72 cents of operating profit from every dollar of sales.

The HBM story is also a comeback. Samsung was slow to qualify its HBM3E chips with Nvidia, and SK hynix took the lead, with 58% of the HBM market in early 2026 against Samsung's 21%. Samsung's DRAM share slipped from 41.5% in 2024 to 34.0% in 2025.

The next generation changed the picture. Samsung says HBM4 sales more than tripled in the third quarter, its HBM share now matches its standing in DRAM, and its planned HBM supply for 2027 is effectively sold out at its target prices.

Samsung is now expected to take the top spot in HBM next year. It has also signed long-term supply agreements with 10 major customers, with 10 more in negotiation.

This is the Samsung most people know: the Galaxy S26 series, the Galaxy Z Fold8 and Fold8 Ultra foldables, the budget Galaxy A line, plus tablets, watches, earbuds, and services such as Samsung Wallet. The same unit sells 5G network equipment to carriers. In 2025 it was solidly profitable.

In 2026 it swung to losses, even as third-quarter sales rose. Samsung blamed "cost pressures," and the main pressure is memory. A flagship phone carries a large amount of DRAM and flash storage, and Samsung's phone unit buys those chips at market prices like everyone else.

The whole industry is feeling it. Global smartphone shipments fell about 20% in the third quarter, the weakest third quarter since 2012, as soaring DRAM and NAND prices made phones more expensive to build and to buy. Samsung held up better than most, shipping 57.8 million phones and lifting its share to 22.6%.

Samsung has paid to keep that share. It raised phone prices across its lineup in 2026 and is reportedly cutting fourth-quarter production of the cheaper Galaxy A series by up to 20%, saving scarce memory for pricier flagships that earn more per phone.

Samsung has been the world's top-selling television brand every year since 2006. It held 29.1% of the global TV market in 2025, and 54.3% of sets priced above $2,500. Its Neo QLED, OLED, and Frame TVs sit alongside Bespoke refrigerators, washers, and air conditioners.

Leadership has not meant profit. The division lost money in 2025 and again in the third quarter of 2026. Samsung cites rising panel prices, higher raw material and shipping costs for appliances, and fierce price competition from Chinese brands such as TCL and Hisense, the latter backed by Hisense's state-linked ownership.

The plan to fix it leans on things sold after the box leaves the store. Samsung wants more revenue from TV services and its streaming platform, plus appliance subscriptions and sales to businesses.

Samsung Display makes the OLED screens inside Galaxy phones, foldables, laptops, and monitors, plus QD-OLED panels for premium TVs. It was the first company to mass-produce OLED for phones, in 2007, and it still held 42.8% of smartphone panel revenue in 2025, by Samsung's own estimate.

The unit sells to Samsung's phone business and to competitors, including Apple, which has long bought OLED panels from Samsung Display for the iPhone. That makes it Samsung's quietest profit center: steady, profitable, and rarely in the headlines.

Its next step is larger screens: a new OLED line for tablets and laptops is ramping up, alongside QD-OLED gaming monitors.

The rest of the chip division has two jobs. System LSI designs chips, including Samsung's Exynos phone processors and the 200-megapixel camera sensors that compete with Sony's image sensor business. Foundry manufactures chips that other companies design.

Samsung does not report either business separately. Chip division sales minus memory came to roughly $5 billion in the third quarter, a rough guide that includes sales to other Samsung units. In contract manufacturing, Samsung held 5.9% of the market in the second quarter of 2026, against TSMC's 72.5%.

The business is finally showing signs of life. Samsung says foundry revenue and earnings improved sharply in the third quarter, helped by the control chip that sits at the bottom of every HBM stack and manages the memory layers above it, and by new 2nm orders from large cloud customers. It also holds a roughly $16.5 billion contract, running through 2033, to make the AI6 chip for Tesla, the Musk-controlled carmaker.

