005930.KS - Samsung Electronics Co., Ltd.

Operator: Hello, everyone, and welcome to the Samsung Electronics 2025 Third Quarter Financial Results Conference Call. I will be your coordinator. [Operator Instructions] As a reminder, this call is being recorded. I would now like to turn the conference over to the Investor Relations team. Please go ahead. Daniel Oh: Welcome, everyone, and thank you for joining us from around the globe. I am Daniel Oh, Head of Investor Relations at Samsung Electronics. It's my pleasure to be with you on our earnings call today to discuss our third quarter results. Before we begin, I would like to address some important housekeeping and legal matters. As a reminder, you can follow today's broadcast and slide presentation on our IR website at www.samsung.com/global/ir. Additionally, this call is being recorded, and it will be accessible on the same platform for those who wish to review it at a later time. We kindly ask for your attention and cooperation as we move forward as this session is designed to provide you with comprehensive insights into our financial performance and strategic outlook. I would like to remind everyone that this conference call may include forward-looking statements which are based on our current expectations regarding future events. These statements are not intended to serve as guarantees of future performance. Our actual results could differ materially from these statements due to a variety of factors, including, but not limited to, market conditions, regulatory changes and operational challenges. We appreciate your understanding and attention to these important considerations in our efforts to provide transparent and accurate information. With that in mind, I would like to outline today's format. I will begin the discussion with our third quarter financial performance, followed by EVP Soon-Cheol Park, our Head of Corporate Management Office and CFO, who will share our business outlook, capital expenditures and updates on shareholder returns. We will then turn the call over to our executives who will take this opportunity to discuss their respective business areas in detail. Following their presentations, we will open the floor to our valued analysts for any questions they may have. Please note that this call is planned to last approximately 1 hour, and we appreciate your time and attention throughout the discussion. In addition to myself and our CFO, the other executives joining today's call are EVP Jaejune Kim, representing Memory; VP Hyeok-man Kwon for Systems LSI; EVP Sukchae Kang for Foundry who has joined us for the first time; EVP Joonyoung Park for Samsung Display Corporation; VP Daniel Araujo for the Mobile eXperience; and finally, VP Mark Kim, representing Visual Display for this quarter. Now let's begin with our consolidated financial performance for the third quarter of 2025. Our total revenue reached KRW 86.1 trillion, up by 15.4% quarter-on-quarter. In the DS division, sales increased by 19% sequentially with the memory business setting a new all-time high for quarterly sales driven by strong growth of HBM3E and server SSDs. In the DX division, revenue was up 11% quarter-on-quarter, thanks to launch effects of new folding phones and solid flagship sales. SG&A expenses came in at KRW 21.3 trillion. And SG&A expenses as a percentage of sales declined by 3.1 percentage points sequentially to 24.8%. As of the end of the third quarter, year-to-date R&D expenses climbed to a record high of KRW 26.9 trillion, reflecting our commitment to innovation and long-term growth. Operating profit totaled KRW 12.2 trillion, representing a sequential increase of KRW 7.5 trillion, and operating margin increased by 7.9 percentage points quarter-on-quarter to 14.1%, led by DS division with increased memory sales, improved foundry line utilization and significantly reduced onetime inventory value adjustments compared to the previous quarter. Meanwhile, in the DX division, an increase in sales of high value-added products such as Fold 7 contributed to the growth. Regarding currency effects, the Korean won's relative strength against the U.S. dollar weighted on our component business as a significant portion of its transactions are in U.S. dollar. However, the negatives were largely offset by positives in the DX division, resulting in a minimal overall impact on the company's operating profit. More detailed third quarter results of each business will be presented by executives shortly. Before that, I would like to pass the conference call over to our CFO, Soon-Cheol Park, who will discuss the outlook for the fourth quarter and 2026. Soon-Cheol Park: Thank you, Daniel. And good morning, everyone. I am Soon-Cheol Park, CFO of Samsung Electronics. It's a pleasure to join you once again on our earnings call. Firstly, our management is fully aware of the concerns of the market and the shareholders had concerning our performance through the previous quarter. However, thanks to the collective dedication of our employees in overcoming challenges, our third quarter results showed a clear rebound and meaningfully met market and shareholder expectations. Looking ahead, we will continue strengthening our business overall, and we remain committed to delivering strong performances to meet expectations. Before we move on, I would like to express my sincere gratitude to our shareholders for your patience and confidence in Samsung Electronics, especially during such a challenging environment. Now let's begin with the outlook for the fourth quarter of this year. We anticipate our mixed market environment in the fourth quarter characterized by ongoing global trade and geopolitical risks on one hand. And on the other, the potential for growth driven by the rapid advancement of the AI industry. In light of this outlook, the DS division will focus on enhancing its performance by increasing sales of high value-added memory products tail-loaded for AI. In the DX division, ongoing challenges such as heightened competition and tariffs may impact our projections for additional earnings growth. Nevertheless, we are persistent in our effort to expand sales, placing a strong emphasis on advanced AI products. Next, I would like to share our outlook for the coming year. In the first half of 2026, we expect the semiconductor market to remain strong driven by ongoing AI investment momentum. However, due to the uncertainties such as tariffs for the second half, we will provide a more detailed outlook during our earnings call for the second quarter of 2026. To navigate this uncertain environment, we utilized our strong technologies and diverse product portfolio to mitigate risks and maximize opportunities resulting in continuous sales turnover growth. In the DS division, the Memory business will make a timely investment and maintain each operational focus on profitability to actively respond to demand for high value-added AI products. At the same time, we will promote the expansion of sales for cutting-edge products such as HBM and high-capacity DDR5 and SSD. For System LSI, we plan to increase sales of premium SoCs and image sensors. The foundry business will work to strengthen its advanced processes and ensure timely ramp-up for the U.S. Taylor Fab. In Display, we will further reinforce our leading market position with our competitive product from the new 8.6 generation IT OLED design and by advancing our differentiated technologies and product excellence to meet the demand of AI devices. The DX division will strengthen its efforts to launch AI products equipped with the most innovative technologies through open collaboration with the leading global partners in respective business segment. Through digital initiatives, we'll expand sales of premium products and enhanced profitability, driving overall growth and reinforcing our leadership across the board. In the MX business, the launch of the S26 and other flagship products will provide our customers with enhanced performance and more intuitive and elevated AI experience. Moreover, we'll continue to lead form factor innovations with the recently released Galaxy XR and the upcoming launch of Tri Fold and leverage our differentiated Galaxy ecosystem to grow sales led by premium devices. In the VD business, we will drive sales growth by enhancing our premium leadership through the innovative new lineup, including Micro RGB and OLED, and we'll deliver unique customer experience with continually improving AI features. In the DA business, we will accelerate sales by strengthening the product lineups overall and improving differentiated connectivity between our products. Turning to CapEx. In the third quarter of 2025, CapEx decreased by KRW 1.9 trillion compared to the previous quarter and by KRW 3.3 trillion compared to the same quarter last year, coming in at KRW 9.2 trillion. This included KRW 7.8 trillion invested in the DS division and KRW 0.8 trillion in Display. For the first 3 quarter of this year, total CapEx was KRW 32.3 trillion, down KRW 3.6 trillion year-on-year. Of this amount, the DS division accounted for KRW 28.5 trillion, while the Display business represented KRW 2.1 trillion. For the full year of 2025, CapEx is projected to decline by KRW 6.3 trillion year-over-year, reaching a total of KRW 47.4 trillion. Within this total, the DS division is expected to account for KRW 4.9 trillion in CapEx, down KRW 5.4 trillion, while the CapEx for the Display business is anticipated to be KRW 3.3 trillion, down KRW 1.6 trillion. In Memory, we expect overall CapEx to remain relatively flat year-over-year, although infrastructure investments are projected to decline. On the other hand, equipment investment, particularly related to advanced node transitions, are anticipated to increase as we focus on expanding sales of high value-added products. In Foundry, we are continuing to invest in advanced node including 1.4 nanometer technology. However, we foresee a decline in total investment with the operations focused on improving and transitioning our current mass production line. In the Display business, our CapEx was mainly concentrated on reinforcing and upgrading existing production facilities as major investment in the 8.6 generation line are nearing completion. We expect the overall spending to decrease compared to the last year. In 2026, we will flexibly respond to the growing demand for AI by increasing investments strategically as needed. Moving on to shareholder returns. The Board of Directors today approved the quarterly dividend of KRW 370 per share for both common and preferred stock. On our shareholder return policy for 2024 to 2026, we are committing to an annual payout of regular dividends totaling KRW 9.8 trillion. The distribution for the third quarter amounting to KRW 2.45 trillion is scheduled for the payment in late November. Thank you. Daniel Oh: Thank you, Soon-Cheol Park. And to wrap up this portion of the call, I am pleased to report that Samsung Electronics has maintained its position as the world's fifth most valuable brand for the sixth consecutive year in the Interbrand Best Global Brands Top 100 ranking. Our brand value was assessed at $90.5 billion, which was the highest among non-U.S. companies. The evaluation highlighted positives such as our AI capabilities across all business units, the application of AI home experiences across our products, focused investments in AI semiconductors and our consumer-centric brand strategy. Now the executives will provide more detailed information on their respective business units third quarter performance, followed by their own business outlook. We'll start with Jaejune Kim, EVP of Memory business. Jaejune Kim: Good morning. This is Jaejune Kim from Memory Global Sales and Marketing. In the Memory market in the third quarter, demand remained strong and continued focus on HBM, high density DDR5 and server SSDs as the need for high performance and high-density server products are growing with the increasing investment in generative AI. As for mobile and PC, supply-demand dynamics remained tight, due to the impact of industry supply disruption focusing on servers. In this situation, along with increasing HBM3E sales, we proactively address the demand in overall application, including server. And our memory business in the third quarter recorded its strongest sales performance ever. Also, our performance improved significantly quarter-on-quarter, and the reduction in the inventory related onetime charges that occurred in the previous quarter also somewhat contributed to the performance improvement. Now let's move on to the outlook for the fourth quarter. Although uncertainties from tariffs and macroeconomic trends exist, we expect data center companies to continuously expand their hardware investments because of the ongoing competition to secure AI infrastructure. Therefore, our AI-related server demand keeps growing, and this demand significantly exceeds industry supply. For mobile and PC, we expect a supply shortage to intensify further in conjunction with the industry server-focused supply trend, increased content products driven by on-device AI and seasonal demand effects. In the fourth quarter, we will maintain our active response to rising server demand. For DRAM, we plan to optimize overall profitability by managing our product mix, focusing on HBM3E and high-density server DDR5 products in response to the robust demand for AI and conventional servers. And also for NAND, we will concentrate on expanding sales of high-density, high-performance server SSDs. Now let's move on to the outlook for 2026. With the continued expansion of AI investments next year and the increase of memory-intensive computer servers prompted by the spread of AI agents, we expect to see simultaneous growth in AI and conventional server demand. Moreover, in mobile and PC segment, we expect the trends of growing content products to continue with the spread of on-device AI. Especially for NAND, we expect supply constraints to intensify as industry inventory levels roll down sharply with the effect of SSD adoption as a replacement for nearline HDDs, which are in short supply. Accordingly, across overall applications, we are currently receiving memory demand for the year of 2026 and it is much stronger and faster than usual. It is expected that customers' demand for the next year will exceed our supply, even considering our investment and capacity expansion plans. In this situation, for DRAM, we plan to continue increasing the sales base for HBM. In particular, as for HBM4, from the initial stage of product development, we have already secured speed above 11 Gbps, exceeding the customers' requirement. With our industry-leading performance, we will focus on offering HBM4 centering on the high-end segment. Also for conventional DRAM, we plan to increase the portion of high value-added products related to AI application, such as high-density DDR5, LPDDR5X and GDDR7. Also, for NAND, we will increase the sales portion of server SSDs and heightened security in line with the strong demand for AI, and we plan to strengthen our portfolio, focusing on cutting-edge products by continuing the transition to V8 and V9. Thank you. Hyeok-man Kwon: Good morning. This is Hyeok-man Kwon from the System LSI business. In the third quarter, the smartphone market showed signs of slowing growth following modest gains in the first half. Major smartphone OEMs, which had built up inventory in anticipation of potential U.S. tariff risks began destocking in the second half, leading to weaker overall demand. We launched our industry's first 200 megapixel image sensors, featuring 2.5 micrometers, ultrafine pixels, laying the foundation for expansion in the high resolution segment. In SoC, efforts were focused on the stable supply of premium products to major customer flagship lineups. However, overall demand declined versus the first half due to broad-based inventory adjustments and seasonal impacts, resulting in flat quarterly earnings. In the fourth quarter, growth is expected to remain limited amid continued global economic uncertainty. With major OEMs maintaining cautious inventory level, demand recovery is likely to be measured. Against this spectrum, we aim to expand the shipment to key customers' premium lineups and continued cost reduction initiatives to defend earnings. Looking out to 2026, overall smartphone demand in major markets, such as China and the U.S., is expected to remain subdued, while the premium segment continued to post solid growth driven by lineup expansion and specification upgrades by leading OEMs. We are accelerating process stabilization and performance enhancement of our X nodes to secure production in key flagship models, while continuing to expand its market share in image sensors through differentiated technologies, such as the 200 megapixel and nanoprism sensors. Thank you. Sukchae Kang: Hello, everyone. This is Sukchae Kang from the Foundry business. In the third quarter, while U.S. export controls on China impacted sales to certain clients, revenue was sustained at the previous quarter's level driven by expanded sales to key customers in the U.S. and increased sales of memory products. Furthermore, profits saw a significant improvement due to a reduction in one-off cost, better line utilization and the realization of cost-saving efficiencies. We also began mass production of our first product using the first generation of nanoprocess while achieving our record high order backlog, driven by large-scale customer wins centered on advanced nodes. Looking ahead to the fourth quarter, the market is projected to see a slowdown in demand that had temporarily slowed due to the U.S. government tariff policies. However, strong demand in AI and HPC, along with the trend of semiconductor self-sufficiency in China is expected to fuel continued growth. We aim to expand our sales by ramping up mass production of 2nm products, increasing shipments of HPC, automotive and memory products and further improve earnings by enhancing fab utilization. In advanced node, development of the second-generation 2 nano process is processing as planned -- progressing as planned. We expect to expand orders for HPC and mobile applications based on our 2 and 4 nano processes. For mature node, we plan to broaden our customer base by diversifying into automotive and other applications through an expanded portfolio of specialty processes. For 2026, while the mobile market is projected to remain stagnant, we forecast continued robust demand for AI HPC applications. Notably, the first scale extension of 3-nano and 2-nano process mass production is expected to drive growth in advanced nodes. However, global supply chain uncertainties stemming from intensifying U.S.-China technology competition and the U.S. government semiconductor tariff policies are likely to persist, meaning demand volatility will also remain a factor. We plan to continuously increase the proportion of advanced nodes to address strong demand from AI HPC applications, thereby aiming for stable revenue growth. Specifically, we will pursue the mass production of second-generation 2 nano process products based on secured stability and focus on developing differentiated processes to strengthen our technological competitiveness. Additionally, we plan to expand demand for mobile and HPC through mass production of the performance and power optimized 4nm process and HBM4-based die. In addition, our new Taylor fab in the U.S. currently under construction is scheduled to commence operations from 2026. Thank you. Joonyoung Park: Good morning. This is Joonyoung Park from Samsung Display. In the third quarter, we delivered a sequential performance improvement in the mobile display business, thanks to the robust demand for our customers' flagship smartphones and newly launched products. Furthermore, we also achieved sales growth supported by an increase in the IT-led adoption rate. For the large display business, amid the rising demand for QD-OLED gaming monitors, we recorded double-digit growth in moving to sales compared to the previous quarter by actively meeting our customers' needs. Also, we introduced a new 27-inch QHD lineup, laying the groundwork for an additional increase in demand for QD-OLED monitors. Next, let me share the outlook for the fourth quarter. On the back of favorable year-end seasonality, we expect the demand for premium products to stay solid. In response, we will expand our sales by actively addressing customer demand for smartphones and boosting sales in non-smartphone segments such as IT, automotive and gaming. We aim to maximize the sales of QD-OLED monitors with the expected full-scale launches of our new lineup. Furthermore, we will respond to our major customers' demand for TVs in the year-end peak season in a timely manner. Moving on to 2026. Our outlook is quite conservative considering the intensifying impact of tariffs and lingering macroeconomic uncertainties. However, OLED adoption is continuously rising in diverse applications, thanks to its outstanding performance. Under these conditions, we plan to strengthen our product competitiveness for diverse segments, solidifying our market leadership. To start with, our new 8.6 generation IT OLED line slated for mass production next year will deliver competitive products, accelerating OLED penetration rate in the IT market. In addition, we will expand our technology lead in smartphones by enhancing the quality of foldable and introducing differentiated technologies for AI device such as low-power consumption and high refresh rate. Finally, for larger displays, we will continue to enhance the differentiated performance for TVs, such as brightness and solidify our position in QD-OLED monitor market by expanding lineups for both B2B and B2C and diversifying our customer base. Thank you. Daniel Araujo: Hi, everyone. This is Daniel Araujo from the MX division. Let me share our results for Q3 as well as our future outlook. The smartphone market rebounded in Q3 as macro uncertainties were somewhat alleviated due to progress in tariff negotiations among major countries together with expectations of interest rate cuts. For the MX business, Q3 saw smartphone shipments of 61 million units, tablet shipments of 7 million units and the smartphone ASP of $304. The launch of new flagship models contributed to growth in both sales and operating profit compared to Q2. Strong sales centered around the Fold 7 resulted in double-digit growth in both shipments and value for foldable devices compared to the previous year, while the S25 series also maintained solid sales momentum. The growth of flagship sales as a portion of total smartphone sales, along with improved sales of new tablet and variable products, enabled us to sustain robust double-digit profitability. Next, let me share the outlook for Q4. The smartphone market is expected to grow compared to the previous quarter due to seasonal factors. However, competition is expected to intensify especially in the premium segment. In the MX business, we expect a decrease in both smartphone shipments and ASP in Q4 as well as a decline in tablet shipments compared to the previous quarter. We aim to continue robust sales of AI smartphones, including our foldable devices and the S25 series, and we'll also press forward with expanding Galaxy ecosystem product sales in conjunction with seasonal demand, focusing on premium new products. Although we anticipate intensified competition and price increases in key components such as memory, we will persist in our efforts to achieve year-on-year annual revenue growth and maintain profitability through flagship focused sales and efficiency improvements across all processes. Next, I'll share our outlook for 2026. The smartphone market is projected to be roughly flat in both value and volume. Within the premium segment, the ultra premium segment is expected to see significant growth, especially around foldable devices. The mass segment is also anticipated to grow, mainly focused on higher price points. For ecosystem products, while tablets are experiencing a slowdown in replacement demand, the notebook PC segment is expected to expand due to growth of AI PCs and Windows 10 replacement demand. Additionally, the watch and TWS markets are projected to grow as interest in health and sports devices, together with the expansion of AI features. And next, we will continue strengthening our leadership in AI and form factor innovation, maintaining our strategy focused on expanding flagship sales. At the same time, we plan to drive growth across all segments by expanding into new regions and channels as well as upselling based on product competitiveness to solidify our leadership in volume. The S26 series will revolutionize the user experience with a user-centric, next-generation AI experience, a second-generation custom AP and stronger performance, including new camera sensors. For foldable devices, we plan to continue form factor innovations to strengthen our product lineup and provide new experiences aiming to expand our customer base. In ecosystem products, we aim to increase premium product sales with superior products and more advanced and intuitive Galaxy AI features. In particular, we will continue to enhance health AI experiences in our watches and further expand our TWS lineup in order to create new demand. Through these efforts, we will continue our business growth momentum even in the face of anticipated challenges next year. Thank you. Mark Kim: Hello, everyone. I'm Mark Kim from the sales and marketing team of Visual Display. Let me brief you on the market conditions and our results in the third quarter of 2025. In the third quarter, TV market demand increased quarter-on-quarter due to seasonality. However, it is expected to decrease slightly year-on-year as global TV market demand remains stagnant. For Samsung, we achieved solid sales growth in premium segment, including new QLED OLED and large screen TV. In response to intensifying competition in the entry-level market, we also diversified the QLED and 75-inches-and-above lineups to expand sales. If so, our profitability decreased year-on-year due to stagnant TV market demand, declining sales and increased costs driven by intensified competition. Now let me go over the outlook for the fourth quarter of 2025. In the fourth quarter, TV market demand is expected to increase slightly year-on-year although competition is likely to intensify with the year-end peak season. For Samsung, through strategic collaboration with major channel partners, we will strengthen our sales program for premium and large screen TVs to preemptively capture peak season demand and achieve a turnaround in the second half of the year. The TV market in 2026 is projected to grow slightly compared to this year. Also, the portion of strategic products such as QLED, OLED and large screen TVs above 75 inches, which are our core focus, is expected to expand further. For Samsung, we will strengthen premium leadership based on our innovative 2026 new lineup, including micro RGB and OLED. In particular, with our new form factors, micro RGB, we will secure new category in advance and reinforce our technological edge. At the same time, we will continue enhancing the competitiveness of the volume segment to drive a turnaround in revenue. By continuously advancing our AI features, we will deliver differentiated customer experience and solidify our leadership in the AI TV market. Lastly, the service business will drive solid profitability and growth momentum by advancing TV plus content and advertisement. Thank you. Daniel Oh: Thank you, Mark and all the other executives. That concludes our presentation on the third quarter performance of 2025 and brings us to the Q&A session which will be conducted in Korean. Questions regarding company-wide matters will be addressed by our CFO, Soon-Cheol Park, and questions for other business segments will be answered by business representatives. Operator: [Interpreted] [Operator Instructions] The first question will be made by [indiscernible] from Citigroup. Unknown Analyst: [Interpreted] Yes. First, congratulations on strong performance. I think recently on the semiconductor and memory side. I have one question for Memory and then for the overall company. In the case of Memory, it does seem that you have achieved strong performance in the third quarter. Could you explain more about third quarter bit growth and also pricing dynamics? And also, what is your outlook on the memory business for the fourth quarter? My second question is regarding your share buyback program. I understand that Samsung Electronics share buybacks have recently been completed and finished. Could you provide further details on the current status? Jaejune Kim: [Interpreted] Yes, let me address third quarter Memory performance and fourth quarter outlook. Well, with the expansion of inference applications and wider adoption of agentic AI, AI-related CapEx among data centers has been increasing even more significantly versus our initial expectations. And we continue to see strong demand in the Memory market for both DRAM and NAND driven by server applications. Also, for mobile and PC applications, with the industry providing priority supply to address AI server demand, there are growing concerns of supply shortages, and we have seen a rise in market prices. So already strong AI-related demand has become even stronger, driving the overall memory market. And in the third quarter, we also have expanded sales primarily of AI-related products to capture that demand. For DRAM, the expanded sales of HBM and high-density DDR5, LPDDR5X and GDDR74 servers, achieving big growth in the mid-teens percentage. For NAND, our focus was on profitability and we were able to proactively address demand for high margin services fees, recording around 10 percentage bit growth. Consequently, third quarter bit shipments outperformed our guidance, both DRAM and NAND, with a further reduction in our inventory levels. In the third quarter, impacted by rising pricing trends across the broad memory market, also increase in HBM sales mix. DRAM ASP rose by mid-10% Q-on-Q and then by mid-single-digit percentage. Profitability-wise, as we explained, inventory valuation adjustments in the previous quarter were reduced, partially contributing to improved earnings performance. Also, in the fourth quarter with major CSPs expected to expand CapEx, solid AI-related demand will continue. Meanwhile, on the supply side, with inventory across the industry dropping to subnormal levels, supply is expected to be highly limited, and rising prices are expected to increase further for DRAM and NAND across all applications. Given these conditions, we intend to continue our profitability-focused operations. For DRAM, while actively capturing HBM3E demand, we'll also increase the share of high-margin products for server applications. Within servers, we'll focus on high-value add products such as high-density DDR5, LPDDR5X to drive sales. That being said, as overall inventory levels come down, our bit shipment growth is likely to be limited to the low single-digit percentage in the fourth quarter. In NAND, as we continue to transition to V8 and V9, we'll also look to expand sales of high performance, 16 terabytes and above TLC SSDs for AI in foreign servers. Meanwhile, we'll ramp up supply of ultra-high density QLC SSD, which we collaborate on with large-scale data centers, starting from the fourth quarter onwards. However, as inventory has been declining at a faster pace and made continued migration of legacy lines to advanced nodes, bit production loss may be inevitable in the short term. So we expect fourth quarter bit shipments to come down to around 10% on a Q-on-Q basis. However, the share of server SSDs in our sales mix is expected to increase substantially. Soon-Cheol Park: [Interpreted] I will provide an update regarding our treasury shares. In November 2024, we announced a phased share repurchase program of KRW 10 trillion, which was fully completed by September 29. This was ahead of our original target date and the revised target stated in the third share repurchase disclosure. By executing the share repurchase within a shorter time frame, we aim to actively enhance shareholder value. In addition to the annual dividend of KRW 9.8 trillion, the company also completed further share repurchase during the quarter, reinforcing our active approach to shareholder returns. Also following the completion of the share repurchase regarding the possibility of additional returns, the management and the Board are fully aware of the market's increased interest. As a result, the company is continuously reviewing strategies to enhance long-term shareholder value. Additionally, excluding those reserved for employee compensation, we'll decide on the appropriate timing to cancel the remaining repurchase shares in the near future. Collectively, these actions reaffirm our commitment to creating long-term value for our shareholders. Thank you. Operator: [Interpreted] The next question will be by Mr. Kim Dongwon Dean from KB Securities. Dongwon Kim: [Interpreted] Yes. Congratulations on the highest performance in 3 years. I just have one question for HBM. I think there has been a great deal of recent interest on whether Samsung Electronics passed the final qualifications from NVIDIA or not for HBM3E. And generally, on the status of your HBMs, so could you provide an overview of your HBM3E and HBM4 business and also your sales outlook for HBM in 2026? Unknown Executive: Yes, let me take your question on HBM. First of all, I must say that regarding our HBM qualifications, we are quite aware that the market is very interested. But due to our NDA commitments with our clients, I'm afraid we are not able to comment further. What I can share with you at this point is that we are seeing HBM demand grow at a faster pace than supply, and that we have been expanding HBM3E mass production and sales to all of our customers. As a result, in the third quarter, our HBM bit shipments increased by mid-80% Q-on-Q. And excluding some small tail-end sales of legacy HBMs, our overall sales mix is now fully transitioned to HBM3E. For HBM4, as we explained at our earnings call late July, our development work is already finished, and we have shipped samples to all customers and are ready to start mass production and delivery in line with customers' required project time lines. One thing to look at regarding HBM4 commercialization is that as competition intensifies among customers for GPU performance, this has prompted some of the customers to change their original plans, and they have been asking for HBM4 with even stronger performance. From the start-up phase of our development work on HBM 4, we have made it a point to reflect these market needs in advance of the market, setting our performance targets above customer requirements in all our developments. Samples shipped to customers to date are fully capable of meeting 11 Gbps plus performance on low power consumption. Meanwhile, there is now fiercer demand for improved performance from AI applications because we expect a rise in demand for related HBM4, we will be proactive in executing on necessary investments to expand our 1C nano capacity. Soon-Cheol Park: [Interpreted] Let me address our sales forecast for HBM next year. While our 2026 HBM bit production plan was set reflecting a significant Y-o-Y increase, we have already secured customer demand -- significant customer demand for the planned volumes. However, as we -- as additional customer interest keeps coming in, we are internally reviewing possible capacity expansion. That's said, the recent rise in conventional DRAM prices has resulted in a sharp improvement in profitability. So for any additional product mix, we will be considering the relative profitability of HBM versus conventional DRAM. Any additional capacity expansion will also be set in an adequate level as we continue to monitor evolving market conditions. Operator: [Interpreted] The next question will be Mr. Jay Kwon from JPMorgan. H. Kwon: [Interpreted] This is Kwon Jay Hyun from JPMorgan. My first is on Memory. This is an extension of the prior question. Could you share your outlook on the memory market for 2026? And second, I understand that the company has recently announced an expanded stock compensation scheme for all employees and executives. So could you explain more about this in further detail? Jaejune Kim: Yes. So the 2026 Memory market outlook, let me take that. Next year, we expect the Memory market to continue growth momentum continuously driven by AI application demand. As DRAM requirements become more advanced for AI use cases, the high-performance HBM4 market is expected to emerge at full scale, while server DRAM will continue to shift toward higher capacities. And as industry supply tilts towards HBM and server DRAM, Mobile and PC applications will likely experience supply constraints. For legacy products like DDR4, LPDDR4X, GDDR6, as legacy processes accelerate transition to advanced cutting nodes across the industry, supply constraints have already been impacting prices, which rose sharply in the second half. This constrained supply condition is expected to continue next year as well. For NAND, similar to DRAM, demand is likely to increase mostly around high-performance, high-density products for AI. Also a supply shortage in nearline HDDs may solidify demand for substitute products, LC SCDs. And inventory -- industry inventory levels may bottom out faster than initially expected. So consequently, next year, amid overall bullish market conditions, even when assuming our CapEx and expansion and maximum production, customer demand will still exceed available supply and our available supply will remain far short of meeting customer demand. That said, for the second half of 2026, given various geopolitical uncertainties such as tariffs or export controls on high-end AI chips. We are looking more cautiously at the possible impact to market conditions. Even under such market uncertainties, we will continue to strengthen the competitiveness of our products in line with market demand and we plan to expand the supply of AI-related products, targeting the high-growth area markets, we'll focus on commercialization of HBM4 with differentiated performance, expanding sales of high-density, DDR5, SOCAR, GDDR7 and server SSDs, with products like 10.7 Gbps LP, DDR5 and UFS 5.0, will also actively address specialized demand for on-device AI to lead the market. Soon-Cheol Park: [Interpreted] Next, I'll provide an update regarding employee stock compensation. As reported in the media on October 14, to support mid- to long-term value creation, we plan to use performance stock units, or PSUs, and we'll expand stock compensation and the NPI performance incentive to include all employees. The goal is to motivate our people to focus on long-term performance and faster mutual growth across the company through this foundation. Under the performance stock units or the PSU program, the final number of shares granted will be determined by the stock's 3-year performance, and the granting of shares will then be made in installments over 3 years. This is an advanced compensation method linked to the company's future performance designed to align employee rewards with a stock price and enhance shareholder value. Next, the OPI stock compensation program will be expanded from executives only to include all employees starting from the payout in January 2026. The program for executives which began in January 2025 to strengthen responsible management will be available company-wide. Of the KRW 10 trillion worth of treasury shares repurchased over the past year, excluding the portion allocated for employee stock compensation, KRW 8.4 trillion worth will be canceled at an appropriate time, consistent with our previous disclosure. The KRW 1.6 trillion worth of treasury shares repurchased for employee stock compensation will be used for existing programs such as OPI, while additional shares for the newly announced PSU program will be purchased in the future. The specific acquisition period and volume will be determined in consultation with the Board and disclosed to shareholders accordingly. Overall, linking employee compensation to the stock price enables employees to focus on enhancing the company's value and delivering long-term performance while providing direct incentives to increase shareholder value so that we can remain committed to enhancing corporate value over the mid- to long term. Thank you. Operator: [Interpreted] The next question will be by Mr. Han Dong Hee from SK Securities. Dong Hee Han: [Interpreted] Yes, this is Han Dong Hee. I'm in charge of semiconductors at SK Securities. I have a question on foundry and another on smartphones. First, for foundry, it seems third quarter loss appears quite noticeably reduced versus the second quarter. What are the main reasons and drivers? Do you expect this improvement to continue into the fourth quarter. And for smartphone, in terms of profitability, amid the rise in memory and other component prices, do you think that you will be able to maintain current levels of profitability? Sukchae Kang: [Interpreted] Yes, let me answer your question on foundry. So in the first half of this year, there was impact from U.S.-China sanctions on advanced AI chips. And we did see an increase in certain one-off costs such as inventory write-downs from products that became unsellable due to sales restrictions. There was also impact from the sale of certain products produced at high cost during a period of low utilization in the second half of 2024 and also low utilization first half of 2025. However, in the third quarter, one-off costs from the second quarter decline and we saw utilization improve primarily around the advanced processes, resulting in cost savings, which combined led to a significant reduction in third quarter loss. In the fourth quarter, we will be ramping up mass production of new products, applying first-generation 2 nano processes. And we also expect an uptick in sales in high-demand HPC and auto products from main customers in the U.S. and China as well as memory products overall. We will engage in ongoing activities to further improve utilization and for cost efficiency gains, and we expect this to present additional improvements to our earnings. Daniel Araujo: I'll take your question on MX. So memory prices have seen a significant rebound beginning in Q3 with a steeper rise expected in Q4, leading to increased material costs for MX. Given the rising cost pressures, we aim to leverage the strong sales momentum of the Fold 7 -- Z Fold 7 as well as the continuing strong sales of the S25 series to drive revenue growth from high-margin flagship models. We will also drive sales of our newly launched Tab S11 and Watch 8 series to strengthen our premium market position in ecosystem products. At the same time, we're continuing efforts on process optimization, such as using standardized components as well as sharing components across product lines, while also pursuing efficiency improvements and cost reduction activities. Thank you. Operator: [Interpreted] The next question will be by Mr. Nicolas Gaudois from UBS. Nicolas Gaudois: So earlier, you have explained that you expect the memory business to be fairly strong in 2026. So in light of that outlook, could you directionally guide us on what Samsung memory CapEx will be looking like in 2026 compared to 2025 and maybe give a bit of clarity on the DRAM versus NAND flash. Jaejune Kim: [Interpreted] Yes. Let me address your question on memory CapEx. In 2026, we plan to maintain a proactive stance toward investments in memory. In fact, we are considering a significant year-on-year increase versus 2025. For several years now, we have been making steady investments in infrastructure to secure clean rooms for the future. Now building on that as a base, we are looking to execute facility investments at a scale required to address rising demand. For DRAM to address the rise in AI demand, we'll build on our 1b nano -- the 1b nano product portfolio and focus on capital investments to boost cutting-edge bit production. Also to respond to mid- to long-term future demand, we will also carry out some construction investments as well. And DRAM share of total investments will likely increase versus this year. For NAND, after confirming market demand, we intend to gradually increase the share of advanced processes in terms of our future directionality. Operator: [Interpreted] The next question will be by Mr. SK Kim from Daiwa Securities. S. K. Kim: [Interpreted] Yes. I'm Sung Kyu Kim from Daiwa. I have a question for foundry and another for a Samsung Display. So for foundry, it seems that your investments in foundry for this year were significantly cut. So could you explain the reasons why? What is your direction for investments next year? What will be your areas of focus investment? And second, for display. Other than smartphones, it seems that OLED penetration is increasing in these other non-smartphone applications as well. So what is Samsung Display's strategy in that regard? Sukchae Kang: [Interpreted] Yes, let me address the foundry CapEx question. This year, we continue to invest for the future to secure competitiveness in our 2 nano and 1.4 nano advanced node processes. CapEx for advanced production, however, was actually reduced year-on-year as we focus mostly on conversion of existing lines and line enhancements and upgrades. In 2026, we will maintain our basic position of flexible CapEx linked to customer demand and customer acquisition. We plan on finishing up construction on our new Taylor Fab for ramp-up of production and we'll be making facility investments toward our goal of supplying advanced semiconductor products to diverse customers in the U.S. In parallel, we'll also be preparing for mass production of new processes such as second-generation 2 nano and 17 nano CLS so CapEx will likely increase to 2024 levels. Joonyoung Park: [Interpreted] I'll give you an answer on the SDC. We have been extending our differentiated technologies proven over many years in smartphones to areas such as IT and auto, leading the expansion of the OLED ecosystem. Recently, across various products, including IT, automotive and watches, the adoption of OLED has been increasing, resulting in a growing contribution to the company's revenue. In particular, with the expansion of AI IT devices, market demand for low power and high-resolution OLED is increasing, and the adoption of OLED in IT products is expected to continue growing. In response, at the new 8.6 generation IT line, we plan to produce competitive products in 2026 to mainstream the IT OLED, while strengthening production and customer support capabilities to secure a mid- to long-term growth trajectory. For automotive products, we'll leverage our competitive edge in rigid OLED to expand our business not only in premium, but also in volume segment while applying UDC new form factors and other differentiated technologies to gradually increase OLED market share. We will further strengthen our competitive advantages in existing businesses while expanding our new growth industries including IT and automotive to establish a stable and balanced business portfolio. Daniel Oh: [Interpreted] I'll just take one more question due to time constraints. Operator: [Interpreted] The next question will be made by Giuni Lee from Goldman Sachs. Giuni Lee: I'd like to ask about the DX division. Could you please provide any update on the status of the Exynos adoption as well as of AI usage patterns for smartphones? Also, the second question is centering on Chinese brands. Price competition in the TV market continues to intensify. What impact will it have on your TV business? And what are your strategies? Daniel Araujo: Sure. So we, in MX, have clear standards for the experiences that each of our products should provide to customers, and we thoroughly evaluate APs across many dimensions and select ones that meet our criteria. This year, the Exynos AP was adopted in several of our products, including the Flip 7 and some A-Series models. For next year's S26, the evaluation for the AP is still underway, so we can't yet confirm on next year's flagship plan. Regarding AI usage patterns, this year's flagship devices show strong AI adoption with usage rates of Galaxy AI features of 60% weekly and 80% monthly. Features like now brief, which provides personalized information and photo assist for AI photo editing has been well received by users. And going forward, we plan to integrate more AI applications through our AI agent in order to streamline complex tasks and expand AI utilization across Galaxy devices. Unknown Executive: [Interpreted] I'd like to give you an answer on the TV part. In the TV market, aggressive pricing by competitors has boosted demand for entry-level models within each segment, heightening competition. Amid this difficult environment, we'll leverage our differentiated TV competitiveness to restore market share and return to a growth trajectory. First, we plan to launch a new form factor, micro RGB, to reinforce our technology leadership. At the same time, we'll expand OLED sales to drive premium growth and maximize synergies between micro RGB and the premium segments. Second, in the volume segments, we'll expand the application of our TV's key strengths, AI features and lineups while strengthening our real QLED marketing communication to counter competitors, price-focused strategies and shift the basis of competition toward consumer value. In September, we launched a conversational AI platform that provides natural interactions with Bixby to offer visually tailored information and recommendations called Vision AI Companion. In 2026, we plan to expand its availability across more lineup and countries to lead the AI TV market. Also, we will highlight the excellence and safety of our QLED TVs, which are the only products certified with real quantum dot display recognition. In addition, within the ultra-large TV segment, we'll expand our entry lineup, thereby strengthening our leadership in the 98-inch and above ultra-large TV market, which is showing a rapid growth even within the volume segment. Last, our service business, which continues to deliver strong profitability will further be expanded as a new growth driver for our TV business. TV Plus, our SaaS service, will differentiate itself by securing exclusive and live content. And to drive growth in performance-based advertising revenue, we will also secure new advertisers. Thank you. Daniel Oh: [Interpreted] Thank you for the answer. I would like to thank everybody who shared their valuable opinion. And that completes our conference call for this quarter. We wish all of you and those close to you to stay strong and in good health. We thank everyone for your participation today, and we look forward to speaking with you. Thank you. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]

