South Korea’s Samsung Electronics (005930.KS) posted a smartphone plant utilization rate of 84.1% in the first half of this year, recovering to pre-COVID-19 pandemic levels. The strong performance of the Galaxy S26 series and AI feature differentiation drove results even as the global smartphone market contracted. Market research firms project Samsung will reclaim the top spot in global smartphone shipments from Apple this year.

According to South Korea’s Financial Supervisory Service electronic disclosure system, Samsung Electronics’ smartphone plant utilization rate for January through June this year came in at 84.1%. This marks a departure from the 60–70% range that persisted for six years since 2020. Compared with 83.6% in the first half of 2018 and 94.8% in the first half of 2019 — before the COVID-19 outbreak — the figure effectively represents a return to pre-pandemic strength.

The inflection point for the utilization rebound was the AI-powered Galaxy S24 series launched in 2024. Utilization, which had languished at 64.5% in the first half of 2023, jumped to 74.1% after the S24 launch and has continued to recover each year since. Samsung Electronics was credited with successfully differentiating itself in the premium market by incorporating AI features such as real-time interpretation and generative image editing ahead of Apple.

The Galaxy S26 series launched this year made the “privacy display” its key differentiator. The technology, which limits viewing angles so the screen cannot be seen from the side, drew a strong consumer response because it protects privacy without a separate screen protector film. The S26 series surpassed 3 million units in domestic sales two months faster than its predecessor after launch.

Share Gains Amid “Chipflation”

The “chipflation” environment — rising smartphone production costs driven by surging AI-related memory demand — is actually working in Samsung Electronics’ favor. With a flagship-centric product portfolio, Samsung is relatively less exposed to demand erosion from price increases than competitors focused on mid-range and budget models.

Counterpoint Research expects global smartphone shipments to decline 14.3% year-over-year this year, while projecting Samsung Electronics’ shipments to grow 0.8%. In that scenario, Samsung would claim the top spot with a 22.6% market share, edging out Apple (22.5%) by 0.1 percentage point.

This trend was already evident in second-quarter results. While global smartphone shipments fell 11% year-over-year, Samsung Electronics posted modest growth. Over the same period, Samsung’s market share rose 4 percentage points from 20% to 24%.

Counterpoint Research noted that Samsung Electronics effectively managed cost pressures through vertical supply chain integration and component procurement competitiveness. The firm explained that Samsung’s decision not to significantly raise average selling prices (ASP) relative to competitors supported demand across both premium and mid-range lineups.

Exynos Competitiveness Recovery Provides Support

Samsung Electronics’ smartphone competitiveness recovery is intertwined with performance improvements in its in-house mobile application processor, the Exynos. According to industry sources, internal performance evaluations at Samsung Electronics found that the next-generation “Exynos 2700” AP outperformed Qualcomm’s next-generation “Snapdragon 8 Elite Gen 6” in key metrics including CPU, GPU, AI computation, and power efficiency. The Exynos 2700 is slated for production on Samsung Foundry’s SF2P, a second-generation 2-nanometer process.

Exynos competitiveness recovery could translate into component cost savings for the MX division. Samsung Electronics spent ₩7.44 trillion (approximately $5.4 billion) on AP purchases from Qualcomm, MediaTek, and others in the first half of this year alone. If the share of Exynos in Galaxy smartphones increases, the company can reduce this expense while the foundry division secures stable internal volume to boost advanced process utilization and yields.

Samsung Foundry secured orders for Tesla’s AI5 and AI6 chips and Apple’s next-generation image sensors (CIS) in the second half of last year, and this year signed a $200 billion-scale memory and foundry business cooperation agreement with Broadcom. With the 4nm process effectively running at full capacity, the structure is one of simultaneous expansion in big tech orders and internal volume.

Foundry pricing power is also improving. Samsung Electronics recently raised 4nm and 5nm process prices by up to 15%, primarily for new orders. Kiwoom Securities projects the non-memory business, including foundry, to post an operating profit of ₩151 billion (approximately $108.9 million) in the third quarter of this year. If realized, it would mark the first quarterly profit since the fourth quarter of 2022 — a span of 15 quarters.