Much of the foundry's future rides on a new plant in Taylor, Texas, about 25 kilometers from the Austin factory Samsung has run since 1996. Samsung announced the $17 billion project in 2021 and originally planned to open it in 2024, but pushed it back while it struggled to win customers for its most advanced chips.

The fab is now scheduled to start operating in 2027, backed by $4.7 billion from the US CHIPS Act, and Tesla's AI6 chip is slated to be made there. A US plant making 2nm chips is Samsung's best pitch to American customers who want an alternative to TSMC.

Samsung bought Harman in 2017, and it remains the company's most separate business. Harman supplies digital cockpits, the screens and software behind a car's dashboard, to automakers, and it held 12.8% of that market in 2025. It also owns consumer and professional audio brands, including JBL, Harman Kardon, and AKG.

It has been adding to the audio side, buying B&W Group, owner of Bowers & Wilkins, and D&M, home of Denon and Marantz, in 2025. Harman is small next to the chip business, but it has stayed reliably profitable.

Samsung's 2026 profit did not come from cutting costs. It came from prices rising far faster than costs could follow.

In 2025, making Samsung's products cost about 61 cents of every revenue dollar. By the third quarter of 2026, it cost about 31 cents.

Samsung's factories, staff, and suppliers barely changed. What changed is what customers paid for the chips that came out of them.

This is the largest cost Samsung carries: about $142 billion in 2025. On the chip side, it pays for silicon wafers, specialty gases and chemicals, enormous amounts of electricity, the engineers who run the fabs, and the wear on equipment that can cost more than $100 million a machine. Depreciation alone, the cost of that equipment spread over its life, ran to about $9 billion in the third quarter.

On the device side, it pays for the parts inside every Galaxy phone and TV: processors, panels, cameras, and memory bought at market prices. It also covers assembly in Samsung's plants in Vietnam, India, Mexico, and Brazil.

Samsung plans to spend about $63 billion on capital investment in 2026, almost double the $33 billion it spent in 2025. About nine of every ten of those dollars go to chips.

The money goes into new production lines at Pyeongtaek and Hwaseong in South Korea, the Taylor fab in Texas, and the equipment needed to stack more HBM. None of it counts as an expense when it is spent. It shows up gradually as depreciation, which is why today's building spree will weigh on profit for years after the factories open.

Excluding research, Samsung spent about $35 billion in 2025 on selling its products and running the company. That covers marketing, shipping, retailer and carrier margins, warranty repairs, offices in 76 countries, and the salaries of the people who are not on a factory floor.

It also covers bonuses, which got much bigger in 2026. To avert a strike, Samsung agreed in May to a new 10-year performance bonus system for chip workers.

Chip workers now receive half their annual salary as a regular cash bonus, plus an average raise of 6.2%. Record chip profits are now flowing straight into the cost base.

Samsung spent a record $26.5 billion on research and development in 2025, about 11% of revenue.

The money funds HBM4 and the HBM4E chips coming next, 2nm manufacturing processes, new DRAM generations, Galaxy AI features, and display technology. Samsung reports research inside its selling and administration costs, so it is a second view of money already counted above, not an extra bill.

No single company competes with all of Samsung. It faces memory specialists, a phone and services giant, a contract chipmaker, and a fast-rising group of Chinese rivals, each fighting it on one front.

The memory rivals matter most to today's profit. The phone and foundry rivals matter most to what happens when memory prices fall.

SK hynix is Samsung's crosstown rival and, on profit margins, the stronger memory business. In the third quarter of 2026, it earned 80 cents of operating profit on every dollar of revenue, against about 72 cents for Samsung's whole chip division.

SK hynix's edge is HBM. SK hynix moved first with Nvidia and became its main HBM supplier, holding 58% of the market in early 2026. It also makes almost nothing but memory, so it carries none of the drag from phones, TVs, or foundry.

That focus cuts both ways. SK hynix plans to return about $75 billion to shareholders and warns that shortages could last until 2030. When the memory cycle turns, though, it will have no other business to lean on.

Micron is the only large American memory maker, owned mostly by US institutional investors, and it is enjoying the same boom. Revenue more than tripled in fiscal 2026, and its gross margin reached 80.7%.

