LONDON: Samsung is preparing to test whether consumers will pay for artificial intelligence (AI) on smartphones as soaring memory chip prices and the rising cost of running AI services squeeze margins. The company is considering a monthly subscription for users who rely heavily on Galaxy AI as it looks to offset those costs, Samsung Southwest Asia president and chief executive JB Park said.
The move reflects a broader shift in the smartphone industry, where AI is becoming a recurring service rather than just a hardware differentiator, with ongoing computing costs.
“Galaxy AI features are free for consumers, but they are a huge cost for Samsung even though they might involve on-device features like Photo Editing. AI features require huge computing power,” Park told reporters at a media roundtable ahead of the launch of its eighth generation of foldable phones last week.
Tokens are the basic units of text, such as words, parts of words or punctuation, that an AI model processes to understand a prompt and generate a response. Advanced AI features rely on cloud servers that process users' requests. The more text or data the AI processes, the higher the computing cost.
"...what we are trying and have learnt in the past few years is there are some consumers who are heavy users on editing part and it requires us to invest more on the data centre or the computing on a GPU (graphic processing unit) that will give a faster result," Park said.
He said users with higher AI requirements could opt for a paid Pro tier, while basic AI features, which account for about 90% of usage, will continue to be offered free.
“Consumers who rely heavily on AI may be willing to pay for premium services. However, for Samsung to successfully monetize Galaxy AI, it must offer features beyond what users can already access by subscribing to platforms such as Gemini directly,” said Prachir Singh, senior research analyst at Counterpoint Research.
Analysts said smartphone makers are increasingly shifting AI processing onto devices rather than the cloud to reduce computing costs.
Chip squeeze
Samsung's AI monetization plans also come as a global memory chip shortage pushes up smartphone manufacturing costs.
Memory chip prices have more than tripled in the past year, driven by demand from AI data centres, according to Counterpoint Research. As a result, smartphone prices in India are up 15% from a year ago.
“The memory price is going beyond everyone's expectations. It was triggered by the big techs that are investing heavily in AI.…For a year or two, the memory price will keep on surging. That's a fact,” Park said.
Samsung has absorbed much of the increase over the past eight months, raising prices less aggressively than rivals. “...we have been absorbing the cost. Not because we want to maintain the market share or grow the market share, but as a company that is focused to provide the best devices. The loss that we are taking in 2026 is humongous,” Park said.
Park also rejected suggestions that Samsung's mobile business receives favourable pricing from its semiconductor division.
"Even though we have a semiconductor business unit (the DS - device solutions division), they are a different creature. There's a wall (between the two divisions - DX - device experience and DS) that is getting higher. We are competing for locking in volume, locking in pricing and whoever (competing brands) gives the best fit for their business unit is what they (DS unit) will go after," he said.
According to industry executives, semiconductor companies such as Micron, SK Hynix and Samsung are investing in new memory manufacturing capacity, although those plants will take one to two years to reach full production.
“We don't see a respite in memory price coming down till late 2027. There is a huge demand for these chips from data centres and cloud service providers who are offering higher prices to chip manufacturers than what these companies can earn by supplying chips to smartphone makers,” Singh said.
Betting on premium
The pressure comes as demand for smartphones weakens. Counterpoint estimates smartphone shipments in India fell 10% year-on-year in the June quarter as higher prices curbed consumer demand. Samsung, however, saw its shipments grow 2%, helped by its Galaxy A and flagship Galaxy S series.
“In an open market like India, with EMI (equated monthly instalment) cost includes the interest, which Samsung is bearing. So, we are giving back, even though the cost of the device has been going up. We are bearing the cost of interest 24 to 30 months on the flagship devices,” Park said.
Last week, Samsung launched its eighth-generation foldable smartphones, its most expensive lineup yet. It said the devices will be manufactured at its Noida factory.
The Galaxy Z Fold 8 Ultra starts at ₹2 lakh and goes up to ₹2.6 lakh for the top-end variant, making it Samsung's most expensive smartphone yet. The Galaxy Z Fold 8 is priced at ₹1.8 lakh, ₹5,000 more than its predecessor, while the Galaxy Z Flip 8 starts at ₹1.25 lakh, ₹15,000 higher than the previous model.
Asked about making foldables more affordable, Park said, “there will be a faster adoption of foldables as more competition comes into this segment and we grow along with them. The more brands there are to compete with, the greater the awareness for the foldables. So, I think that's where we are heading to.”
Samsung's latest launch comes ahead of the expected debut of Apple's first foldable iPhone in September, setting up fresh competition in the premium smartphone segment. Globally, foldable smartphones cost about $1,800 ( ₹1.75 lakh), nearly five times the average selling price of a conventional smartphone in India.
The writer was in London at Samsung's invitation to attend Galaxy Unpacked.