Operator: Hello, everyone, and welcome to the Samsung Electronics 2025 Second Quarter Financial Results Conference Call. I will be your coordinator. [Operator Instructions] As a reminder, this call is being recorded. I would now like to turn the conference over to the Investor Relations team. Please go ahead. Daniel Oh: Hello, everyone. Thank you for joining us today for Samsung Electronics' Second Quarter 2025 Earnings Call. I am Daniel Oh, Head of Investor Relations. It's my great pleasure to welcome you all to this earnings call. Before we proceed with the presentation, I want to take a moment to address some important housekeeping and legal matters. As a reminder, you can follow today's broadcast and presentation deck on our IR website at www.samsung.com/global/ir. Additionally, this call is being recorded and webcast, and it will be accessible on the same platform for those who wish to review it at a little time. We ask for your full attention and cooperation as we move forward since this session is designed to provide you with comprehensive insights into our financial performance and strategic outlook. We kindly request your attention to the fact that this conference call may include forward-looking statements, which are based on our current expectations regarding future events. Please note that these statements are not intended to serve as guarantees of future performance. Our actual results could differ materially from these expectations due to a variety of factors, including, but not limited to, market conditions, regulatory changes and operational challenges. We appreciate your understanding and attention to these important considerations as we strive to provide transparent and correct information. With that, I would like to extend my gratitude once again for your presence and participation. Let us now proceed with the presentation, during which, I will go through the key highlights of our second quarter performance, capital expenditures and sustainability management, which will be then followed by EVP Soon-Cheol Park, our Head of Corporate Management Office and CFO, with our outlook for the second half of the year and comment on shareholder returns. We will then turn the call over to our executives who will take this opportunity to discuss their respective businesses in detail. Following their presentations, we'll open the floor to our valued analysts for any questions they may have. Please note that this call is planned to last approximately 1 hour, and we appreciate your time and attention throughout the discussion. In addition to myself and our CFO, the other executives joining today's call are Jaejune Kim -- EVP, Jaejune Kim, representing Memory; VP, Hyeok-man Kwon for Systems LSI; VP Mijung Noh for Foundry; EVP Joonyoung Park for Samsung Display Corporation who is joining us for the first time; and VP Daniel Araujo for the Mobile eXperience. Last but not least, EVP KL Roh for Visual Display. Let us commence with the details of our consolidated financial performance for the second quarter of 2025. Our total revenue decreased by 5.8% quarter-on-quarter to KRW 74.6 trillion. Turning our attention to the DS division. Sales rose by 11% sequentially, driven by increased sales of high value-added memory products for server such as HBM3E and DDR5 as well as the expansion of major customers in foundry. In the DX division, revenue declined by 16% compared to the previous quarter, due to the diminishing launch effects of new smartphone models, coupled with intensified competition in TV and other segments. On the cost management front, SG&A expenses were successfully reduced by KRW 0.6 trillion, bringing the total to KRW 20.8 trillion. This reduction was achieved through the efficient management of sales and marketing costs reflecting our commitment to optimizing operational efficiency. At the company level, operating profit stood at KRW 4.7 trillion, representing a sequential decrease of KRW 2 trillion compared to the previous quarter. Consequently, the operating margin contracted by 2.2 percentage points, settling at 6.3%. During the second quarter, the DS division, despite the mentioned revenue growth, recognized inventory value adjustments in the memory business and booked one-off costs related to the impact of the export restrictions related to China in the non-memory business. In the DX division, operating profit declined quarter-on-quarter, weighed on by a sequential decline in sales volume following the launch of new smartphone models in the first quarter. Regarding currency effects, the relative strengthening of the Korean won against the U.S. dollar has adversely impacted our operating profit by approximately KRW 0.5 trillion compared to the previous quarter. This impact is primarily observed in our Component business, where a significant portion of transactions are conducted in U.S. dollars. Now turning to capital expenditures. In the second quarter of 2025, CapEx experienced a decrease of KRW 0.9 trillion on a quarter-on-quarter basis, resulting in a total of KRW 11.1 trillion. Of this amount, KRW 9.8 trillion was allocated to the DS division, while KRW 0.8 trillion was invested in the Display business. This strategic allocation reflects the company's ongoing commitment to optimizing distribution across its key business areas, ensuring sustained growth and operational excellence. In Memory, investments remained steady quarter-on-quarter as we continue the transition to advanced nodes, not only strengthen competitiveness in HBM and other high value-added products but also to ensure readiness for anticipated demand. Foundry CapEx was down quarter-on-quarter, reflecting on a conservative investment approach focusing on line conversions. For Display, CapEx increased slightly quarter-on-quarter due to line upgrades for small to midsized panels. I will now highlight our key achievements in sustainability management. On June 27, Samsung Electronics published its 2025 sustainability report. The report incorporates materiality assessments that align with global disclosure standards and it features broadened disclosure of climate-related scenarios to reinforce compliance with the international requirements. In the environmental domain, we remain committed to securing renewable energy as we demonstrated by the signing the power -- new power purchase agreements at key sites. As a result, the DX division achieved a renewable energy transition rate of 93.4%, while in the DS division, we are scaling efforts to reduce direct carbon emissions by continually expanding the implementation of our internally developed regenerative catalytic system at our production sites. Also, we are committed to reducing Scope 3 carbon emissions across the value chain. As an example of our diverse initiatives, the application of high-efficiency energy technologies in major products achieved on average power reduction of 31.5% compared to the 2019 levels. Meanwhile, we continue to advance our sustainability goals through the broad application of recycled materials in newly launched Galaxy Z Fold7 and Z Flip7. The new models incorporate an additional recycled material compared to their predecessors, bringing the total number to 9, with recycled materials accounting for 13.7% of the total weight for the Z Fold7 and 18.2% for the Z Flip7. Notably, the cathode materials used in the batteries are made with 100% recycled cobalt and lithium. Once again, we reaffirm our unwavering commitment to further enhancing and expanding our sustainability initiatives. We recognize the critical importance of these efforts in addressing global environmental challenges and contributing to a more sustainable future. Our dedication to this cause remains steadfast, and we are actively exploring innovative strategies and solutions to ensure that our sustainability efforts are both impactful and enduring. With that, I will now pass the conference call over to our CFO, Soon-Cheol Park. Soon-Cheol Park: Thank you, Daniel, and good morning, everyone. I am Soon-Cheol Park, CFO of Samsung Electronics. It's a pleasure to join you once again on our earnings call. I will now present our outlook and review our shareholder return policy. Let's start with the outlook for the second half. Despite ongoing global economic concerns driven by uncertain trade policies and geopolitical tensions, the IT industry appears poised for a gradual recovery, fueled by increasing momentum in AI and robotics. In this context, we anticipate a rebound in our performance in the second half following a bottoming out in the second quarter with the earnings expected to improve steadily as the year progresses. In the DS division, we are making all our efforts to restore fundamental technology innovation. Also, we've taken steps to address operational inefficiencies and have reflected inventory value adjustment in the second quarter. Looking ahead, we are truly preparing for a turnaround in the second half. In addition, we aim to further reinforce our technology leadership and proactively position ourselves to meet the growing demand for high value-added and AI-driven products. We expect the demand for memory to maintain its momentum across all applications. In this regard, we are actively focused on AI-related products such as HBM3E as well as high-capacity, high-performance offering. For Systems LSI, we are working to drive sales growth by enhancing the capabilities of our flagship SoCs and capitalizing on the rising demand for ultra-high-resolution image sensors. For our Foundry business, we expect a gradual improvement in profitability from expanding our customer base and utilization rates while strengthening our 2-nano technology. In the Display business, we anticipate improved results supported by new product launches from key smartphone customers. Additionally, we plan to expand sales in the IT, auto, monitor and other segments. In the DS division, with the uncertainties stemming from tariff policies likely to persist, we are seeking diverse methods to minimize the related impact. In the MX business, we will drive sales of our premium mobile AI devices, including our newly launched foldables and aim to lead the market by expanding our ecosystem through innovative form factors like the upcoming TriFold device and our first XR headset as well as services such as connected health. As the world-leading seller of mobile devices, MX will establish a distinctive AI ecosystem through the collaboration with the leading global AI and tech companies by positioning our devices as the central platform of truly open and advanced AI ecosystem, will secure AI competitiveness while continually driving business innovation. For the VD business, we'll further solidify our market leadership with strengthened AI features to deliver unique viewing experiences amid diverse challenges due to stagnant growth and intensified competition in the market -- TV market. For the DA business, we aim to reinforce sales of innovative AI-based products and focus on aligning the business around high value-added segments such as HVAC. Overall, we are actively driving AI transformation across all business to enhance the internal productivity and strengthen business capabilities. We will extend our leadership in launching products with internally developed AI functionalities and maximize the product differentiation and service value by connecting AI infrastructure models, devices and services. Moving on to shareholder returns. Today, the Board of Directors approved a quarterly dividend of KRW 367 per share for both common and preferred stock. Under our shareholder return policy from 2024 to 2026, the annual payout of regular dividends is set at KRW 9.8 trillion and the quarterly distribution of KRW 2.45 trillion for the second quarter is scheduled for payment in late August. In November 2024, we announced the KRW 10 trillion share repurchase program. As of May 2025, we acquired shares worth KRW 6.1 trillion across 2 separate phases. The KRW 3 trillion worth of shares acquired in the first phase were canceled in February, while the KRW 3 trillion worth of shares from the second phase, excluding common shares was KRW 0.5 trillion, earmarked for executive and employee compensation are scheduled to be canceled in due course. For the third and finance share repurchase or KRW 3.9 trillion approved by the Board of Directors on July 8, KRW 1.1 trillion worth of shares will be allocated for executive and employee stock compensation, including incentives with the remaining balance of KRW 2.8 trillion designated for shareholder returns. We expect to complete the full program on October 8 ahead of the original 1-year target of November 14. Our primary objective is to fulfill our commitment to shareholders and executing digit buybacks more quickly than originally planned shows our dedication to delivering on our promise in a timely manner. The KRW 10 trillion repurchase program will be completed as promised. And in the near future, we'll determine the appropriate timing to cancel the repurchased shares aimed at enhancing shareholder value. Thank you. Daniel Oh: Thank you, CFO Soon-Cheol Park. Now each executive from different business segments will provide more detailed information on their respective business units second quarter performance, followed by the outlook. We will then start with Jaejune Kim, EVP of Memory business. Jaejune Kim: Good morning. This is Jaejune Kim from Memory Global Sales and Marketing. In the Memory market in the second quarter, the recovery of demand became more visible than previously expected, thanks to strong AI server demand. And demand for server SSD also increased as previously suspended data center projects resumed. In addition, we saw an increase in the market price for DRAM legacy products as the supply reduced with the impact of the industry's capacity transition to cutting-edge nodes. In this situation, we increased the sales of HBM3E products and responded to robust demand for servers while expanding the portion of high-density DDR5 products. Moreover, we delivered initial mass products of LPDDR5x for AI servers to the major customer. As a result, compared to the previous quarter, our bit growth for DRAM increased by low-teens percentage in line with the initial guidance. For NAND, we exceeded our bit guidance as the bit growth increased by high 20% compared to the previous quarter by actively responding to server SSD demand improvements. Thus, our inventory level decreased significantly. In the second half of the year, although uncertainties such as tariffs are likely to persist, AI demand should remain robust, thanks to continued investments at major cloud service providers. Therefore, we expect server demand for both DRAM and NAND to remain strong. In addition, our demand for PC and mobile is expected to show momentum, driven by seasonal effects in the second half and the spread of on-device AI. We plan to keep operating our business focusing on profitability for both DRAM and NAND in the second half of the year. For DRAM, to align with strong AI server demand, we plan to proactively address the trends toward high density and product diversification with our HBM, high-density LPDDR5, LPDDR5x for AI servers and so on. For NAND, as we expect our inventory levels to be normalized, we will prioritize the sales of high-density and high-performance SSDs for server and storage. And we will continue to enhance our cost competitiveness by accelerating the transition to V8 for all applications. Thank you. Hyeok-man Kwon: Good morning. This is Hyeok-man Kwon from the System LSI business. In the second quarter, macroeconomic growth forecasted faced repeated downward revisions, underscoring a notable economic slowdown. Nevertheless, the smartphone market maintained a gradual recovery, bolstered by temporary U.S. tariff exemption and Chinese subsidies. In addition, the launch of new models by major customers further catalyzed the component demand, contributing positively to market dynamics. Amid expanding external uncertainties, we delivered resilient performance through strategic product mix optimization and market diversification. In the SoC business, we commenced mass production and expand the supply of flagship products utilizing the GAA process, which is specialized in improving performance and power consumption for the future products. Combined with the sensor business' robust sales of 200 megapixel and wide product lines, these efforts drove record-high revenue for the first half of the year. However, increased development cost for our advanced products constrained the extent of our profitability improvement. Looking ahead to the second half, the smartphone market is projected to experience moderate growth momentum. While the first half benefit from distributors' inventory buildup to mitigate tariff risk and the impact of Chinese subsidies, demand expansion is expected to be limited as major customers focus on depleting accumulated inventory. In the SoC business, we will prioritize stable supply for flagship models launched in July, while concentrating on securing process and yield competitiveness for next-generation flagship products to secure entry into major customers 2026 lineups. In the sensor business, we will continue to lead the ultra-high-resolution market and expand the adoption of Nanoprism technology based on products with enhanced low-light image quality. These initiatives aim to sustain revenue and enhance the profitability. Through this strategic efforts, we are committed to strengthen our competitive position and driving sustainable growth in the challenging market environment. Thank you. Mijung Noh: Hello, everyone. This is Mijung Noh from the Foundry business. In the second quarter, the broader market faced continued headwind from muted mobile demand and persistent U.S.-China trade restriction. Even so, solid momentum in AI HPC application underpinned overall industry growth. We commenced full-scale volume production of 3-nanometer GAA mobile products and expanded sales on the back of strong demand from U.S. and Chinese key customers, resulting in a significant quarter-over-quarter revenue increase. Even so, U.S. export control on advanced AI chips for China led to sales restrictions and related to related inventory value adjustment, while sustained lower fab utilization at mature node weighed on profitability. Despite these challenges, we completed reliability assessments for the first-generation 2-nanometer process, ensuring seamless readiness for mass production. Additionally, we established the technical infrastructure necessary to support customer design enablement for the second-generation 2-nanometer and performance and power optimized 4-nanometer processes in a timely manner. These efforts bolstered our advanced node competitiveness, enabling us to secure increased orders from major customers. In mature nodes, we enhanced our specialty process capabilities by completing the development of PPAC optimized low power FinFET process for image sensor applications. This has allowed us to actively pursue and expand new business opportunities. Looking to the second half, geopolitical uncertainty driven by intensifying U.S.-China technology rivalry and potential U.S. semiconductor tariff policies will likely persist. Nevertheless, robust AI and HPC demand is expected to sustain strong growth and advanced nodes. We anticipate revenue improvement in the second half, driven by the full-scale mass production of new mobile products using the first-generation 2-nanometer process. By continuing to expand sales to Chinese and U.S. customers with strong demand, we aim to simultaneously enhance fab utilization rates and profitability. In advanced nodes, we will focus on stabilizing the 2-nanometer process while ensuring mass production readiness for automotive-grade 4-nanometer processes supported by stable yields. Furthermore, we will strengthen our advanced node portfolio by securing 2.5D, 3D advanced packaging technologies. For mature node, we will enhance our competitive edge in specialty technologies, including 14-nanometer automotive, RF millimeter wave and 17-nanometer DDI platforms. By leveraging these advancements, we will actively pursue new business opportunities and expand customer orders. Thank you. Joonyoung Park: Good morning. This is Joonyoung Park from Samsung Display. I will now brief you on our results for the second quarter. For the Mobile Display business, we achieved revenue growth compared to the previous quarter despite the stagnant demand in the smartphone market. The growth was supported by timely supply of new smartphone products to our major customers and increase in sales for IP and automotive segments. For the large display business, sales volumes for TV and monitors increased quarter-on-quarter, driven by strong performance of QD OLED. In detail, we responded to our major customers' needs in the TV market. And for monitors, following our high-resolution products, we further strengthened our premium lineup with the launch of 500-hertz refresh rate model and achieved sales growth, especially in the gaming market. Now I will share our outlook and strategies for the second half of the year. For the Mobile Display business, we expect our sales to increase as our major customers launch flagship smartphones. However, uncertainties are likely to persist due to external factors such as tariff. In response, we will concentrate on driving sales growth and maintaining our leadership in the smartphone market by further enhancing our differentiated technologies. These include the world's first commercialized polarizer-free technology, which enables low power consumption as well as slim foldables with enhanced durability. We will also continue to expand sales in IT and automotive segments. Lastly, I will discuss our outlook for the large display business. In the premium TV market, the OLED adoption rate continues to rise. In the second half, we will not only address demand for TVs, but also strengthen our market presence in the premium segment by continually developing high-performance products. In addition, we expect QD-OLED monitors to continue their strong momentum, driven by rising demand for gaming monitors. By offering diverse refresh rates, we aim to broaden our product lineup across both B2C and B2B sectors, accelerating the penetration of QD-OLED in the monitor market. Thank you for listening. Daniel Araujo: Hi, everyone. This is Daniel Araujo from the MX division. Let me share our results for Q2 as well as our future outlook. The smartphone market remained seasonally down in Q2 with demand declining compared to the previous quarter. For the MX business, Q2 saw smartphone shipments of 58 million units, tablet shipments of 7 million units and the smartphone ASP of $270. While smartphone shipments decreased compared to Q1 when our new flagship models were released, both revenue and operating profit showed year-on-year growth. This was made possible by robust sales of flagship models, especially the S25 series as well as strong performance across our major products, including the A-Series and tablets. Some components, including memory and displays, saw a slight decline in price versus last year, while we also continued initiatives focused on resource efficiency. And as a result, we maintained double-digit profitability in Q2. Moving on to the second half of the year. Overall smartphone demand is expected to contract slightly year-on-year due to concerns about rising tariffs in mature markets and a continued slowdown driven by persistent inflation. However, the premium segment is projected to grow modestly, driven by shifting consumer preferences toward higher-end products due in part to economic growth in emerging markets. While the tablet and wearable markets are also expected to decline year-on-year due to macroeconomic uncertainties, the TWS market is poised for growth as adoption expands in emerging markets. For the MX business, we expect an increase in smartphone shipments and ASP in the third quarter, while tablet shipments are expected to decline sequentially as we transition to new models later in the year. We will continue our flagship-first approach in the second half, and we are confident in the strong market reception of our newly launched seventh-generation foldable products, which feature significant advancements in performance, design and durability. The Galaxy Z Fold7, the thinnest and lightest model in the Fold series to date, combines the portability of a bar-type phone with the expansive display of a tablet, featuring ultra-level features such as a 200-megapixel camera. The Galaxy Z Flip7 delivers improvements in 2 key areas: design and portability and optimizes the Galaxy AI experience for the larger flip cover screen. With the integration of One UI 8 optimized for the foldable form factors, alongside an expanded lineup, we aim to drive new demand and broaden our customer base. For the Galaxy S25 series, we will focus on maintaining sales momentum with seasonal promotions as well as an earlier launch of the S25 FE. We are also strengthening the A-Series lineup with new entry-level models, while emphasizing awesome intelligence and extended OS upgrades to differentiate our product experience. Furthermore, we're expanding channel presence in growth markets to increase our market share. Beyond smartphones, we are accelerating our ecosystem strategy in the second half of the year with a range of new products designed to maximize Galaxy's competitive edge, including the next-generation form factor. First, we are set to release the Galaxy Tab S11 series, powered by enhanced AI capabilities and new mid-tier and entry-level models will complete our portfolio. In wearables, the recently launched Galaxy Watch 8 series introduces a bold new cushion design across all models and integrates Gemini for innovative AI functionality. With the refresh of the Galaxy Watch Ultra model for 2025 and the return of the Galaxy Watch Classic after a 2-year hiatus, we are poised to strengthen our position in the premium wearable market. In addition, with the pending acquisition of U.S.-based digital health care company, Xealth, we aim to accelerate the transformation of Samsung Health into a connected care platform. In TWS, our Galaxy Buds lineup will expand in order to address demand across all price segments. Meanwhile, we are also preparing to introduce next-generation innovative products, including our XR headset and TriFold smartphone this year. Our XR headset, which seamlessly integrates the XR ecosystem developed in partnership with Google as well as multimodal AI capabilities will serve as a key stepping stone in solidifying our leadership in future technologies and further expanding the Galaxy ecosystem. Despite ongoing macroeconomic uncertainties and anticipated increases in material costs, the MX division will focus on expanding flagship sales and our ecosystem business with a focus on new premium products. We will also continue to optimize operations across the board in order to maintain robust profitability. Thank you. K. L. Roh: Hello, everyone. I'm KL Roh from the Sales and Marketing team of Visual Display. Let me brief you on the market condition and our results in the second quarter of 2025. In the second quarter, TV market demand is projected to decrease slightly year-on-year due to the impact of last year's big sporting event. However, demand for premium and big TV remained solid. For Samsung, we expanded the sales portion of premium products by driving sales of Neo QLED, OLED and Super Big TV. Even so, our profitability decreased year-on-year due to stagnant TV market demand, declining sales and increased cost driven by intensified competition. Now let me go over the outlook for the second half of 2025. In the second half, TV market demand is expected to decrease slightly year-on-year as economic uncertainties raised the concern over inflation. However, the growth trend of high value-added products, including QLED, OLED and Super Big TV will continue. For Samsung, based on the new lineup with enhanced AI feature and viewing experience, we will preemptively capture peak season demand and achieve a turnaround in sales growth. In addition, we will reinforce growth engine by enhancing communication of our key strengths such as SmartThings, Knox security, slim design and App Store. Lastly, with an unmatched leadership in global TV sales for 19 consecutive years, the service business will drive solid profitability and growth momentum by advancing TV+ content and advertisement. Thank you for listening. Daniel Oh: Many thanks to all the executives who present their business updates. That concludes our presentation on second quarter performance of 2025 and brings us to the Q&A session, which will be conducted in Korean. Given that the company's presentation lasted longer than we expected, we will try to get -- receive as many questions we can today. Questions regarding company-wide matters will be addressed by our CFO, Soon-Cheol Park, and the other business segments will be answered by each business representative. Operator, you may now open the line for analyst questions. Operator: [Interpreted] [Operator Instructions] The first question will be made by Simon Woo from Bank of Korea (sic) [ Bank of America ] Dong-je Woo: [Interpreted] I am Woo Dong-je from Bank of America. I'd like to ask about tariff impact. This morning, there was a news article that U.S., Korea have reached an agreement on trade. How will it impact your business? And what's your response strategy? Soon-Cheol Park: [Interpreted] We believe that the conclusion of the negotiations between Korea and the U.S. has helped to reduce uncertainties. We will actively monitor the detailed aspects of the agreement by closely paying attention to the follow-up discussions between the 2 governments and will prepare response measures accordingly. Additionally, in mid-August, the U.S. Department of Commerce's Section 232 investigation on semiconductors and derivative products is expected to be announced, and we are paying close attention to the results. Considering the investigation includes semiconductors along with smartphones, tablets, PCs, monitors and other end products, the findings may significantly impact our business. We have been sharing our views on the Section 232 investigation directly and indirectly and are in communication with the relevant authorities of both countries. Potential risks and opportunities stemming from both the investigation and agreements will be thoroughly analyzed to prepare response measures in a way that minimizes the impact on our business. Thank you. Operator: [Interpreted] The next question will be made by Mr. SK Kim from Daiwa Securities. S. K. Kim: [Interpreted] I'm Sung Kyu Kim from Daiwa. I have some questions regarding your foundry business. So I think there was a recent announcement about the large-scale order win. So if you could elaborate more on those details. And does this mean that there's a likelihood of increased CapEx either this year or next year, including at the Taylor fab? Mijung Noh: [Interpreted] Yes. Let me answer the question on the Foundry business. Well, regarding the major client award, I would like to first seek your kind understanding. We're not able to comment on detailed contractual terms. That being said, we have won a $16.5 billion order from Tesla for a next-generation product to be built based on our advanced process technology, which demonstrates the competitiveness of our advanced process capabilities. So with this as an inflection point, we hope to win additional orders from other major customers, and we expect it to help boost higher, more stable fab utilization at our advanced nodes, including the Taylor plant, which will in turn help boost revenue and profit. Regarding investments, our goal has been to win next-gen chip awards from diverse U.S. clients as we set up our new Taylor fab, which is set to ramp up operations from 2026. Currently, we are working to strengthen local execution to ensure timely operations and customer engagement at the new fab. Meanwhile, our investments in the Taylor plant for this year is projected to be inside the scope of our existing CapEx plan for 2025. That said, when considering the ramp-up time line for the Taylor fab, we'd expect higher CapEx in 2026 versus this year. Operator: [Interpreted] Next question will be made by Jay Hyun Kwon from JPMorgan. H. Kwon: [Interpreted] This is Hyun Kwon JPMorgan. I have some questions about memory. So changes to ASP trends in the second quarter for DRAM and NAND, if you could provide some more details. And then if you look at the tentative earnings disclosure for the second quarter, it does seem that you recorded some one-off expenses. So do you expect similar one-offs in the third quarter as well? Jaejune Kim: [Interpreted] Yes. I will cover your question regarding second quarter performance for memory. So due to U.S. tariffs and other geopolitical issues, we did hold a rather conservative outlook on the memory market in the quarter. Later, however, as GPU supply conditions across the industry started to visibly improve, that's when AI-related demand really started to scale, and we saw a clear turnaround in the business cycle from the midpoint of the second quarter onwards. For DRAM legacy products like DDR4 and LPDDR4x, supply declined amid a broad shift in industry capacity to advanced process nodes, coupled with anxiety from clients over uncertainty of future supply. This led to a steep increase in market pricing across distribution channels starting in the second half of Q2. Given these conditions, we focused on capturing the short-term upside in demand for legacy DRAM like DDR4, LPDDR4X while boosting sales of advanced products such as HBM3E, DDR5, LPDDR5x and GDDR7. As a result, DRAM bit growth increased by a low teens percentage Q-on-Q, in line with our bit guidance while inventory decreased to below normal levels. For conventional DRAM, at the start of Q2, based on our conservative market view at the time, we expected ASP to drop by mid-single percentage, but pricing actually ended the second quarter up by a low single-digit percentage versus the first quarter. So after declining in Q1, ASP started rebounding in the second quarter, considering most clients do price negotiations on a quarterly basis. The uptrend in market prices will likely become more fully reflected in ASP starting in the third quarter. For NAND, driven by growing server SSD demand, bit growth increased by a high 20 percentage Q-on-Q, exceeding our prior guidance, and we saw a significant reduction in NAND inventory for 2 consecutive quarters. The rebound in demand resulted in a notable improvement in market conditions, limiting the decline in ASP to a low to mid-single-digit percentage Q-on-Q. And for some NAND products, ASP even increased slightly versus the first quarter. That being the case, Memory business earnings declined compared to Q1 due to one-off expenses, including inventory valuation adjustments, which were recognized in the second quarter as part of conservative financial management, but this is expected to significantly be reduced in the third quarter. Operator: [Interpreted] Sorry, the previous question made by Kwon Yun from JPMorgan, and this question will be made by Kim Dongwon from KB Securities. Dongwon Kim: [Interpreted] I am Kim Dongwon from KB Securities. I'd like to ask you two questions. First, with 3 major M&As this year, visibility on Samsung's strategy seems to be clearing and market expectations for a major M&A deal in the second half are also rising. What's the company's M&A strategy? And also for the display part, competition among peers to expand the smartphone market share is intensifying. What is SDC's response strategy? Soon-Cheol Park: [Interpreted] First, regarding shareholder expectations on M&A as a means to secure growth engines, we have delivered tangible results this year as promised. Following the acquisition of a controlling stake in Rainbow Robotics at the end of last year, Samsung signed agreements in May to acquire Masimo's Audio division and Global HVAC specialist FläktGroup. In July, we started the acquisition process of digital Healthcare Platform, Xealth. These M&As are a part of our strategy to swiftly respond to trends in future growth industries such as AI, robotics, data centers and digital health while further strengthening our position as a premium brand and enhancing overall customer experiences. In the first half of this year, in addition to M&As, aiming to send future technologies and explore and corporate with leading tech companies, we made venture investments of over $120 million combined in around 40 companies, mainly in AI, robotics and digital health, marking the largest half year venture investment in Samsung's history, despite the high uncertainties involving geopolitics and tariff impacts. As mentioned at the AGM, as part of our commitment to growth and shareholder value, Samsung will continually review its business portfolio while actively seeking opportunities for inorganic growth. In addition to strengthening the competitiveness of our business, we will proactively address rapid changes in global tech trends to secure technological leadership in a wide range of swiftly evolving industries such as AI, HVAC, medtech, robotics, automotive, electronics, fintech and components. We will share specifics when details are finalized. Thank you. Joonyoung Park: [Interpreted] Let me give you an answer for the display part. As the smartphone market matures, competition is intensifying. We are using differentiated strategies through technological innovation to reinforce our competitive edge. Among them, our polarizer-free low-power technology named LEAD is an industry's first technology to be developed and mass produced in 2021, where we reduced panel thickness while lowering panel power consumption by over 30%. With the recent expansion of AI, there is a growing demand for low-power and high-resolution technology in the market. With the aforementioned LEAD technology, we'll keep addressing the demand and further strengthen our competitiveness. Also, as for our foldable products, we have demonstrated our stable technological capabilities and production capacity through which we have introduced increasingly advanced technologies each year. In the latest foldable product, durability has improved as demonstrated by passing the 500,000 folding tests. And with a slimmer panel design competitiveness was also reinforced. To summarize, touch integrated and power-efficient technologies that combine LTPS and oxide and other high-spec and innovative products have been proactively introduced. Going forward, in form factors like LEAD will continue to develop performance and design differentiated technologies. Operator: [Interpreted] Next question will be made by Ryu Young Ho from NH Investment Securities. Young Ho Ryu: [Interpreted] I am Ryu Young Ho from NH Investment & Securities. I'd like to ask questions about the MX business. Fold7 is receiving better-than-expected feedback. How are the initial sales trend and sales outlook for this year? Daniel Araujo: Sure. So in light of stagnation in last year's foldable product sales, we very thoroughly revisited our consumer insights and reviewed the products from all angles. And so this year, we've significantly enhanced the product performance and the overall user experience. The Galaxy Z Fold7 and Flip7, which we unveiled at this year's New York Unpacked event reflect technological innovation that surpassed what existing foldable smartphones are capable of. They feature slimmer, lighter designs, top-tier performance, durability and seamless integration with Galaxy AI to provide real usefulness in people's everyday lives. So to provide some figures, the Z Fold7 has a thickness of 8.9 millimeters when folded and only 4.2 millimeters when unfolded, which is half the thickness of our first-generation model. And its weight is only 215 grams, so the portability is comparable to bar-type smartphones. As I mentioned before, the 200-megapixel camera supports photography on par with the Ultra and the durability has also improved, thanks to enhancements in glass, frame and hinge materials. With the Z Flip7, we improved it to reflect customer demands in terms of design and portability. The new Infinity cover screen has the thinnest bezel among current smartphones, and it's actually 70% thinner compared to the previous model, which provides more aesthetic appeal as well as practical functionality. And we also optimized the new Android OS and One UI 8 for our foldable form factors together with Galaxy AI. So in actuality, initial results are showing positive growth in line with our expectations. We look to continue the strong momentum from preorders into the remainder of the second half and aim for double-digit foldables growth compared to last year. Thank you. Operator: [Interpreted] The next question will be by Mr. Sei Cheol Lee from Citi Securities. Sei Cheol Lee: [Interpreted] Yes. This is Sei Cheol Lee from Citigroup. I have some questions about your Memory business. So there is actually a great deal of market interest still in Samsung Electronics HBM business. Could you elaborate more on second quarter HBM performance as well as future plans, including for HBM4? And then another big theme is hybrid copper bonding technology. So if you could provide a progress update on this future technology, please? Jaejune Kim: [Interpreted] Yes, I will take your question on our HBM business. In the second quarter, HBM bit shipments increased by 30% Q-on-Q. And the share of HBM3E from overall HBM sales volume has increased further to a high 80% level. So our goal is to normalize the HBM business. And so we plan to achieve a meaningful expansion in HBM3E sales in the second half versus the first half. We have been steadily securing demand customer by customer by obtaining mass production approval. And we expect HBM3E as a share of total HBM revenue to exceed the high 90% range in the third quarter. We have obtained mass production approval for 1z-nano mother dies, and we have developed samples of HBM4 based on the 1z process, which have been shipped out to some of our major clients. Our HBM4 products offer optimized design with the base die fabricated using an advanced logic process, delivering twice the performance of earlier generation HBM3E with significant improvements in energy efficiency. As we anticipate HBM4 demand to enter into full scale, we intend to expand timing supply in alignment to the rising demand, and we continue to make necessary investments in 1z-nano capacity expansions. So next-generation stacking technology, hybrid copper bonding has been drawing a lot of attention among customers, and we are in discussions with key clients on the technology in the context of volume production. Operator: [Interpreted] The next question will be by analyst Minsook Chae from Korea Investment Securities. Dana Minsook Chae: [Interpreted] So I would like to hear more about your future advanced process road map for foundry. What will be the overall direction? It seems not just for Samsung, but competitors are also moving toward 2-nano volume production. So what is your differentiation strategy in that case? Mijung Noh: [Interpreted] Yes. So we have been working to enhance the competitiveness of our advanced process technologies as we seek and obtain more supply orders from large-scale clients. In terms of our advanced node road map, development of 2 nano nodes is currently underway with the goal of achieving greater performance and maturity. And this is part of our long node strategy where we seek to deliver a advanced process node with high degree of execution. Every year, as new processes are developed, we face various challenges in terms of yield, maturity of performance and timely acquisition of core IP. So to resolve these difficulties, we wish to go beyond our existing single-track road map to adopt a 2-track development approach that distinguishes between leading technologies versus platform technologies. For a new process development, we will work out yield, maturity, et cetera, with a small number of lead customers and building on that as a base, then the strategy would be to then open up and make the platform technology available to other global customers across diverse application and end markets once we acquire core IP. We want to minimize process variation between generations focus on improving SI maturity while using design technology co-optimization for additional performance enhancements, and this will solidify the foundation for future growth. Operator: [Interpreted] The next question will be made by Baik Gil-Hyun from Yuanta Securities. Gil-Hyun Baik: [Interpreted] With the recent acquisition of FläktGroup, there is growing interest in your HVAC business. What's the HVAC market outlook and your strategy for the HVAC business, including the acquired company? Daniel Oh: [Interpreted] VP [indiscernible] will answer the following question on the DA business. Unknown Executive [Interpreted] Let me give you my answer. The global HVAC market as of 2024 is valued at approximately $180 billion. With global warming AI data centers and increasing demand for green products, the market is forecast to keep growing. In line with this trend, we'll not only expand our current business, but also acquire and cooperate with leading global players to foster our HVAC business as a future growth engine. Currently, our business operates in ductless HVAC segment. However, through the joint venture established with Lennox last July, we are expanding our business in North America, the world's largest air conditioning market. With the recent acquisition of FläktGroup, we'll broaden our business scope into the central HVAC segment while also enhancing our position as a pure HVAC player. FläktGroup and Lennox' outstanding capabilities and SmartThings energy technology will be incorporated to lead the market trend in energy saving. And we'll also expand into specialized markets such as data centers, biotech and commercial applications. Beyond our current ductless business, we'll enter the central HVAC segment and secure maintenance packages for energy savings and operational cost optimization to build the foundation for a global top-tier HVAC business. Operator: [Interpreted] Next question will be made by Han Dong Hee from SK Securities. Dong Hee Han: I am Han Dong Hee from SK Securities. I have two questions. First, I'd like to ask about the MX business. What's your profitability outlook for the second half? And what's the direction of your AI strategy? And next, I'd like to ask about System LSI. The Exynos has reentered your recently launched flagship model. And what improvements make this reentry possible? And can you talk about whether it's likely to be adopted again in the 2026 flagship model? Daniel Araujo: So first, on the MX second half profitability outlook. Given the uncertain external environment, including potential increased tariff burdens due to changes in U.S. trade policies and currency fluctuations, memory prices are expected to rebound beginning in Q3. Despite the challenging business conditions, we're aiming to increase smartphone revenue focused on our flagship models with the momentum of our new foldables as well as maintaining the sales momentum of our S25 series. We're also aiming to expand sales of our ecosystem products like the Galaxy Tab S Series and Galaxy Watch Ultra, driving growth, especially in premium products. We'll also continue efforts in cost reduction, process optimization and eliminating inefficiencies in order to secure robust profitability. For the AI strategy, we're focusing on enhancing the performance of Galaxy AI in order to improve the user experience and deliver more real-world value. We're at the forefront of a paradigm shift in smartphone interaction, which is a transition from app-centric to agent-centric and from touch-centric to multimodal interfaces. We're aiming for a more personalized and intuitive AI experience by evolving into an open platform that connects to various AI agents and optimizes the interaction depending on the user need. So to get there, we are equipping our devices with optimal hardware components such as the AP and memory, while also researching and developing software technologies that maximize the performance of on-device AI, improve the processing speed, make models more lightweight while also being optimized to our systems. We have strategic collaborations to deeply integrate AI across the range of Galaxy devices as we continue to expand and develop the Galaxy AI ecosystem. Together with Google, we implemented the cross-app interface in the S25, which leverages the agent to let users take action across multiple apps with one single prompt, vastly simplifying complex tasks. And as another example, the Gemini Live feature enables real-time camera and screen sharing, multimodal AI experience that understands and responds to what the user is viewing. We've optimized these features for the new Fold7 and Flip7 and we'll continue to evolve our AI functionality and its usability for future devices as well. Thank you. Hyeok-man Kwon: [Interpreted] Yes. Let me take your question on System LSI. So Exynos 2500 made a successful entry into a foldable model that was released in July, thanks to improved AI performance and camera functions. We want to build on this success to expand into other new models. The next flagship Exynos 2600 will be the first flagship chipset fabricated on the latest 2-nano gate-all-around process. We're working closely with the Foundry division on development to secure the required yield and performance so that we can enter the flagship models of key customers in the first half of 2026. Exynos 2600 offers a significant improvement in NPU performance versus prior version with enhanced support for on-device AI functionality, which will allow users to leverage AI functions in a more comfortable setting. We plan on leveraging 2-nano as our long node for the future, and we're working closely with the foundry division to enhance the process maturity with Exynos as a bridgehead for securing competitiveness of future products. Operator: [Interpreted] Because of the time, we will accept one last question. It will be by Giuni Lee from Goldman Sachs. Giuni Lee: [Interpreted] To ask one question on memory. What is your outlook for the memory market in the second half? There are some recent concerns about competition becoming even more intense in the HBM market. So what is your outlook for memory over the second half of the year? Jaejune Kim: [Interpreted] Okay. So let me answer your question about our outlook. For the server market, there's been a rapid rise in paid subscribers for AI services. So CSPs have been expanding their inference services as well, which is driving investments into underlying infrastructure. Supply conditions have been improving for GPUs and ASICs, which are critical for building out infrastructure. So we expect accelerated growth in demand from AI server applications in the second half. Moreover, we expect robust continued demand for conventional servers and storage for general computing that is required for pretreating data in AI applications. For PC, we expect upside demand momentum from end of the year promotions as well as other seasonal demand drivers, also the end of support for Windows 10. For mobile, we project growing demand for high-performance, high-density products, driven by greater on-device AI trends aligned with new product launches by major customers. So boosted by the overall boost in demand across applications, market prices are expected to increase by a greater margin in the second half for DRAM, while NAND is also expected to see an overall rally in pricing from the third quarter. However, the exact extent of price increases will vary by product depending on supply-demand dynamics. We believe prices of products in legacy DRAM and planar NAND, where there's increasingly tight supply may rise by a bigger extent in relative terms. So although legacy memory prices are expected to rise, we will continue to focus on advanced node migration for DRAM and NAND to secure competitiveness in the mid- to longer term. We will expand sales of diverse offerings that we have been preparing in expectation of increased growth in AI over the mid to longer term. For DRAM outside of HBM, we've also been expanding sales of high-density LPDDR5X for AI servers, also high-density DDR5, RDIMM 128-gigabyte and above, 24-gigabit GDDR7 as well, where we already hold a leading position. In the third quarter, we'll commence mass production and supply of SOCAM as well as reinforce our AI product portfolio. In the third quarter, DRAM bit shipments are expected to increase by high single percentage Q-on-Q. For NAND, we will speed up V8 migration across all applications, including servers to strengthen cost competitiveness while also increasing the share of server SSD sales for better margins. Server SSDs, in particular, together with product leadership in Gen 5 TLC SSDs, we have seen -- we have obtained a series of customer approvals for high-density 64, 128-terabyte QLC SSDs, which puts us on good track to boost AI server application sales in the second half. This is why we project NAND bit growth at around mid-single percentage for Q3. Regarding intensifying competition for HBM, for HBM3E, supply actually has grown faster versus demand. So we anticipate supply demand dynamics to change, which will likely impact market prices for the time being. And considering the upward pricing momentum for conventional DRAM, so far, the second half, based on current signals and also near-term expectations, we believe the difference in margins between HBM3E and conventional DRAM is expected to narrow sharply. So to optimize profitability in the short term, this may mean greater need for a more balanced product mix strategy. However, for us, given the strong mid- to long-term demand for HBM driven by AI, we intend to focus on addressing demand for HBM3E while strengthening tight cooperation with customers for commercialization of HBM4 as well. And as an extension, we will continue to develop products for the future, including custom HBM while continuing with necessary relevant investments as well. Daniel Oh: [Interpreted] I'd like to thank everybody who shared their valuable opinion, and we'll be sure to refer to them in our decision-making process. That completes our conference call for this quarter. We wish all of you and those close to you stay strong and in good health. Thank you very much.