The numbers show the same pattern as Samsung's. Micron's DRAM prices rose about 180% from a year earlier while the bits it shipped grew only in the mid-20% range. Profit came from pricing, not volume.

Micron is the smallest of the three big DRAM makers, but being American is becoming an advantage with customers and governments wary of relying on Korea and Taiwan.

Apple is Samsung's main rival in phones and one of its biggest customers. The two were virtually tied in the third quarter of 2026, with Samsung at 22.6% of global shipments and Apple at 22.4%.

The businesses behind those phones look nothing alike. Apple's record fiscal 2026 was built on high iPhone prices and a services arm that brought in $31.6 billion in a single quarter.

Samsung sells far more low-priced phones and earns little from services. Ownership differs just as sharply: Apple's widely held shareholder base has no controlling family, while Samsung's founders still steer their company.

The relationship runs the other way too. Apple buys OLED screens from Samsung Display and memory from Samsung's chip division. Every iPhone sold puts some money in Samsung's pocket, even as it takes a sale from Galaxy.

TSMC, the widely held Taiwanese foundry, makes chips for Nvidia, Apple, AMD, and most of the world's chip designers. Its operating margin reached 58.7% in the third quarter of 2026, without any help from a memory boom.

Samsung is the only other company offering the most advanced manufacturing processes at scale, but the gap is enormous. TSMC is doubling its 2nm capacity by 2027, while Samsung is still trying to prove its yields, the share of usable chips per wafer.

TSMC now touches Samsung's memory business too. Nvidia is reportedly pushing for the control chips at the bottom of each HBM stack to be built by TSMC for all three memory makers. That could steer work away from Samsung's foundry just as those chips are reviving it.

Xiaomi is the third-largest phone maker in the world, behind Samsung and Apple. It is pushing into premium phones and electric cars, and it competes with Samsung on price across Asia, Europe, and Latin America.

The bigger long-term threat may be ChangXin Memory Technologies, or CXMT, China's leading DRAM maker. It is already the fourth-largest DRAM maker by revenue, and raised about $8 billion in a Shanghai listing in July.

CXMT is far behind in HBM and lacks access to the most advanced chipmaking tools. It does not need to catch up to hurt Samsung, though.

Its capacity is expected to rise from 300,000 to 550,000 wafers a month between 2025 and 2028. Enough extra conventional DRAM could end the shortage that is lifting prices today.

Samsung's near-term outlook is as strong as it has ever been. Management expects AI demand in 2027 to "far exceed" industry supply, its 2027 HBM output is sold out, and it is locking customers into multi-year contracts. These contracts often come with price floors as well as ceilings, which could soften the next downturn.

The risk is the memory cycle itself. For decades, high prices led every memory maker to build new factories, and the new supply eventually crashed prices.

DRAM prices are already forecast to fall about 23% in 2028 from 2027, while still sitting far above 2025 levels. Some Korean industry figures warn of a flood of new supply by 2029.

Investors are already pricing in some of that risk. Samsung shares fell 22% between the day before its record results and November 6, as the US midterm results set off a broad selloff in AI stocks.

They now trade at roughly half their 2026 peak. Political pressure on US data center construction could slow the very spending that fuels Samsung's chip profits.

The device side needs its own repair. Phones and TVs cannot rely on cheap memory again soon, so Samsung has to earn more from premium models, services, and subscriptions. Foundry needs the Taylor fab and its 2nm customers to deliver before the memory boom fades.

The financial position gives Samsung room to make those bets. It earned about $189 billion of operating profit in the first nine months of 2026, held about $147 billion of net cash at the end of September, and plans to return $67 billion to $82 billion to shareholders for the year, with details due in late January 2027.

Whether the current trajectory holds comes down to two things. The first is whether long-term contracts can keep memory prices high once new capacity, including China's, comes online. The second is whether Samsung's phone and TV businesses can earn money again on their own, without the chip division carrying them.