Operator: Hello, everyone, and welcome to the Samsung Electronics 2025 First Quarter Financial Results Conference Call. I will be your coordinator. [Operator Instructions] As a reminder, this call is being recorded. I would now like to turn the conference over to the Investor Relations team. Please go ahead. Daniel Oh: Welcome to all the participants worldwide, and thank you for joining Samsung Electronics Earnings Call for the first quarter of 2025. I am Daniel Oh, Head of Investor Relations. Before we proceed, I have some legal house meters to take care of. First, I want to remind you that quarterly results and supplementary materials to our earnings call are on the Samsung Electronics Investor Relations website at www.samsung.com/global/ir. Our webcast of today's call will also be uploaded to the website. Secondly, we must state that today's call may contain forward-looking statements. These statements represent our predictions and expectations of future events, but numerous risks and uncertainties could cause actual results to differ from those projected. Furthermore, the. The information provided herein reflects the company's views as of the date of today's call, and the company undertakes no obligation to update the information subsequently. With that, now let me briefly outline today's agenda. I will first start the discussion with the first quarter financial performance, capital expenditures and sustainability management, and our Chief Financial Officer will follow with a summary of our business outlook going forward and any updates on shareholder value. We will then turn the call over to executives for details on their respective business areas before opening the call for analysts' questions. The executives joining us on today's call are EVP Soon-Cheol Park, Head of Corporate Management Office and Chief Financial Officer; EVP Jaejune Kim, representing Memory; VP Hyeok-man Kwon for Systems LSI; VP Mijung Noh for Foundry; EVP Charles Hur for Samsung Display Corporation; VP Daniel Araujo for the Mobile eXperience; and finally, EVP Kl Roh for Visual Display. Let's begin with our consolidated financial performance for the first quarter 2025. The company's revenue increased by 4% quarter-on-quarter to KRW 79.14 trillion on new all-time high for any quarter. Revenue in the DX division was up 28%, driven by increased sales of flagship smartphones and high value-added home appliances. However, revenue in the DS decreased by 17%, impacted by a decline in HBM sales due to deferred customer demand, which will be addressed further in detail by EVP Jaejune Kim from the Memory business later. SG&A expenses decreased by KRW 0.6 trillion quarter-on-quarter to KRW 21.4 trillion, thanks to efficient execution. And SG&A expenses as a percentage of sales declined 2 percentage points to 27.1%. Operating profit increased KRW 0.2 trillion sequentially to KRW 6.7 trillion, led by strong sales of the Galaxy S25 series and high value-added products in the Visual Display and Digital Appliances businesses despite headwinds from the DS division. Operating margin was 8.4% comparable to the previous quarter. Regarding currency effects, the appreciation of major currencies, including the U.S. dollar, had a positive impact of approximately KRW 0.5 trillion on operating profit compared to the previous quarter that is mainly in the component business, which has a high proportion of U.S.-based transactions. Next, I will cover capital expenditures. CapEx in the first quarter of 2025 decreased by KRW 5.8 trillion quarter-on-quarter to KRW 12 trillion, of which KRW 10.9 trillion was invested in DS dividend and KRW 0.5 trillion was invested in Display. In Memory, investments also declined sequentially, reflecting our more flexible approach to better align with supply and demand. However, we remain committed to investing in R&D and advanced technology. Foundry investments decreased as we prioritize tech migration considering market conditions and investment efficiency. In Display, CapEx declined sequentially following the completion of major investments in 8.6 generation IT OLED panels. I will now comment on one of our key achievements in sustainability management. Our company recently ranked first in a supply chain human rights assessment of 45 leading global ICT companies conducted by nonprofit organization, Know the Chain. This recognition reflects our strengthened efforts to improve supply chain due diligence and grievance mechanism with particular attention to managing forced labor risk by expanding protections for migrant workers. Our enhanced transparency through broader public disclosure of supply chain information was also positively received. The company remains committed to advancing its sustainability management practices to drive long-term value for all stakeholders. At this point, I will pass the conference over to our CFO, Soon-Cheol Park. Soon-Cheol Park: Thank you, Daniel, and good morning, everyone. It's a pleasure to join you once again on our earnings call. I will now present our outlook and review shareholder value initiatives. Recently, global trade tensions have led to a slowdown in growth and increased fluctuations in financial markets, raising concern with the performance of tech companies, especially in the semiconductor industry. We expect to encounter elevated uncertainties throughout the year. In this situation, we will continue our efforts to launch a top-tier innovative products and services to overcome the challenges and maintain our position as a leading tech company. First of all, in an environment that is changing faster than ever, we are posing new growth opportunities by developing diverse new businesses, including robotics and AI. For robotics in particular, we are sparing no efforts to outpace peers by advancing both hardware and software through internal development and external partnerships. Through this effort, we are committed to positioning ourselves as an industry leader. To this end, we have emphasized our R&D investments, which reached their highest ever annual total in 2024. Moreover, our R&D spending in the fourth quarter increased by 16% year-on-year, setting a new record high for the fourth quarter. For our full year outlook, we cautiously expect the overall performance to gradually improve as we move into the second half assuming easing current uncertainties. In the DS division, we expect AI server demand to continue growing while mobile and PC demand should benefit from the on-device sale trend. We proactively addressed demand for high-density products such as HBM and improve our market position by focusing high value-added products. Also in foundry, we plan to focus on improving profitability by securing more customer orders in both advanced and mature nodes. In the DS division, despite constant flow of global trade and economic slowdown, we'll strive to increase sales of older devices and other flagship products. The second half launch of this product will provide a unique tailored AI experiences for wearables will capitalize on rising demand across the entire lineup and prospect for broader adoption in emerging markets. Our plan is to reinforce our AI leadership by enhancing and expanding the integration of innovative AI features, including in our TVs and home appliances. However, it is widely understood that the current unpredictable environment is a product of major shift in the global politics and the international trade, resulting in heightened market uncertainties, driving our experiences from our economy numerous crisis since founding. We have managed risks by preparing tailored countermeasures for more scenarios and found this crisis into an opportunity for us to leapfrog. As a global company, we are thoroughly reviewing all options to flexibly utilize our global production facilities and user infrastructure in response the changing environment through these efforts, every member of Samsung Electronics will work together to minimize business impact and enhance corporate value. Lastly, amid regulatory shift to paradigms, we are committed to setting direction with speed and executing without hesitation. Additionally, we are offline AI and robotics technologies to our businesses and continuously expanding their use to improve operational efficiency. On top of these efforts, we harness diverse cutting-edge technologies, including AI, to develop smart products and services. We aim to advance technology innovation in new growth opportunities through cross-correlations that combine the structures of each business unit. Moving on to enhancement shareholder value, the Board of Directors today approved a quarterly per share dividend of KRW 365 for both common stock preferred stock. While in our 3-year shareholder return policy covering 2024 to 2026, the total annual dividend is KRW 9.8 trillion Thus, the payout for the first quarter is KRW 2.45 trillion scheduled for payout in late May. In November 2024, we announced our plan to repurchase KRW 10 trillion worth of shares to enhance shareholder value. Of this amount we purchased and canceled KRW 2.7 in common shares and KRW 0.3 trillion in preferred shares by mid-February. For the remaining KRW 7 trillion, the repurchase of KRW 3 trillion worth of shares is in progress. Turning to stock-based compensation. After through discussions questions, we decided to increase the scope of stock-based compensation for all objectives to encourage and ramp up long-term value creation. Linking objective compensation to stock performance and business regions results that are aligned with our shareholders' interest encouraging a strong focus on corporate shareholder value as well as the sustainable result. In addition, we hope to further enhance shareholder value through a clear incentive structures the promote value creation in the mid- to long term. Thank you. Back to Daniel. Thank you. Daniel Oh: Thank you, CFO. Now our executives will provide more detailed information on their respective business units first quarter performance followed by their outlook. We will start with Jaejune Kim, EVP of Memory business. Jaejune Kim: Good morning. This is Jaejune Kim from Memory Global Sales and Marketing. In the memory market in the first quarter, demand for AI server stayed solid, and the recovery of PC and mobile demand also became more visible than initially expected. But for server SSD market, demand remained relatively weak following the previous quarter as some data center projects were delayed. In this market situation, for DRAM, by expanding our bit shipments focusing on servers, we exceeded the initial guidance by a high single-digit percentage in bit shipments. As a result, our Q-o-Q bit growth increased by a low single digit. However, HBM sales decreased quarter-on-quarter caused by impacts of export control on AI chips and defer demand in anticipation of the upcoming enhanced HBM3E products. For NAND, as server asset demand weaken, bit growth decreased by about 10% compared to the previous quarter. But we slightly exceeded our big guidance, which was projected at the previous call due to additional purchase demand arising from the perceptions that the market price had reached a bottom. Now let's move on to the outlook for the second quarter. In the second quarter, along with a robust demand for AI servers, we have seen a preemptive purchasing activities after the pause on the reciprocal tariffs. Especially since memory inventory for PC and mobile has been normalized earlier than anticipated, because of the stimulated demand -- domestic demand in China in the first quarter, we expect the demand to continue its momentum. However, we need to keep monitoring the direct and indirect impacts on demand, which result from additional changes in tariffs, policies of major countries. In this circumstance, we continue to operate our business focusing on profitability. For the, we plan to strengthen our position in the high value-added market by expanding our initial response to demand for enhanced HBM3E products and operating product mix focused on high-density products for servers. However, from a profitability perspective, we plan to flexibly respond to the demand from PC and mobile segments, where market price increase has been recently observed. For NAND, based on our flexible product mix operation, we plan to focus supply on applications showing signs of recovery and improved cost competitiveness by accelerating the transition to create for all applications. Lastly, let me talk about the outlook for the second half of 2025. For server, our demand for AI server is forecasted to remain robust in conjunction with the launch of new CPUs, and demand for server SSD is also likely to recover as the previous suspended data center projects resume. For PC, we expect demand to improve due to the discontinuation of our Windows 10 services and arrival of the replacement cycle. Moreover, demand momentum for mobile device is also projected to increase, thanks to the spread of AI services and increased content profile. However, as macro uncertainties such as the change of a tariff policy continue to expand, demand volatility is expected to be quite high accordingly. In this situation, for DRAM, we plan to continue expanding the transition to 1b nanometer. In addition, in the server market, we will increase sales of our enhanced HBM3E products as well as high-density DDR5 modules such as 128 gigabyte and higher. As for the mobile and PC market, in which on-device AI trends are expected to keep spreading, we plan to proactively respond to the high density and high performance plans with our industry-leading 10.7 giga bps LPDDR5X products. For NAND, we will actively address the growing demand for high-performance computing SSDs for AI server by offering for PCI Gen 5 lineup of both 16 and 8 channels. And in the mobile market, we plan to promote [indiscernible] products featured with the industry's highest performance. In addition, we will keep strengthening cost competitiveness by accelerating the transition to V8 across all applications. Thank you. Hyeok-man Kwon: Good morning. This is Hyeok-man Kwon Jung from the system LSI business. In the first quarter, revenue was initially pressured by our service smartphone market and delayed the adoption of our flagship SoC and our key customer. Nonetheless, stronger seasonal demand from major customers enable us to expand the shipments of image sensors and LSI products, resulting in a slight increase in total sales and a modest improvement in profitability. Looking to the second quarter, rising geopolitical risks are leading to global customers diversifying supply chains and adjust inventory strategies, which may heighten demand volatility and discouraging new investment and development. Digital softness could reduce sensor and LSI volumes versus previous quarters, yet we aim to maintain revenue steady by entering our SoCs into major customers and new flagship models and taking advantage of the growing adoption of 200 mega pixel sensors in the Chinese market. In the second half, overall mobile market momentum is expected to remain limited, but component specification upgrade driven by on-demand AI should stay vigilant, and demand for premium mobile and IT devices is likely to persist. For SoCs, we will maximize supply of next-generation product from flagship lineups. For DDI, we will sharpen our solution competitiveness, particularly in type C TCON. For image sensors, we will actively address the high resolution demand for main and telephoto cameras and expand our automotive sensor portfolio. By launching higher value-added products, optimizing cost and improving our product mix, we will improve the division's profitability. Thank you. Mijung Noh: Hello, everyone. This is Mijung Noh from the Foundry business. In the fourth quarter, the market recorded a quarter-over-quarter decline due to seasonal weakness in mature nodes. Our short-term performance was also negatively impacted by the ongoing U.S.-China trade tensions, continued inventory adjustment by customers on motor nodes, and the fact that revenue from the new advanced node is expected to be concentrated in the second half of the year. Despite the challenges, we remain focused on enhancing yield and ensuring seamless readiness for mass production of 2-nanometer GAA process. Furthermore, we achieved a quarter-over-quarter increase in order intake for HPC AI applications primarily driven by advanced process node, including 2-nanometer, 4-nanometer and under the 5-nanometer [indiscernible]. Looking ahead to the second quarter, demand for [indiscernible] nodes is projected to be somewhat subdued, but we anticipated a gradual recovery supported by HPC and AI demand. To address Strong demand from the certain U.S. mobile automotive, we plan to ramp up production while simultaneously implementing hedging strategies against risk related to U.S.-China trade tensions. However, ongoing uncertainties surrounding U.S. tariff policies continues to pose a potential risk of demand slowdown. From a technical perspective, we completed the reliability assessment of the first-generation 2-nanometer GAA process and will start [indiscernible] for its production in the second quarter. Simultaneously for the second-generation 2-nanometer and performance and power optimized 4-nanometer process, we are systematically building the technical infrastructure required to support customer design enablement in a timely and efficient manner. We are strengthening our position in advanced node competition by focusing on securing orders from Tier 1 customers in the HPC and automotive sectors. In parallel, we are enhancing the competitiveness of our PPAC within the VirtuNode by advancing the FinFET process development of low power CIS and mobile DDI applications. In the second half, geopolitical and policy risk may intensify and demand associated with mobile and PC market could remain weak. Nevertheless, robust AI and HPC momentum is expected to sustain strong growth at advanced nodes. We will drive earnings higher by increasing the revenue contribution from advanced node, underpinned by the full ramp-up of new robust product, a seasonal rebound in maternal demand and sustain the strength in AI and HPC applications. We will begin mass production for our first generation of 2-nanometer GAA process and accelerate customer orders for the second-generation 2-nanometer node by stabilizing the process. For 4-nanometer, we will continue our low-node strategy by steadily improving yield and ensuring this production capability for automotive grade products. In mature node, we will deepen our specialty portfolio and expand orders for consumer and automotive products. Thank you. Charles Hur: Good morning. This is Charles Hur from the corporate strategy team at Samsung Display. I will now brief you on our results for the first quarter of 2025. For the Mobile Display business, we responded to the demand of our major customers' high-end smartphones in a timely manner. As a result, our performance improved year-on-year, supported by favorable exchange rates. However, our performance declined quarter-on-quarter due to seasonal effects. For the large display business, our major customers launch new to LED products, including 27-inch UHD monitor which features the highest resolution of 160 ppi. Given the positive market feedback, the QLED demand continued to grow. By focusing on new products, we achieved a double-digit growth in monitor sales, which contributed performance improvement compared to the previous quarter. Next, I will share our outlook and strategies for the second quarter of 2025. For the Mobile Display business, our performance outlook is a little bit conservative due to external uncertainties such as changes in tariff policies. We strengthened our product competitiveness and ensure a stable panel supply for our major customers, new products, including foldable smartphones. Furthermore, we will strive to expand our sales in IT and automotive applications. For the large display business, while keeping our sales performance stable, we are planning to launch monitors featuring ultra-high refresh rates. We expect the market to grow as the new monitors enrich gaming experiences. Next, I will share our outlook and strategies for the second half of 2025. Market uncertainties are expected to increase due to intensified competition and weak consumer sentiment. For the Mobile Display business, with the growing demand of AI devices will reinforce our competitive edge and expand sales by enhancing our differentiated technologies in smartphones such as low power consumption and diverse form factors. In addition, we'll continue to increase sales in IT and automotive segments aiming for double-digit revenue contribution to the mobile display business. We believe it will stabilize overall business portfolio. For the large display business, QD OLED demand continues to grow in premium TV and monitor markets supported by high-definition image quality and superior performance. We'll also expand our product line up to include not only premium monitors, but also mainstream models. As a result, we will broaden our presence in both B2C and B2B monitor market. Through continuous efforts we'll accelerate OLED penetration in monitor market and solidify technology leadership of QD-OLED. Thank you. Daniel Araujo: Hi, everyone. This is Daniel Araujo from the MX division. I'd like to share our results for Q1 and the future outlook. The smartphone market entered into the seasonally lower Q1 with a decline compared to the previous quarter. For the MX business, Q1 smartphone and tablet shipments were 61 million units and 7 million units, respectively, with a smartphone ASP of $326. We achieved revenue and operating profit growth quarter-on-quarter with the launch of the S25 Series. Its more robust Galaxy AI experience has helped it maintain the strong sales momentum of its predecessor. We saw flagship revenue within the smartphone segment expand year-on-year. We also continue to enhance cost competitiveness through resource efficiency initiatives while Samsung component prices also showed a downward trend in Q1. As a result, we maintained solid double-digit profitability and improved operating profit compared to the previous year. Moving on to our Q2 outlook. Overall smartphone demand is expected to decrease quarter-on-quarter due to seasonality trends. Additionally, there is potential for further adjustments in the forecast due to global tariff policies. The MX business expects a decrease in smartphone shipments and ASP due to the fading effects of our new flagship model launches. While tablet shipments are expected to grow sequentially, we plan to sustain flagship centric sales with a successful launch of the new S25 edge and continued strong sales of the S25 series. We will also expand our AI phone line up by introducing Awesome intelligence to our newest A-Series devices. This brings over many of the highly used AI features from our flagship devices such as Circle to Search and Now Bar. Given the backdrop of volatility in U.S. tariff policies and anticipated increases in key component prices, we are pushing ahead with our premium product strategy and continuing to focus on resource efficiencies. Looking ahead to the second half of the year. Given macroeconomic uncertainty caused by U.S. tariff policies, smartphone market demand is expected to be revised downward and decline year-on-year. The tablet market will also see slower growth but premium demand is expected to remain robust. Wearable product categories are projected to grow due to increased demand for premium products and expansion into emerging markets. Looking across the MX division for our upcoming new foldable devices, we are enhancing the performance, design and durability while also optimizing AI functionality to offer a differentiated user experience. We plan to strengthen our product lineup in order to create new demand and expand our affordable customer base. With the S25 series, including the soon-to-be added Edge, we will continue flagship-centric sales, along with seasonal promotions and sustained marketing efforts. On the A Series, we are reinforcing our efforts to increase market share by offering the differentiated awesome intelligence experience and expanding channel presence in growth markets. We will also launch new ecosystem products with enhanced core functionality, including AI and health capabilities to strengthen product competitiveness and differentiation. In tablets, we will drive premium revenue growth by launching the AI-enhanced TAB S11 series in the latter half of the year and strengthening targeted marketing across the Tab S line to capture new demand. For wearables, we will expand our market presence with a strengthened premium experience while expanding our lineup across all price segments. We plan to launch a new Galaxy Watch with an innovative design and enhanced health-related features. In TWS while we strengthened premium marketing on one hand, we will also address demand across all price segments by launching a new entry-level model. Furthermore, beginning with the successful launch of our XR headset, we will proactively explore new products that meet the diverse needs of consumers while also ensuring market viability. Despite ongoing macroeconomic uncertainty and anticipated increases in material costs, the MX division will drive growth in flagship centric sales and our ecosystem business with a focus on new premium products while we continue to optimize operations across the board to sustain robust profitability. Thank you. KL Roh: Hello, everyone. This is KL Roh from the Sales and Marketing team of Visual Display. Let me review on the market conditions and our results in the first quarter of 2025. TV market demand decreased quarter-on-quarter after the year-end peak season, but it increased slightly year-on-year due to continued growth in the demand for premium and big TV. For Samsung, we expanded sales share of high value-added products compared to last year through proactively addressing solid demand for Neo QLED, OLED and of our 75 inches. Also, we improved quarter-on-quarter profitability by raising price and reducing material costs. Even so, our profitability decreased year-on-year due to stagnant TV market demand and increased costs driven by intensified competition. Now let me go over the outlook for the second quarter and second half of 2025 In the second quarter, TV market demand is expected to remain the same year-on-year while uncertainties such as the impact of U.S. tariffs are likely to continue. With [indiscernible] on AI, which is the direction our AI screen should move forward, we will launch the new 2025 AI TV model globally with advanced features and lineup, and focus on enhancing sales of premium product and profitability. As for the second half of this year, economic uncertainties are projected to continue. However, demand for high value-added products, including super big TV, QLED and OLED model will stay solid. With newly launched AI TV, we will lead the AI screen market not only by strengthening the core competitiveness of our TV product, including improved picture and sound quality but also by actively promoting differentiated drilling experience. In addition, based on the imported lineup of super big TV, Quality and OLED, we will preemptively capture peak season demand in the second half through strategic collaboration with major retailers. Finally, as the global leader in the TV market for 19 consecutive years, we will advance Samsungs' business, through enhancing TV+ content and diversified advertisements, thereby strengthening profitability and new growth engine. Daniel Oh: Thank you all our executives for their comments. That concludes our presentation on the first quarter performance of 2025 and brings us to the Q&A session, which will be conducted in Korean. Operator, you may now open the line for analyst questions. Operator: [Operator Instructions] The first question will be made by Dong Woo from Bank of America Merrill Lynch. Dong Woo: I want to ask about tariffs. There are a lot of uncertainties in the IT sector. What are your response strategies, including supply chain management? Unidentified Company Representative: I believe this is one of the most important questions due to the rapid changes in policies and geopolitical tensions among major countries, it's difficult to accurately predict the business impact of tariffs and established countermeasures. For example, the U.S. enacted a 90-day pause on reciprocal tariffs imposed in early April, including the 10% baseline. Our flagship products such as semiconductors, smartphones and tablets are exempt from risk apical tariffs. But a product-specific tariff investigation is underway for these categories. So there are a lot of uncertainties ahead of us. By monitoring likely policy paths in major countries, we are communicating with related countries to minimize negative effects. Also by utilizing our core strengths, managing global production and customer relationships, our agile response measures enable immediate action. The MX business, if tariffs are imposed on semiconductor derivatives and other products, we expect the purchase price of core components to rise the MX by expanding sales of flagship smartphones, including for the soon-to-launch S25 Edge and new premium ecosystem devices will secure profitability. For BD and DA, we will pursue sales expansion of premium products. And if necessary, we'll consider options such as relocating production volumes by leveraging our global manufacturing footprint to minimize tariff impacts. The DS division will monitor the direction of U.S. semiconductor tariff policies and we'll review countermeasures based on various scenarios. Thank you. Operator: The next question will be by Mr. Jay Hyun from JPMorgan. Jay Hyun: This is Kown Jay Hyun from JPMorgan Securities. I also have one question. You explained about the performance for your memory business in the first quarter. I'd appreciate if you could provide a little bit more detail, please? Soon-Cheol Park: Yes. Let me explain further on our Memory performance. Over the first quarter, AI server demand remains solid, and there were growing perception that prices are pretty much bottomed out for both PC and mobile applications. And as a result, we saw a pickup in additional purchasing demand. Also amidst concerns are ahead of changes to global tariffs. Companies have been increasing preproduction of their finished products, leading to a faster-than-expected drawdown of their components inventories and recurring demand has been gaining more visibility versus our initial outlook. As for HBM, clients have been deferring demand ahead of the planned launch of our enhanced HBM products. And together with the impact of export controls on AI chips, we said to a gap in HBM demand as we projected in January in our earnings call with sales decreasing quarter-on-quarter. Despite these conditions, our server DRAM bit shipments increased by a mid-teens percentage Q-on-Q which helped conventional DRAM post high single-digit bit growth. And meanwhile, ASP decreased by a mid-single percentage Q-on-Q. For NAND, as some data center storage projects were postponed, overall, we saw weaker demand in the SSD market. Previously, in the first quarter, though, with services enjoying higher margins, there was a supply concentration in software SSDs within the industry with service SSD product prices falling by more than other products. As server SSD take up a big share of our revenue mix, our ASP in the first quarter fell by mid-10% level while bit growth was down by about 10% Q-on-Q. Still, as overall demand conditions improved compared to the start of the quarter, bit growth came in slightly above our previous guidance. Operator: Next question will be made by Sang Kyu Kim from Daiwa Securities. Sang Kyu Kim: I'd like to ask about company overall and mix. Regarding the KRW 10 trillion stock repurchase, are there any plans to cancel the shares acquired in the second phase? And do you have any plans for possible M&A deals? And regarding MX' first quarter profit growth, what drove the growth? And is the improved cost structure sustainable throughout the year? Soon-Cheol Park: I will answer the third question. Of the KRW 3 trillion in the second phase, excluding the share designated for employee stock compensation, we will cancel KRW 2.5 trillion worth of shares in line with the first phase to enhance shareholder value. For the programs remaining KRW 4 trillion, the Board will identify options to enhance shareholder value. They will thoroughly review the timing and the scale of the potential cancellations, accounting for the company's management, financial and regulatory environments. We'll provide update when plans have been concerned. Last, we plan to utilize our cash reserves so that even in the currently challenging and uncertain environment, we can facilitate operational stability, continue to invest in initiatives for future growth and fastly implement our shareholder return policy. We are continuously exploring strategies for our cash holdings to enhance shareholder value and pursue M&A opportunities. We will also share details when plans are more concrete. Daniel Araujo: And on your question about smartphone profitability, so in Q1, overall sales of flagship models grew and the product mix also improved. So the portion of flagship model revenue within smartphones increased compared to last year. We also saw a profit improvement from optimization and efficiency enhancements across our development, manufacturing and logistics processes, including sales costs. We also secured additional cost competitiveness as the memory and display prices declined compared to last year while we also optimized product specs and standardized components across more products. So given the uncertainties surrounding U.S. tariff policies as well as rising component prices, we aim to expand the portion of flagship revenue through the, on to the S25 Edge and grow our premium ecosystem to sustain profitability. Thank you. Operator: The next question will be from KB Securities, Mr. Kim Dongwon. Kim Dongwon: My name is Kim Dongwoon from KB Securities. I have a question for memory and V8 First, on HBM, within the market, I believe there is still a high degree of interest in Samsung Electronics HBM. So what is your business outlook for HBM from the second quarter onwards? And then for your TV business, it seems that your TV market share has been decreasing recently. Do you think that a rebound will be possible this year? If so, what is your main VD rebound strategy? Soon-Cheol Park: So regarding our HBM business, let me cover that first. So our enhanced HBM3E, samples have already been shipped out to major accounts. We expect a gradual contribution to our top line starting from the second quarter. Considering uncertainties surrounding the tariffs and semiconductor export controls, this may introduce some volatility to improvement in sales However, we expect HBM sales, which bottomed out in the first quarter will likely start showing a step-by-step recovery with every quarter as we expand sales of our enhanced HBM3 product. For HBM4 development is underway in accordance with customer project time lines with mass production set for the second half as planned. Customer HBMs, which has been driving great interest from the industry is also under discussions with multiple clients for their HBM4 or 4E-based projects. And further, we're expecting custom HBM4 projects to start contributing to revenue starting 2026 alongside standard HBM4, and we are continuously making necessary investments to respond to customer demand for HBM4 and 4E. KL Roh: I'd like to answer about the TV market. In the TV market, demand for QLED and big TV products of 70 inches and larger is continually rising, but in each segment, the demand centering on entry-level products is growing. So the entry-level share of the TV market is rising, leading to intensified market competition. Amid this environment, will further differentiate our TVs competitiveness and recover market share. First, as mentioned earlier, based on Vision AI, we will enhance the core competitiveness of our TV such as picture and sound quality. Also, we will identify customer needs and tastes to provide tailored experiences and expand our AI TV lineup with more sophisticated and improved AI features compared to previous Neo QLED and oil leading to QLED and the frame to create new demand. Second, to solidify our leadership in the premium market, we will expand the lineup of OLED and super big TVs of 98 inches and larger while strengthening the large entry-level lineup of 75 inches and above, to respond to intensifying competition in the entry-level market. Last, the key strengths of our TV such as security design and small things will be communicated more broadly. At the same time, we'll strengthen our service business such as TVs and advertisements to secure profitability and growth engines. Operator: The next question is by Mr. Han Dong Hee from SK Securities. Han Dong Hee: This Han Dong Hee from SK Securities. To ask a question on foundry. You have been seeing widening loss recently, it seems deterioration is profitability is deteriorating. So what are the reasons? And do you expect an improvement in the second half? Mijung Noh: Yes. Let me cover that question from the Foundry business. In the short term, as global economic uncertainties persist, demand from mobile and PCs are also seeing a continued slowdown. Poor demand from major customers has resulted in a drop in utilization rates and rising fixed costs, which are the main reasons for the recent deterioration in our profitability. In terms of our second half outlook, uncertainties, of course, will continue to remain, but we are expecting a gradual recovery in demand, which, in turn, will help improve utilization and gradually help narrow our loss. More specifically, we are planning -- we are securing stable mass production across our advanced process nodes, helping boost customer trust as we expand customer engagements more assertively. For more mature nodes, we will be optimizing power, performance, cost competitiveness and develop specialty process nodes as we seek to maximize cost competitiveness and expand our markets. This way, we can secure competitiveness in both technology and cost at the same time, which will help us achieve our mid- to longer term objective of improving performance on a sustainable basis. Operator: The next question will be by Mr. Lee Giuni from Goldman Sachs Securities. Lee Giuni: Yes, I have a question on memory and also display. For memory due to changes in the tariff policies, market uncertainties on the rise. So what is your outlook for memory given these developments? And what is the Samsung Electronics strategy? For display, the small- to medium-sized OLED market has been seeing intense competition. So what is your strategy to stay competitive? Jaejune Kim: Yes, in terms of our outlook for the memory market, let me cover that. In the second quarter, we believe that customers' component inventories will normalize and driven by continued AI-related demand, we expect strong fundamentals underlying the memory market to continue. However, we believe changes to the tariff policies of major economies as well as stronger export controls against AI have already been adding to rising uncertainty of expected demand in the second half, especially in the second quarter, the great period on tariffs have prompted some customers to increase preproduction. And we've actually been seeing some pull-in demand for our components. And this preemptive purchasing may likely have some negative impact on demand in the second half. Still to assess the actual impact, it depends on additional changes to tar policies, also available supply capacity relative to for demand. So we'll have to monitor development and see. Given these market conditions, in the short term for DRAM, we expect mobile and PC applications, which had relatively lower ASP to start seeing pricing recovery first in the second quarter. For NAND, in the second quarter, we expect the decline in prices to slow down some product prices may be flat, others may increase sightly, but overall, we expect a change in the pricing overall. To sum up, while there may be a slight fluctuation in our Q2 performance, we expect DRAM to see increased sales driven by an increase in overall shipments Q-on-Q. Meanwhile, given different supply-demand dynamics by application and end market, pricing trends may end up quite different by product. which is why we plan on managing supply flexibly between different applications to manage profitability. We expect DRAM bit growth to increase by low 10% percentage Q-on-Q. For NAND, amid growing perceptions, the prices have reached the bottom, we expect customer demand recover as they rebuild inventory. We will expand supply in line with growth in demand the Gen 5 server PCIe market while managing supply across different applications centered on profitability. We'll also be accelerating our tech migration to V8 to enhance cost competes, and we expect NAND bit growth to be up by a mid-teens percentage Q-on-Q in the second quarter. Charles Hur: I'll answer the question about display. Despite high uncertainties such as changing tariff policies, and the challenging business environment caused by intensified competition among OLED panel makers, we are striving to strengthen our competitive edge and maintain our leadership. First, from the early stages of developing new technologies with differentiated performance, we will closely cooperate with customers to continually deliver high-quality products that meet their needs while further strengthening our cost competitiveness, especially technologies with improved brightness, low power consumption, foldable devices and next-gen form factors will continually be enhanced so that in the AI smartphone era, we can lead the display markets. Also, we'll utilize the 5.5 Gen 6 and the upcoming 8.6 Gen IT line to secure and expand our position with optimized products for each line, not only in smartphones, but also in emerging reality markets such as IT and automotive, thus solidifying leadership in the OLED market. Operator: Next question will be made by Geun Chang Roh from Hyundai Motor Securities. Geun Chang Roh: I'm Geun Chang Roh. I'd like to ask about the MX business first. It's about the foldable shipments. The increase of foldable shipment is decreasing. And some people say that it may show reverse growth rates. And can you talk about Samsung's foldable shipment targets? And the second question is about Tri-Fold Huawei and many other Chinese companies are coming up with new smartphones, does Samsung have any plans on launching Tri-Fold? And when we'll be able to meet this new smartphone? Daniel Araujo: Well, we've continued to lead the foldable market through our innovation. And this year, with more innovation on the foldable form factor, we will improve the competitiveness of our products even further, enabling more customers to experience the benefits of foldables. In terms of technological innovation, we're significantly improving the portability and performance, which are key buying factors for our customers. The advanced Galaxy AI experience from the S25 series will be tailored individually to each of the foldable form factors, fold and flip to deliver a more differentiated and specialized experience. With the fold, we will offer and optimize large screen AI experience. And on the flip, it will feature a portable AI experience that can be used anywhere at any time. We'll expand sales of the high-end models while also strengthening the foldable lineup in order to attract new customers aiming for meaningful growth. Now as for new form factors, we believe that beyond the form factor itself, it's essential to ensure a level of product quality and usability in real-world scenarios that's aligned with market demands and customer expectations. We are reviewing products with new form factors with a focus on securing a meaningful competitive advantage in performance and quality. Thank you. Operator: Due to the time constraint, we'll have one final question. The next question will be by Mr. Lee Sei Cheol from Citigroup. Lee Sei Cheol: This is Lee Sei Cheol from Citi. I have a question on Memory, just on your mid- to longer term perspective. So DeepSeek obviously caused a big buzz early in the year. and it's expected to prompt a lot of change regarding AI. So has there been any changes beyond servers like in PCs or the mobile market in terms of demand or product requirements. Jaejune Kim: Yes. So as you mentioned, at the start of this year, there was a great deal of attention toward DeepSeek and prompting expectations about high accuracy AI inference models bolt-on smaller LLM. And it seems not only for servers, but for PCs and smartphones and other edge devices. We expect lots of different ideas to be tested out the use of AI functionality. First, workstation grade AI PCs have shown the first signs of market traction. High-spec systems deploying at least 128- to 512-gigabyte DRAM power system are being released, and we're seeing a rapid increase in demand. For conventional PCs, considering the size of AI models, care hardware specifications are just not enough, so it will likely take more time to uncover a killer application for AI. So with end of support for Windows 10 in the second half of this year, we expect replacement demand mostly for AI PC. In the mid- to long term, as hardware specification become increasingly upgraded, there will be continuous solid demand for higher memory density and performance. For mobile applications to enable AI processing at the device level, we expect demand for DRAM with improved power efficiency, performance intensity to increase. This year, as AI competition heated up in the flagship segment, the trend toward higher density LPDDR5X products, for example, has become more visible to target the future market looking beyond the second half of 2026, different products such as LPW or LP PIM with improved power efficiency and performance under active discussions along with standard LPDDR6 as well. So the spread of generative AI is involving in many different forms, not only in servers, but at the Edge as well. We are committed to timely development of difference products demand if today's changing market dynamics to preemptively capture new market opportunities. Daniel Oh : I'd like to thank everybody who participated in this earnings call. And also, I'd like to thank everybody who share their valuable opinion, and we'll refer to them in our decision-making process. That completes our conference call for this quarter. We wish all of you and those close to you stay strong and healthy. We thank everyone for your participation, and we look forward to speaking with all of you soon. Thank you.

Operator: Hello, everyone, and welcome to the Samsung Electronics 2024 Fourth Quarter Financial Results Conference Call. I will be your coordinator. All participants will be in a listen-only mode until we open the question-and-answer session following the presentation. As a reminder, this call is being recorded. I would now like to turn the conference over to the Investor Relations team. Please go ahead. Daniel Oh: Thank you, coordinator. Good day to everyone tuning in from around the globe and thank you for joining Samsung Electronics earnings call for the fourth quarter of 2024. I am Daniel Oh, Head of Investor Relations. Before we begin, I would like to inform you that quarterly results and supplementary materials to our earnings call are available on Samsung Electronics Investor Relations website at www.samsung.com/global/ir. A webcast of today's call will be also be uploaded to the website after the session. Following is our legal disclaimer for today's call. I want to remind you that some of the statements we will be making during today's call are forward-looking based on the environment we currently see. They are subject to certain risk and uncertainties that may cause our actual outcomes to defer materially from those expressed in today's discussion. The information we are giving you on this call this morning is as of today's date. For today's conference call, we'll begin with the 2024 fourth quarter results and outlook, followed by updates on capital expenditures, shareholder returns, and ESG. Executives from each business unit will subsequently provide updates on their respective businesses and then we will open the Q&A session. Now for the executive joining us on the call, I'm pleased to introduce EVP, Sooncheol Park, the Head of Corporate Management Office, and our new CFO, who is here today to discuss our financial results. And from the business unit, EVP, Jaejune Kim, representing Memory. Rejoining the call VP, Hyeokman Kwon for System LSI. Joining the call for the first time, VP, Mijung Noh for Foundry. Returning to the call EVP, Charles Hur for Samsung Display Corp; VP, Daniel Araujo for the Mobile eXperience business. And finally, EVP, KL Roh, who recently got promoted for Visual Display. Now I'll pass the conference over to our CFO, Sooncheol Park. Sooncheol Park: Thank you, Daniel, and good morning. It's an honor to communicate with our shareholders as the new CFO. The management team, including myself and all the employees at Samsung Electronics are very aware of the challenges the company is facing, and we are fully committed to overcoming the current difficulties. Samsung's business portfolio spans a diverse range of industries that operate within different business cycles and market dynamics, which cause fluctuations in our company's performance, and we are confident that this diversity, along with the progress being made in our businesses will drive gradual recovery. In the past, Samsung has often relied on each core strengths and capabilities to overcome hardship and achieve sustained growth. We firmly believe that the current challenges can be resolved swiftly and by overcoming these challenges, Samsung can enter new phase of growth. To our shareholders, I ask for your trust and supporting our efforts. And as the CFO, I am committed to enhancing communication with our investors and working to further reinforce your trust in Samsung Electronics. Now I'm going to review the consolidated financial performance for the fourth quarter of 2024. The company's revenue declined 4% quarter-on-quarter to KRW 75.8 trillion. In the DS Division, revenue increased by 3%, led by increased sales of high-value-added memory products for servers. In the DS Division, revenue decreased by 10%, mainly due to rising competition and pending launch effect of new smartphone models. At the company level, annual revenue reached KRW 300.9 trillion, our second highest total ever surpassed only in 2022. SG&A expenses increased to KRW 22 trillion up by KRW 1.2 trillion quarter-on-quarter, reflecting our continued commitment to secure future tech leadership through R&D. SG&A expenses as a percentage of sales also increased, rising 2.7 percentage point to 29.1%. Operating profit was KRW 6.5 trillion, down KRW 2.7 trillion quarter-on-quarter due to soft market conditions, especially for IT products and the increase in expenditures including R&D. Operating margin decreased to 3 percentage points to 8.6%. Regarding currency movements versus the Korean won, effect of the stronger U.S. dollar were offset by relative weakness in other currencies, resulting in slightly positive impact of roughly KRW 0.7 trillion company-wide. Now I'd like to discuss our outlook for 2025. In the first quarter, improvement in the company's overall performance are likely to be limited by ongoing weaknesses in our semiconductor business. However, we will push growth by increasing sales of smartphones, offering differentiated AI experiences in premium segment across the DX product lineup. In the DX Division, memory will accelerate tech migration to address the demand for high-value-added products. Following recent weak performance, the system semiconductor business will improve each effort to supply flagship products, slated to launch in the second half, identify opportunities to win orders in emerging application areas and advance the maturity of the 2 nano processes. For Display, our outlook remains conservative with the weakness in the overall market demand for smartphones expected to carry over from the fourth quarter. For the DX Division, our strategy to improve our performance centers on driving sales growth of Galaxy S25 and S premium AI-enhanced product across our lineup. Looking at 2025 as a whole, we aim to enhance our technology and product advantages in the AI market, advanced effort to meet further demand for high-value-added products and drive growth in premium segment. In the DS Division, we anticipate that market conditions will remain soft in the first half. Within this environment, we will focus on securing our tech leadership for mid to long-term growth and developing our portfolio of a high density, high performance product. In addition, we aim to improve SoC capabilities and fully address the demand for ultra-high resolution image sensors. In Foundry, we are focused on securing orders from major customers while improving profitability in mature process technologies. For Display, we strengthened our leadership position in high-end product by enhancing and leveraging the advantages of our product. Furthermore, we remain committed to diversifying our portfolio by accelerating our expansion in the IT and automotive sectors. For the DX Division, our strategy will focus on extending our leadership in AI and continuing to deliver innovations and new experience in premium segment all via reinforcing value across our product portfolio. Now on to the capital expenditures. CapEx in the fourth quarter of 2024 increased by KRW 5.4 trillion to KRW 17.8 trillion quarter-over-quarter of which KRW 16 trillion was invested in DS Divisions and KRW 1 trillion in Display. Annual CapEx for 2024 remained relatively steady at KRW 53.6 trillion up slightly from KRW 53.1 trillion in 2023. Of the 2024 total KRW 46.3 trillion was invested in DS and KRW 4.8 trillion in Display. In Memory, we increased our investment both on a quarter-on-quarter and full-year basis with our continued focus on securing for the tech leadership through R&D and expanding capacity for advanced products such as HBM. In Foundry, however, we reduced the total annual CapEx to account for difficult market conditions. Meanwhile, in Display, we increased our annual investment, maintaining our commitment to bolstering our technology edge, especially in small to medium size to panels. For 2025, our specific investment plans are steering development, but in a general sense, we expect yearly memory investment to remain as a similar letter. With that, I will turn the call back over to Daniel. Thank you. Daniel Oh: Thank you, CFO, Park. Let's move on to shareholder returns. The Board of Directors today approved a quarterly per share dividend of KRW 363 for common stock and KRW 364 for preferred stocks. Under our three-year shareholder return policy for 2024 to 2026, we committed to an annual dividend of KRW 9.8 trillion with a KRW 2.45 trillion payout for the fourth quarter scheduled for mid-April. With the 2024 results concluded, the company's free cash flow was KRW 19.9 trillion and the shareholder return pool which is 50% of free cash flow stands at approximately KRW 9.9 trillion. Considering our regular annual dividends of KRW 9.8 trillion, there was no meaningful surplus in 2024 for any early returns. In November 2024, the company announced a share repurchase program valued at KRW 10 trillion to enhance shareholder value. Of this amount, we have studied the repurchase and cancellation of KRW 3 trillion worth of shares over a three-month period from the time of the announcement. Of the KRW 3 trillion worth of shares, we had achieved 89.3% of the purchase of the common and preferred shares proportionally as of January 2024. Now I want to share some of our achievements in sustainability management. On January 23, our local time here in Korea, the company unveiled the Galaxy S25 series at Galaxy Unpacked 2025 in San Jose, California. The S25 marks on another step forward in our sustainability journey, utilizing cobalt extracted from the used batteries from Galaxy smartphones and recovered from the battery production process, establishing a more circular system for our batteries. Furthermore, S25 incorporates recycled plastics sourced from waste wafer trays from our semiconductor manufacturer. Also through the launch of our new Galaxy Trade-In program, we aim to not only preserve the long-term market value of Galaxy smartphones, but also contribute to circular economy by facilitating more resales of our devices. Our sustainability efforts continue to gain momentum as we innovate and shape a better future. Now the representatives from each business segment will present more detailed information on the fourth quarter of 2024 performance and business outlook. EVP, Jaejune Kim from the Memory business will get us started. Jaejune Kim: Good morning. This is Jaejune Kim from Memory Global Sales and Marketing. In the Memory market, in the fourth quarter, the scale of inventory adjustment by mobile and PC customers was rather than initial expectations. For server applications, as major data center and tech companies continue to invest in AI, demand focusing on HBM and server DRAM remained strong. But the server SSD demand was relatively impacted by the delay of some data center customers projects. In this situation, we expanded sales mainly focusing on HBM and high-density DDR5 for servers, our well demand momentum exist. As a result, our DRAM ASP per gigabit increased compared to the previous quarter. Moreover, thanks to DRAM ASP increase, we achieved a record high fourth quarter revenue. However, as some data center projects were delayed, server SSD shipments were limited compared to the initial expectations. Moreover, with the additional impacts weak mobile and PC demand, our big growth for both DRAM and NAND came in on the guidance. In addition, in terms of profitability, our operating profit decreased slightly compared to the previous quarter due to the increases in both R&D expenses to secure future technology leadership and initial ramp-up cost to expand production capacity for cutting-edge nodes. Now let's move on to the outlook for the first quarter. For mobile and PC applications, we expect that our customers will continue to lower down their inventory level until the first quarter. In server, we expect AI demand to continue its momentum. However, we expect there will be changes in DRAM and SSD demand of data center and OEM customers depending on the GPU supply situation. On top of that, due to export control on AI chips, the volatility of HBM demand will be unexpectedly high. As the uncertainties in demand continue, we are continuing to shift our business portfolio, focusing on high-value-added products. To achieve this, we are optimizing the line operations for some legacy nodes while accelerating the migrations to cutting-edge nodes to respond to the demand for high-performance and high-density products. For DRAM, we are expanding the shipment portion of DDR5 and LPDDR5x by accelerating the transition to 1b nano. For NAND, we are executing the tech migration from V6 to V8 while increasing V7 QLC-based server SSD sales. Lastly, let me talk about the outlook for 2025. AI investments are projected to continue across the industry in 2025 and we observed that our inventory adjustment by mobile and PC customers are now progressing faster than our market expectation. Thus, we expect memory demand to start to recover from the second quarter. For NAND, in particular, given the industry's conservative CapEx deployment over the past three years and the recent industry trend to add production cuts, we expect that there will be an impact on supply and demand from the early stage of second half in this year at the latest. Under this situation, we are reducing the portion of legacy DRAM and NAND products to align with market demand and accelerating the migration to cutting-edge nodes. We will optimize our business portfolio by increasing the portion of high-value-added products such as HBM, DDR5, LPDDR5x, GDDR7, and server SSDs based on cutting-edge nodes. Through this, we will continue to strengthen our business competitiveness. Thank you. Hyeokman Kwon: Good morning. This is Hyeokman Kwon from the System LSI business. During the fourth quarter, under the rate cut cycle and heightened geopolitical uncertainties, our earnings declined due to demand weakness in the mobile market as well as increased the R&D expense to advance cutting-edge product development. However, as a technological achievement, our Exynos sales of W1000 wearable processor currently in mass production using 3-nanometer process for our innovation award at CES 2025. In the first quarter, we anticipate to rising demand for core products such as image sensors and DDI, driven by flagship smartphone launches, yet the overall earnings downturn is expected to persist for the time being due to the delayed entry into the flagship SoC market. Looking ahead, we will focus on further enhancing our flagship SoC, Exynos 2500 through product optimization and close collaboration with our foundry business, aiming to secure design wins for our flagship mobile models scheduled for release in the second half. For sensors, we expect to contract for the world's first 0.5 micrometer pixel 200-megapixel project. In 2025, following the inauguration of the Trump administration's second term, shifting policies and fluctuations in interest rates and inflation are expected to create a range of uncertainties and weight on consumer sentiment. As a result, growth in the mobile market are earlier closely tied to our earnings may slow somewhat. Nonetheless, market expectations for our device AI remains strong and demand in the premium smartphone segment is projected to persist. We intend to develop our flagship SoC in a timely manner with the required performance level to secure additional demand by entering major customers' new flagship models. For sensors, we will proactively respond to high resolution needs, such as 200-megapixel telephoto and cameras and expanding to diverse applications, including automotive and XR. For DDIs, we will continue to improve our recent competitiveness in touch and TCON to maintain our market leadership. Thank you. Mijung Noh: Hello, everyone. This is Mijung Noh from the Foundry business. In the fourth quarter, the market showed solid growth in advanced node driven by steady demand for AI and HPC applications. Even though the demand for mobile and the other major applications remained relatively weak, our sales resulted in a slight increase due to a few U.S. customers' strong demand. However, our profit declined due to lower utilization rate and higher R&D expenses of advanced technology. Our 2-nanometer GAA technology is under active development where design-kit already distributed to customers for product design. Meanwhile, the 4-nanometer technology is in mass production for HPC products based on the stable yields. We continue to reinforce our competitiveness across overall process technologies and design infrastructure to expand into a wider range of applications, including mobile and HPC and to broaden our customer base. Looking ahead to the first quarter, the foundry market is expected to contract quarter-over-quarter due to seasonality. Our earnings are also expected to remain weak due to sluggish mobile demand and higher fixed cost burden stemming from lower utilization. We will concentrate on advancing leading-edge process development and enhancing process maturity to drive expanded opportunity in AI, HPC applications and advanced node engagement. Turning to the 2025 outlook. While mobile and PC demand may remain soft due to ongoing macro economy uncertainties, the AI, HPC sector is expected to stay strong. Against this backdrop, advanced technology below 5-nanometer are projected to maintain double-digit growth. We expect a slower-than-anticipated recovery in demand for some of our major customers, which could limit our earnings improvement in the first half. Nonetheless, we plan to achieve year-over-year revenue growth by progressively increasing the portion of our sales from advanced technology backed by robust AI, HPC demand. In particular, we will try to secure orders to major customers by ramping and stabilizing our 2-nanometer GAA technology in 2025 while simultaneously bolstering our 4-nanometer technology and design infrastructure to meet the growing needs of mobile HPC. In the mature technology, we will pursue the commercialization of the specialty technology, such as mm, millimeter wave and RF to diversify applications and further strengthen our competitiveness. Thank you. Charles Hur: Good morning. This is Charles Hur from the Corporate Strategy team at Samsung Display. I will now brief you on our results for the fourth quarter of 2024. For the mobile display business, profits have declined quarter-on-quarter due to sluggish smartphone demand and rising competition. However, IT and Auto segment achieved sequential sales growth in double digits. This was a result of our consistent efforts to diversify our business portfolio. For the large display business, we have achieved a double-digit growth in revenue compared to the previous quarter with an increase in TV sales, thanks to won seasonal demand. Overall, the business results improved slightly on the back of higher productivity and utilization. Next, I will share our outlook and strategies for the first quarter of 2025. For the mobile display business, our performance outlook is quite conservative, considering overall soft demand in smartphone and IT market. However, we will strive to expand our sales by actively addressing demand for the major customers' new products. For the large display business, we are scheduled to launch security OLED TV with improved brightness as well as monitors with high resolution. We seek to increase our sales volume promptly by fulfilling customer demand. Next, I will share our outlook and strategies for the Mobile Display business in 2025. Ongoing uncertainties and delayed economic recoveries may slow down the growth of smartphone market. However, we expect OLED adoption in smartphones to keep rising. Against the competition among panel makers and the smartphone market, we wiill strengthen our product competitiveness with the low power consumption and differentiated design lineups to maintain our leadership in high-end segment. For IT and auto application, we also accelerate OLED penetration by entering the volume zone segment which will diversify our business portfolio. In addition, as planned, we have been preparing 8.6 generation IT OLED production line to secure a competitive advantage in the growing IT OLED market. Finally, for the large display business in 2025, for TV, will solidify our premium position in most of our customers by delivering superior features such as improved brightness. And for monitors, we will continue to capture demand in gaming market with a launch of 160 ppi UHD product and 500Hz refresh rate to each model. Also, we continue to broaden our product lineups and customer bases to enter the B2C market in 2025. Thank you. Daniel Araujo: Hi, everyone. This is Daniel Araujo from the MX division. I'd like to share our Q4 2024 results and outlook for this year. Despite ongoing inflation and global political unrest, the smartphone market experienced positive growth in Q4, led by the premium segment. The MX division's Q4 smartphone and tablet shipments were 52 million units and 7 million units, respectively, and the smartphone ASP was $260. For the MX business, sales and profit decreased quarter-to-quarter due to a reduction in smartphone sales, including fading effects of new flagship models. However, flagship sales saw robust growth on a full-year basis, led by double-digit growth of S24 featuring Galaxy AI. Tablet and wearable products also grew in both value and shipments. Moving on to our outlook for Q1 2025. Overall smartphone demand will decrease quarter-on-quarter due to seasonality trends. The MX business expects to see an increase in smartphone shipments and ASP due to the launch of new models, while tablet shipments should stay similar sequentially. We plan to drive sales growth focused on flagship models with the newly launched Galaxy S25. We will actively promote new AI experiences and enhanced competitiveness of our products while strengthening collaboration with partners to continue leading the AI smartphone market. Still, as the risk of rising costs for key components is expected to persist, we will strive to expand flagship-centric sales by advancing Galaxy AI capabilities while continuing to realize operational efficiencies in order to secure a double-digit operating margin. Looking ahead to 2025, despite continued uncertainty in the macro economy, the smartphone market is expected to grow slightly year-on-year, driven by increased expectations for AI products. In particular, the mass market segment is expected to grow, given the rollout of AI functionality to mid-range products along with overall improvements in the hardware performance. The growth rate of the premium segment is expected to slow down slightly compared to the previous year. The tablet market is anticipated to grow in both value and shipments due to demand from the product replacement cycle and the expansion of AI features across tablet products. The smartwatch and TWS markets are also forecast to grow as AI functionality expands and the market demand for premium products increases. The MX division will reinforce our leadership in mobile AI through the launch of the S25 Series. The S25 provides an enriched and personalized ASPs, built on our One UI 7.0 AI integrated platform, which offers differentiated AI functionality such as multimodal interaction, especially, we aim to drive sales growth by effectively communicating our highest performance devices ever with the S25 and the advanced Galaxy AI experience via innovative marketing and sales strategies. For foldable devices, we plan to significantly enhance product competitiveness, focusing on their portability and performance. We will optimize the AI experience of S25 for the foldable form factors as well as strengthen our lineup to generate new foldable device demand and expand our customer base. In tablets and OTCs, we will provide further advanced Galaxy AI features and expand sales centered on premium products. For wearables, we are striving to create products and experiences with unrivaled quality while driving sales growth by enhancing product differentiation and usability. In particular, for smartwatches, we will emphasize the health experience to further strengthen our presence in the premium market segment. For TWS, we are strengthening our lineup with specialized AI functionality and enhancing the sound quality in order to expand sales in the premium segment. Regarding XR, having now showcased the device during our Unpacked event, we are preparing to deliver an enriched customer experience across the expanded Galaxy ecosystem, which includes our new XR platform. In 2025, we anticipate increases in the prices of major materials due to spec improvements in line with increasingly advanced products. Even with this backdrop, we will strive to improve profitability by continuing to enhance Galaxy AI and expand sales centered on flagship products. Thank you. KL Roh: Hello, everyone. I'm KL Roh from the sales and marketing team of Visual Display. Let me review on the market conditions and our results in the fourth quarter of 2024. TV market demand increased quarter-on-quarter due to year-end seasonality, and demand increased slightly year-on-year, mainly centering around entry-level product. For Samsung, we expanded sales and improved our sales mix through proactively addressing regional peak season promotion with a focus on high value-added products such as Neo QLED, OLED and our 75-inch. Even so, our profitability decreased slightly due to stagnant TV market demand and the increased costs driven by intensified competition. Now let me go over the outlook for the first quarter and 2025. In the first quarter, TV market demand is expected to remain stagnant year-on-year as demand decreased after the year-end peak season and uncertainties grew both internally and externally. However, demand for high value-added products such as Super Big TV, QLED and OLED model will stay solid. With big on AI, which is the direction our AI screen should move forward, we will amplify the marketing both around the newly launched order and take a more proactive approach to promoting our differentiated product and service experience. By doing so, we aim to enhance profitability through expanded sales of premium strategic products. The TV market in 2025 is projected to grow slightly. Thanks to continued growth of high-value-added products such as QLED and OLED TV and a demand recovery in the second half in major emerging markets. For Samsung, we will integrate AI in all connected device experience based on SmartThings, on the home AI business for hyperpersonalized consumer experience. At the same time, we will extend our lead in the AI screen market by expanding adoption of security technology based on Samsung Knox, our in-house security solution. In terms of product, we will expand our line up and sales lesion from premium to entry-level product to target diverse regional demand. In particular, we will strengthen the sales of Super Big TV above nine inches and expand the differentiation of lifestyle screen to solidify our positions as a global leader in the TV market. Finally, we will continue to strengthen new growth engine and enhance profitability by driving growth in service business such as TV Plus and app store. Thank you. Daniel Oh: And that concludes our prepared statements for the fourth quarter of 2024. Let's open the line for the Q&A session, which will be held in Korean. Our CFO, Sooncheol Park, will answer questions about the company as a whole while the other representatives will answer any questions concerning their respective businesses. Operator: Now we will begin the Q&A session. [Operator Instructions] The first question will be by Kim Dongwon with KB Securities. Dongwon Kim: Thank you for the opportunity. I have one question on the company overall in won memory. First, it's about shareholder return. On November 2024, Samsung said it will repurchase KRW 10 trillion worth of shares over the next 12 months. Can you share details on the execution plan for the remaining KRW 7 trillion? Is the KRW 10 trillion part of the current return policy? Can you also update on the value program? The second question is on memory. Could you provide more details on DRAM and NAND bit growth, ASP and operating profit? Sooncheol Park: Here is the answer for your first question. We have always prioritized shareholder value. In early 2024, we announced a three-year plan to return 50% of the period's free cash flow. Given the concerns about our significant undervaluation, management and the Board decided to initiate a share repurchase program. We plan to repurchase KRW 10 trillion worth of shares over 12 months starting with buybacks and cancellations worth KRW 3 trillion. For the remaining KRW 7 trillion details such as the timing method and whether it will be a part of 50% free cash flow are under review, and we will share more details soon when they are concrete. Also, we are fully aware of the strong shareholder interest in value-add program plans. A key goal of the value-add program is to continually enhance the shareholder value. And our recently announced repurchase plan underscores our commitment to enhancing shareholder as well as company value. In 2025, business conditions are expected to remain uncertain. However, we are committed to sharing detailed plans within the shortest possible time line, including ways to improve our company's growth and profitability. Thank you. Jaejune Kim: Yes, let me take your question on the memory business performance. In the fourth quarter, the memory market saw more significant inventory adjustments by mobile and PC clients than expected, which deepened already weak demand. Demand for server DRAM was relatively solid, although for eSSDs, because large-scale data centers, excluding hyperscalers experienced project delays, this resulted in a more limited demand than expected. Given these market conditions in Q4 DRAM bit growth was down by low teens percentage Q-on-Q and bit growth down by low single percentage. DRAM ASP rose by around 20% Q-on-Q. Although following on the third quarter, we continue to drive sales of aging stock to normalize inventory back to more sound levels, which limited the rise in ASP. Overall, high-value-added products increased as a share of total sales with HBM sales increasing by 1.9x, sales of 128 gigabyte or higher DDR5, modules increasing by 2.5x. As a result, we did see a substantial increase in ASP versus the third quarter. For NAND, overall, we saw weak demand for mobile and PC applications, coupled with deferred demand for higher-priced server SSDs, which resulted in a mid-single percentage drop in ASP quarter-on-quarter. So in the end, while the overall memory business posted a record high fourth quarter quarterly sales, in terms of profitability, however, we saw an increase in R&D spend as we invested to secure future technology leadership, including in next-generation semiconductor R&D facilities as well as early ramp-up expenses from advanced node capacity expansion, which resulted in a slight decrease in operating profit Q-on-Q. Thank you we will move on to the next question, please. Operator: The next question will be made by Han Dong Hee from SK Securities. Please go ahead. Dong Hee Han: Yes. This is Han Dong Hee from SK Securities. Thank you for the opportunity to ask the question. So I'd like to ask more about HBM. There is high interest in the market regarding your HBM business. So if you could provide a walk-through, we would appreciate it. Also perhaps if you could share a progress update on your HBM3E business and your next-gen product development roadmap beyond HBM3E. Also, DeepSeek has been gaining a great deal of interest on the market as well. So how do you think this may impact your HBM or the overall HBM industry? Sooncheol Park: So let me cover the question regarding our HBM business. Well, in the fourth quarter, the combination of geopolitical issues, plus our plans enhancements to our HBM3E product targeting the first quarter 2025. While we did see some changes in HBM demand. As a result, our HBM sales in the fourth quarter grew by 1.9x Q-on-Q, which was slightly below our initial forecast. Since the third quarter, our HBM3E, 8-stack and 12-stack layer products have been in mass production and sales. In the fourth quarter, we expanded our HBM3E supply to multiple GPU providers and data center clients with HBM3E sales exceeding HBM3 sales. And so our work on HBM3E optimization is also proceeding according to plan. And though we are planning to start mass production and initiate supply for some clients starting from late Q1 and more noticeable ramp in the supply of the optimized product is likely to come later with full swing delivery starting from the second quarter onwards. That said, we do expect a temporary constraint on HBM sales in the first quarter, not only due to the recent U.S. government announcement on export controls and AI chips, but also because after we announced our product optimization plans, there's been a shift among major customers who are opting to wait for enhanced HBM3E product which may potentially result in a temporary gap in HBM demand. Nonetheless, from the second quarter, we are forecasting a transition in customer demand from 8-stack to 12-stack to unfold faster than initially expected, which is why we are planning to ramp up production of the optimized product in line with customer demand while expanding total HBM bit supply to twice the level of last year in 2025. For HBM3E 16-stack, while we do not expect any commercial demand from clients yet, we have already produced and shipped down samples of the 16-stack product to major customers for technology validation. For HBM4, based on 1c nano processes, development is underway as originally planned, targeting mass production in the second half of 2025. For custom HBM projects based on HBM4 and HBM4E solutions, we are in ongoing discussions with clients on the technology as originally planned. And lastly, to just briefly touch upon your question on DeepSeek. As we also supply HBM, which is deployed in CPUs to multiple customers, we obviously are also closely watching and monitoring industry developments based on different scenarios. However, industry dynamics are always subject to change following the adoption of new technologies. Although it is a bit too early to say based on the limited information we have at this time, we do expect the market to see a mix of both long-term opportunities and short-term risk, and we intend to closely watch the developments in the industry to respond to the quickly change AI market on a timely basis. Unidentified Company Representative: Thank you for the answer. We will move on to the next question, please. Operator: The next question will be by Sei Cheol Lee with Citigroup. Please go ahead. Sei Cheol Lee: I'm Sei Cheol Lee from Citigroup. I have two questions. One is about the whole company, and one is on memory. My first question is about the Trump administration, the Trump administration's impact on the company. The Trump policy agenda could significantly influence the company. How does Samsung view policy risk from his agenda? What are the planned countermeasures? And the second question is on the memory. With the recent semiconductor export restrictions and weak conventional memory market, the market raised concerns about the outlook for the first quarter. Could you update us on the memory market and Q1 outlook? Sooncheol Park: First, let me take your question on the policies and responses. We acknowledge that the Trump administration will probably bring significant changes to the global trade environment. As a company with operations and supply chains in numerous regions, potential impact seems inevitable. Samsung closely monitors not just U.S. Presidential elections but also other geopolitical developments to identify potential opportunities and risks in various scenarios. The Trump administration set the direction from day one by issuing dozens of executive orders and memorandums. We will continue to track the policymaking process in detail to evaluate potential impacts on our businesses and develop responses. It is difficult to disclose specifics on our plans at this time. But based on our global production capabilities, including in the U.S., our advanced global supply chain management in AI technologies, we will leverage advantages with our exceptional product competitiveness and portfolio diversity to respond to potential changes. We will make every effort to turn challenges into opportunities and proactively address dynamic environment. Thank you. Jaejune Kim: Yes. So let me take your question on the memory business outlook for the first quarter. First, for DRAM, amid weak mobile and PC demand, first quarter DRAM bit growth is expected to decline by a high single-digit level versus the previous quarter. For HBM in particular, export controls on AI, semiconductors and other geopolitical issues have led to greater demand uncertainty. And since our product obsession plans were announced, we have seen a deferral of demand among customers, which may likely cause considerable volatility in our first quarter outlook. Overall, we do expect sales to decline to a certain extent on a Q-on-Q basis. So to sum up, we expect market prices of conventional products to decline in the first quarter as the share of HBM sales decreases temporarily. We expect DRAM ASP and performance to also see a slight decline Q-on-Q. For NAND, we expect inventory adjustments by mobile and PC customers to continue in the first quarter. Server SSDs are also likely to see some inventory adjustments as market prices decline. Consequently, we expect our first quarter NAND bit growth to decline by a low-teens percentage Q-on-Q. Given the circumstances for DRAM, we are planning to accelerate our conversion to more advanced 1b nano process nodes while continuing to expand supply of DDR5 for servers and LPDDR5x for PC and mobile. We're also planning to initiate mass production and sales of 256-gigabyte products based on 32-gigabit DDR5 technology in the first quarter. For NAND, we plan on to accelerate conversion to V8 and V9 NAND processors and focus on product competitiveness of the mid to longer term, expanding the share of high-density QLC SSDs for servers as well. Unidentified Company Representative: And we will move on. Operator: The next question will be made by Mr. Nicolas Gaudois from UBS Securities. Please go ahead. Nicolas Gaudois: Yes. Good morning. Thanks for taking my question. On the Foundry side, could you update us on 2-nanometer with regards to the production timing notably the SDK and the nature of the external customer engagements at this stage for 2-nanometer? Thank you. Mijung Noh: So let me answer for the Foundry business regarding our 2-nano process. Samsung's 2 nano platform process is currently under development, optimized for mobile and HPC applications. After achieving improved process maturity in our first-generation 2-nano process, we have released the first version of our process design kits, the PDKs to customers in the first half of 2024 and are currently working towards mass production in 2025. We're now working on our second generation 2-nano process with improved performance was planned to release PDK in the first half of 2025 while targeting mass production in 2026. We're currently doing PPA analysis and MPW runs for major customers and have started product level designed for certain clients. In terms of order wins, we are in talks with Tier 1 customers across diverse application areas, and we're also leveraging our competitive GAA process to expand customer engagements in differentiated advanced packaging and other core enabling technologies. Operator: The next question will be by Giuni Lee from Goldman Sachs. Giuni Lee: I have two questions, one on memory and then one on MX. First, I'd like to hear more about your outlook for the memory market this year. And if you could share more on the directionality for your memory business? And the second, regarding MX, following the launch of S25, what are your strategies to enhance competitiveness in the on-device AI market in terms of hardware and software? Jaejune Kim: So yes, let me answer about the memory business outlook first. In the short-term, the memory market is expected to show weak business conditions. For mobile and PCs, inventory adjustments by customers are expected up to the first quarter, while constrained GPU supplies are leading to project delays for some data center customers which in turn, has led to memory demand being deferred and pushed down. Given these circumstances, external market resource organizations are projecting a decline in prices in the first quarter, not only for mobile and PC applications, but even for server DDR5 and SSDs, which have maintained relatively strong pricing trends so far. However, memory demand is expected to start showing signs of recovery in the second quarter. In the case of mobile and PC applications, once inventory adjustments wind down after the first quarter, we expect demand to improve as new products embedded with on-device AI functionality come to the market in full scale. For server applications, as investments into AI infrastructure continue, underlying fundamental demand remains solid. And we believe that once GPU supply improves and delayed data center projects belatedly materialize down the line, we should see a recovery in demand, mostly around high-performance, high-density products. However, since the memory market is broadly exposed to various factors such as macro trends, geopolitical issues, semiconductor export controls, et cetera, also the scheduled release dates for new GPUs, well, we do need to continue to monitor these diverse market indicators. We want to be proactive in capturing demand for future high-value-added products. And even if it means accepting some bit loss in the short-term, we intend to migrate to more advanced nodes for DRAM and NAND, and focus on expanding our advanced node production capacity. We expect production bit loss mostly from legacy process products and production bit growth will likely be significantly limited for both DRAM and NAND in 2025. For NAND, as we convert from single-stack V6, the double-stack V8, we will have to replace more equipment versus previous technology nodes, which will result in greater production bit loss in the short-term. Under these constrained production bit growth conditions, we will focus on addressing demand for high-value-added AI products. For DRAM, we'll expand sales of optimized HBM3E products while completing development and starting up mass production of HBM4 in the second half of the year to strengthen our competitiveness in the AR market. Another focus will be expanding supply of server DDR5 products while leading industry trends toward higher density with our 128-gigabyte and 256-gigabyte memory products, which are critical for AI servers, also expand application of 1b nano-based LPDDR beyond mobile for PC and server applications active, we increased the share of high-value-added products. For NAND, we want to actively address demand for high-density SSDs, including QLC to reinforce our leading position in the server space, while ramping our V8 and V9 conversion to enhance product competitiveness. Thank you. Daniel Araujo: Yes. On your second question, so with the recently launched S25 series, we enhanced the NP performance by optimizing the latest AP to our devices. And we also increased the DRAM bandwidth in order to improve the LLM performance. So based on these performance improvements, Galaxy AI is becoming more comprehensive and integrated in previous models. And it's better at understanding the user situation and context. So through close collaboration with our partners, users can now outperform many different kinds of actions via voice command without boundaries between apps. We implemented features that analyze users' preferences and usage patterns with the personal data engine, which is secured by our improved Knox Vault security solution, ultimately, offering a more personalized experience and valuable insights to the user. Our vision is to continue enhancing Galaxy AI, so it can act as a personal agent capable of understanding a user's context in order to identify what the user is really trying to do in each situation and then take the appropriate action. So we plan to enable intuitive and natural multimodal interactions such as touch, gesture and speech regardless of which agent or app is being used. Unidentified Company Representative: And we will move on to the next question. Operator: Yes. The next question will be made by Mr. S. K. Kim from Daiwa Securities. Sung-kyu Kim: Yes. Thank you for the opportunity. I will also be asking two questions, one on memory and then another on display. For memory, so if you look at the conventional DRAM market, mostly more Chinese suppliers have been establishing a bigger presence. So how is this impacting the overall memory business? And what is the company's response? And for display, as overall smartphone demand remains flat, it seems that there's more intense competition between panel suppliers nowadays. So what is your differentiation strategy? Jaejune Kim: Yes. So regarding the Chinese suppliers in the memory space, let me take that question first. So there were recent announcements by the U.S. government to impose export control and advanced chips, for example, and other geopolitical factors that are a source of uncertainty. And so while they can impact the overall memory business, since it's not appropriate to comment directly on other suppliers. I will just comment based on our company strategy in addressing the DRAM market. We have been focusing our business more on the high-end market versus the low end. So we have been speeding up our ramp, speeding our ramp-up of advanced node processes, scaling down the share of legacy products like DDR4 and LPDDR4. We're expanding the share of high-value-added products including HBM, DDR5, LPDDR5 and GDDR7. So for products, we expect more intense competition like DDR4 and LPDDR4, which accounted for low 30% of sales as of 2024, we're planning to dramatically scale down to a single-digit share in 2025. For products with limited supply availability like DDR4 and LPDDR4, we will be concentrating supply to major mobile and consumer clients and also the high-value-added automotive market. And because we'll be providing critically required volumes only, any impact from oversupply of these products will likely be limited for us. The building of product portfolio centered around high-end products, we will further strengthen the foundation for sustainable growth even under uncertain market conditions. Thank you. Charles Hur: To answer your question on display. Despite the stagnation in the smartphone market, OLED panel adoption continues to grow. As demonstrated at CES, AI functionality is becoming increasingly essential, so the need for low power consumption is increasing and demand for new form factors is also growing. To meet this demand, we are establishing a roadmap for low-power consumption and advancing technologies across back plane, materials and electronics, we also plan to expand our low-power panel structure to a wider range of products. To drive demand for diverse form factors, we will continuously enhance the product durability and the flatness of the product of flatness, ensuring we establish our own differentiated technology. With advanced functionality and production competitiveness, we aim to stay ahead of the competition and strengthen our leadership in the smartphone OLED market? Thank you. Unidentified Company Representative: Thank you for your answer. We will take the next question. Operator: The next question will be by Min-Sook Chae with Korea Investment & Securities. Min-Sook Chae: Thank you for the opportunity. I have one question for MX and one for VD. For MX, could you share your outlook on the smartphone market growth in 2025 and the company's sales guidance? And for VD, competition, it seems like competition is getting fierce even in the high-end market. What are your strategies to stay ahead of the competition in the TV market? Daniel Araujo: Amidst continued macroeconomic uncertainty in MX, we expect market growth to be driven primarily by the upper portion of the mass market segment due to the proliferation of AI functionality to mass market devices as well as improvements in hardware performance. So we expect the growth rate of the premium segment to decelerate slightly compared to the previous year. And this year, we aim to continue our flagship-centric growth through the launch of the S25 series in the first half, which features unprecedented performance, an integrated AI platform and multimodal interaction. For foldable devices, we are aiming to enhance the form factor design and durability while also diversifying our line up later this year in order to expand our customer base. Through that, we're committed to achieving double-digit growth in flagship revenues this year. For the A series, we will enhance the core specs that consumers really care about, like the design, the display and battery and prepare go-to-market strategy on par with that of our flagship devices. Regarding the competitive situation in the mass market segment, rather than engaging in price for us, or directly competing on particular specs will be called pin to pin, we aim to strengthen communication about our strengths, like security and overall product competitiveness mainly targeting emerging markets like the Middle East and Africa. Through all these efforts, we aim to expand our smartphone market share and firm up our position as the global leader in shipments. Thank you. KL Roh: Here is answer for your second question. Amid stagnant demand and intensified competition in the TV market, we will strengthen our product differentiation while continuously enhancing operational efficiency to drive growth and improve profitability. To achieve this, first, as I mentioned earlier, we will pioneer the AI screen era with our vision AI. Our next-generation AI processor built with our advanced technology will elevate the core competitiveness of TVs in picture and sound quality and enhanced features that let customers fully experience the true value of AI TVs. With this, we aim to drive new market demand. Second, we will strengthen our competitiveness in TVs to improve sales and the revenue structures. We aim to enhance all segments online from premium to mass market while optimizing operations for profitability, and we will also expand sales in the fast-growing super big TV segment. Third, we will strengthen key growth drivers for our service business by expanding advertisement sales with a tailored approach for diverse advertisers in enhancing the content offering of TV Plus, our free ad-supported service. Lastly, we will reinforce our leadership in lifestyle TVs. Our latest model, the frame, features Neo QLED picture quality and a wireless connectivity, strengthening Samsung's product differentiation. So with our unique technology, we will meet diverse customer needs. Unidentified Company Representative: Thank you for your answer. We will take one more question due to time constraints. Operator: The last question will be by Simon Woo from Bank of America. Simon Woo: My question is about robotics, which is garnering high interest recently. Could you please share the company's strategy for robotics-related projects, including humanoid robots? Sooncheol Park: Here is the answer for your question. We are developing advanced multipurpose intelligent robots with the ultimate goal of addressing major societal challenges transforming everyday life and creating new growth opportunities. Our focus stands manufacturing, services and home applications. We will continue to build up an advanced core robotic technologies such as mechatronics and AI to lead the cutting-edge robotics market and fully leverage its high growth potential. Samsung has incorporated Rainbow Robotics as the subsidiary under its consolidated financial statements to strengthen the foundation for advanced robot technology. By combining the robotics expertise with our AI and software technologies, we will accelerate the development of intelligent humanoids. We established the future robotics office under direct CEO oversight, led by Professor Jun-Ho Oh a founding member of Rainbow Robotics and supported by Samsung's diverse robotics talent, we aim to elevate humanoids development to a global top-tier level. As robot AI drives future robotics competitiveness, we are strengthening our capabilities through in-house development strategic investments and partnerships with leading global robotics AI and platform companies to ensure continuous advancement. Thank you. Daniel Oh: Thank you for your answer. I would like to thank everybody who shared their valuable opinion, and we will be sure to refer to them in our decision-making process. That completes our conference call for this quarter. We wish all of you and those close to you stay strong and good health. And also, we thank everyone for joining us today. Thank you.

Operator: Hello, everyone, and welcome to the Samsung Electronics 2024 Third Quarter Financial Results Conference Call. I will be your coordinator. All participants will be in a listen-only mode until we open the question-and-answer session following the presentation. As a reminder, this call is being recorded. I would now like to turn the conference over to the Investor Relations team. Please go ahead. Daniel Oh: Good morning to those here in Korea in Asia, and good evening to those in the Americas and Europe. I am Daniel Oh, Head of Investor Relations. Welcome to Samsung Electronics earnings call for the third quarter of 2024. Before getting into details of our performance, I want to inform you that presentation deck and other supplementary information can be found on Samsung Electronics Investor Relations website at www.samsung.com/global/ir. And a webcast of today's call will also be available on the website. Today's discussion will include forward-looking statements based on current environment. These statements are subject to certain risks and uncertainties, and actual outcomes may differ materially from the views expressed in today's call. Please note that, information we are giving you on this call is as of today's date. I will start with an overview of our third quarter performance and outlook for the fourth quarter and 2025. We will then discuss CapEx, quarterly dividends, sustainability management and other current topics. Afterward, we will turn the call over to executive team members, who will comment on their respective business areas before starting the Q&A session. For today's call, I'm joined by following executives: EVP Jaejune Kim, representing Memory; VP, Tommy Kwon for System LSI; VP, Taejoong Song for Foundry; EVP, Charles Hur for Samsung Display Corp; EVP, Jongmin Lee, from CX MDE Center; VP Daniel Araujo for Mobile eXperience business; and finally, VP, KL Roh for Visual Display. We also have other executives attending today's call for the Q&A session. Let's start with the consolidated financial performance. During this call, we will refer to Device Solutions division to DS and Device Experience to DX. In the third quarter, company-wide revenue increased by 7% sequentially to KRW 79.1 trillion. The MX business recorded 13% growth, led by the launching effects of new smartphone models. DS revenue was up 3%, thanks to increased sales of high-end memory products. And Display booked a 5% increase, driven by major customers' launching of new products. Gross profit increased slightly quarter-on-quarter to KRW 30 trillion, mainly due to the MX businesses' improved sales performance centered on flagship products. However, gross margin came in at 37.9%, down two percentage points sequentially due to the effects of a significant decline in the value of inventory valuation reversals and the impacts of depleting aging inventories. SG&A expenses increased sequentially by KRW 1.5 trillion to KRW 20. 8 trillion, with R&D expenses rising to a new high once again, as we continue to invest in advancing our technological competitiveness. SG&A expenses as a percentage of sales moved up to 26.3%. Operating profit declined by KRW 1. 3 trillion quarter-on-quarter to KRW 9.2 trillion, mainly due to one-off cost, including the provisioning for incentives in the DS division. In perspective, the one-time cost in the DS division were more significant than the gap between company's operating profit and consensus estimates. Operating margin decreased by 2.5 percentage points to 11.6% compared to the previous quarter. In terms of currency effects, the Korean won showed strength against the U.S. dollar and major emerging currencies, adversely impacting our operating profit by approximately KRW 0.5 trillion. The impact mainly felt in our component businesses, where a significant portion of our transactions are in U.S. dollars. Now I will share our business outlook. Please note that, our business representatives will provide more detailed information in their presentations during this call. In the fourth quarter, we expect the semiconductor business to deliver improved results, although relatively lackluster performances in finished goods may constrain overall growth. Within this context, we are prioritizing sales of high value-added products and reinforcing the technological leadership of our components businesses. We also continue to promote sales growth in premium segments and advancing our AI strategy for finished products. In the DS division, growth in AI and the data it creates should keep memory demand robust, while we expect to encounter softness in mobile and PC. Considering these dynamics, we will concentrate on driving sales growth of HBM and high-density products and fulfilling the demand for server SSD. In Foundry, we are committed to increasing our order volume by enhancing and maximizing the competitiveness of our advanced technologies, particularly our GAA 2 nano process. For Display, we expect demand for major customers' new smartphone models to continue and IT and auto sales to grow. However, due to rising competition, we have a conservative outlook toward performance improvements. In the DX division, while our commitment to robust growth in premium segments by delivering exceptional products is unchanged. We expect sales to decline slightly compared to the previous quarter. Now looking ahead to 2025. Although macroeconomic uncertainties are unlikely to ease, we see potential for market demand to trend positively in the coming year. We remain laser-focused on enhancing our competitiveness in advanced technologies and consolidating leadership in premium segments and products featuring AI. Aiming to keep delivering new experiences to our customers, and driving our long-term value, we'll continue to improve connectivity across products, fuel the expansion of next generation businesses and identify powerful new growth engines. Getting into more specific for 2025, in the DS division, shifting to our profitability focused portfolio is central to our strategy. We'll achieve this goal by addressing the demand for differentiated products, based on advanced technologies and strong interest in high value-added products such as HBM and server SSD. Furthermore, we leveraging the mass production of the 2 nano GAA process to pursue opportunities with the top tier clients. For display, we'll maintain our leadership in high-end products and discover new opportunities to broaden our portfolio. In the DX division, we'll continue to deliver exceptional customer experiences, through innovations across our premium product lines, enhanced AI engagements and product connectivity. Companywide, we will ensure prompt and flexible responses to changing conditions, by closely tracking the global economic situations and growth trends of real demand. Now moving on to capital expenditures. CapEx in the Q3 increased by KRW 0.3 trillion sequentially to KRW 1-2.4 trillion, of which KRW 10.7 trillion was invested in the DS division and KRW 1 trillion was invested in Display. Year-to-date, CapEx as of third quarter end declined KRW 0.9 trillion year-to-year to KRW 35.8 trillion, with KRW 30.3 billion invested in DS and KRW 3.9 that invested in display. We expect annual CapEx to increase by approximately KRW 3.6 trillion to KRW 56.7 trillion, with the DS investments down slightly to KRW 47.9 trillion, while display investments increased to KRW 5.6 trillion. As a reminder, the full year numbers are projections and the actual figures may differ depending on future market conditions, the timing of equipment deliveries and other factors. For Memory, while maintaining a flexible approach towards equipment investments, we are prioritizing investments in advanced technology to meet demand for high value-added products, such as HBM and DDR5. This, combined with investments in the back-end process and for R&D, should result in similar annual CapEx to last year. For Foundry, investments are centered on tech migration on existing lines, considering market conditions and investment efficiency. Overall, we expect Foundry's annual CapEx to decline. In Display, we expect annual CapEx to be higher than last year's total, due to our proactive investment strategies. Specifically, we preemptively invested in new fabs for mobile display and strategically invested in enhancing production lines to maintain our competitive advantages. Now turning to the third quarter dividend. Today, the Board of Directors approved a quarterly dividend of KRW 361 per share for both common and preferred stocks. Based on current dividend policy, the total amount distributed for this year will be KRW 9.8 trillion. Accordingly, the payout for the third quarter is KRW 2.45 trillion, which will be paid near the end of November. I will now cover our sustainability management achievements and other current topics. I'm pleased to say that, Samsung Electronics has taken the number five position in Interbrand's top 100 best global brands for the fifth consecutive year and is still highest ranked non-U.S. Company. Over the past year, our brand value grew by 10% to reach $100.8 billion breaking through the $100 billion threshold for the first time. Interbrand cited several factors behind this achievement, including our early presence in the mobile AI market, expanded offerings of products featuring AI, strengthened connectivity experiences that provide meaningful benefits and enhanced sustainability policies and actions in sustainable management. Overall, our dedication to expanding and strengthening sustainability activities throughout our business is stronger than ever. Finally, our management recognized a significant interest in the value of program, and its importance to our stakeholders. Given the highly-uncertain business environment, we are conducting a thorough review of all our options as we speak and plan to share specific details when they become available. Let's move forward and invite the executives from each business segments to present more detailed information regarding each business' third quarter performance and outlook. We will divide the following section into two, the DS division including Display and the DX division. For the first section, we will start with EVP, Jaejune Kim, from Memory Business. Jaejune Kim: Good morning. This is Jaejune Kim from Memory Global Sales and Marketing. In the Memory market in the third quarter, for server, as major datacenter and tech companies continue to invest, demand for AI and conventional servers was strong. However, in the case of Mobile segment, demand was relatively soft due to inventory adjustments by some customers and the supply-demand situation was impacted somewhat by the increasing supply of legacy products in China market. Thus, in the third quarter, as demand focus on server application and cutting edge products was strong, our market decoupling by each application and product seem to be intensified. In this situation, we focused on adjusting the business portfolio, mainly toward cutting-edge and high value-added products, aiming to strengthen our business fundamentals. To accomplish this, we focus on depleting aging inventories, mainly consisting of legacy products to further improve our inventory level mix. On the other hand, in the case of cutting-edge products, we actively responded to the demand for high profitable products for AI and servers. Thus, compared to the previous quarter, we achieved sales revenue growth of over 70% for HBM, the mid teens for server DDR5 and mid-30s for server SSD. As a result, compared to the previous quarter, despite the impact of depleting aging inventory, both DRAM and NAND ASPs increased by high single-digits and sales increased by mid single-digits in dollar terms, thanks to the sales of high profitable products. However, our performance decreased due to reduced reversal of inventory valuation loss compared to the previous quarter. One time charges such as incentive provisioning and currency effect due to a weak dollar. Now, let's move on to the outlook for the fourth quarter. In the Memory market, we expect the trends experienced in the third quarter to continue in the fourth quarter. Specifically, while demand for AI is likely to remain strong, we expect some mobile customers to continue adjusting inventory following the previous quarters. On the other hand, we will continue to monitor factors that influence demand, such as geopolitical issues and interest rate and stimulus package in key countries. In the fourth quarter, as this market decoupling trend remains, we plan to continue improving our business portfolio focusing on profitability. On top of that, we are flexibly rolling down our production for some legacy DRAM and NAND products, in line with market demand in order to accelerate the conversion of cutting-edge nodes in our legacy lines. In addition, following the previous quarter, we aim to strengthen our business fundamentals by completing the normalization of inventory level and mix, by the end of the year. For DRAM, we plan to expand sales in line with the increase in HBM capacity, accelerate the transition to 1b nano for server DDR5 and actively expand the sales portion of high-density module based on 32-gigabit DDR5. In addition, we will secure leadership on high value-added products with mass volume business of 10.7 gigabps LPDDR5X and GDDR7, which are developed for the first time in the industry. For NAND, while server SSD demand continue to stay strong, we will actively respond to the demand for TSG SSDs, which accounts for the main portion of the market and further expand the sales of V8 based TCI Gen 5. Especially for QH market that has a high growth potential. We plan to mass produce the 64 terabyte product and sample the 128 terabyte product in this quarter. Therefore, by the first half of next year, we expect to mass produce up to 128 terabyte in QH SSD lineup. Now let's move on to the outlook for 2025. For server, our data center and enterprise investments are likely to remain strong in association with AI and build demand for conventional server as well as AI servers is expected to be strong and stable. In particular, we are anticipating that the size of general type AI data will dramatically increase and the trends toward high density in HBM, DDR5 and server SSDs will be constantly accelerated. For Mobile, as major customers launch more and more on device AI smartphones and the higher specs are required mainly in the flagship segment, we expect memory contents per box to increase. And also for PC, we expect a gross momentum in demand due to the discontinuation of Windows 10 services and the arrival of the replacement cycle for PCs that was sold during the early period of pandemic. But we will continue to monitor some uncertainties such as the macroeconomic recovery trend and potential for the launch of killer application for device AI. Likewise, although demand in 2025 is focused to be robust overall, we expect the demand increase to be driven primarily by high density and high-end products based on cutting-edge nodes rather than legacy products. Therefore, in the next year, we plan to accelerate to process conversion of our existing lines to reduce the portion of luggage products and to expand the portion of cutting-edge nodes. Considering the bill loss during the conversion process, we expect production de-growth to be limited for both DRAM and NAND. But we will focus on the portion of differentiated product based on advanced node rather than short-term pressures, preparing for a competitive business portfolio focused on profitability. For DRAM, we plan to further expand the sales of HBM3E, and we are scheduled to develop and mass produce HBM4 in the second half of the year. In addition, by accelerating the transition to 1b nano in the legacy lines, we plan to reduce the portion of DDR4 and LPDDR4 products based on legacy process that are seeing intensifying competition and to expand the portion of high-end products such as 128 gigabyte or higher DDR5 server modules and LPDDR5x for mobile PC server and so on. For net, while expanding server SSD sales, we will proactively respond to the high-density trend, based on QH products, including 64-terabyte and 128-terabyte SSDs. Also, we will solidify our leadership in the PCIe Gen5 market by accelerating the tech migration from V6 to V8. Focusing on improving our portfolio towards cutting-edge products and strengthening our business structure, we will secure sustainable business competitiveness. Thank you. Tommy Kwon: Good morning. This is Tommy Kwan from the System LSI Business. Smartphone shipments are expected to grow by around 2.5% this year with a roughly 5% increase in the first half, a slowing growth in the second half, leading to increased debt inventory levels and vehicle purchasing demand. In anticipation of vehicle purchasing demand in the second half and fourth quarter, we have increased third quarter sales through effort to reduce inventory, but earnings have declined due to increased one-time costs such as incentives. SoC sales rose as flagship products were designed in a new project, sensors are being adjusted due to customers' inventory accumulation in the first half, and DDI sales expanded due to the launch of new projects. Throughout the fourth quarter, SoC will continue to increase supply of Exynos 2400 and sensor will reinforce new product development verification and reduce work in process inventories amid weak market demand. DDI is focusing on growth area in a stagnant Display market through the commercialization of mobile OLED TDDI products and support for the expansion of OLED for IT. Although, there is little chance of recession in 2025, the smartphone market is expected to grow by less than 1% next year, compared to 2.5% this year. However, the momentum of on-device AI is expected to be strong. The impact of China's economic stimulus could be an upside opportunity in the smartphone market. In our business division, we plan to focus on supplying our SoC to major customer flagship products, while preparing for next generation tonometer products. Image sensors are expected to expand camera function differentiation, as smartphone component prices stabilize. We aim to strengthen our leadership with high dynamic range capability, low power consumption and zoom functionality. Satellite's strategy to improve yield and secure cost competitiveness in the logic side remain valid. DDI plans to develop advanced low-power products and integrate PDDI and T-COM. Thank you. Taejoong Song: Hello, everyone. This is Taejoong Song from Foundry Business. In the third quarter, the overall market showed continued growth in advanced technology nodes, largely driven by rising demand for AI and HPC application. However, recovery in mobile and PC applications was slower-than-anticipated. As a result, our overall earnings declined compared to the previous quarter due to the impact of a one-off cost related to employee incentive and inventory provisions of engineering run wafers. Despite these short-term challenges to our business, we successfully met our order targets, particularly in 5 nanometer technologies. To be specific, we have released our 2 nanometer GAA PDK, enabling our customers to proceed with their product design. Our mature technology portfolio has been diversified with improvement in RF, EMN technology and design infrastructure. Looking ahead to fourth quarter, a delayed rebound is expected in Mobile and PC market, leading to potential customer demand weakness. However, HPC and AI related market will continue to show robust growth. Although inventory adjustments among our customers may continue beyond this quarter, we are committed to improving our business performance by focusing on streamlining operations, targeting high gross products of key customers. In this quarter, we will also strive to acquire customers by improving the process maturity of 2 nanometer GAA technology. Furthermore, we'll continue to develop competitive technology and design infrastructure for additional business opportunities. For 2025, the Foundry market is expected to show double digit growth driven by HPC and AI application in advanced technology. Samsung Foundry aims to spend revenue through ongoing yield improvement in advanced technology, while securing major customer demand through successful 2 nanometer mass production. In addition, we are enhancing the comparativeness of our 4 nanometer technology and design infrastructure to address the growing demand for mobile and HPC. Finally, I would like to highlight Samsung Foundry's close collaboration with the Memory division. Integrating advanced technology and packaging solution to develop HBM prototype will help us acquire new customers in AI and HPC sectors. Our major technologies continue to evolve, focusing on specialty technologies, such as RF and automotive, further diversifying our business portfolio. This concludes the key message from Foundry Business. Thank you. Charles Hur: Good morning, everyone. This is Charles Hur from the corporate strategy team at Samsung Display. I will now brief you on our results for the third quarter of 2024. For the Mobile Display business, we performed sequential improvements in both sales and profit, thanks to the launches of a major customer's flagship products. The sales contribution of Mobile Display business exceeded over 90%, which is similar to the previous quarter. In addition, the Smartphone segment achieved double-digits sales growth. For the larger display business, sales volume has increased compared to the previous quarter, driven by stable demand of both TV and monitors. However, earnings has underperformed compared to previous quarter. Next, I will share our outlooks and strategies for the fourth quarter. For the Mobile Display business, sluggish demand for smartphone is expected to continue into the first quarter, along with the sales growth in IT and automotive business. However, our performance outlook is quite conservative considering the rising competition among panel makers. For the larger display business, we'll continue to address the demand from major customers by improving production efficiency and keep striving to expand sales compared to the previous quarter. Also, we'll respond to the demand for 2025 new products with a timely supply. Next, I'll share our outlooks and strategies for the Mobile Display business in 2025. We expect overall growth in the smartphone market will be limited. However, OLED penetration rate is predicted to keep rising, as more smartphones with OLED panels are projected to be released. As high performance display is required with the spread of AI devices, OLED adoption trend will continue to increase. We will maintain our leadership in foldable and high-end smartphones with our innovative OLED technologies, such as low power consumption and high resolution, which is optimized for AI devices. Additionally, we'll accelerate the expansion of IT and automotive sectors to diversify our business portfolio further. Finally, for the larger display business, we continue to leverage the performance advantage of OLED panels to strengthen our position in premium TV market. And for monitors, we'll broaden our lineup by adding new high resolution product and diverse refresh rate options. Consequently, we'll not only solidify comparative edge in gaming monitor market, but also actively enter the B2C market in 2025. Thank you. Daniel Oh: Many thanks to our DS Division representative. We will now move on to the second section, which will cover DX division. First, EVP, Jongmin Lee from the CX MDE Center will discuss the company's overall AI strategies followed by other DX Business representatives. Jongmin Lee: Hi, everyone. Before we move on to performance of DX Business, I'd like to discuss our multi-device AI strategy, driven by Samsung's extensive product lines and cutting-edge technologies. Every year, Samsung delivers over 500 million diverse products to our consumers around the globe, with the tailored application of AI in each product, helping to secure our position as a market leader. Samsung devices are becoming more and more connected each day, and we are striving to deliver AI functionalities that bring practical benefits to daily life, making it safer, more convenient and more efficient, so you can reclaim your time and effort, while saving energy in the process. At the base of this is SmartThings, our platform with 360 million users using the capabilities that we have developed so far, which include product intelligence, spatial intelligence and personalization, we will establish our presence in the future home, where AI is the norm. First, we believe security is the key priority in the AI era, and Knox Samsung Account is core. We have expanded and applied our proven support technology across our product lines from mobile to TVs and home appliances. In fact, our home appliances recently received a diamond-level rating, the highest level of security in the industry. Increasing device connectivity also carries increased risk. To further protect against such threats, we have applied NOx Matrix, our trust chain based solution that creates a safer AI home. Second, I'd like to address convenience. Devices in your home will not only automatically connect to SmartThings, they will also evolve to understand your lifestyle. When you power on a newly purchased Samsung product, it will automatically connect to SmartThings, allowing you and your family to easily use it along with other previously connected devices. This is made possible through our AI-based Calm onboarding technology, a stepping stone to convenient life. Samsung TVs and home appliances come equipped with hub functionality right out of the box, enabling seamless connections with various products from partner companies without having to buy a separate hub device. In addition, our technology can automatically create a map of your floor plan, allowing you to arrange devices and furniture in 3D. This provides a visual for you to ensure that air quality and power consumption are maintained at optimal level throughout your home. Furthermore, Samsung's voice assistant, Bixby, can recognize different users and offer tailored experiences to each individual. Third, our intelligent saving technology makes our customers wiser. It helps them to reduce energy cost, reduce time spent on household chores and even supports environmental protection. For example, our technology can detect when no one is at home and power down unnecessary appliances, which saves the energy and helps to protect the environment. Last, our technology can help you to take care of your health and well-being of loved ones. We will expand the AI connectivity experience from the home to health with the ability to monitor sleep quality, health metrics and your diet through diet coaching, providing multiple ways to help you to take care of yourself and your family. In June, we introduced a Family Care, a service that analyzes device usage patterns of elderly parents or those under your care, helping you ensure their well-being even when you are apart. With kid care, we are currently in the process of expanding this service to include the children. Given our customer first approach, we will keep working to build a warm, welcoming home AI environment centered on well-being of everyone in this space. In addition, we are continually advancing dedicated solutions for the B2B sphere, such as SmartThings Pro, aiming to expand in commercial space like public housing, hotels, stores and offices and contribute to growth in our B2B businesses. Now let's discuss the performance and traction of each business unit. Thank you. Daniel Araujo: This is Daniel Orajo from the MX division. I'd like to share our results for Q3 and the outlook for Q4 and next year. The smartphone market in Q3 was affected by lingering global inflation, which delayed the recovery in consumption. Despite major vendors releasing new products, demand only increased slightly. The MX division recorded shipments of 58 million smartphones and 7 million tablets in third quarter with a smartphone ASP of $295. We achieved growth in both revenue and operating profit compared to the previous quarter, due to the release of new smartphone, tablet and wearable products. Although material costs rose as product specifications improved to enhance their competitiveness, our expanded sales focused around flagship models drove profitability close to the double-digits. Now let me move on to our outlook for Q4. The smartphone market in Q4 is forecast to grow quarter-on-quarter due to seasonality, but competition in the mass market segment is to intensify amid an increase in demand, especially in emerging markets. The MX division expects shipments of smartphones and tablets to decrease and ASP to decline compared to Q3 when many new models were released. With the holiday season in mind, we will implement various sales programs to continue the solid sales of AI smartphones such as the Fold 6, Flip 6 and S24 series aiming for double digit growth in annual flagship sales. For tablets and wearables, we aim to expand sales linked to year-end seasonality with a particular focus on new premium products, featuring significantly enhanced performance in order to contribute to MX's sales and profits. Next, I'll share our outlook for 2025. We expect the macroeconomic environment to stabilize somewhat in 2025, due to the impact of interest rate cuts, and the smartphone market should grow slightly. In particular, we expect the mass market segment to grow, given the expansion of AI functionality from primarily premium products in 2024 to midrange products, along with overall improvements in hardware performance. Market demand for ecosystem products is also likely to increase. The tablet and Note PC markets will grow due to demand from the product replacement cycle and increasing AI functionality. The Smartwatch and TWS markets will also see applications of AI functionality and expansion of premium demand. And as for the Smart Ring, rising demand for new wellness experiences such as sleep management should lead to continued market growth. In the MX business, we plan to drive sales growth centered on flagship products, based on further advancements of Galaxy AI. The S25 Series scheduled to be released in the first half of next year, will offer an even more complete Galaxy AI experience, driving innovation around real use cases in everyday life. We also aim to expand sales through strengthened marketing and hands on experiential programs in that spreading Galaxy AI. For foldable phones, we will strengthen product competitiveness with design innovations and AI specialized for foldables, further solidifying our leadership in AI phones from 2024 onwards. Galaxy Tab and Book will offer more advanced Galaxy AI features, and we will focus on expanding sales of premium products. In wearables, we aim to increase sales by further differentiating products by refining them and improving usability. We will expand the Galaxy Watch's position in the premium market by focusing on AI functionality. And for the Galaxy Buds, we will bolster premium sales by establishing an AI specialized line-up while also enriching sound quality. The Galaxy Ring, which launched this year, will contribute to expanding the Samsung Health ecosystem by enhancing our sleep management experience, and we will improve the connectivity between our products, including upcoming XR devices to further elevate user experiences in the Galaxy ecosystem. Lastly, in 2025, we anticipate seeing an increase in the prices of major components due to improved product specifications, as we strengthen product competitiveness. However, we aim to improve profitability by further enhancing Galaxy AI, as well as expanding sales centered on flagship products. Thank you. KL Roh: Hello, everyone. I am KL Roh from the sales and marketing team of Visual Display. Let me brief you on the market condition and our result in the third quarter of 2024. TV market demand increased quarter-on-quarter, thanks to seasonal effect, but it declined slightly year-on-year, mainly due to global sporting events pulling demand into the first half. For Samsung, we improved profitability both year-on-year and quarter-on-quarter by focusing on sales of strategic products, such as Neo QLED, OLED and BIG TV. At the same time, we expanded sales in the service business and optimized the resource management. Now let me go over the outlook for the first quarter and for 2025. In the first quarter, TV market demand is expected to recover, thanks to year-end peak seasonality, although competition is likely to intensify. To preemptively capture peak season demand, we will enhance our sales program focusing on premium model, big TV and lifestyle screen, through strategic collaboration with major retailer. Also, we will focus on expanding sales and securing profitability by emphasizing the non-price competitiveness of our TV related to security, design and contents, which have recently emerged as important consumer value. The TV market in 2025 is projected to grow slightly, with strategic products such as QLED, OLED and Big TV continuing to gain share. We will continue to differentiate AI functionality and innovate our product, centering on premium and live lifestyle screen to solidify our position as #1 player in the global market. In particular, we will actively employ AI technology to not only advance core TV performance, such as picture and sound quality, but also enhance the overall customer experience with the SmartThings ecosystem, thus expanding the role of TV to become the hub of the AI home in the era of hyper connectivity. By product, for Neo QLED, the backbone of our premium TV lineup, we will sustain our key differentiator and related communication. And for OLED, we will improve the picture quality of our main model and reinforce regional lineups to drive dual premium sales of Neo QLED and OLED. Furthermore, we will strengthen our lineup in nine inches above Super Big TV to target growing demand in this segment. As for lifestyle screen, we plan to make full use of our competitive edge over later commerce products to solidify our position at the forefront in this category. Lastly, by leveraging our extensive installed base secured with our leadership in hardware, we will keep expanding our service platform business, driven by advertisement and media, such as TV Plus. Thank you. Daniel Oh: Thank you, everyone. With that, we have concluded our prepared statements. Let's open the line for questions. The following Q&A session will be conducted in Korean. Operator: The first question will be by Mr. Sung-kyu Kim from Daiwa Securities. Please go ahead. Mr. Dong-Won Kim from KB Securities will make the first question please. Dong-Won Kim: Yes. Thank you for the opportunity to ask some questions about Memory and MX. You already -- what is your outlook in terms of bit growth for DRAM and NAND in the fourth quarter? And also, what do you intend in terms of innovating or reinforcing your foldable lineup for 2025 as well? Jaejune Kim: Let me take the first question regarding fourth quarter bit growth first. First, for DRAM, we will be expanding HBM production and sales. And so, we expect that DDR5 and LPDDR5X products will likely see limited production growth. Meanwhile, amid inventory adjustments by Chinese mobile clients, mostly for legacy products, plus the base effect from sales of aging inventory in the third quarter, we expect our DRAM bit growth to decline to a mid single-digits level in the fourth quarter. For NAND, as we see continued solid demand for server SSDs and boosted by an upside in QLC SSD sales, we expect server SSD revenue to increase by an additional 10% Q-on-Q on a bit basis. However, on the weaker mobile demand, we expect demand growth to be constrained. And this, when combined with the base effect from low bit shipments in the third quarter, overall NAND bit shipment is expected to see limited growth at around the low single digit level. We aim to offer a differentiated foldable experience, that actually transforms our users' mobile lifestyles. We try to create these new mobile experiences by improving the product itself on the one hand, while at the same time incorporating AI functionality tailored to the form factor. We will continue to further differentiate our premium products, as we make the fold slimmer and lighter with a powerful camera experience and enhance the Flip's unique design and cover screen experience. Since customers of our foldable devices have high-levels of product satisfaction, we're also considering ways to ease the purchase barriers so that more people can experience foldable products firsthand. We are preparing a new form factor for consumers seeking an even more powerful and innovative mobile experience, aiming to introduce it when we can ensure that the quality and the real life experience meets our users' expectations. Thank you. Daniel Oh: Thank you for your answer. Next question, please. Operator: The next question will be by Mr. Sung-kyu Kim from Daiwa Securities. Please go ahead. Sung-kyu Kim: I have two questions on semiconductors. First is on the Memory side. Third quarter performance was actually below market expectations. So can you explain more on the memory business results in terms of both sales and profit? And second, regarding your flagship SoCs, could you provide a status update on the development of the Exynos flagship SoC and comment on possible application on next gen flagship models? Daniel Oh: Okay. Let me take the question on the performance for DS. In the third quarter, we boosted the share of sales from high value-added products as we focused on improving profitability. Also, to normalize inventory in volume and quality, we also expanded sales of aging inventory. Third quarter bit growth was flat Q-on-Q for DRAM, down to single digit growth for NAND. The increase in ASP was also slightly more constrained versus budget from the impact of aging inventory. Overall, DRAM and NAND ASP both saw high single-digits growth compared to the second quarter. Also, total revenue for the Memory business in dollar terms posted mid single-digits growth quarter-on-quarter. And for DRAM, we saw HBM sales grow by more than 70% Q-on-Q as we ramped HBM3E mass production. Meanwhile, as production was focused around HBM, there was limited supply capacity for DDR5 products based on advanced nodes. Nonetheless, server ASP increased by more than DRAM ASP, while DDR5 sales accounted for more than 80% of total server DRAM sales. Notably, as AI models become bigger in size, we have been seeing an increase in demand for high capacity DDR5. Our 128-gigabyte product, which is the first time in the industry, based on 1b nano, 32-gigabit technology has increased as a percentage of the sales mix now, accounting for high single-digits percentage of total server DDR5 sales. NAND also continued to see a rise in server SSD sales, and we reported a record high in the third quarter and now accounts for 50% of total NAND sales. Amid inventory adjustments by some mobile customers, however, there was a slight decrease in purchasing demand, and coupled with our operational focus on profitability, NAND sales volume came in below our bit guidance. For earnings, despite the Q-on-Q increase in sales, third quarter operating profit was down on a quarter-on-quarter basis, as write back of provisions for inventory valuation loss was lower versus the second quarter, also impacted by one-off costs, such as incentive provisioning and weakening USD. Tommy Kwon: So, let me take your question on system LSI. While I cannot comment on details concerning customer projects, we are in close collaboration with the foundry side to secure sufficient supply capacity for our next gen flagship SoCs, as we look to start application on flagship series models next year. We're also looking to expand adoption of current generation SoCs in our current upcoming flagship models for next year. As AI spreads further, building on our experience and capabilities in the flagship SoC space, we're working to move beyond smartphones to expand into on-device related business opportunities. We're focusing on acquiring relevant technologies, including on-device AI software, xPU link technologies, also telecommunications, sensor display, security power to identify further business opportunities in the solutions space. Thank you. Operator: The next question will be by Mr. Nicolas Gaudois from UBS Securities. Please go ahead with your question. Nicolas Gaudois: In your recent statements, alongside the Q3 '24 prelims, you mentioned experiencing delay with one of your major customers for HBM3E commercialization. What's the business that you spend plan for HBM of all and specifically HBM3E from here? Thank you. Jaejune Kim: Yes. First, let me take you through the status of our HBM business. In the third quarter, total HBM sales grew by more than 70% Q-on-Q with both HBM3E 8 and 2 stacked layer products in mass production and generating sales. The share of HBM3E increased to low-to-mid 10% of total HBM sales. But, of course, there were some commercialization delays, and so those figures will likely be below guidance that we provided in Q2. But still, we expect HBM3E to account for about 50% of HBM sales in the fourth quarter. As explained together with our preliminary results, while we did experience some delays in the supply of HBM3E for a major account, we have nonetheless made a meaningful advance. As we have now completed an important phase in the qualification process, we expect to start expanding sales in the fourth quarter. Additionally, we are working to increase and expand into more number of projects, as we seek to expand supply for both HBM33E 8 and 12 stacked products for multiple customers to broaden our revenue base. Additionally, we are preparing an improved HBM3E offering for several of our key customers optimized for their next gen GPU programs. Mass production of these enhanced products is planned for some time in the first half of next year. We're currently in talks with our clients on scheduling. So we're looking to expand supply of existing HBM3E products to previously-awarded projects while driving additional sales of enhanced HBM3E products to supply for new projects to expand the addressable demand pool. For HBM4, development is underway according to plan as we target, starting mass production in the second half of 2025. We're working on custom HBM business development for multiple clients. And for custom, because meeting customer requirements is key, choosing -- when choosing a foundry partner for production at the base side, customer requirements will be the priority. We'll be flexible in our approach regardless of whether it involves an internal or external partner. Operator: The next question will be by Mr. Sei Cheol Lee from Citigroup. Sei Cheol Lee: This is Sei Cheol Lee from Citi. I have a question for Memory and also Foundry. First, regarding Memory. I would like to hear more about your outlook for memory in 2025. You did mentioned some, but, could you elaborate more on decoupling and other developments that you expect? In a related question, could you share more on your CapEx plans for next year as well? Next question has to do with your Foundry business. I'd like to ask about the current status of your advanced process node development for Foundry, and I'd like to hear an update on development of your 2 nano process nodes, which we've heard will enter mass production next year. Jaejune Kim: So we will start with the memory question first. Next year, in terms of overall industry-wide supply conditions, we expect Chinese memory makers to increase supply of their legacy products, while conversion to more advanced process nodes is likely to accelerate among existing players, mostly around DRAM. Amid continued supply constraints for clean rooms across the industry, increasing the share of advanced nodes will likely be achieved not so much through capacity expansion but by conversion of existing lines to more advanced nodes. Considering the bit loss that can occur during this kind of line conversion, I think supply bit growth will likely be constrained to a certain extent for next year. In addition, for DRAM, as production is concentrated on HBM, the existing outlook that production bit growth for conventional products would be constrained, I believe this outlook still holds valid today. For NAND, when CapEx was constrained across the board for the industry during the downturn, we did see supply still increase in 2025 from higher utilization rates. However, as we do not see further scope for further utilization upside next year, we expect supply growth to slow down to a certain extent in terms of the pace or extent. On the demand side, market decoupling is expected to continue at least up to the first half of 2025. For server applications, solid demand is expected to continue for AI related HBM, server DRAM and server SSD. We expect enterprise demand to also see some growth momentum as Windows 10 services are discontinued for PCs, and PCs sold during the pandemic reach their replacement cycle. On the other hand, for mobile applications, due to inventory adjustments from some clients, we expect limited demand conditions to continue for the time being. But, potentially, we may see some recovery in purchasing demand in the first half of next year once the inventory adjustments wind down, and as on device AI is deployed on flagship models around that time as well. As demand is expected to vary between different use cases, there may be a bipolarization of demand between different end use applications. As production bit growth for advanced node products continue to be constrained, we believe the decoupling of supply/demand dynamics between advanced process nodes versus legacy products are likely to continue for some time. Based on this outlook, we are setting CapEx at level similar to this year. Our priorities will include building next gen semiconductor R&D complex, investing into HBM packaging, making advanced investments to secure clean rooms for the mid-to-longer term as we focus on strengthening our future competitiveness. For facility investments, our focus will be on investing in conversion to advance process nodes rather than capacity expansion. We plan to accelerate conversion of existing lines to 1b nano DRAM and V8, V9 NAND processes so that we can focus on the high value-add markets enabled by advanced process nodes to benefit from strong demand momentum. For DRAM and NAND, rather than simply targeting bit share, we'll focus on tapping the high margin market, strengthening the competitiveness that the market demands. We'll manage production and CapEx in a flexible manner as a baseline position. Now let me address Foundry. Our two nano process is under development designed to be an enabling technology platform that is optimized for mobile and HPC applications. Based on improved process maturity and expansion of our IP portfolio, development is currently underway targeting mass production in 2025. We're doing PPA analysis for performance, power consumption and area, mindful that our 2 nano GAA all around PDK and design infrastructure will be used to customize different products for our key accounts. Other evaluation work is also underway for certain customers to assess IP content and to characterize silicon through MPW. To acquire additional sources of competitiveness for our 2 nano GAA process, we've been developing several fabrication processes and design technologies like BSPTN and automotive technologies. Customers are not just looking at the competitiveness of process knowledge, but seeking a total solution that includes advanced packaging technologies. So based on our 2 nano GAA process with competitive PPA, we're aligning with customers on differentiated packaging, aligning with them on our roadmap for differentiated 2.5D, 2.3D and 3D packaging technologies and seeking strategic partnerships to secure more diverse customers, not only for mobile but also HPC and AI automotive. Operator: The next question will be by Giuni Lee from Goldman Sachs. Giuni Lee: Thank you for the opportunity to ask. I have a question for Foundry and one for VD as well. Could you provide more color in terms of CapEx investments for Foundry this year and next year? What will be your main areas of investment for foundry as well? For VD, it seems that competition is getting more intense, mostly in the mid-to-low end markets. How does the company intend to respond? Taejoong Song: Yes. Let me answer your question on Foundry. In Foundry, our Foundry investments were mostly focused on customer demand for mobile and HPC. However, in light of market conditions and investment efficiency, conversion of our existing lines for reutilization was our biggest priority, and we expect the amount of CapEx executed this year to decrease. For 2025, we will maximize utilization of our existing production infrastructure to provide a timely response to customer orders for advanced process and legacy products. Apart from R&D for cutting-edge process notes, any investments into capacity expansion will be considered thoughtfully and efficiently considering utilization and profitability. KL Roh: Here's the answer for VD. Demand for strategic products like QLED and large TVs continues to grow, while entry level demand is also rising within each category. This expands the mid to low range market and intensifies competition. In response, we will strengthen our leadership in the premium segment, while expanding entry level lineups across key product categories to capture mid-to-low range demand, focusing on cost efficiency and manufacturing competitiveness. Also, we will emphasize marketing security ESG content to deliver unique customer experiences by promoting customer value through differentiated products and services like Knox Security Solution with high stability and slim and high resolution design achieved through advanced technology, we will expand sales in the volume zone and secure profitability at the same time. Daniel Oh: I'll take one more question due to time constraints. Operator: The last question will be by Dong-je Woo with Bank of America. Please go ahead, sir. Dong-je Woo: Thank you for the opportunity. My first question is for MX, about smartphone enhancement and their functionality enhancement and how will they evolve in the future? And the second question will be on SSD. Could you provide the time line for the 8.6 generation fab utilization and revenue outlooks? And any plans for capacity expansion? Daniel Araujo: As our AI phones rapidly evolve, product hardware specs and AI functionality are expected to further develop. So we aim to provide our customers with first rated AI features. So we're analyzing adopting APs and memory that can meet these requirements. To run a generative AI model on device requires high performance APs and memory, which is also expected to increase heat generation and battery consumption. So we are also considering various technologies and solutions to address these issues. Regarding Bixby, Samsung introduced the upgraded Bixby AI voice assistant to home appliances and televisions beginning at the end of August. In the future, we also plan to release a smartphone version capable of performing more complex functionality. Thank you. KL Roh: I'll take your second question for display. In April 2023, to support rising demand in notebooks and tablets, we announced investments in our 8.6 generation IT OLED line, which is on track for mass production in 2026. The facility has completed receiving its main equipment, and we are now setting up the fab, fine-tuning specifications and boosting overall technical maturity. In IT markets like notebooks and tablets, demand for high-resolution, high-performance display is driving OLED adoption. With our extensive technology and early investments, we will achieve economies of scale ahead of our competitors, enabling us capture the IT market, maximize utilization and drive sales growth as well. For capacity expansion, we will focus on the previously invested 8.6 generation IT line, ensuring stable technology and supply. Expansion timing and scale will be evaluated based on the market conditions and customer demand in the future. Thank you. Daniel Oh: Thank you for your answer. Finally, we will answer questions that were submitted online in advance. We received a wide variety of questions for this quarter as well, and I believe the majority of the submitted questions were sufficiently answered during the Q&A session. We will answer one more question on a topic that garnered a high level of interest from our shareholders, but was not addressed during the Q&A session. The question is, do you anticipate a rebound in consumer demand for home appliances in 2025? If so, what is Samsung's plan to expand sales of major home appliance accordingly? VP, Jaejune Kim, representing Digital Appliances, will answer the question. Jaejune Kim: Here is the answer for your question. In 2025, demand is expected to return to growth due to easing inflation, increased investments in emerging markets and rising international trade. Consumer sentiment in North America and Korea, which are our primary markets, is always expected to improve slightly, easing the pace of negative growth. The demand in Southeast Asia, Southwest Asia and Latin America is like likely to grow, thanks to recovery in production and export and expansion in infrastructure. With rising interest in AI technology for its convenience, demand for premium products, especially AI-powered home appliances, is expected to increase. In 2025, with our reliable security service, we will offer voice ID recognition for tailored experiences and appliances equipped with screens for home monitoring. We'll also enable easy AI controls to simplify household tasks and keep upgrading the AI connectivity experience. Furthermore, we will boost global sales with innovative AI products like hybrid refrigerators and the bespoke AI combo focusing on premium segments. And to expand our B2B business, we will strengthen product lineups and sales capabilities, driving revenue growth with a focus on profitability. Thank you. A - Daniel Oh: Thank you very much. I would like to thank everybody who shared their valuable opinion, and we will be sure to refer to them in our decision-making process. That completes our conference call for this quarter. We wish all of you and those close to you stay strong and in good health. We thank everyone for joining us today. Thank you.

Operator: Hello, everyone, and welcome to the Samsung Electronics 2024 Second Quarter Financial Results Conference Call. I will be your coordinator. All participants will be in a listen-only mode until we open the question-and-answer session following the presentation. As a reminder, this call is being recorded. I would now like to turn the conference over to the Investor Relations team. Please go ahead. Daniel Oh: Good morning, everyone. Thank you for joining us this morning. I am Daniel Oh, Head of Investor Relations at Samsung Electronics. I'm pleased to have you all on today's call. I want to begin this call by introducing the following executives from our different business segments joining today's call. Starting with EVP Jaejune Kim, representing Memory; VP, Tommy Kwon for System LSI; VP, Taejoong Song for Foundry; EVP, Charles Hur for Samsung Display Corp; VP, Daniel Araujo for Mobile eXperience business; and last but not least, VP, KL Roh for Visual Display. The presentation deck and other materials, which are intended to supplement our prepared remarks for today's call can be found on the Samsung Electronics Investor Relations website at www.samsung.com\global\ir. Please note that our webcast of this call will be archived on our website. The following is usual disclaimer for today's call. I want to remind you that some of the statements we will be making during today's call are forward-looking based on the environment we currently see. They are subject to certain risks and uncertainties that may cause our actual outcomes to differ materially from those expressed in today's discussion. The information we are giving you on this call this morning is as of today's date, and we undertake no obligation to update the information subsequently. Now, I will start with a review of our consolidated financial performance for the second quarter of 2024. Total revenue reached KRW74.1 trillion or 3% increase from the previous quarter. The DS Division experienced 23% revenue growth, thanks to recovery of the Memory business, while Displays revenue increased by 42% on the back of robust OLED sales. However, the MX division's revenue decreased by 19% because of a weak seasonal demand for smartphones. Gross profit was KRW29.8 trillion, up KRW3.7 trillion compared to last quarter. This was mainly due to strong demand for DDR5, HBM and other high value-added memory products. The strong showing by our component businesses, including Memory, also contributed to our enhanced profitability. As a result, the gross profit margin expanded by four percentage points to reach 40.2%. Our SG&A expenses slightly improved from previous quarter, reaching KRW19.3 trillion attributed mainly to efficient advertising and promotion expenditure management. Despite reaching a new high in R&D expenses aimed at driving future growth, SG&A expenses as a percentage sales decreased by 0.9 percentage points to 26.1%, reflecting the overall increase in revenue. Next, our operating profit surged by KRW3.8 trillion sequentially to KRW10.4 trillion, essentially fueled by higher average selling price resulting from more opportune memory market conditions and robust demand from key OLED clients. We achieved this growth despite persistent cost pressures from rising component prices in our finished product businesses. As a result, our operating profit margin expanded by 4.9 percentage points sequentially to 14.1%. With respect to foreign exchange impacts, the strengthening US dollar positively impacted our consolidated operating profit by approximately KRW 0.8 trillion during the quarter. Now moving on to capital expenditures. CapEx in the second quarter increased by KRW 0.8 trillion sequentially to KRW 12.1 trillion, of which KRW 9.9 trillion was invested in the DS division and KRW 1.8 trillion was invested in Display. For Memory, we continued our proactive investments to meet the demand for high value-added products such as HBM and DDR5 along with ongoing investment in R&D and back end to enhance future competitiveness. For Foundry, although we remain committed to investing in R&D to strengthen our technology competitiveness, the second quarter CapEx decreased compared to the previous quarter due to adjustments to facilities and infrastructure investments based on market conditions. In Display, our investments were focused on IT OLED fabs with additional investment aimed at mobile panel production lines to maintain our technology advantage. Now, I will discuss the second quarter dividend. The Board of Directors just approved a quarterly dividend of KRW 361 per share for both common and preferred stocks. According to our current dividend policy, the total amount distributed per quarter amounts to approximately KRW 2.45 trillion, which will be paid near the end of August. Now, let me turn to our sustainability management. Last month, we published our 2024 sustainability report, which provides detailed insights into our sustainability efforts. Here are some key achievements from last year. From an environmental perspective, as of the end of 2023, the DX division has achieved a renewable energy conversion rate of 93.4%, including a complete transition for major manufacturing facilities worldwide. This aligns with our objective of reaching net zero for Scope 1 and 2 emissions by 2030. The DS division recorded an 11.6% decrease in greenhouse gas emission in 2023 compared to the previous year. In pursuit of our long-term goal of net zero for Scope 1 and 2 emissions for 2050, we increased the installation of regenerative catalytic systems to handle process gases, and we also expanded the utilization of waste heat recovery system to minimize the usage of liquified natural gas. In terms of our social responsibility, during the quarter, Samsung Electronics introduced our Global Grievance Resolution Policy to protect human rights and to enhance working conditions. Additionally, recognizing the value of diversity in our workforce, we aim to significantly increase the proportion of female executives by 2030, targeting a minimum twofold increase from the 2002 figure of 6.9%. Moreover, to boost our supply chain management, we conducted external audits on the work environment of second-tier suppliers in Asia during 2023. Regarding our products, we persistently broadened the application of recycled materials in our newest products, this is exemplified by the incorporation of nine recycled materials in the Samsung Galaxy Z Fold6 and Z Fold Flip 6 Series, reflecting a substantial increase from the poor materials utilized in the proceeding series. Furthermore, we have enriched a variety of our recycled material portfolio by incorporating gold and copper alongside preexisting constituents. As a responsible corporate citizen, we are committed to expanding our sustainability management in all areas of our operations. Let's now move forward and invite the executives from each business segment to present more detailed information regarding the second quarter performance and second half of the year outlook of each business. To begin with, we have EVP, Jaejune Kim from the Memory business. Jaejune Kim: Good morning. This is Jaejune Kim from Memory Global Sales and Marketing. The memory market in the second quarter continued to recover due to strong generative AI server demands. Furthermore, our robust demand for not only HBM also conventional DRAM and SSD for server drove the market recovery with contributions also coming from the expansion of AI investments by cloud service providers and rising demand for AI are in the enterprise on-premise supermarket. Meanwhile, our demand for PC was relatively weak due to sluggish sellout. However, demand for mobile remained solid, thanks to increased overseas exports by Chinese OEM customers and some demand for inventory buildups occurred in the -- in line with the prospects of price increases. While our demand focusing on server application continued to show a favorable trend, our Q2 results improved significantly compared to the previous quarter, thanks to our active response to demand for high value-added products for generative AI and to improve the market prices overall. By product category, compared to the previous quarter, our HBM sales increased by mid-50% and server DDR5 sales recorded a mid-80% increases, thanks to increased shipment and ASPs. As for server SSD, despite the base effect of high shipments in the previous quarter, our sales revenue increased by mid-40%. In addition, we strengthened our leadership in the DDR5 market by starting mass volume business of 128-gigabyte product with customers based on 1b nanometer solid 32-gigabit DDR5, which was developed for the first time in the industry. Now let's move to the outlook for second half of the year. For server, we expect the portion of AI servers in the market to continuously increase as major cloud service providers and general enterprises expand their AI investment are in the second half. Considering that, AI servers equipped with HBM also feature high content per box in terms of conventional DRAM necessity, strong demand is expected to continue across-related products such as HBM, DDR5, sub-SSD and so on. For PC and mobile, demand still has momentum, thanks to effect of peak seasonality and increased content per box, driven by the expansion of on-device AI featured models. Considering the elevated customer component inventories in the first half of the year, there might be some possibility that the growth in demand for the second half would be limited. In terms of industry supply, as capacity is being concentrated on HBM, server DRAM, and server SSD in response to AI server demand, it is expected that the conventional bit supply of cutting-edge products for PCM mobile application will be continuously constrained. To sum up, even though the range of market price increased by each application is forecasted to be decoupled, the environment Memory business is projected to remain positive. In particular, we foresee a solid server demand led by generative AI to lead the strengths. Therefore, we also plan to actively respond to the demand for high value-added products for AI in the second half. As for HBM, we will expand the portion of HBM3E sales with capacity expansion. And in the server, we will strengthen our market competitiveness based on high-density products such as 128- and 256-gigabyte modules based on 1b nanometer solid 32-gigabit DDR5. In addition, in mobile and graphic applications, we will strengthen our leadership in high value-added product lines through sales penetration of 10.7 gigabps LPDDR5X, which is the industry's fastest its operations speed and industries to first develop GDDR7. Also for NAND, we plan to further expand our sales by strengthening the supply for TSG SSDs, which are currently in high demand for AI servers. Furthermore, increased products, we plan to timely address customer demand based on our lineups, which is optimized for all applications such as server, PC, and mobile and we also plan to start mass production of [indiscernible] in the third quarter. With the industry-leading technology and supply competitiveness, we will keep enhancing our market leadership in the memory industry. Thank you. Tommy Kwon: Good morning. This is Tommy Kwon from System LSI business. In the second quarter, an easing of inflation and increase in disposable income have led to a recovery in consumer spending and sentiment. As a result, overall smartphone shipments have exceeded expectations. Additionally, the turnaround in domestic smartphone sales in China is seen as a positive signal. However, smartphone OEMs have continued to implement price cuts due to the normalization of component prices and BOM cost pressures. At Samsung, we posted improved earnings for the second quarter, primarily due to increased supply of key components, and we achieved record high sales for the first half of the year. Demand for the Exynos 2400 remains strong, and we've begun supplying new SoCs for a U.S. customer second half new model. In terms of image sensors, we focused on stabilizing fab-light operations and expanding the market for highlight dilution sensors. DDI sales increased by over 40% year-over-year, driven primarily by OLED applications. We also started mass production of panel DDI for the first OLED tablet major U.S. customer. Looking forward to the second half of the year, we anticipate further stabilization of consumer prices and interest rate cuts in many countries. Although consumer spending is expected to recover, the rebound is likely to be more pronounced in essential goods. Therefore, the impact on ICT devices will be somewhat limited and vary by application. We remain strategically cautious as smartphone component procurement demand might weaken in the second half, considering the outperformance and potential demand pull-in from the first half. For our business, our industry's first 3-nanometer SoC for wearable is receiving strong, positive initial feedback. With this, we plan to focus our resources on ensuring a stable supply of the Exynos 2500. In the Image Sensors segment, we will concentrate on addressing the high-resolution market by expanding the application of 200-megapixel sensor from main wide camera to telecameras. Our DDI products are set to be mass produced for new models by U.S. customers, contributing to increase sales in the second half. Lastly, our power products are slated for mass production in several market applications. Thank you. Taejoong Song: Hello, everyone. This is Taejoong Song from Foundry business. In the second quarter of 2024, overall demand on Foundry business improved in most of our business application by achieving double-digit growth compared to the first quarter. As a result, the number of AI, HPC customers have increased twofold year-over-year due to expanded orders in sub-5-nanometer technologies. Meanwhile, 2-nanometer GAA PDK, or process design kit, had its upgrade and diligence to several customers, which support customers to move forward with a product design for mass production in 2025. Looking to the second half, we anticipate a rebound in mobile demand as market uncertainties for set manufacturers gradually dissipate due to the recovery of the economy. In addition to continuous high growth in AI, HPC demand. Consequently, we project the foundry market to see growth, particularly in advanced nodes. For 2024, we expect our growth to outpace the market, driven by expansion of advanced technology operations and first scale mass production of the second generation of 3-nanometer GAA technology. We plan to continue expanding business of AI/HPC applications aiming for four-fold increase in the number of customers and nine-fold increase in sales by 2028 compared to the levels in 2023. In addition, we will focus on enhancing 2-nanometer maturity and competitiveness to meet high performance, low power and high bandwidth required in advanced technology. For mature technologies, we will develop competitive RF and EMM technologies, including design infrastructure to expand the business in mobile, automotive and consumer applications. This concludes of key messages from Foundry business. Thank you. Charles Hur: Good morning. This is Charles Hur from the Corporate Strategy team at Samsung Display. I will now summarize you on our results for the second quarter of 2024. Our performance improved quarter-on-quarter driven by overall sales increase of flexible resi and QD products. The sale contribution of our mobile display business remained over 90%, which is similar to the previous quarter. For the Mobile Display business, we achieved earnings growth as both the sales and utilization rate increased sequentially. Sales volume has grown in double digits with the contributions from the customer base expansion for visual display and solid demand for flexible display rising from the launches of flagship products of major customers. In the case of our IT products, we supplied customer demand in a timely manner, thanks to our stable production. In the large display business, for monitors, sales of newly released products which in high resolution and high refresh rates have increased mainly in the gaming monitor market. For TV, we maintain a stable sales base as the penetration rate of OLED panels has increased in high-end segment. Next, I will share our outlook and strategies for the second half of this year. For the Mobile Display business, with the release of our major customers' new smartphones and potential replacement demand from the adoption of AI, second half sales are expected to be improved. However, the competition among panel makers is expected to be more intense compared to the first half of this year. To address this, we are stably manufacturing products with the improved performance in areas such as low power consumption, high brightness, slim design and enhanced durability. In addition, with stable quality management and cost reduction, we'll continue to increase sales and also improve profitability. Lastly, for the large display business, we'll strive to expand sales and narrow losses by enhancing productivity and centering production lines with high value-added products. Also, we will continue to focus on monitor sales by providing diverse refresh rate options into the market. Thank you. Daniel Araujo: Hi, everyone. This is Daniel Araujo from the MX division. I would like to present our financial results for Q2 and provide our outlook for the second half. Seasonal trends continued in the smartphone market as demand for smartphones in Q2 decreased compared to the previous quarter, particularly in the premium segment. The MX division recorded smartphone shipments of 54 million units and tablet shipments of 7 million units in Q2, smartphone ASP was $279. While revenue declined compared to Q1 when our new models were released, the S24 Series continues to see strong sales and achieved double-digit growth in both shipments and revenue Y-o-Y compared to the previous series when looking both at Q2 and the first half. Profitability fell slightly compared to the previous quarter due increased costs from rising prices of key components. However, for entire first half of the year, we recorded double-digit profitability. Next, let me share the outlook for the second half of 2024. The smartphone market in the second half is expected to increase year-over-year with increased demand for premium products driven by growing AI demand and the launch of new products equipped with innovative features. However, the growth rate of the mass segment is expected to slowdown due to channel inventory buildup resulting from excessive sell-in during the first half by some vendors as well as shrinking sales and marketing activities caused by rising material costs. The market demand for ecosystem products is also expected to expand. The tablet market is expected to grow from the approaching product replacement cycle and release of new models from our major vendors. The smartwatch market is expected to see a slight increase in value terms due to continued health related demand as well as upgrade demand. TWS demand is also expected to grow with the launch of new models from major brands. As for smart rings, which is a relatively newer form factor, the market is expected to grow significantly due to increasing customer interest in sleep and health management products and the impact of our new product launch. The MX business expects an increase in smartphone shipments and ASP in Q3, while tablet shipments are expected to remain at the same level. We plan to drive revenue growth by expanding sales of flagship smartphones and in particular, ecosystem products. First, we aim to expand sales of foldables where on top of their enhanced product competitiveness, we apply to Galaxy AI experience tailored to the form factor. In particular, the new devices have significantly improved core smartphone performance, including durability, battery life and camera compared to the predecessor products. Furthermore, the Galaxy AI experience has been developed specifically for these form factors, allowing users to make better use of both the large screen and cover screen. We are actively promoting this new Galaxy AI experience and at the same time, leveraging marketing associated with the Paris Olympics to attract initial attention from the market and customers. Additionally, through active investment and promotions with our trading partners based on close collaboration, we will ensure strong sales momentum and solidify our global leadership in the foldable market. With S24, we will strengthen and sustain marketing to maintain sales growth compared its predecessor and strive to achieve annual flagship growth through this effort. For tablets, with the introduction of Galaxy AI features beginning in the Tab S9 series, will continue to drive the expansion of premium tablet sales. And as for smartwatches, we are targeting the super premium segment with the Galaxy Watch Ultra launched in the second half and aiming to achieve double-digit growth in overall watch sales. For the Galaxy Ring, micro wearable device that can be worn 24 hours a day, we plan to provide an advanced health experience, including enhanced sleep monitoring and strengthen its connection with other Galaxy devices to lead the market. Now while cost pressures such as rising costs of key components, we will continue in the second half of the year. We will make the almost effort to secure solid profitability through optimizing product specifications, including component commonization and standardization and pursuing operational efficiencies. Furthermore, even in challenging circumstances, we will continue investing in upgrading Galaxy AI functionality in order to secure a long-term sustainable growth engine. Thank you. KL Roh: Hello, everyone. I'm KL Roh from the sales and marketing team of Visual Display. Let me brief you on the market conditions and our result in the second quarter of 2024. TV market demand increased year-on-year, especially in advanced countries. And it also increased slightly quarter-on-quarter, mainly due to global sporting events, backed by differentiated launches of new model in 2024, we solidified our leadership in the premium market by focusing on strategic products, such as new QLED, OLED and lifestyle screen. However, profitability decreased year-on-year as a cost increase due to panel price and intensified market competition. Next, I will share our market outlook and strategy for the second half of 2024. We expect overall TV market demand to recover further, thanks to growing demand for QLED, OLED and Big TV. We will preemptively capture peak season demand in the second half by strengthening sales program focused on premium and Big TV. At the same time, we will actively promote our unique competitiveness involving AI, security and design, along with the differentiated customer experience based on smart things to lead growth in the TV market. In addition, we will work to advance user experience and reimpose growth momentum by strengthening our service platform business, driven by advertisement and media, such as TV Plus to leverage the device scale secured by our leadership in hardware. Thank you. Daniel Oh: With that, we have concluded our prepared statements. Before I turn it over to the operator to open up the line for Q&A sessions, changing the order today. First, I would like to address the question that was submitted online in advance before this call concerning our matter affecting the entire company. Additionally, please note that following Q&A session will be conducted in Korean. Operator: The question is, have there been any managerial issues related to the strike, such as cutbacks in production? Jaejune Kim: We are continuing to communicate sincerely with the union in order to bring the strike to an early end despite the strike, we have had no issues in responding to customer demand, and we will do all can within the law to ensure there are no business setbacks or production delays in the future. Thank you for your question. And now let's open the line to analyst questions. Operator: Yes, we will now begin the Q&A session. [Operator Instructions] The first question will be made by Mr. Sung-kyu Kim from Daiwa Securities. Sung-kyu Kim: Yes, I have two questions for semiconductors. First has to do with memory. In the second quarter, your performance actually exceeded market expectations. And so could you provide more details about Q2 result? And what is your outlook for third quarter performance? The second question has to do with foundry. So, for the second generation 3-nano processors, I understand you're preparing ahead of full ramp up. So, could you give us a status update? Also more on your sub-2-nano road map and differentiation strategy for AI if you don't mind sharing. Jaejune Kim: Yes. Let me cover your question on memory performance first. In the second quarter, memory market continue to see strong Gen AI-driven growth with solid demand for server application. And so there were limitations in available capacity for us to respond to all incoming demand from our customers. So, given the position, we maintained our sales operations centered around profitability, while expanding the share of high value-added products, including HBM, server DDR5, and SSD to achieve qualitative growth across our business portfolio. Our ASP increased in part thanks to improved portfolio and a rising market pricing, and prices rose in the high 10% range for DRAM and low 20% range for NAND Q-on-Q. For conventional memory products, which saw a greater drop in ASP last year, well, actually pricing increased, further accelerating our improved performance versus Q1. For bit growth, as we responded to server application demand for DRAM HBM and DDR5, we saw mid-single-digit increase versus the first quarter, and we achieved our guidance. For NAND, we maintained our sales strategy focused on flexibility, recording a mid-single-digit decrease. Due to the high basis of the strong bit shipments in the first quarter for DRAM and NAND, second quarter bit growth may look limited, but as sales exceeded production, inventory levels saw additional improvement on the previous quarter for both DRAM and NAND. In the third quarter, we expect favorable business conditions to continue and expect the overall uptrend to market pricing to also continue. But as we mentioned at our last conference call, the degree price increase will likely be different by product. So, we intend to strengthen our product portfolio further, center around profitability-based growth to continue to deliver improved performance, given the constraints to production bit growth, and we'll focus on providing supply to real demand as a priority. So, we expect third quarter bit growth in DRAM and NAND to record low single-digit level. Also, considering the overall business cycle and market conditions, this is expected to be largely similar to the broad market levels. Thank you. Taejoong Song: Let me take your question on Foundry. First of all, for our 3-nano GAA process, our first-generation GAA process, which is now in year 3 on mass production, has reached the maturity in terms of both yield and performance and are in stable mass production. Building on this asset base, our 3-nano second-generation GAA is scheduled to enter full-scale production for mobile products in the second half of the year, and we'll start off with wearable. In terms of our sub-2-nano on road map going forward, leveraging experience in 3-nano GAA processes and mass production, we plan to start mass production of our first 2-nano process in 2025 and prepare a 2-nano process with further PAA management by 2026. We're also preparing our back side PDN process for AI, HPC by 2027. Recently, as we see continued growth in AI, HPC use cases, we will continue to work as one team with the Memory business to develop high-performance, low-power consumption, high bandwidth solutions that are key for advancements in AI. We're currently working together on an integrated solution that combines high bandwidth memory, advanced new processes and cutting-edge packaging technology. This will allow us to provide information required for product design in a more efficient manner to our customers and will benefit not only through improved product competitiveness, but we'll be able to offer more supply chain optimization and quick time-to-market benefits as well. Thank you very much. We'll move on to the next question. Operator: Next question will be by Mr. Sei Cheol Lee from Citigroup. Please go ahead, sir. Sei Cheol Lee: Yes, good morning. This is Sei Cheol Lee from Citi. I have a question from memory and also display. First, for Memory, HBM, SEC in terms of the current guidance of your HBM business, could you provide us at update also on litigation testing. Also update us on the different iterations HBM3, HBM3E and HBM4 as well? Second question is regarding OLED. For small size display or within that market, OLED penetration continues or is expected to continue to rise. So as you see, how do you intend to maintain your market leadership? How are you preparing to maintain your position? And how do you see the potential for future sales upside? Jaejune Kim: So first, regarding the status update on our memory HBM business, one thing that I do want to start off by saying is that while I understand that there is significant interest among investors and media regarding our HBM qualification status, we are under NDA commitment with our customers, and so we seek understanding that we're not able to comment on those details. First, for HBM3, we are expanding mass production supply to all major GPU customers. And in the second quarter, actually, revenue grew by about threefold Q-on-Q. For HBM3E for the 8H product, early last quarter, we started to prepare for early ramp-up and shipped samples to our customer sites, so they are now being evaluated, and we're scheduled for mass production in the third quarter. For HBM3E 12H, which we were the first in the industry to complete development on, we have already shipped samples and have completed the preparations for ramp-up, and we are planning to expand supply in the second half in accordance with the required time lines for multiple customers. So 12-high products within HBM3 have already accounted for two-third of the total HBM3, revenue mix. So we have already achieved a very mature level of packaging yield based on our accumulated packaging technology in 12-high and in HBM3 as well. HBM3E as a percentage of HBM sales is expected to expand to above 10% -- mid-10% in the third quarter and further up to high 60% by the fourth quarter. As we move to full-scale ramp-up for HBM3E, there will be an additive effect for our capacity expansion as well, and we expect HBM revenue to grow even more sharply in the second half. In the second quarter, HBM revenue increased by about 50% Q-on-Q, but we think that going forward, there will be about twofold increase in sales every quarter, and we expect the revenue to -- to expand about 3.5x the revenue recorded in the first half in 2H, in the second half. HBM4, we are on normal track with the goal of market launch in the second half of the year -- in the second half of 2025. We are also responding to customer demand for customized HBM and currently developing custom HBM products, which are fundamentally optimized to respective customer needs. And we're in talks with multiple customers on detailed specs. And so we will continue to enhance the profitability of our product backed by underlying supply capacity. Charles Hur: Here is the answer for your second question. Firstly, with the recent rise of on-device AI smartphone, demand has increased for lower power consumption. In response are focusing more on technology development across all areas, including materials, electronics and structure. By leveraging our differentiated technologies in power consumption as well as design and cost competitiveness, we will solidify leadership in the smartphone OLED market. Next is about IT. In the IT market, particularly in high-end segments, OLED adoption is increasing. In 5.5 Gen rigid fab and 6 Gen flexible fab, we are actively producing IT OLED and also making preemptive investments in the 8.6 Gen fab. We are developing products and technologies optimized for each production line. And with this, we will actively address diverse customer needs and thus, gain competitive edge over competitors. We will also accelerate the OLED penetration rate to drive sales growth. Thank you. Unidentified Company Representative: Thanks for your question. Operator: The next question will be by Mr. Dong-Won Kim from KB Securities. Please go ahead. Dong-Won Kim: Yes. Thank you for the opportunity to ask. One question on Memory and one on Display. First, my question has to do HBM. Samsung Electronics for this year and next year, by how much do you expect to expand HBM good supply? And are there any changes versus your existing plan? And then for Samsung Display, I understand who the OLED monitor panels are actually building up greater presence in the gaming monitor space. So what are the strengths of your products? And also, could you share your future strategy? Jaejune Kim: So for HBM supply plan, and under memory, let me cover this question, we are continuously increasing our HBM capacity. And based on our latest updated production and sales plan, the 2024 big production and committed volume where we have completed discussions with customers is around four times that of last year. In 2025, we seek to acquire leading capacity in the industry as we plan to expand bit supply to double the level of this year. However, even based on the expanded supply plan, we're still seeing continued increase in requested volume from some customers for 2025. So we'll continue to engage with them in discussions on supply as we finalize the additional production volume for 2025. Here is the answer for your second question. Self-luminous QD-OLED, first introduced by Samsung Display is recognized for high color production and quick response speed and evaluate it as a product with distinctive strength, especially in the premium segment. Our 31.5-inch 4K, 240-hertz and 27-inch QHD 360-hertz monitors released this year provide enhanced immersion with its largest screens, high definition and refresh rates. These are receiving positive feedback especially in the gaming market. QD-OLED, as supporting the highest image editing technology, the monitors -- the QD-OLED monitor is recognized for its super picture quality and expanding their presence beyond the gaming market. In the premium leader market, the demand for high-resolution and excellent color reproduction is expected to continue, leading to a rise in penetration rate of self-luminous panels. We will continue to enhance our lineup of ultra high-resolution panels and expand sales beyond the gaming market to B2B. Thank you. Operator: The next question will be by Dong-je Woo from Bank of America. Dong-je Woo: Thank you for the opportunity. My question is to system LSI followed by MX. First, regarding system LSI, widgets that you provide for flagship smartphone applications, what is the current status on that? And do you expect increased adoption of your products in future smartphone release model? Second question is with MX. I understand Edge AI functionality has been improved. So what is your differentiation strategy? And what is the direction for AI functionality that will be introduced onto future models like S25. Tommy Kwon: Thank you for your question. For flagship smartphones in terms of the status of our chips, also expectations for the future. So if you look at major customers, new flagship smartphone models released this year, they include various SoC products like modems, APs, RF, also 200 mega-pixel, 50 million pixel image sensors, CDI, PMIC security, et cetera. So in fact, out of the 28 core components that are required to produce smartphones are now semiconductor products. So compared to 10 types last year, this actually is a remarkable level of growth. We expect or we plan to increase that number further and we expect it to top 20 types next year. But this increase actually is quite significant going beyond just a boost to our top line and profits. I don't think we should limit the interpretation of underlying meaning of this increase in semiconductor parts components. This signifies the increasing important role of semiconductors and boosting future productivity. And in fact, across the global supply chain, we are one of the very few companies with the competitive advantage to provide a total solution. So as AI advances further, there will likely be countless on device innovation across computing, telecommunications, camera display. We own and continue to advance our key enabling technologies. So. Daniel Araujo: So on your second question, we've consistently upgraded the hardware in our S Series to deliver industry-leading experiences to customers, and we'll continue to enhance key experiences as well upgrade hardware so that we can offer top performance. For camera and display specs in particular, where we've been leading, the S25 at launch will have top-of-the-line upgrades. And we're also preparing industry-best APs and memory to boost AI performance and offer an overall premium experience. We introduced the world's first AI Phone through the S-24 launch in January of this year, followed by the recent launch of the world's first AI foldable phone. So we'll stay ahead of evolving AI technology trends so that we can enrich and also simplify the Mobile eXperience for our customers. We're expanding the Galaxy AI ecosystem beyond smartphones to include smartwatches, buds, the ring tab and Galaxy Books as well as our OS, apps and services. The Galaxy's hybrid AI will effectively make use of both on-device AI for fast and stable usability and cloud AI for high-quality results depending on the situation, while also providing strong security including customer data, and personal information protection through NOx. So looking forward, we expect to be able to understand the context of conversations and provide a natural conversation and experience across our devices. To achieve this, we'll strengthen partnerships and collaborations while developing our AI technologies further. By partnering with global AI leaders, we aim to proactively introduce diverse AI solutions and better understand users commands and intentions, making AI more enjoyable, rich and easy to use across various experiences like creation, productivity and health. Thank you. Operator: Thank you for your answer. The next question, the next question will be presented by Giuni Lee from Goldman Sachs. Go ahead, sir. Giuni Lee: Thank you for the opportunities. I have one question for VD and another for MX. For VD, could you please tell us how major sports event affect TV demand and give us a forecast for the second half of this year? And also for MX with the rising memory price, we expect there might be some impact on smartphone margins. Do you have any strategy to offset this? KL Roh: The second quarter is usually a low season. However, this year, thanks to the impact of big sporting events, such as Euro 2024, the demand slightly increased year-on-year. By segment, QLED, OLED and large TVs over 75 inches showed a strong growth trend. In response, we achieved our sales targets in major markets through the expansion of premium and large TVs increased our market share in the global premium market. TV market in the second half is anticipated to see a demand recovery, thanks to the peak season and ongoing trend towards the TVs. We will enhance product competitiveness and nonprice sales and distribution strategies to capture peak season demand and promote differentiated customer experiences to solidify our position as market leader. Thank you. Unidentified Company Representative: So, while there are concerns about reduced profitability due to continued increases in the cost of key components, we are working hard to ensure solid profitability in 2024 by continuously improving efficiencies across our processes, including development, manufacturing, and logistics. And at the same time, to minimize any impact of rising costs from macroeconomic factors, we will continue with our upselling strategy, focus on premium products to grow our revenue. In the second half of the year, with F 2024's continuing positive sales trend and expanded smartphone sales, primarily focused on flagship devices like Fold 6 and Flip 6, which have enhanced core features and form factor-specific AI experiences, we will continue improving our sales mix. In tablets, we are focusing on expanding premium sales with the Tab S Series. And for wearables, we are enhancing our presence in the premium market with new models like the Galaxy Watch Ultra, aiming to contribute more to our profits. And I mentioned this in the earlier update, but despite -- or despite demanding circumstances, and we plan to continue investing in upgrading the capabilities of Galaxy AI so that we can secure it as a sustainable growth driver for the long run. Thank you. Operator: Thank you for your answer. We'll move on. The next question is by Mr. Jong Ho [indiscernible] from NH Securities. Unidentified Analyst: Yes, thank you for the opportunity to ask. I have a question just on semiconductor memory. Across the industry, there's a lot of investment in terms of migration of existing nodes and lots of production constraints in place. So, given the conditions, what kind of CapEx plans do you have? And what's your supply strategy as well? Jaejune Kim: So, in terms of memory CapEx and supply strategy, let me cover this. So, following the second half of this year, we think next year, we will also continue to see very strong demand driven by Gen AI server application, whereas industry bit growth is likely to be constrained. For DRAM, a major boost in HBM ramp-up. Conventional DRAM based on advanced processes is expected to see a particular supply constraint. NAND was impacted by reduced CapEx which acts as a constraint last year, it is impacted by bit loss from the node migration of the existing lines. So, we expect production bit growth also to be limited. So, as we're also seeing increased over SSD demand related to Gen AI, whereas the industry supply will likely continue to be tight across the industry. Recently, we have received requests from customers to enter into an earlier annual supply contract for 2025 for both DRAM and NAND. They're asking us to sign LTAs or MOUs. So, same as last year as we continue to invest despite the downturn, this year, we will continue to manage our investments flexibly, focus on plants with real demand within a more limited scope of change versus the prior year, same as we did last year. So, for Atrium, we are continuing to invest in capacity expansion, mainly in advanced packaging. For conventional products where we expect the growth to be constrained, we are accelerating the migration of legacy lines to smooth response to rising demand for advanced processes, driven by high performance, high density trend triggered by AI. So we will execute fast migration for DRAM from D1x, D1y, D1c, D1b and D1c for NAND from V6 to V7 to V8 and V9 to enhance our available capacity. So we'll continue to execute investments to secure more space also to respond to mid to long-term demand for DRAM and NAND as well. So again, we'll continue to reflect these market conditions as are look for mid- to long-term demand in our investment plans, as we build a foundation for sustainable growth. Because at that time, we will accept one last question. Operator: The last question is by Mr. Jay Kwon from JPMorgan Securities. Jay Kwon: Yes. Thank you for the opportunity to ask a question on NAND. As Gen AI spread, it seems that overall in the industry, there is a very rapid rise in demand for server SSD, so what is the current status of your SSD business? And how would you intend to respond? Jaejune Kim: So for the server SSD market, let me answer your question. So this market actually has shown sharp growth year-on-year. With the spread of multimodal AI, the competition value of AI models is increasing exponentially. And so this has spurred rising demand for high-performance, high-density SSD So we actually were the first in the industry to start mass production supply of Gen5 SSD, building on our traditional leadership in server SSD, we are actually moving to respond quickly to rising demand in this space, also expanding our supply capacity by shifting our product mix around server application. So server SSD revenue will be benefited from improved ASP, shipment growth and higher premium mix, as we expect improved performance in the second half of the year, and we expect to achieve four times higher revenue performance on a year-on-year basis this year. Also, our premium QLC-based 16-channel SSD, which is above 16-terabyte capacity has shown a sharp rise in sales this year. And we expect revenue to grow by more than tenfold versus last year. For QLC products, although it is just in the low mid 10% range of the total server SSD market mix, we do see it as a potential in terms of source of future demand, and so we are conducting technology and business these elements together. And 16 and 32-terabyte, SSD, which accounts for the most of the volume in QLC SSD is already in mass production, 64-terabyte SSD, which is under customer approval at the moment is set for mass production in the second half of the year as well. We'll add on 128-terabyte product to our lineup in the second in the fourth quarter, as we provided a timely response to rising demand for high-density QLC SSDs. Daniel Oh: Thank you for your answer. I would like to thank everybody who shared their valuable opinion, and we will be sure to refer to them in our decision-making process. And thank you for participants, including executives for today's event. That completes our conference call for this quarter. We wish all of you [Foreign Language]

Operator: Good morning and good evening, everyone, and welcome to the Samsung Electronics 2024 First Quarter Financial Results Conference Call. I'll be your coordinator. [Operator Instructions]. Now I'd like to turn the conference over to Daniel Oh, EVP and Head of Investor Relations. Please go ahead. Daniel Oh: Thank you, coordinator. Greetings, everyone, and welcome to Samsung Electronics' 2024 Fourth Quarter Earnings Call. Thank you for joining us today. For today's call, the following representatives from business units are participating. Starting with the EVP, Jaejune Kim representing Memory, VP Tommy Kwon for System LSI during the call for the first time for Foundry, VP Taejoong Song. For Samsung Display Corp, EVP Charles Hur. For the Mobile eXperience business, VP Daniel Araujo. And last but not least for VP -- Visual Display VP KL Roh. We also have other business representatives during the call to answer any questions if necessary for the Q&A session later. Please also note that on Samsung Electronics Investor Relations website at www.samsung.com\global\IR, you can find our earnings press release and presentation deck which are intended to supplement our prepared remarks during today's call. I want to remind you that some of the statements we'll be making during today's call are forward-looking based on the environment we currently see. They are subject to certain risks and uncertainties that may cause our actual outcomes to differ materially from those expressed in today's discussion. Our webcast of this call will be also archived on our website, and the information we are giving you on today's call is as of today's date. First, I will start with our 2024 first quarter consolidated financial performance. Our revenue came in at KRW 71.9 trillion, 6% quarter-on-quarter thanks to strong sales of flagship Galaxy S24 smartphone series and the effects of higher ASPs in memory, led by improved memory market conditions. Our gross profit was KRW 26 trillion, up KRW 4.4 trillion sequentially, attributable mainly to improvements in the cost of goods sold in memory and the smartphone mix in the MX business. Gross margin was up 4.2 percentage points to 36.2%. SG&A expenses increased KRW 0.6 trillion quarter-on-quarter to KRW 194 trillion, as R&D expenses increased. However, as a percentage of sales, SG&A expenses decreased by 0.8 percentage points to 27% due to the increase in sales. Operating profit increased KRW 3.8 trillion sequentially to KRW 6.6 trillion, many thanks to improving IT market conditions and operating margin increased by 5 percentage points quarter-on-quarter to 9.2%. We attribute the gains mainly to the Memory business returning to profit as it achieved strong growth by addressing the demand for high value-added products such as LPDDR5X and enterprise SSD and to the MX business booking higher profits driven by robust sales of chip smartphones. In addition, the Visual Display and Digital Appliances businesses recorded higher profitability, while display saw profit decline quarter-on-quarter due to weak seasonality. Regarding currency effect, the Korean won showed overall weakness against major currencies during the quarter, resulting in approximately KRW 0.3 trillion of consolidated operating profit compared to the previous. Now moving on to capital expenditures. CapEx in the first quarter increased by KRW 0.6 trillion from the same period last year to KRW 11.3 trillion, of which KRW 9.7 trillion was invested in the T.S. division and KRW 1.1 trillion was invested in display. For Memory, we continue to invest in R&D to solidify our technological leadership. In the quarter, our investments focused on facilities and packaging technology to address the demand for HBM DDR5 and other advanced products. For Foundry, investment focused on establishing the infrastructure to medium- to long-term demand and on advanced R&D while we adjusted the facility investment in line with the market conditions. In Display, we continue to invest in preparations for IT OLED products and advancing technology and flexible displays. I will now share some of our key activities in sustainability management. First, Samsung Electronics zoned on overall rating of AA in the MSCI ESG ratings during this quarter, the highest level among peers in the Korean ICT industry. We improved our overall rating by 1 notch as our commitment to sustainability management led to improvements in the social and governance categories. Specifically, we made substantial gains in the areas of human capital development, raw material sourcing and corporate governance. Second, regarding our water resource management and building on last year's achievement at the Hwaseong campus, our manufacturing site in Kilo, Pantech, Sohan, Kumi and Guangzhou,, along with the China achieved Platinum Certification from the Alliance for Water Stewardship, which is a testament to our outstanding water station. Furthermore, we continue to progress on numerous other front in water resource management, including signing MOUs with government agencies and local governments to achieve 0 increase in DX division's order intake and restore water 100% for the amount used by DX division by 2030. As a responsible corporation to our stakeholders, we maintain committed to strengthening sustainability management and expanding ESG initiatives throughout our business. Next, I would like to address the first quarter dividend. Today, the Board of Directors approved a quarterly dividend of KRW 361 per share for both common and preferred stock. Based on current dividend policy, the total quarterly payout is KRW 2.45 trillion which will be paid towards the end of May. Now without any further ado, I will turn the conference call over to the representatives of each business unit to present first quarter performances and outlooks for their respective business segments in more detail. The Memory business will start the next session, followed by System LSI Foundry, Samsung Display, Mobile eXperience and Visual Display. We will start with EVP Jaejune Kim of the Memory business. Jaejune Kim: This is Jaejune Kim from Memory Global Sales and Marketing. In the memory market in the first quarter, we saw customers' overall purchase demand was strong due to market expectations that price will keep rising. For server and storage, the demand for generative AI showed solid trend and the demand for DDR5 and high-density SSD stayed strong, following the previous quarter. In particular, although high-density assets linked with generative AI showed additional demand growth as customers upside demand surged. In the case of PC and mobile, content per box continued to grow for both DRAM and NAND. Furthermore, our demand remained strong following the previous quarter, thanks to an active selling mainly driven by Chinese mobile OEM customers. Along with this increase in ASP, we achieved this qualitative growth of the business by addressing the demand by focusing on high value-added products such HBM, DDR5, [indiscernible] SSD and UFS 4.0 and so on. As a result, our Memory business returned to profit. Now let's move to the outlook for the second quarter. We expect the industry recovery trend to continue throughout the quarter, mainly led by the demand for generative AI. In particular, the continuous increasing supply of AI servers and subsequent expansion of our associated cloud services should increase the demand for HBM, which is directly linked with AI, but also conventional servers and storage in parallel. Therefore, we expect overall server-related demand to remain strong. And for mobile, as the [indiscernible] drive mainly led by Chinese OEM customers continues, demand is expected to be stable in the second quarter as well. However, for PC under the effects of low seasonality, it appears that in the second quarter, customers are likely to temporarily adjust. They have finished good inventory in the distribution channels in preparation for new product launches focused on on-device AI in the second half of the year. Thus, in the second quarter, it is expected that the demand centering on server and storage products will be getting strong. And in addition to this, as supply constraints for cutting-edge products are expected in the second half of the year though overall increase of market price is predicted, although there might be differences by application. In this market environment, in order to optimize our business portfolio, we plan to allocate production more to serve and storage-related products such as HBM, DDR5 and high-density SSD than to our PCM mobile product. From our product deployed standpoint, we started mass production of HBM3E 8-high this month to address the demand for generative AI. And we plan to produce 12-high products within the second quarter. Also, in the second quarter, we plan to strengthen our leadership in the server market, mass producing 128 gigabyte product based on the 1 billion-nanometer to sold DDR5 and shipping it to customers. Also for NAND, we plan to expand SSD sales for server and a timely response to AI demand by developing and providing samples of ultra high-density 64 terabyte SSD during the second quarter. In addition, we will enhance our sustainable technology leadership by mass-producing V9 for the first time in the industry. Now I will share our outlook for the market in the second half of the year. We expect business conditions to stay positive despite some volatility related to macroeconomic trends, geopolitical issues and so on. As the industry supply of HBM improves in the second half, we expect a spread of AI servers to accelerate and thanks to this, associated cloud services are also expected to expand further. Sequentially, this should lead to increased demand from nano and servers, but also conventional servers and storage, and we expect these purchase to occur to clearly outcome. As for PC, a replacement cycle of some products that showed a significant sales growth during the pandemic is expected to be approaching. In addition, we expect to see positive impact on such shipment and content per box, thanks to growth in the number of on-device AI features models, which will be newly launched in the second half. For mobile, we expect the demand in terms of content per box to be robust with the spread of on-device AI, but there are chances that our growth in set demand will be limited in the second half as customers inventory in our distribution channel have increased at due to the customers' activity setting in the first half of the year. Likewise, we expect memory demand to stay strong in the second half, mainly around generative AI. However, on the supply side, we expect to see constraints in overall bit production as capacity concentrate on HBM in DRAM. And industries limited execution of CapEx in NAND has continued since last year. Therefore, we plan to flexibly adjust our product mix in accordance to demand for each application and actively respond to demand for high value-added products for AI. In the case of HBM, we will continue increasing supply and expanding our capacity in order to respond to growing demand for generative AI. In addition, we also plan to accelerate our ramp-up of our industry first developed HBM3E 12-high product in line with the increasing needs for high-density products in the industry. In DRAM, we plan to accelerate our 1b-nanometer based 32-gigabit DDR5 supply with fast ramp-up speed and further strengthen our competitiveness in the high-density DDR5 major market, which is linked with the AI servers. In NAND as well, with the growth of AI demand, we will improve our profitability by proactively addressing the demand for high value-added server products such as VA-based SSD high density [indiscernible] and so on. In addition, based on our industry-first experience entering the UFS 3.1 market with OLC technology, we plan to introduce a QLC solutions further to the UFS 4.0 market in the second half, thereby strengthening our product competitiveness in the mobile market. For V9 following the industry first mass production of QLC in the second quarter, we plan to further enhance our technology leadership by mass-producing QLC in the third quarter. We will continue to strengthen our market leadership based on our leading-edge technology and timely execution of investment. Thank you. Tommy Kwon: Good morning. This is Tommy Kwon from the System LSI business. In the first quarter, the U.S. manufacturing PMI exceeded 50, indicating a rebound in market sentiment in manufacturing industries as well. This, along with the reduced semiconductor inventory levels has helped stabilize component prices upward. However, macroeconomic uncertainty have been exacerbated by global complex, volatile oil prices and fluctuating exchange rates. Although smartphone production increased in the fourth quarter, all indicators this year suggested a slowdown in sellout rates. During the first quarter, we increased our supply of SoCs and sensors for key product launches. Demand for on-device AI and high regulation features continue to drive our production. However, displayed driver IC sales have dropped due to a decrease of panel demand, and overall performance improvement has been slower than anticipated. In the second quarter, the external economy pressure on consumer spending could challenge smartphone manufacturers in passing increased bill of material costs on to consumers. The need to reduce component prices is becoming more acute as manufacturer may use only slow sellout rate to justify price negotiation. Despite a slow start, smartphone sellout is now showing sign of recovery, highlighting on device AI as a significant growth opportunity for us. We remain committed to ensuring a stable supply of flagship SoCs. We are gearing up to deliver more advanced process product for new wearable device. For mobile sensors, channel inventory is at a healthy level, and major set manufacturer selling target continues to grow year-over-year. We anticipate high utilization rate in the second quarter as well, including the mass production of 50 megapixel sensors. Our [indiscernible] strategy will bolster our ability to meet timely pixel wafer demand. Regarding DTIs, we are focused on maintaining market leadership with 22 nanometer low-power chips, expecting performance enhancements from upcoming IT and TV product releases. Looking at the year as a whole, the increased bill of material costs associated with the adoption of on-device AI, we are encountering intensified pressure for component pricing. The impact of this pricing pressure are likely to be uneven across components, influenced by selective specification downgrade within the smartphone lineup. We are proactively planning to adjust our product mix to navigate these challenges effectively. Thank you. Taejoong Song: Hello, everyone. This is Taejoong Song from Found business. In the first quarter, weaker market demand due to seasonal effects could to delay in sales improvement in addition to the continued inventory adjustment at major customers. Even so, we narrowed our losses slightly by operating fab efficiency. Advanced technologies such as 3 and 2 nanometers are under development smoothly. And in particular, yield of 4-nanometer technology has been stabilized and significantly expanded product offer of Tier 1 customers. Thanks to this improvement in advanced technologies, we achieved our highest-ever order backlog for the first quarter. In the second quarter, our middle likely gradual recovery in market conditions, the winding down of inventory adjustment at customers and increases in our line utilization should lead sales to rebound and reach double-digit quarter-to-quarter growth after bottoming in the first quarter. In addition, we will strive to keep expanding business in advanced technologies by completing the development of 2-nanometer design infrastructure and preparing for 3D IC-based 4-nanometer technology. For the module technologies, we will also strive to enhance the infrastructure for various applications. To be specific, 14- and 8-nanometer technologies. Meanwhile, in June, we plan to hold a Samsung Foundry Forum event in the U.S. to share our vision for Samsung AI solutions. In the second half of this year, uncertainties are likely to eased in finished goods market. We expect limited growth for foundry market. Despite the uncertainties, we expect to outpace the market growth rate in annual sales, thanks to increased sales of leading edge technologies. In addition, we will start mass production of the second generation of GAA 3-nanometer technology and improve the maturity of 2-nanometer technology to expand the orders focusing on AI, HPC and mobile application. That concludes the key message from Foundry business. Thank you. Charles Hur: Good morning. This is Charles Hur from corporate strategy team at Samsung Display. I will now brief you on our results for the first quarter of 2024. For the Mobile Display business, even though our performance declined quarter-on-quarter due to intensifying competition, we responded to the launches of major customers' high-end smartphones with a timely supply. In visual displays, we improved our utilization rate based on our sales increase. For the large display business, despite weak demand and up season effects, we narrowed our losses by introducing new QD-OLED monitors and strengthening our customer base. Next, I will share outlook and strategies for second quarter and second half. For the Mobile Display business in the second quarter, it is expected for sales to increase ahead of the launch of major customers for double smartphones and growing demand for IT products. However, intensifying competition among panel makers is likely to limit earnings growth. For the large display business, we'll address demand for TV panels from major customers. Also, we strive to boost the sales of premium monitors where market expansion is expected. For the Mobile Display business in the second half of this year in regards to the smartphone market, we expect the market to grow moderately and in particular, the OLED penetration rate is likely to keep rising. For flexible displays, we remain committed to maintaining our competitive edge and expanding sales through our differentiated technologies, which deliver low power consumption, enhanced durability and more. In rigid displays, we'll continue to replace LCD by acceleration cost reductions. In addition, we strive to diversify our business portfolio by increasing IT and auto business, thereby strengthen operational stability. Finally, for the large display business, we expect to achieve year-on-year revenue growth Firstly, we will increase capacity without additional investments, but instead, we'll focus on improving production efficiency. Secondly, we'll enhanced our product mix around high value-added offerings. Thank you. Daniel Araujo: Hi, everyone. This is Daniel Araujo from the Mobile eXperience division, and I'll be sharing our results for Q1 and discussing the outlook for the MX business. As the smartphone market entered into the seasonally lower Q1, the premium and mass segments decreased sequentially in both volume and value. The MX business recorded smartphone and tablet shipments of 60 million units and 7 million units, respectively. And smartphone ASP was $336. Despite the market decline, we achieved revenue and operating profit growth due to strong sales of our first AI phones, the S24 series. In particular, Galaxy AI features in the S24, such as Circle To Search, have seen continued high usage rates and contributed to sales expansion. Through this, MX' overall revenue grew, and even as we see component prices beginning to rise, we maintained solid double-digit profitability with our efforts to streamline resources. Moving forward to Q2, the overall demand for smartphones will decrease quarter-on-quarter due to continued seasonality effects. The MX business in Q2 expects to see a decrease in smartphone shipments and ASP, while tablet shipments should stay similar sequentially. We plan to maintain our flagship-oriented sales and upselling approach as we apply the S24's AI experience to other flagship models and maximize product competitiveness, and we'll push for continuing sales of the Galaxy S Series by strengthening communication especially around Galaxy AI functionality. Externally, with escalating geopolitical instability as well as price hikes and key components that are likely to materialize, we'll strive to secure solid profitability by continuing to streamline operations. At the same time, even in this difficult environment, we remain committed to investing in R&D, including in AI. Looking further ahead to the second half of the year. While the smartphone market is contracted in 2022 and 2023, amid prolonged economic uncertainty, it's expected to turn around this year, thanks to stabilizing consumer sentiment following the Fed's signaling of interest rate cuts this year and expansion of AI products and services and economic growth in emerging markets. Similarly, the tablet market is expected to bounce back after contracting in 2022 and 2023 following the surge in demand related to remote work and education in 2021. Both volume and value are projected to rise in 2024 in line with replacement cycle. For wearables, a double-digit increase in value is expected in the smart watch market, driven by consumers looking to upgrade given the increased interest in health-related features since the pandemic. Meanwhile, TWS is expected to experience double-digit growth in both volume and value due to continued mass market volume growth as well as the release of new models from major vendors in the second half. In the MX business, we are aiming for annual smartphone sales growth as we maintain sales momentum by applying Galaxy AI beyond the S24 to existing flagship products. For our new foldable devices in the second half, we're planning to once again drive forward with the mainstreaming of foldables by improving the user experience and optimizing AI functionality for these form factors. In tablets, we started providing Galaxy AI functionality in the Tab S9 series, and we will continue to improve the user experience as we pursue sales growth focused on premium devices. For wearables, we plan to strengthen the Galaxy ecosystem experience by expanding sales of new models that will be launched in the second half. First of all, we plan to release the Galaxy Ring, a product with a new form factor designed to be worn comfortably 24/7. With the Galaxy Ring, we expect to improve our customers' sleep and overall daily health care. We also plan to release new premium smart watch models, which will meet upgrade demand. And in TWS, we aim to expand sales with new products in the second half that have highly improved competitiveness thanks to an innovative design and exceptional sound performance. To address rising component costs, we will continue to make efforts to realize operating efficiencies so that we can secure solid annual profitability. And even if the external situation is not favorable, we are committed to our role as a first mover pioneering the mobile AI experience. We will continue R&D and proactive AI investments in order to advance and expand Galaxy AI as we prepare for the future. Thank you. KL Roh: Hello, everyone. This is KL Roh from the Samsung Marketing team of Visual Display. Let me brief you on the market condition and our result in the first quarter of 2024. TV market demand decreased quarter-on-quarter after the peak year-end peak season, but the demand for QD-OLED, OLED and big TV above 75 inches remained solid. Samsung solidified its leadership in the premium market and increased profitability quarter-on-quarter by focusing on premium products such as OLED, OLED and big TV above 75 inches. However, profitability decreased year-on-year due to segment TV market demand overall and increased cost quoted by intensified market competition. Next, I will share our market outlook and strategy for the second quarter and 2024. We expect overall market demand to continue to decrease as TV demand is projected to decline in emerging markets However, we believe there are still chance to achieve sales growth via opportunities such as global sporting events. We will work to secure profitability by increasing sales of strategic products with our differentiated launch of 2024 model and also by strengthening operational management in each business segment. As for the second half of this year, we believe overall TV demand will recover gradually, but macroeconomics and geopolitical uncertainties are likely to continue. Despite the uncertainties, we will continue to target the demand in various segments, while promoting AI screen leadership, driven by the innovation of premium TV and lifestyle screen. Also, we will provide a differentiated customer experience through synergies with connected device. To reach the market growth, we will actively promote our advanced features, involving security and sustainability and boost our competitiveness in service business, such as TV plus. Thank you. Daniel Oh: Thank you, everyone. That wraps up our prepared remarks. The following Q&A session will be held in Korean and translated simultaneously to English. With that, let's open the line for questions. Operator. Operator: [Operator Instructions]. First question will be Mr. Sung Kyu Kim from Daiwa Securities. Sung Kyu Kim: Congratulations for your good performance. I have one question for memory and each. Could you provide more details about first quarter performance for memory? And then what is your outlook for second quarter performance as well? And also for display, recently, it seems that for foldable display, there are some concerns that the gap between you and the next competitor is narrowing. So can you explain your strategy in terms of how you intend to maintain that competitive gap? Unidentified Company Representative: So let me answer your question on our memory performance first. In the first quarter, we saw a surge in demand from generative AI. And so we expanded our mix of high value-added products. including HBM and server SSD, and we focus mostly on improving profitability through improved ASP over bit shipment growth as we undertook in a qualitative improvement of our business portfolio. So for bit growth, DRAM declined by mid-10%, NAND by a low single digit, but the rising ASP was actually above-market expectations, nearly 20% for DRAM, low 30% for NAND. So this helped turn around the memory business to profit for both DRAM and NAND. And due to rising pricing, we were able to write back positioning on inventory valuation loss, which also contributed to our profits. In the second quarter, we expect the business cycle to continue to improve, and the rising ASP trend is also expected to continue, and so we will maintain the same operational stance as we did in the first quarter. As inventory levels improve and amid limited available supply, we also expect most of the production capacity to be focused on HBM. So we expect additional supply constraint for advanced known processes for DRAM. So we intend to focus mostly on addressing real demand. So bit growth for the company, we are expecting to be in the low single digit to mid- to high single-digit range for DRAM, maybe similar to prior quarter for NAND. In terms of the P mix, to a lesser surge in demand for advanced products driven by generative AI, we intend to expand our sales of advanced products for server application. And so DRAM bit growth is expected to be over 50% Y-o-Y, over 100% for server SSD. And so we hope to maintain our momentum for improved earnings into the second quarter. Unidentified Company Representative: I'll take your second question on SDC. We started mass production of foldable displays in 2019, an industry first and has since been growing by accommodating launches of new products by various customers, including Samsung Electronics. One of the most crucial points requested by our customer is to minimize decrease. We are developing various ways to reduce decrease, such as by improving materials and optimizing the curvature, radios and foldable spec structure. The foldables to be released this year will reflect our latest technologies, bringing visible effects to the products. As you see, we'll reduce the crease, increase durability against scratches and marks and improved functions such as low power. Through this, we will expand the quality gap between our competitors. We are developing new form factors beyond existing products, including out folding in and out folding and slidable. Through discussions with our customers, we will timely launch new products. Thank you. Operator: Yes. Thank you. We'll move on to the next question, please. The next question will be by Mr. Sei Cheol Lee from Citi Securities. Sei Cheol Lee: Yes, this is Sei Cheol Lee from Citigroup. I have a question on memory and your foundry business as well. First, on memory, recently regarding HBM, there's a lot of market interest. So for next year, what is the size in terms of your HBM supply? How much supply expansion are you planning? And could you provide us an update on in terms of your HBM3E business? And the second question still is foundry. So your U.S. investment in the foundry fab, what is the direction for that investment? And what is your mass production time line for the w Taylor fab in the short term? Unidentified Company Representative: Yes. Let me address your question on HBM first. In 2024, our HBM bid supply actually has expanded by more than threefold versus last year. And we have already completed discussions with our customers with that committed supply. In 2025, we will continue to expand supply by at least 2x or more year-on-year, and we're already in smooth talks with our customers on that supply. For HBM3E business initiative for everything is moving along smooth in line with customer time lines. Commenced early mass production for 8-layer, and we expect revenue to start recognize -- to be recognized at the end of the second quarter at the early end. And the main trend in generative AI is an increase in parameters and multi-modality service expansion, leading to greater needs for high-density HBM. So we have already shipped samples of our 12-layer HBM3E, which was the first in the industry with planned mass production for the second quarter of the year. And for our 12-layer product that supports high capacity, 36-gigabyte capacity, while we are deploying TCNCS technology, which is very strong in stacking, so this gives us a very leading product competitiveness. So with this product lineup, including the 12-layer, we intend to address the surge in demand as we expand our HBM business more quickly. We're going to make a quick transition to 3E in the second half of the year and focus on capturing the preemptively capturing high-capacity HBM demand. We expect the HBM 3E mix to account for more than 2/3 of the total HCM sales volume by the end of the year. We will continue to build on our HBM capacity -- supply capacity and established strong leadership in HBM. Unidentified Company Representative: Let me take your second question on our foundry investment in the U.S. The purpose of the investment is to respond to demand for leading-edge semiconductor chips and also to contribute to global supply chain stability, which is why we decided on the Taylor fab investment in '21. We have signed a preliminary agreement with the U.S. government, and the scope investment was expanded to include R&D and advanced packaging lines. We're expecting to execute USD 40 billion going forward. However, final talks with the U.S. government still remain and so things are subject to change. So we are mindful of changing market conditions in foundry. And given our approach of gradual investment in line with customer orders, we expect mass production to begin maybe 2026. Operator: The next question will be made by Mr. Nicolas Gaudois from UBS Securities. Nicolas Gaudois: The industry has perceived DRAM as being the main beneficiary for generative AI in memory, but we recently see hyperscale customers asking for high-density fast right solid-state drive solutions for AI servers, in particular, to support training. Could we use a Flash for AI training and inference become a more meaningful demand driver? And how is Samsung preparing for it? Unidentified Company Representative: The impact on NAND demand from expansion of generative AI was your question. Well, recently, genital models continue to evolve in both training and influence, we're seeing an increase in request for SSD supply. First, for training. So as AI promoters increase, the size of training data becomes proportionately bigger, leading to higher performance and data storage needs. So we're seeing a lot of incoming requests from the customers for Gen 5, 8 terabyte, 16 terabyte solutions, which have more than doubled the IO performance and capacity of Gen 4 for terabyte SSD. In insurance, in order to improve coherence, vast amounts of database storage is required, so we're seeing increase in inquiries from customers for 64-terabyte 128-terabyte, ultra-high density SSD solutions. Traditionally, we are very strong in server and storage SSD with strong market leadership. So we will be -- we expect to be able to address this demand as a priority. And so as the generative AI market grows, leading to demand growth not only for HBM, DDR5 and DRAM products we see clearly that it is impacting the rise in SSD demand as well. So we have a full line up of SSD products, including TLC, Gen 5 and Ultra high-density QLC. So we will respond to rising demand using our products. Our server SSD shipments this year is expected to grow 80% Y-o-Y and also bids sales volume for QLC server SSD is expected to search 3x in the second half versus the first half of the year. Operator: The next question will be presented by Gil-Hyun Baik from Yuanta Securities. Gil-Hyun Baik: I'm Gil-Hyun Baik from Yuanta Securities. Second quarter has shown a trend of having the lowest profitability. How about this year? How do you think about the profitability and sales this year? Will BOM stay on its trend? And can you reach double-digit profitability? Daniel Araujo: So profitability in Q2 is expected to be down slightly compared to Q1 and Q3, which is when we release new flagship products each year. In Q2, continuing from the first quarter, we expect to see cost increases of major components for memory in particular. And there are also risks of rising geopolitical instability. In response, we're focusing on cost competitiveness throughout the R&D, manufacturing and sales processes to achieve solid profitability. At the same time, we're continuing to work on mix improvements including by boosting flagship sales through the expansion of models that support the LC AI, promoting upselling within our smartphone man and expanding sales of ecosystem products. Despite the difficult environment, we will continue to invest in AI, including AI R&D to strengthen and further mainstream Galaxy AI, all aimed at securing sustainable growth in the mid- to long term. Thank you. Operator: The next question will be Mr. Dongwon Kim from KB Securities. Dongwon Kim: One on memory and one on display. So this year, in your view, what is the outlook for supply and demand. And we're seeing a recovery in the business cycle. So what is your strategy on the supply side? And then for Samsung Display, large-sized QD-OLED business, what is your overall strategy for this business this year? Unidentified Company Representative: So in terms of our supply-demand outlook, let me start there. demand this year is expected to continue to recover. Driven by strong generative AI demand, we think server will continue to show solid demand also AI-based storage as well. And then conventional server replacement has actually been postponed for many years, but that is set to accelerate late transfer to new CPUs and we'll reach the replacement cycle. Likewise, for PC and mobile, a lot of the products that were sold early on during the pandemic are going to need replacement, and it will drive a decrease in on-device AI driven demand. For mobile, due to aggressive selling by customers in the first half of the year, there is a bit of increase in distribution inventory. So this may act as a constraint on set demand growth in the second half. On the supply side for the industry bit growth is likely to be limited for DRAM as most of the advanced process capacity is focused on HBM from generative AI demand, we think that non-HBM products will likely see constrained bit growth. Also for NAND, there is, there was a constraint from CapEx starting last year. And there's a natural production decrease from node migration of legacy product lines. So this will also an additional constraint on production bit growth. Now as we see a rapid surge in advanced process demand, we are seeing for certain leading products or shortfall in supply relative to demand. And likely, supply conditions may see additional tightening. Given the current market conditions, we want to -- we expect the profitability of conventional DRAM products like DDR and LPDDR to continue to improve. For NAND, as we see growing demand for server SSD, we expect sales to increase amid rising ASP, we expect performance improvement as well. So building on the CapEx initiatives over the years, we want to continue to reinforce our capacity to supply so that we can smoothly capture and respond to customer demand. Unidentified Company Representative: I'll take your second question on display. For QD-OLED, we plan to expand the scope of the self-emitting market, especially in premium TVs and monitors. Based on talks with key customers, we are building a sales base for TVs. And for monitors, we focused on tapping new markets by continually expanding functions in the lineup. To give more details on QLED TVs, our products are positioned in the top segment of customers' lineup based on superior picture quality and functionality. We are diversifying the lineups with our customers. Our monitor offer excellent low gradation, wide color gamut and high response speed, necessary for switch changes and clear representing in darker [indiscernible] for immersive gaming experiences. Third is we are leading expanding the gaming monitor market. We plan to go beyond that and enter the B2B market by further improving the after image and the lifespan of the product. Unidentified Company Representative: Due to the time, we will accept our last question. Operator: The last question will be from Mr. Jay Hyun Kwon from JPMorgan Securities. H. Kwon: I also have two questions. First, regarding the image sensor market. It seems that the downturn is winding down, and we're seeing some improvement in market conditions. So what is the strategy in terms of your image business? There is growing interest in AI in the electronic appliance space. So what is your business strategy in terms of AI-enabled appliances? Unidentified Company Representative: So let me answer the question regarding image sensors. Well, channel inventory has largely been depleted. And since then we have seen increased utilization rise among major camera module providers and say, for us in the first and second quarter and more set makers are demanding more differentiated camera functionality. So we're seeing rising demand for our 1-megapixel 2-megapixel type solutions. Through a fab-light transition, for the pixel line, we are expanding our own production capacity while expanding our supplier base for larger lines through outsourcing. So regarding pixel wafer, we will be able to benefit from better production efficiency and also cost efficiency as well to allow for more added supply flexibility. Unidentified Company Representative: Based on for Digital Appliances, will answer the questions. I'll take the second question. According to market research firm, as technology continues to develop and more people are changing their lifestyles, their prioritize convenience and connectivity at home, the AI appliance market is anticipated to grow an average of 10% annually. Our connected appliances can detect situations and learn patterns, providing consumers with optimal [indiscernible]. We globally launched new bespoke AI product featuring such AI functionality on April 3. Reliable security lies at the core of AI appliances for book AI appliances in order for our customers to safely use products and services, we apply Samsung Knox and Knox Matrix, a blockchain-based security solution to build safer ecosystem. In the second half, through Samsung for service, our consistent software upgrade service based on smart things, we will implement a large language model to realize natural voice control similar to conversations between people and elevate AI functionality. We'll also lead the AI market and fortify leadership with unique connectivity experiences across mobile, TV and digital appliances. Unidentified Company Representative: Finally, we will answer questions. There was limited online in advance, we received a wide variety of questions for this quarter as well. And I believe the majority of the submitted questions were sufficiently answered during the Q&A session. We will answer one more question on a topic that's garnered a high level of interest from our shareholders but was not addressed during Q&A. The question is are the strong sales of S24 due to AI functionality? Which AI functions the customers usually use and what are some new AI features that will be introduced to the future? Daniel Araujo: [Indiscernible] volume and sales and the consumer response has been positive, thanks to the series differentiated AI functionality. We're spreading about Galaxy AI given the elevated customer interest in the technology and its utility and the overall past experience. We assess consumer interest to be higher in the S24 than it was in its predecessor and that Galaxy AI is driving this uptrend. We ran a customer survey and found that almost half of F24 buyers purchased the device with the intention of using AI functionality. Of course, the improved AP display camera, gaming experience and design also contributed to the S24 strong sales. Around 60% of S24 customers regularly use AI functionality. And the most used feature is circled to search and intuitive start experience. Next most of these features are photo assist, which provides convenient photo editing and live translate. And in particular, we observed that Gen Z is more receptive to Galaxy AI and use the new features more often than other age groups do. Looking at used growth by age group for the S24 compared to a predecessor, Gen Z shows growth that is much higher than the average for all age groups, and their usage rate of AI features also exceeds the average. We're using big data analysis and consumer research to assess user satisfaction and use patterns of AI feature. And we're looking to use these findings to improve AI functionality and introduce new experiences. We're also preparing to introduce AI features that are optimized to the form factor of each device, including foldables, large screen tablets and wearables. Thank you. Unidentified Company Representative: Thank you, everyone, who share their valuable opinion and we will be sure to refer to them in our decision-making process. That completes our conference call for this quarter. We wish all of you and those close to you stay strong and in good health. We thank everyone for joining us today. Thank you.

Operator: Good morning and good evening. Thank you all for joining this conference call. And now we will begin the Conference of Fiscal Year 2023 Fourth Quarter Earnings Results by Samsung Electronics. This conference will start with a presentation followed by a divisional Q&A session. [Operator Instructions] Now we shall commence the presentation on the fiscal year 2023 fourth quarter earnings results by Samsung Electronics. Daniel Oh: Good morning everyone for those in Asia and good evening to those in Europe and the Americas. Thank you so much for joining Samsung Electronics’ 2023 fourth quarter earnings call. I am Daniel Oh, leading the Investor Relations team at Samsung Electronics. For today’s call, additional information can be found in our earnings presentation at our IR website, www.samsung.com/global/ir. And joining me today on this call are EVP, Jaejune Kim, representing Memory; joining the call for the first time, VP, Tommy Kwon, for System LSI, for Foundry EVP, Gibong Jeong; also for the first time joining the call, EVP, Charles Hur for Samsung Display Corp, which I will refer to as Display during today’s call. For the Mobile eXperience Business, VP, Daniel Araujo; and the last but not least for Visual Display, VP, KL Roh. I want to remind you that some of the statements we will be making today are forward-looking, based on the environment we currently see. They are subject to certain risks and uncertainties that may cause our actual results to differ materially from those expressed in today’s discussions. First, I will start with our 2023 fourth quarter consolidated financial performances. Consolidated revenue came in at KRW67.8 trillion, up 0.6% sequentially. Thanks to higher memory prices, above market peak growth and continued strength in sales of premium display products, even though smartphone shipments declined due to rising competition during year-end seasonality. Consolidated gross profit was KRW21.7 trillion, up KRW0.9 trillion quarter-on-quarter, mainly due to increased sales of high valued memory products such as DDR5 and LPDDR5X. The gross margin was 32%, up by 1.1 percentage point. SG&A expenses increased KRW0.5 trillion quarter-on-quarter to KRW18.8 trillion, as R&D expenses reached a record high under our commitment to future growth. As a percentage of sales, they increased by 0.6 percentage point to 27.8%. All in all, consolidated operating profit increased KRW0.4 trillion sequentially to KRW2.8 trillion, as the effects of memory significantly improved performance and display sustained strength outweighed the negatives from intensifying competition in consumer goods and fading launch effects of flagship smartphones. Operating margin increased by 0.6 percentage point to 4.2%. Regarding currency effects, the average exchange rates of the U.S. dollar, the euro and major emerging currencies were relatively stable and had no material effects on our consolidated operating profit compared to the previous quarter. Now moving on to capital expenditures. CapEx in the fourth quarter was kRW16.4 trillion, of which KRW14.9 trillion was invested in the DS division and KRW0.8 trillion in display. Annual CapEx stayed steady at KRW53.1 trillion, with KRW48.4 trillion invested in DS and KRW2.4 trillion in display. For memory, we continued to build out infrastructure in Pyeongtaek, preparing clean rooms for mid- to long-term demand and we increased R&D portion of investments as a part of our commitment to extending our technology leadership. In particular, we invested in expanding the production capacity of HBM, DDR5 and other advanced nodes. And in line with our investment principles, we adjusted investment in wafer fabrication equipment to balance our needs with recent market conditions. In foundry, the annual CapEx increased due to capacity expansions for advanced EUV nodes of 5-nanometer and below, and for infrastructure investment at the Taylor Fab to address future demand. In display, investment focused on preparing for IT OLED products and advancing technology in flexible displays. Now I will share some of our key activities in sustainability management. Samsung Electronics has ranked fifth in Interbrand’s Best Global Brands Top 100 for the last four years and remained the top non-U.S. company on the list. According to the Interbrand, several factors influenced the evaluation. Consistent company-wide improvements in customer experiences, unparalleled connectivity and enhanced gaming experiences via our wide-ranging portfolio and SmartThings. Our leadership in the future innovative technologies such as AI, automotive, 6G, AR and VR, and consistent efforts to strengthen ES&G [ph] leadership by enhancing sustainability across our products. Second, we recently joined the Energy Collaborative and Carbon-Free Alliance initiatives aimed at expanding renewable and carbon-free energy resources. We believe our work as part of these initiatives will increase the use of efficient energy resources in the semiconductor ecosystem and also contribute to laying the foundation for carbon neutrality in the Asia-Pacific region. Finally, we expanded the use of recycled materials in our recently launched Galaxy S24 series. The batteries of S24 Ultra and S24 Plus contain a minimum of 50% recycled cobalt and speakers in all models use 100% recycled rare earth elements and a minimum of 40% recycled steel. Overall, we remain committed to strengthening sustainability management and expanding ES&G initiatives throughout our businesses. Now, turning to shareholder returns. The Board of Directors today approved a quarterly per share dividend of KRW361 for common stock and KRW362 for preferred stock. Based on our current policy, the total quarterly payout is KRW2.45 trillion, which will be paid after final approval at the Annual General Meeting of Shareholders in March. This is the final quarterly dividend under the policy covering 2021 to 2023, through which we pledge to return KRW9.8 trillion annually in regular dividends as a part of our total return of 50% of free cash flow. Over the past three years, we generated a free cash flow of KRW18.8 trillion, creating a shareholder return pool of approximately KRW9.4 trillion based on the policy. Including today’s declared dividend, we will have returned capital to our shareholders worth KRW29.4 trillion, equivalent to 157% of free cash flow and 313% of shareholder return pool. We are pleased that we have faithfully executed our shareholder return policy despite the significant pressure on our cash flow from the memory market’s significant downturn and myriad uncertainties in the global economy. Regarding our next shareholder return policy, the Board of Directors and top management comprehensively evaluated the current projected business environment, our investment strategies and financial structure, ways to enhance shareholder value and many other variables that could affect our business. However, the market rapidly changed during this process, causing our earnings to severely weaken and our cash holdings to fall. Moreover, the overall business environment still faces several persistent risks. After long deliberation, the Board approved or maintained the terms of previous shareholder return policy. Samsung Electronics will pay an annual regular dividend of KRW9.8 trillion as part of total shareholder returns of 50% of free cash flow for the period covering 2024 to 2026. At the close of each year, we will consider executing an early return of capital beyond regular dividends if we forecast there is a potential for significant surplus. We will consider implementing a new policy flexibly before the expiration of the proposed one in consideration of M&A activities and cash positions. I will now summarize outlook -- our outlook for the first quarter in 2024. Please note that more details will be included in the speeches from our business units. In the first quarter, with the IT market environment recovering gradually, we will focus on increasing sales of high-value added products to improve profitability. For our component businesses, we will capture the rising demand for advanced products and those aimed at generative AI even under weak seasonality. Meanwhile, DX will emphasize strengthening AI functionality in smartphones and other products, while increasing strategic product sales. In 2024, we expect memory market conditions and IT demand to keep recovering even though a number of macroeconomic risks are likely to remain elevated. Samsung Electronics will fully respond to the demand for AI-used semiconductors, while striving to establish early strongholds in markets for AI-enabled consumer products. Also, we will fortify our leadership in premium products and competitiveness in advanced nodes while we continue to prepare for future technologies. In the near future, we expect high macroeconomic risks to continue to weigh on the business environment and thus expect our results to see moderate improvements in the first half and more significant improvements in the second half with a pace of recovery to differ by business and product. For additional details on the results and outlooks for our businesses, as mentioned earlier, please refer to the slides from our website and the following presentation. Now, without any further ado, I will turn the conference call over to the representatives from each business unit to present fourth quarter performances and outlooks for their respective business segments in more detail. We will start with EVP, Jaejune Kim of the Memory business. Jaejune Kim: Thanks. Good morning. This is Jaejune Kim from Memory Global Sales and Marketing. In the fourth quarter, the memory market showed a recovery trend compared to the previous quarter. For PC and mobile, contents per box continue to grow with the normalization of customers’ finished goods inventory and for mobile, particularly, the demand environment has improved as selling competition in Chinese smartphone market intensified. For servers, as investment in generative AI has expanded across the IT industry, the related demand has remained strong and coupled with the nearly normalized inventory level at conventional server customer site, the demand showed signs of recovery. Moreover, as the perception of price increase spread in the market, it was observed that demand for inventory builds up also occurred across all applications in addition to fundamental demand increases. In this situation, focusing on expanding the high value-added products to improve business performance as early as possible, we significantly increased the sales of cutting edge products such as HBM DDR5, LPDDR5X, UFS 4.0 and so on. As a result, our big growth exceeded the market level and inventory depletion of both DRAM and NAND accelerated due to impact of production discipline. In particular, our DRAM inventory improved even more significantly and the DRAM business became profitable, thanks to ASP increase. Now let’s move to the outlook for the first quarter. Recovery of PC and mobile demand has already been witnessed last quarter and it is expected that the demand recovery trend will continue following the previous quarter. In the case of servers and storage, while the demand that had been relatively sluggish for quite some time has shown signs of recovery, it seems that maybe we need to wait one or two more quarters to see whether there would be a full recovery in demand or not. Meanwhile, in terms of industry supply, the big growth of cutting edge products is expected to be constrained. Therefore, the customer’s demand for cutting edge products is likely to stay strong and we also focus the demand for inventory build-up to continue to occur. In this market environment, while focusing on responding to the demand for cutting edge products, we plan to focus on improving profitability by actively addressing the demand for HBM server SSDs related to generative AI. And accordingly, our memory business is expected to return to profit in the first quarter. However, as the overall big growth of memory production is expected to be constrained across the overall industry, we will focus on responding to the true demand over demand for inventory build-up. Now let’s move on to the outlook for 2024. We expect the memory business to continue to recover despite volatility aligned with various factors such as future interest rate policies, geopolitical risks and so on. For PC and mobile, due to the impact of the adoption of on-device AI, content per box is expected to grow mainly in commercial PCs and flagship smartphones. In addition, there would be a positive effect on sales shipment trends coupled with approaching replacement cycles of some products sold during the early stage of the pandemic. For server, in the trends of continuing solid demand for AI, we expect the demand to gradually recover as server replacements, which have been postponed under last year’s tightened budget, proceed in conjunction with the transition to a new platform. In this situation, we plan to continue to focus on profitability based on the competitiveness of our cutting-edge node. Despite the worsened business condition in 2023, we have been striving to maintain CapEx for long-term competitiveness. As a result, we expect the supply competitiveness of our advanced node to expand further as last year’s investment will take effect this year. Thus, we plan to actively address the demand for premium products based on leading-edge nodes and pursue profitability for sustainable growth. For DRAM, we aim to enhance our leadership in the high-density DDR5 market by introducing the industry’s highest capacity 32-gigabit DDR5 based on 1B nanometer, which was developed for the first time in the industry. While market needs for advanced HBM performance and capacity are ever-growing with the spread of generative AI, leveraging the competitiveness of TSV capacity, we plan to proactively solidify our competitiveness as a leading HBM company by ramping up our mass-volume business for next-generation HBM3E in a timely manner and accelerating the transition to 3E12i in the second half of the year. Also for NAND, by penetrating into the mobile QAC market for the first time in the industry, we will actively respond to customers’ needs for high-density mobile storage and we will strengthen market leadership by leading the early market for Gen5 SSD in the generative AI era. Thank you. Tommy Kwon: Good morning. This is Tommy Kwon from System LSI Business. In Q4, demand from restocking increased as smartphone makers finished their inventory adjustments and our newest and most advanced Exynos 2400, which was selected for a major customer’s flagship smartphone model, has contributed to our earnings. Image sensor sales also increased compared to the previous quarters due to customers’ inventory normalization. As a result, both sales and profit improved compared to the previous quarter. Please note that further recovery of the semiconductor component industry is likely to be affected by the future sales trend of smartphones. In Q1, we expect sales of our new SoCs and high-pixel image sensors to remain strong. However, with seasonal market changes, we also expect decline from some of the SoCs that has contributed to the last quarter’s earnings. Our mobile DDI-related earnings will be normalized since customer restocking is complete, so we expect improvements in our overall earnings to be somewhat limited. For the smartphone market, the introduction of on-device AI expected -- expect to attract customers’ desire to replace smartphones. The market has declined steadily over the past few years due to the increased replacement cycle, and with this on-device AI, we’ll flexibly respond to -- respond by accounting for the possibility of changes in demand and inventory from Q1. In 2024, although, we expect the smartphone market to rebound with the on-device AI, the normalization of chip prices and higher financing costs are likely to erode decision-markers’ [ph] promotional capabilities and this could limit demand growth. It remains to be seen whether the recent increase in orders for smartphones will lead to overall earning growth for this year. We’ll secure future growth engines by leveraging AI momentum and maximizing SoC, sensor and LSI business competitiveness on the back of our reorganization. Our new SoCs are considered superior to competitors in terms of stability and graphic capabilities such as ray tracing and we plan to continuously strengthen our competitiveness by bolstering the on-device AI function through NPU performance and model weight reduction through quantization. For the image sensors, we will expand sales of high-pixel sensors to continuously expand our business scale and profitability. And for DDIs, we will achieve growth even in uncertain environments as more IT devices adopt OLED. We will also continue our effort to secure future growth engines by securing additional orders from major automotive customers and winning orders for new products such as UWB. Thank you. Gibong Jeong: Good morning, and good evening, everyone. This is Gibong Jeong from the Foundry Business. In the fourth quarter, sluggish demand continued due to customer inventory adjustments and global economy recovery delays leading to earnings stagnation. Despite these challenges, we are actively developing 3-nano and 2-nano GAA technology and planning to expand into newly emerging application segments using advanced process technologies. This effort has increased product mix and design awards, especially in the HPC application sector, in fact, which achieved our highest annual order backlog in 2023, strengthening our growth foundation. In the fourth quarter, we expect demand to improve with the launch of new products featuring AI smartphones and AI PCs. Our earnings may not significantly recover due to the ongoing trend of customers reducing inventory. Nevertheless, we are focused on improving yield and optimizing the second-generation 3-nano GAA process. Additionally, we are getting ready for the future by securing a 2-nano AI accelerator order, including HPM and advanced packaging. In 2024, as demand for smartphones and PCs gradually recovers, the foundry market is expected to approach 2022 levels, primarily due to advanced processes. Our focus is on improving our advanced process technologies. We will continue stable mass production of the 3-nano GAA process, develop the 2-nano process and increase orders for fast-growing applications like AI accelerators. We also continue to expand our automotive business, while improving our cost competitiveness in mature processes. That concludes my key messages from the foundry business. Thank you. Charles Hur: Good morning. This is Charles Hur from the corporate strategy team at Samsung Display. I will now brief you on our results for the first quarter of 2023. For the mobile display business, market demand for smartphones slightly increased year-on-year, aided by a low base. We performed well amid numerous challenges in the quarter and recorded a similar result Q-o-Q by accommodating launches of major customers’ new products via timely supply. For the large display business, even though demand remained weak due to sluggish economic conditions, we posted sales growth and narrowed our losses on the back of year-end seasonal TV demand. Next, I will share our outlook and strategy for the first quarter and 2024. For the mobile display business in the first quarter, we expect performance to decline quarter-on-quarter and year-on-year, owing to intense competition among panel makers on top of effects of potential weak seasonal demand. For the large display business, despite difficulties stemming from weak demand and off-season effects, we will continue to narrow losses by launching new QD OLED monitors and thereby expanding our customer base. For the mobile display business in 2024, in regards to market demand for smartphones, we expect encounter headwinds due to global economic slowdown and prolonged regional crisis. In the stagnant smartphone market, we expect competition among panel makers to be intense. In particular, the high-end segment is expected to be more competitive. We will focus on sales growth based on differentiated technology and capacity. In addition, we will strive to strengthen future growth engines in the IT and auto segments in 2024. Finally, for the large display business, despite the continued macro uncertainties such as the sluggish economy and dampened consumer sentiment caused by inflation, we expect TV demand to rise moderately with contributions from upcoming sporting events. We will continue monitoring the market for any changes while working to improve our profitability by maximizing efficiency through enhanced product mix, improved production efficiency and added capacity without additional investments. Thank you. Daniel Araujo: Hi, everyone. This is Daniel Araujo from Mobile eXperience Division. Today, I will be sharing our financial results for Q4 and discussing the outlook for the MX business. Despite ongoing inflation and global political unrest, the smartphone market experienced modest growth in Q4 of 2023, led by the premium segment. For the MX business, sales and profit decreased quarter-to-quarter due to a reduction in smartphone sales, which included fading effects of new flagship models launched in Q3. However, tablet shipments saw significant growth, led by newly released products, including healthy sales of premium products and wearable devices maintained their sales momentum during the peak holiday season. Thanks to our continuing optimization of resource use and hardware design, we managed to maintain solid double-digit profitability. Moving forward to Q1 of 2024, although we expect a sequential decrease in total smartphone demand due to seasonality trends, the premium segment is expected to grow compared to the same period last year. To capitalize on this opportunity, we plan to leverage our newly launched Galaxy S24 series to increase sales. By emphasizing the series’ cutting-edge AI capabilities and enhanced product competitiveness alongside our efforts to strengthen our carrier partnerships, we aim to establish Samsung as the leading brand in the AI smartphone market. Though we acknowledge the potential risk of rising component costs and we will strive to secure a double-digit operating margin by continuing to realize operational efficiencies. Looking ahead to 2024, while the smartphone market contracted in 2022 and 2023 amid prolonged economic uncertainty, we expect consumer sentiment to stabilize and demand to rebound in anticipation of a soft landing for the global economy, leading to market growth, especially in the premium segment. Similarly, we expect the tablet market to bounce back after contracting in 2022 and 2023 following the surge in demand related to remote work and education during the pandemic. Both volume and value are projected to rise in 2024 as the replacement cycle approaches. For wearables, we expect to see a double-digit increase in value for smartwatches, driven by consumers in the mass market looking to upgrade, given increased interest in health-related features since the pandemic. Meanwhile, we project that TWS devices will experience modest growth in value due to increasing volume demand, especially in the mass market. As for the MX business, with our innovative Galaxy AI integrated into the S24 series, we intend to lead the AI smartphone market by offering users an unparalleled level of creativity, convenience and personalization. For foldable devices, we plan to continually enhance the user experience while maximizing usability with Galaxy AI that is optimized to the form factor. This strategy aims to boost our annual flagship shipments by over 10%, outpacing the industry growth rate in terms of value, while also fortifying our leadership in the foldable category. In tablets, we’ll continue to focus on sales of premium devices, especially around the Tab S series, by emphasizing their improved user experience and connectivity. For wearables, we’ll strive to elevate the Galaxy ecosystem experience and increase the smartphone attach rate by integrating AI technologies, while enhancing wellness functions in our smartwatches to cater to health-conscious consumers. For TWS, we’re building a comprehensive lineup to address all segments. By executing these strategies in 2024, we aim to achieve revenue growth while continuing to realize resource efficiencies so we can achieve solid profitability amidst volatile market conditions. Furthermore, we aspire to broaden the Galaxy AI ecosystem in all directions so that it becomes the global standard for mobile AI. Lastly, we’ll strengthen advanced R&D and investment in future growth areas such as generative AI, Digital Health and XR, and work closely with partners to build an ecosystem from the initial stages in order to sustain long-term growth for the MX business. Thank you. KL Roh: Good morning and good evening. I am KL Roh from the sales and marketing team of Visual Display. First, I would like to give you the market condition and our performance in the fourth quarter of 2023. TV market demand increased quarter-on-quarter mainly due to year end seasonality. But decreased year-on-year as our consumer sentiment continue to decline especially in advanced countries. For Samsung, we improved the sales mix and expanding our leadership in the premium market by preparing for regional peak season promotion including Black Friday. With our focus on high value-added products such as Neo QLED, OLED, Big TVs above 75 inches, even so, our profitability decreased slightly quarter-on-quarter and year-on-year as TV market demand was stagnant and our cost increased due to intensified competition. Now let me move on the outlook for the first quarter and 2024. In the first quarter, we expect overall market demand to continue to decrease as it is our low season, but demand for premium product such as, QLED, OLED, Big TV above 75 inches should remain solid. At Samsung, we will have amplified the buzz created at [inaudible] and CES around newly launched premium model, take more productive approaches to promoting our differentiated product and service experience and focus on enhancing sales of strategic product and securing profitability. Regarding the TV market in 2024, the trend of decreasing market demand will ease gradually, thanks to replacement demand linked to global sporting events and others. However, uncertainty related to various macro factors are likely to continue. We will target various demand by innovating production team on premium, lifestyle screen and diversifying our lineup. Also we will leave the AI screen era by continuing to bring innovation of hyper connectivity and customized the content and service into our daily life based on the next-gen AI process and Tizen OS. Thank you. Daniel Oh: Thank you. That sums up the fourth quarter results presentation. Before we move on to the Q&A session, I would like to share some data points in the key business areas. Comparative figures are on a sequential basis for quarterly data. For DRAM, in the fourth quarter, Samsung’s bit growth was in the mid-30% range and ASP increased by percentage just into the double digits. For the first quarter of the year, we expect market bit growth to decline by mid-teen percentage and which should be around market expectation. For NAND, our bit growth was in the mid-30% range and ASP increased by high single-digit percentage. For the first quarter, we expect market bit growth to fall by low single-digit percentage and which should come in slightly below market. For display in the fourth quarter, small panel portion of revenue was in the high 90% range and small panel sales volume grew by a percentage in the early 20s. In MX, approximate sales volumes of smartphones and tablets were 53 million units and 7 million units, respectively, and smartphone ASP was US$258. In the first quarter, we expect smartphone shipments and ASP to rise, while tablet shipments will probably decrease. For TVs in the third quarter, sales volume increased by a percentage in the early part of the 10% range and in the current quarter, we expect to decline by a percentage in the early to mid-teens. This completes our prepared remarks. Please be advise that starting from today, we will provide simultaneous interpretation services for the Q&A session. We will now open the line for analysts’ questions. Operator: [Operator Instructions] The first question will be by Mr. Peter Lee from Citi. Please go ahead, sir. Peter Lee: Yes. Good morning. This is Peter Lee from Citigroup. I have one question for the semiconductor and other for MX. My first question, memory question, is about your fourth quarter shipments, you mentioned increase for both DRAM and NAND, you came way above what market expected. Can you give us some color to how this shipment increase and where did you see an increase in sales? My second question is for MX, recently the Galaxy S24 was launched and there is a lot of attention about the on-device AI feature of the new flagship. What kind of differentiating features do you offer on on-device AI and do you think this will be enough to turnaround the sluggish smartphone demand overall in the market? Jaejune Kim: Yes. I will first answer your memory question. Fourth quarter overall there was the demand environment improvement and then there was also the base effect against the third quarter, where shipment was limited and so both our DRAM and NAND achieved bit growth of mid-30%. In particular, in the case of server DRAM, server DRAM recorded above 60%-bit growth Q-o-Q and also in Q4, our DDR5 migrated to 1A nano accelerated and now accounts for over half of our server DRAM driving overall DRAM bit growth. NAND environment is also improving and demand is coming in particularly around server SSDs for data centers and storage. And server SSD shipment increased by close to 50%, which is a huge jump on a Q-o-Q basis in sales. This year we are expecting demand recovery to continue around the cutting edge nodes and products, and we will leverage our competitiveness in advance nodes that we have acquired through investments to capture the market demand growth. Thank you. Daniel Araujo: This is Daniel. I will take your second question. So we are focused on developing practical features that consumers can use in their daily lives, not just simply applying AI technology for the sake of it. With the AI embedded in the S24 series, we’re aiming to revolutionize experiences such as translation, text creation and organization and search. So let me call out a few ways that we’re enhancing communication. With our on-device AI, real-time phone call translation, as well as interpretation of face-to-face conversations can be readily used in the call and message apps without having to install another application. Our keyboard-ready assistant, Chat Assist, helps users create messages appropriate for different types of situations and counterparts. And Samsung Notes now summarizes and organizes very large amounts of information. Circled Search allows you to immediately search anything you’re curious about on your screen. As for the camera in the S24 series, it has a significantly enhanced zoom with the ProVisual Engine, also based on Galaxy AI, as well as improved performance in low-light conditions. Instant Slow-mo takes videos not originally shot in slow motion and generates new frames based on Galaxy AIs prediction of the motion between frames in order to allow the videos to be viewed slowly and smoothly. We also offer a more creative editing experience with Edit Suggestion, where Galaxy AI analyzes a photo and suggests adjustments. And also Generative Edit, which uses generative AI to fill in parts of an image background. Also, the AP performance and heat dissipation system have also been improved, which allows efficient processing of AI workloads and lets you stably enjoy playing high-end games for extended periods of time, while the ray-tracing graphics engine has been enhanced for high-spec gaming and more games with ray tracing will be released soon in collaboration with major game partners. So based on all of these elements that comprise our new S24 series experience, we aim to continue growing compared to the previous model. And as the market is expecting growth for the first time in two years, especially around premium, we’ll accordingly make every effort to cement our position within the premium segment. Thank you. Operator: Now we’ll move on to the next question. The next question will be from Giuni Lee of Goldman Sachs. Please go ahead. Giuni Lee: Yes. Thank you for giving me this opportunity. I have one question on memory, the other on display. My question is about recent media reports that Samsung may increase visualization rates in Q1. Can you confirm whether you’re continuing to reduce your production? When do you think your inventory will reach normal levels? Second question is about display. Competitors are also making investments for IT OLED to move into the market faster. Now you have had a head start. Can you give us an update on your customer discussions and do you think you can have margins similar to smartphone OLED? Jaejune Kim: Yes., I’ll take your first question about memory. Our goal of normalizing inventory and adjusting production volume to achieve this has not changed. Our inventory has decreased quickly in Q4 with the shipment increase and production reduction, especially in the case of DRAM, which is improving faster. There has been inventory reduction significantly. That said, inventory levels actually differ depending on specific DRAM or NAND products, and so we plan to continue our production adjustments selectively during first half, taking into account future demand and inventory levels. So for DRAM inventory, we’re expecting that to reach normal range as we pass Q1, and in the case of NAND, we expect that to normalize at least within first half even accounting for changes in demand and market environment. Going forward, we’ll continue to constantly monitor market demand and inventory levels and flexibly adjust our operational strategy accordingly. Charles Hur: Here is the answer for your second question. First of all, we apologize for not being able to provide specific details regarding our customers. However, following our April announcement about investment on eighth generation class IT OLED, many of our customers have shown considerable interest. We are engaging closely with multiple customers and some projects are underway for early technological verification with customers. We plan to thoroughly prepare so that we can immediately spur production as soon as the line is set up. As for the outlook for the IT OLED business and similar to the smartphone market in the past, the need for high quality, high performance is strong, especially in premium products. As a result, we are seeing a sharp increase in OLED penetration in the premium laptop segment. As we expand the sales growth, we will strive to be earned premium in the market in recognition of our OLED technology. When the IT OLED business begins full scale production, it will drive an increase in sales, which have been somewhat stagnant and help distribute the fixed costs, which is beneficial in terms of profitability. In addition, we will make efforts to continually improve the profitability. Thank you. Daniel Oh: We’ll take the next question. Operator: The next question will be from KB Securities, Dongwon Kim. Please go ahead. Dongwon Kim: Yes. Thank you for this opportunity. I have one question on semiconductor, the other on display. Recently, the memory industry is showing signs of recovery. What is your outlook for memory on both the demand and supply side? Second question is for a Samsung display. Competitors are also moving into the smartphone market, but you are continuing to record very good profitability. Do you think that you’ll be able to maintain your current profitability and competitive edge, and what kind of strategy do you have in mind for this year? Jaejune Kim: I’ll take your first question about the memory outlook for this year. While various geopolitical issues and macroeconomic trends need to be watched carefully going forward, I think, overall, the demand environment is expected to gradually improve, especially generative AI servers are adopting more HBM and DDR%. And in the case of NAND, we are seeing the 8 terabyte plus high density SSD demand coming in, which are all positive signals for memory demand. Also at the set level, PC and mobile are using the on-device AI as a new sales point, which may lead to increase in DRAM content, as well as set shipments themselves. If we look at the supply side of memory, this year, industry overall production bit growth is expected to be limited at least versus demand. And last year, the industry CapEx was reduced quite significantly and this is leading to delays in node migration and new capacity and the limited bit supply will be more noticeable in the advanced nodes. This year, CapEx is expected to recover overall in the industry somewhat, but most will be focused on HBM and the non-HBM production bit growth is likely to be even more limited. Also, HBM has larger chip size versus the existing DDR products and also needs a buffer chip on the bottom, which are all additional production constraints, further limiting bit growth achievable for a given CapEx. Under such limited production, if the market suddenly sees improvements, it is possible that demand -- that supply may be below demand around certain advanced node products. We have maintained CapEx last year, despite profitability challenges and have increased our supply capabilities across not only HBM, but also other products as well. And it is time for us to now use that supply competitiveness we have preemptively prepared to respond stably to customer demand going forward. Thank you. Charles Hur: Here is the second question. As you mentioned, competitors are accelerating their entry to the premium smartphone market and the economy continues to stagnate. So to maintain current competitiveness and our dominant position in the mid-long-term, we have been deeply considering the situation and making thorough preparations. Most of all, our main focus is on technological differentiation and cost competitiveness, and we will strive to maximize these points. By developing power consumption, brightness in design differentiation technologies, we plan to offer the best technology solutions, exceeding customer expectations. Also, by maximizing productivity and improving process efficiency, we will keep enhancing cost competitiveness. Competition is rising, just as the industry worries, but we believe that our source technology and manufacturing know-how, IP, a stable SCM, competencies increases in value over time. We will consider to focus on technological differentiation as we have since the early stage of the OLED business. Thank you. Daniel Oh: We’ll move on to the next question. Operator: The next question is from UBS, Mr. Nicolas Gaudois. Please go ahead, sir. Nicolas Gaudois: Good morning. Thanks for taking my question. This is regarding memory and DRAM. You have previously indicated expecting to ship HBM3 to more customers, more meaningfully by the end of 2023, while sampling HBM3E12i to key customers by early 2024. Can you update us on the progress made there and can you share some plans for the development of next-generation HBM, like HBM4? Thank you. Jaejune Kim: Yes. I’ll answer your question about our HBM business. Our HBM sales is hitting new records each quarter, and in Q4, it increased by more than 40% Q-o-Q and around 3.5 times on a year-on-year basis. HBM3’s mass production only started in Q3, and in Q4, we added a major GPU customer to increase sales. Therefore, share of HBM3 and 3E and other advanced products is increasing, and likely to account for more than half of the sales volume in the first half of this year and reaching around 90% in the second half of this year. We’re also, of course, pursuing business opportunities for the next-generation HBM3E. Customers are sampling our 8-stack product with maximum 1,280 gigabit bps bandwidth, which will be ready for mass production within first half of this year. Also, using our 12-stack technology, we are planning on offering a 36-gigabyte high-density product to respond to needs for even better memory performance and capacity needs, and this will also be available for sampling during Q1. You’ve also asked about the next-generation HBM, which is HBM4. This is in development with a 2025 sampling and 26 mass production timeline. Demand for also customized HBM is growing, driven by generative AI and so we’re also developing not only a standard product, but also a customized HBM optimized performance-wise for each customer by adding logic chips. Detailed specifications are being discussed with key customers. In the custom HBM space, co-work with system IC companies will be important and our synergies with the Foundry, LSI and the advanced packaging will be an important edge in this area to give us greater market competitiveness. Thank you. Daniel Oh: Thank you for your answer. Operator: Here’s the next question. The next question will be presented by Sung Kyu Kim from Daiwa Securities. Please go on, sir. Sung Kyu Kim: Good morning. Thank you for the opportunity. I have a question for VD. In 2024, regarding OLED premium lineup, can you tell us more details on your strategies? And amid intensifying competition, what is your strategy for differentiation strategy in the premium market? Thank you. KL Roh: Here is the answer for your question. Beyond the limits of existing smart TVs, we are preparing an AI screen era that changes our lives and presents new lifestyles. And with the vision of opening this AI screen era, we are formulating differentiated business strategies. First, we will expand the hyper-connectivity experience through SmartThings. TV will not be a device just for watching. It will monitor and control all house devices and even optimize power usage. We plan to transform TVs into center of AI home devices. Particularly, we will actively appeal Samsung Knox metrics as a security solution suitable for the era of ultra-connectivity. Second, we will enhance customer experiences through a smart service differentiation. Based on the device scale secured through our hardware leadership, we’ve been evolving our service platform, focusing on gaming media advertising. In 2024, we will develop a customized content and will enhance gaming experiences. Not only that, through Samsung’s own service like TV Plus, which is channel-based free service, we plan to provide differentiated customer experiences that directly relate to sales profit increase and build up this virtuous business structure. Furthermore, on top of our two-track premium strategy with Neo QLED and Micro LED, we strengthened our OLED lineup to expand customer choices and even for low definition content, we provided next generation AI processors for upscaling, offering the best viewing experiences and also maximizing picture and sound quality. Last, our unique and differentiated product lineup, our lifestyle screen products will be actively leveraged to keep addressing diversifying customer needs. Thank you. Daniel Oh: We’ll take one more question. Operator: The last question is from Mr. Jae Hyun Kwon [ph] of JPMorgan. Please go ahead. Unidentified Analyst: Yeah. Thank you very much for this opportunity. I have a question on your Foundry business. There’s a lot of talk about on-device AI. What kind of implication do you think that would have on the Foundry’s demand side and what kind of opportunities do you expect to see related with on-device AI? Gibong Jeong: Yes. I’ll take your question about on-device AI. 2024 will be the year one in the age of on-device AI and customers want faster devices. With AI performance increasing, the NPU block size needs to get larger and the SRAM capacity will also need to get larger. So in 2024, we are expecting a high single-digit increase in silicon consumption-based growth, and in the future, we expect this to even contribute greater for Foundry demand. Thank you. Operator: Finally, we will answer questions that were submitted online in advance. We received a wide variety of questions for this quarter as well. And I believe the majority of the submitted questions were sufficiently answered during the Q&A session. We will answer one more question on a topic that generated a high level of interest from our shareholders. The question is, what is the growth forecast for the smartphone market in 2024 and what are some of our goals, strategies and could you elaborate on whether the premium segment will continue to be strong? The answer -- the… Jaejune Kim: So the smartphone market in 2024 is projected to see mid-single-digit growth in terms of value, primarily by the premium segment, because also expected to continue to expand as a portion of the total market. And it’s anticipated that ultra-premium smartphones will account for approximately 40% of the total market. With our S24 series, we aim to deliver a completely novel Mobile eXperience with Galaxy AI, with the target of double-digit sales growth in the premium segment. Our goal is for consumers to associate AI phone with Galaxy or AI phone equals Galaxy and for us to see an early lead in the nascent AI smartphone market. As for foldable phones, we will continue to improve the competitiveness of our products by enhancing the usability and leveraging the unique form factor to achieve substantial growth in both shipments and revenue in 2024, solidifying our leadership in the foldable phone market. Thank you. Operator: And now we thank you for all of your opinions and we will refer to them in making our business decisions. This completes our conference call. I hope for everyone’s health and success. Thank you.

Operator: Good morning and good evening. Thank you all for joining this conference call. And now we will begin the conference of our fiscal year 2023 third quarter earnings results by Samsung Electronics. This conference will start with the presentation followed by a Q&A session. [Operator Instructions] Now we shall commence the presentation on the fiscal year 2023 third quarter earnings results by Samsung Electronics. Ben Suh: Welcome, everyone. This is Ben Suh, Head of Investor Relations. Thank you for joining Samsung Electronics' Third Quarter 2023 Earnings Call. For additional details regarding our quarterly results, please refer to our earnings presentation, which is available on our IR website at www.samsung.com/global/ir. Joining me today on the call are EVP, Jaejune Kim, representing Memory; VP, Hyeokman Kwon for System LSI; EVP, Gibong Jeong for Foundry; EVP, Casey Choi for Samsung Display, which I will refer to as Display during today's call; VP, Daniel Araujo for Mobile eXperience; and VP, KL Roh for Visual Display. I want to remind you that some of the statements we will be making today are forward-looking statements based on the environment as we currently see it. They are subject to certain risks and uncertainties that may cause our actual results to materially differ from those expressed in today's discussion. I will start with our results for the third quarter of 2023. Our consolidated revenue increased 12.3% sequentially to KRW 67.4 trillion, with the release of new smartphone models and increased sales of premium display products being the main contributors. Consolidated gross profit increased 13.2%, up KRW 2.4 trillion quarter-on-quarter to KRW 20.8 trillion, led by improved product mixes from both MX and Display. Gross margin also increased slightly to 30.8% from 30.6% in the previous quarter. SG&A expenses grew KRW 0.7 trillion quarter-on-quarter to KRW 18.4 trillion, as advertising and promotional spending increased with the release of new smartphone models, while we continued our large-scale commitment to R&D for future growth. However, as a percentage of sales, SG&A expenses decreased by 2.3 percentage points to 27.2%. Operating profit was KRW 2.4 trillion, up KRW 1.8 trillion sequentially, driven by strong sales of flagship models in MX, increased demand in Display, thanks to strong demand for major clients' new products, and DS division's narrowed losses compared to the previous quarter. I will now provide high-level overviews of our performance and outlooks. In representatives of the business units, we'll provide more details following my presentation. For the DS division, memory reduced its losses quarter-on-quarter mainly due to sales growth of high value-added products and a rise in ASP. For our system semiconductor businesses, results remain subdued with a delayed demand recovery in major applications. However, in Foundry, new backlog from design wins reached a new quarterly high. In Display, the mobile panel business recorded a significant increase in profit, thanks to the release of new flagship models by its major customers, all the large panel business reduced its losses, and it saw improvements in both yields and cost efficiencies. The DX division again posted solid quarterly results despite a highly competitive market as it delivered strong sales growth of premium smartphones and TVs. In the Network business, sales decreased in major overseas markets, including North America as mobile carriers scale back their investments. The Digital Appliances business reported similar earnings year-on-year in a period of weaker seasonality. Harman notched a new high for quarterly operating profit led by sales growth in car audio products, amid an overall increase in orders from automotive customers and also consumer audio products such as portable speakers. Regarding currency effects, average exchange rates of major currencies, such as the U.S. dollar and the euro, had just minor fluctuations in the third quarter. And as a result, did not have any significant effect on our consolidated operating profit when compared to the previous quarter. Now I would like to share our business outlook. In the fourth quarter, under prospects of a gradual recovery of global IT demand, the DS division will focus on sales of high value-added products such as HBM and bolstering technology leadership. Display and DX meanwhile, we remain committed to maintaining solid profitability via enhanced strategies focusing on premium markets. For the DS division, we expect demand from PC and mobile to improve as customer inventories have generally reached normal levels. The memory business will actively address the growing demand for new interfaces while expanding the portion of advanced nodes, and HBM3 sales should start to expand meaningfully. In our System Semiconductor businesses, we expect to deliver improved results, thanks to shipment starts for a major mobile customers new products, which will also lead to demand growth for Foundry. In Display, we expect the mobile panel business to maintain its strong performance on the back of continued robust demand for premium OLED smartphone displays. The large panel business will expand its QD OLED sales driven by strong year-end seasonality. The DS division will strive to maintain solid profitability by reinforcing strategies for flagship smartphones, expanding sales of premium tablets and wearables and capturing strong seasonal demand for high value-added TVs. Networks will seek to obtain additional wins in overseas markets. In Digital Appliances, we'll focus on securing profitability while strengthening our product sales mix, centering on premium products. Harman will push for another strong quarter by expanding sales of audio products during year-end seasonality amid ongoing and favorable trends in automotive product orders. In 2024, all certain macro uncertainties seem likely to persist. We expect to see a recovery in memory market conditions and IT demand. Accordingly, our component businesses will focus on expanding sales of high-performance advanced node products, and continuing to win new orders. DX will strengthen its product competitiveness, focusing on premium segments as it continues to prepare for future growth. The DS division, expecting that normalized inventory levels to continue as well as the trend of higher density adoption will lead to a recovery in memory demand, will strive to expand the sales of advanced known products. We also plan to meet the demand for high-performance, high-bandwidth products by increasing our portion of HBM3 -- in HBM3 e-sales by leveraging the highest HBM capacity in the industry. For Foundry, we will work to narrow the gap with a lead competitor. By entering mass production of our second-generation 3-nanometer GAA process and by starting operations of the Taylor fab. System LSI will continue to strengthen the competitiveness of its SoC offerings. In the Advanced Packaging business, which has been garnering keen attention recently, we have received orders from multiple domestic and overseas HPC customers, including orders for our one-stop turnkey service, which encompasses logic, HBM and 2.5D interposer. In 2024, we expect to start mass production and expand the business. For Display, the mobile panel business will actively address rising demand in new application areas and leverage its technological leadership to further strengthen its position in the smartphone market. The large panel business, we will strengthen our position in the premium market and improve profitability by expanding our product lines and improving yields. The DX division will strengthen its competitiveness with a focus on premium segments by increasing smartphone sales centering on flagship models, continue introducing innovative TV products and leading the market for super large TVs. DX will also thoroughly prepare for growth by expanding the application of AI technology, providing tailored hyperconnected experiences via smart things and securing technologies in new growth areas such as XR. Networks will strive to grow revenue by actively seeking new overseas business opportunities while simultaneously expanding existing relationships. We will also reinforce its technology leadership in core 5G chips and vRAN. Digital appliances will strengthen its leadership in premium segments via simultaneous global launches of home appliances with AI features. Meanwhile, we will continue to advance interconnection experiences between smart things based digital appliances and other devices, while also continuing to improve profitability through increased sales of higher-margin products, such as system air conditioners. Harman is expected to increase its presence in new areas, including automotive display as it continues to upgrade the in-vehicle experiences and to enhance responsiveness to high-growth product demand, such as home audio. Moreover, it will further differentiate its products and expand sales through synergistic collaborations with Samsung Electronics. Moving on to capital expenditures. CapEx in the third quarter was KRW 11.4 trillion, of which KRW 10.2 trillion was invested by the DS division and KRW 0.7 trillion by Display. Total CapEx up to the third quarter of this year is KRW 36.7 trillion with KRW 33.4 trillion invested by DS and KRW 1.6 trillion by Display. We expect full year CapEx to be approximately KRW 53.7 trillion with KRW 47.5 trillion allocated to DS and KRW 3.1 trillion to Display. As a reminder, the full year numbers are projections, and the actual figures may differ depending on factors such as future market conditions and the timing of equipment deliveries. Memory investments are ongoing in Pyeongtaek infrastructure, which include the completion of P3 and progress of P4 framework, all to prepare for mid- to long-term demand. And the investment portion for R&D is likely to increase due to our strong commitment to enhance technology leadership. And just as a reminder, we dynamically adjust our capacity investments in accordance with market conditions. Nonetheless, we remain committed to investing in new technologies such as securing industry-leading HBM production capacity and process upgrades. For Foundry, investments will center on expanding production capabilities at Pyeongtaek to address the demand for advanced processes, in accordance with our principle of responding swiftly and flexibly to customer demand. Foundry will also expand investments for our Taylor fab infrastructure to ensure longer-term readiness. As a result, we expect Foundry CapEx to increase compared to last year. In Display, investments will primarily focus on preparing for IT OLED products and flexible displays. Next, I would like to address the third quarter dividend. Today, the Board of Directors approved a quarterly dividend of KRW 361 per share for both common and preferred stocks. Based on the current annual dividend policy, the quarterly payout total for this quarter will be KRW 2.45 trillion and will be paid in mid-November. Finally, I will share some of our key activities in sustainability management. First, our company once again ranked top in Forbes 2023 list of World's Best Employers. Our fourth consecutive year at #1. The compiler list Forbes surveyed over 170,000 employees in over 50 countries working for various multinationals. Evaluation criteria included: Talent development, working conditions, benefits, diversity and pride in the company's products and/or services. And we were the only Asian company in the top 20. Next, in September, we received the highest ranking in the Korea Commission for corporate partnerships Win-Win growth index for the 12th consecutive year. Such recognition reflects our efforts and achievements in partnerships with our supply chain, which have included support via a fund for partners R&D facility investments, free manufacturing, quality innovation consulting to over 1,800 companies in the past decade. And support for SMEs to build smart factories to enhance their competitiveness. And finally, Samsung Electronics has further embraced environmentally responsible production by incorporating recycled materials in a combined total of 15 internal and external components of our new foldable phone Galaxy Z Flip5 and Z Fold 5. The materials include plastics sourced not only from discarded fishing nets and water barrels, which were also featured in the previous models, but also pet bottles and aluminum and waste glass byproducts generated during the manufacturing process. We will continue our efforts to enhance sustainability in all aspects of our business. I will now turn the conference call over to representatives from each business unit to present third quarter performances and outlooks for their respective business segments in more detail. We will start with EVP, Jaejune Kim of the Memory business. Thank you. Jaejune Kim: Good morning. This is Jaejune Kim from Memory Global Sales and Marketing. In the third quarter, the Memory market somewhat recovered compared to the previous quarter. For PC and mobile, increasing adoption of high-density products in both DRAM and NAND and the completion of customers' inventory adjustments led to improvements in the demand environment. For server, demand was relatively sluggish in conventional servers as IT investments by customers who are limited on the macroeconomic uncertainties but demand for generative AI-oriented, high-density and high-end products remain strong. In addition, we received a number of purchase inquiries from customers seeking to secure component inventory. And it's based upon widening awareness that the industry reached a bottom while the industry goes through production costs. Focusing on profitability improvement in normalizing industry conditions, we continue to expand the sales of advanced node products, such as HBM, DDR5, LPDDR5x and UFS 4.0. At the same time, for products with relatively high inventory levels, we strive to reduce inventory level by production adjustment rather than by operative sales expansion. As a result, our big growth came in under guidance both ASP of both DRAM and NAND. So some decent increase compared to the previous quarter. Now let's move to the outlook for the fourth quarter. Considering the normalization of industry inventory level, we expect the recovery trend in the memory market to accelerate. In PC and mobile applications amidst its normalized and finished goods inventory at customers, our component demand is likely to improve, thanks to effect of peak seasonality, including year-end promotion and launches of new smartphones by major mobile customers. Moreover, we expect to see a positive demand effect coming from the trends of high-density penetration for both speech and mobile devices, which has been accelerating more than forecasted. In server market, as cloud service providers, CapEx is concentrated on generative AI, the associated demand is expected to remain strong. In addition, the expansion trends of purchasing activities is becoming more noticeable because even several storage OEMs and data center customers are getting aware that the memory market reaches the bottom, as customer inventory level will become normalized towards the end of the year. Considering improved backdrop of market demand recovery and impact of the additional production cut in the industry, we expect growth of the overall market ASP in the fourth quarter to expand compared to the previous quarter, although some disparities in ASP movements among products. Under these circumstances, we plan to operate a business focusing on improving its profitability. To do so, we will enlarge the sales portion of our high profitable automotive products and expand the HBM3 mass volume business for major customers, in line with its growing demand for generative AI. Also, we are now actively ramping up Pyeongtaek Line 3 as a part of the infrastructure investment activities that we have continuously carried on in order to secure mid- to long-term competitiveness and to expand the portion of cutting edge and all. Based on this, we will proactively address the rising demand for new interfaces, such as DDR5, LPDDR5x, PCIe Gen5 and UFS 4.0. Now let's move on to the outlook for 2024. For PC and mobile applications, set demand should benefit from the arrival of some replacement cycles for products sold during the initial phase of pandemic and trends of high-density penetration are expected to keep expanding. For DRAM, in particular, due to the spread of on-device AI, the high-density trends in the flagship and high-end segment is expected to continue. And for NAND, the trends towards high-density based on price elasticity is expected to set as a market trend. Although demand in server application is improving relatively slow compared to the others, we expect overall memory demand to recover gradually, thanks to increasing demand for AI and normalizing inventory levels at customers. If the server market normalizes, the pace of business recovery may gain further momentum, but various factors that could affect our market need to be continuously monitored. In particular, we will keep eyes on geopolitical issues and IT spending trends which are related to macroeconomic conditions and a bias towards generative AI. In this situation, in order to operate our business stably despite various uncertainties, we will expand the sales of advanced node products, such as 1B nanometer based DDR5, LPDDR5x, and PCIe Gen5 and UFS 4.0, while focusing on strengthening product competitiveness and improving profitability. In addition, we plan to actively address the growing market demand for generative AI by significantly increasing our HBM3 and HBM3E portion of sales on the back of the industry-leading production capacity. And we strive to strengthen our market leadership by flexibly responding to diversify this demand growth with our differentiated high-density, low-power and high-performance products for on-device AI, which has recently attracted a significant attention. Thank you. Hyeok-man Kwon: Good morning. This is Hyeokman Kwon from the System LSI business. In the third quarter, premium smart phone demand was solid despite the influences of the economic downturn and inflation as it is less sensitivity to prices. However, demand for media and low priced models remain sluggish due to lengthen the replacement cycle caused by a drop in consumer purchasing power. As a result, performance improvements were slower than expected due to a delay in recovery in semiconductor demand alongside the impact from inventory adjustments. Mobile SoC has completed the development to Exynos 2400, which has significantly improved CPU, GPU and NPU performances compared to its predecessor. And is expected to maximize the user experiences, especially in high-end new games through cutting edge [ very interesting ] technology with high benchmark performance. In addition, mobile DDI achieved its highest quarterly sales thus far this year backed by the launch of new products by major customers. And image sensors have expanded our business all over, 200 megapixel products from wide to tele applications. In the fourth quarter, we expect the overall mobile market to remain mostly flat, but we believe inventory adjustment by customers are in their final stage and expected demand to start showing a recovery due to base effect. In addition, we expect our performance to improve significantly, thanks to increase the supplier part for our major mobile customers' new products. For mobile resourcing, we are in the final development stage into response to next year's flagship smartphones. Meanwhile, we plan to expand our business portfolio, we are targeting global customers for our modem business and to enhance our solutions capabilities on device AI. Automotive SoC will start to win design awards for UWB and [indiscernible] products. And we expect the image sensors to contribute to our sales by starting best products and supplier of flagship oriented business, thus the mobile market is focused to pursue sales growth next year by increasing the premium model portion of sales. We will also seek qualitative growth by increasing our sales portion of flagship products. In addition, to ensure a solid business structure, there is less color over to rapid market changes. We are assessing various options to widen our business area beyond the mobile market. Thank you. Gibong Jeong: Good morning, and good evening, everyone. This is Gibong Jeong from the Foundry business. In the third quarter, sluggish earnings continued primarily due to fab expansion and lower capacity utilization stemming from anticipated volatilities in short-term demand forecast. This recurring trend can be attributed to the impact of ongoing global macroeconomic uncertainties and the continuous inventory adjustments carried out by our customers. This, in turn, reflects the delayed recovery of demand for major applications such as mobile and consumer products on end users. Nonetheless, in the third quarter, we achieved a remarkable milestone, the largest new design awards per quarter with a focus on high-performance computing, HPC applications. This achievement underscores our growing reputation and capability to meet the demands of customers seeking advanced process technology in the HPC field. We anticipate robust mid-teens annual growth in new backlog from design awards with a strong uptick in GAA products. The rising interest in our advanced process technology reflects the expanding demand for generative AI and energy-efficient computing. This addresses the need for the superior performance, energy efficiency and cost effectiveness. Our GAA process technology is attracting considerable tension in the HPC industry and our long-term capacity planning will be aligned with these evolving demands. Since last year, we have been producing 3-nanometer GAA products in volume. Concurrently, we are dedicated to advancing the second generation of our 3-nanometer GAA technology in line with our strategic road map and progressing well with 2-nanometer GAA technology for mass production in 2025. In this month, we held the Samsung Foundry Forum, SFF and SAFE 2023 in Japan and Germany. During these events, we showcased our updated process technology road map for both advanced and mature nodes, presented our design platforms in the ecosystem and shared insights into our long-term capacity planning. This comprehensive presentation also included a dedicated session on our automotive and HPC solutions. Where we introduced our 5-nanometer EM RAM, namely Embedded Magnetic RAM offerings. In addition, we actively promoted the multi-die integration alliance together with our ecosystem partners. We emphasize the importance of collaboration as a key to success in the chiplet and advanced packaging industry. In the fourth quarter, uncertainties persist regarding the market's recovery driven by wars and geopolitical risks, a gradual demand rebound and ongoing customer inventory adjustments. Nevertheless, we are observing initial indications of demand gradually stabilizing and improving, spurred by recovering consumer sentiment, easing inflation and major customers introducing new products, particularly in the PC and mobile segments. To capture the upcoming increases in customer demand, we will prioritize enhancing our GAA technology, focusing on the top-tier performance and energy efficiency. We are fully committed to expanding our product portfolio through continuous development of specialized process technologies including 5-nanometer RF and EM RAM, Embedded Magnetic RAM technology. That concludes my key messages from the Foundry business. Thank you. Kwonyoung Choi: Hello. I'm Casey Choi, from the Corporate Strategy team at Samsung Display. I will now brief you on our results for the third quarter of 2023. For the Mobile Display business, market demand increased slightly quarter-on-quarter. Notably, with the polarized trend intensifying between low and abide and high-end markets. We achieved solid results by focusing on premium OLED. For the Large Display business, amidst muted demand, we concentrated on high-end products, such as gaming monitors, and at the same time, we improved our bottom line by building stronger operational fundamentals, enabling enhanced yields and reduce the loss. Next, I will share our outlook and strategy for the fourth quarter and 2024. For the Mobile Display business, we expect an increase in sales, thanks to seasonal effects in the smartphone and IT markets. But the growth would be limited as lingering inflation and high interest rates weigh on consumer sentiment. Yet we will strive to generate similar results quarter-on-quarter against all out by leveraging our competitiveness in the high-end market. That shows a relatively strong demand and new foldable product offerings. For the Large Display business, despite concerns over a prolonged [ tougher ] demand due to economic downturn, we'll strive to offset our losses by improving our product mix with a larger share of monitors. In 2024, in spite of persistent and adverse macroeconomic uncertainties will double down on our efforts to continuously secure robust results by utilizing our unrivaled capability, including preemptive investment and technology development and our ability to manage reliable product quality and yield. Also, our strategic customers are releasing. OLED products in [indiscernible] in the foldable smartphone, IQ OLED, automotive and gaming segments that we have been committed to for business diversification for several years. We will actively promote the unique selling point of OLED, thereby creating a turning point in the market. In particular, we will maintain our leadership in Display industry by developing technology that caters to customers' needs and complete upstream and downstream supply chain in the high-potential AR/VR markets. Daniel Araujo: Thank you. Hi, everyone. This is Daniel Araujo from the Mobile Experience division. I'd like to share our results for 2023 Q3 and the outlook for Q4 and next year. In Q3, global smartphone market demand have rebounded, leading to market growth quarter-on-quarter. MX sales and operating profit both increased quarter-on-quarter, thanks to the successful launch of our new flagship models. New foldables, tablets and wearables, all showed strong sales led by a smooth supply and the S23, which we released in the first half of the year, also maintained solid sales momentum. The portion of flagship sales in our major product lines increased, thus raising ASP and growing overall sales. Together with continuous efforts to enhance resource allocation, we achieved solid double-digit profitability. Next, let me share the outlook for Q4. Due to seasonality, the smartphone market is expected to grow and the competition to intensify, especially in the premium segment. Competition within the mass market segment is also expected to intensify. And given the geopolitical situation, market uncertainties remain. As for the MX business, we will continue steady sales of our new foldable products as well as the S23 series with various sales promotions in anticipation of the year-end holiday season. For tablets and wearables, we will expand sales focused on new premium products by actively leveraging seasonality and strengthening marketing campaigns in close collaboration with our partners. As competition in the smartphone market intensifies and economic uncertainties remain, we will make every effort to expand flagship-oriented sales and upselling in order to increase revenue and profits year-on-year. Next, let me share the outlook for 2024. In 2022 to '23, contraction of the smartphone market continued due to prolonged economic uncertainties. In 2024, however, market demand is expected to turn around as consumer sentiment stabilizes in anticipation of a soft landing of the global economy, with the premium segment continuing steady growth. Similarly, the tablet market also contracted in 2022 and '23 compared to 2021's high demand related to remote work and education, but is expected to turn around in 2024 with growth focused on the premium segment as the replacement cycle approaches. In wearables, the smartwatch market is forecast to grow by double digits given the replacement cycle together with health-related demand in advanced markets and an increasing penetration rate in emerging markets. The TWS market is expected to grow slightly, mainly due to expansion of the mass market segment primarily in emerging markets. As for the MX business, in line with our customers' needs, we are striving to refine and enhance the core experience of premium smartphones even further. And as a global leader of the foldables market, widens the gap with our competitors. Through these efforts, we aim to grow annual flagship shipments by double digits and achieve smartphone revenue growth exceeding the market growth. In tablets, we're focused on boosting sales by strengthening the premium product lineup to meet consumer preferences for large screens and further advancing experiences such as the S-PEN. For wearables, we will increase their contribution to profits by expanding sales, focusing on newer models and increasing the attach rate to smartphones by providing a stronger connected experience. In particular, we will actively address customer demand related to healthy living by strengthening wellness features of the Galaxy Watch. While for TWS, we will focus on establishing a full lineup that can address the growing mass market segment as well as strengthen high-quality sound, active noise cancellation, fit and other aspects of premium Galaxy Buds products. With these efforts, the integral annual revenue and profit in 2024 while also continuing to enhance resource allocation in response to market instability in our effort to secure stronger profitability. Furthermore, we're trying to create meaningful innovations by applying generative AI technology, beginning with a core functionality that people need the most and use every day. We provide our customers with more creative, convenient and hyper-personalized functionality starting next year. Additionally, in future growth areas like XR, Digital Health and Digital Wallet, we're strengthening investment and advanced R&D in order to secure core technology and collaborating closely with partners from the initial stages to build an ecosystem so that the MX business continues its growth in the mid- to long term as well. Thank you. Kyung-le Rho: Good morning. I'm KL Roh from the Sales and Marketing team of Visual Display. First, I would like to review the market conditions and our performance in the third quarter of 2023. TV market demand increased quarter-on-quarter mainly due to seasonality, but decreased slightly year-on-year as the consumer sentiment continued to decline amidst the influence of various macro factors. For Samsung, we expanded our leadership in the premium market by focusing on sales of high value-added products such as new QLED, OLED, Super Big TVs. And we improved year-on-year profitability by reducing overall cost, including material cost. Now let me go over the outlook for the fourth quarter and 2024. In the fourth quarter, we expect demand uncertainty to continue to various risk in the business environment, but demand should remain solid for premium products such as QLED, OLED and Super Big TVs. That said, we expect competition to intensify as companies respond to peak seasonality. At Samsung, we will continue to strengthen the competitiveness of online and offline channels to capture peak season demand and focus on securing profitability. By continuing to improve the mix centering on high value-added product lines such as new QLED, 98" Super Big TVs, Lifestyle Screens. Regarding the TV market in 2024, demand is likely to fluctuate depending on the impact of external risk that continue from this year and consumer sentiment is expected to improve slightly from its current weakening trend and [ alleviate ] decline in the market demand compared to this year. We will continue to innovate products centering on premium Lifestyle Screens and the ultrahigh definition, ultra-large-sized TV market. Targeting demand linked to several sporting events scheduled to be held in 2024. Moreover, we will provide differentiated screen experience and continue to actively promote not only the basic competitiveness of our TV products such as picture quality and sound quality, but also product features related to earlier that are highly valued by our consumers [ recently ], such as the environment, security and content. Thank you. Ben Suh: So that sums up the third quarter results presentations. Before we move on to the Q&A session, I would like to share several data points in key business areas. Comparative figures are on a sequential basis for quarterly data. For DRAM, in the third quarter, our bit growth was approximately 10% and ASP increased by a percentage in the mid-single digits. For the fourth quarter, we expect market bit growth to be around 10% in our bit growth to exceed the market. For NAND, our bit growth declined by a low single-digit percentage, while ASP increased by a low single-digit percentage. For the fourth quarter, we expect market bit growth to be flat and our bit growth to be above the market level. For display in the third quarter, the small panel portion of revenue was in the high 90% range. And small panel sales volume grew by a percentage in the mid-teens. In MX, approximate sales volumes of smartphones and tablets were 59 million units and 6 million units, respectively, and smartphone ASP was USD 295. In the fourth quarter, we expect smartphone shipments and ASP to decrease and the tablet shipments to rise. For TVs in the third quarter, sales volume increased by a percentage in the early part of the 10% range, and we expect it to grow by a percentage in the high teens in the fourth quarter. Now I will move on to the Q&A session. First, we will start taking questions from the conference call. Operator: [Foreign Language] [Operator Instructions] The first question will be presented by Peter Lee from Citigroup. Sei Cheol Lee: [Interpreted] My first question is on memory HBM question. There has been growing interest in the market regarding HBM. Can you give us some updates on how you're responding with your HBM3? And also your plans of developing the HBM3E business? Second question is to Display, your third quarter performance was quite noticeable, and you have been maintaining the large gap versus competitors for quite some time. Internally, what does Samsung Display considered to be its competitive edge? Ben Suh: [Interpreted] To answer your first question about the HBM, there has been a rapid increase in HBM demand, especially with the wider adoption of generative AI following our HBM2E, we have been actively expanding our HBM3 and HBM3E new product businesses, regarding next year, in order to maintain the industry's largest supply capacity for HBM. Next year, we're planning to increase our supply capacity capability for HBM by 2.5x increase, and also, we have already completed supply talks for next year with our key customers for this volume. An update on our HBM3 business. Already in third quarter, we have mass produced and started supply of both 8 high and 12 high products, and we are planning to increase that scale further throughout the fourth quarter. And so we expect our HBM3 to continuously increase so that by first half of next year it will account for more than half of our entire HBM volume. In the case of our next-generation HBM3E, it is -- it has been developed with 9.8 giga-bps, which is industry's highest level performance. We've already started supply of samples for the 24 gigabyte 8 high product and plan to start mass production of this during first half of next year. The 36 gigabyte 12 high product is scheduled for sample supply during first quarter next year. Particularly the HBM3E product is based on already proven 1a nano -- node technology, and therefore, it has advantages in terms of capacity scale and also mass production stability, and we will be able to provide key customers with that additional comfort of stable supply. Also next year, second half, we plan to have a rapid switch over to HBM3E in order to actively capture the growing demand with the -- from the AI market. And so regarding HBM, our plan and strategy is to maintain our leadership in the HBM market through greater product competitiveness such as higher speed and low power and also stable supply. Kwonyoung Choi: [Interpreted] To answer your second question about Display and what we consider to be our strengths that are keeping that gap versus competitors. Recently, during the several years -- past several years, there has been some structural challenges or threats such as competitors catching up and also the market becoming more mature. Actually, we have foreseen that's happening. And so far, several years before, we have prepared against these challenges. And I think these efforts are starting -- have started to deliver visible results. I think one of our key competitive advantages is on the technology side. As the leader of the OLED industry, we have accumulated quite a large IP and technology know how, and that has worked as a very effective entry barrier against competitors. Even though competitors have been catching up and the market and products have become more mature, we actually see new technologies and new entry barriers being built up such as whole display and oxide new technology. In addition to this technology advantage, the fact that we are the largest producer of OLED gives us the advantage of economies of scale as well as the competitive supply chain that we have benefited from. That has contributed to our competitive advantage. Unlike LCD, in the case of OLED, there is a complex -- complicated layering of different materials. And also various components and equipments are key and critical to competitiveness. I think that has been also an advantage for us. We do know that the smartphone innovations are leveling off and the replacement cycles on smartphones are becoming longer that has made competition more fears. So we will continue to invest further on R&D and also focus on building a more competitive supply chain so that we can maintain -- strengthen our competitive advantage, while at the same time, expand to new business areas such as IT, Automotive, AR and VR to create a more stable business portfolio. Operator: [Interpreted] Next question will be presented by Giuni Lee from Goldman Sachs. Giuni Lee: [Interpreted] My first question is a Memory question. I'm wondering whether you've also reversed your inventory valuation loss this quarter like some other memory companies? Also in that context, can you give us a bit more detail of the criteria that the company uses either to take or reverse inventory valuation loss? Second question is once again towards Display. There is a lot of interest in the market towards the OLED 8G market. And I think SD, Samsung Display is currently the only company that has made the 8G OLED investments. Can you give us an update on that investment? And also in that context, what is your overall strategy regarding 8G OLED? Jaejune Kim: [Interpreted] To answer your question about the memory valuation, the inventory valuation lows, despite the increase of ASP during third quarter, we actually took a meaningful size of additional inventory valuation loss in third quarter due to some production cut effect and also our conservative accounting standards. And you've asked about the criteria that we use for this. We take a conservative approach when either taking or reversing our inventory valuation loss. And of course, depending on each company's accounting standards, the level or size of reversal or loss taking could differ even during a price rebound phase. Kwonyoung Choi: To answer your question about the 8G OLED investments. As we mentioned during the presentation, most of the investments for SDC in third quarter were in the investments in the 8.6G. Our investments are on track, and we are gaining steadily both on product development as well as raising the completeness of our technology. The definition of success for this project would be to achieve the same high level of completeness in the large-sized 8G OLED products, even though they are produced on large area glass that are around 2x larger than our existing lines. We, as you have -- as mentioned in your question, we have started this investment earlier than other companies. The competitors have not yet been able to follow us on this investment. There could be several reasons why. I think, one is the fact that we have already secured the supply chain is a barrier that's keeping competitors from following. Also at this point, there are not many companies that have both the technology and the investment capacity. And I think the head start we have made will give us a first mover advantage, not only in terms of technology but also in claiming markets. Of course, there are still the different views regarding the 8G OLED market and the 8G consumption has rapidly decreased post pandemic. And so there are some risks when we look into the market itself. However, fundamentally, versus LCD, the OLED display has advantages not only in picture quality, but also the fact that it's thinner and lighter. And so we think that there is sufficient competitiveness for 8G OLED. And also, we know that collaboration with strategic customers are very critical. And so we are closely collaborating with them. So we are going to continue to work on perfecting our technology and further enhancing our cost competitiveness so that we will see another wave of OLED innovation in other applications such as IT and Automotive. Operator: [Interpreted] The next question will be presented by Dongwon Kim from KB Securities. Dongwon Kim: [Interpreted] I have only one question about Memory, and that's about your next year outlook on Memory supply, demand and if possible, ASP? Jaejune Kim: [Interpreted] First, in terms of next year demand, we think that the current recovery that we're seeing will continue next year, the fact that customers and industry inventory have been normalizing. Also the growth in AI-related demand and also the high-density trend in PC and mobile, all are positive factors assigning for demand recovery next year. Now regarding the supply side, next year, we think that on a selective basis production cuts would continue within the industry next year. Also considering the fact that there has been an overall reduction in CapEx in the industry since the second half of 2022, there will be a fairly limited up room in terms of production bit growth next year in the industry. On top of that, considering that even within the limited CapEx, most of the plants been focused on HBM related investments, the production bit growth in other advanced node products would actually be lower than the demand growth average. And so we think that in these products, the industry improvement, the recovery could actually happen earlier than other products. Now regarding ASP because there are so many factors in play, we're still very cautious. But we think that as the overall industry recovers, the potential for price increase would also further increase. That said, of course, that would depend on each product because the demand and supply situation would differ. Operator: [Interpreted] The next question will be presented by Sung Kyu Kim from Daiwa Securities. S. K. Kim: [Interpreted] My first question is a Memory question. Samsung has been going through quite aggressive production cuts. Can you give us a bit more detail of the size of the production reduction by product and roughly until when you plan to continue to reduce your production? Second question is for Digital Appliances. Your profitability has continued to worsen, and this does tie in with the fact that overall consumer durable demand has been slowing down. What are your plans to improve the profitability of the business? And also, there has been quite a lot of interest around AI. Does the company have any plans of launching digital appliances that are related with AI or services? And can you share with us your overall strategy? Jaejune Kim: [Interpreted] Now regarding your first question, as we mentioned during the past earnings call, we have continued to downward adjust our production volumes. And especially with its flexible production operation and improving demand, our inventory has, after peaking out in May, has been decreasing for both DRAM and NAND. And looking towards the fourth quarter, considering the improved demand environment and also our continued downward adjustment of production, we think that our inventory levels will decrease at a rapid pace during Q4. Our basic approach is to achieve normal inventory levels within a short period of time. And in order to do that, we are planning to take additional necessary measures such as selective production adjustments additionally. And also for the time being, we plan to downward adjust the production of NAND larger versus DRAM. Among various products, especially the advanced node products that are essential for high-performance on-device AI products or generative AI, the demand for these products have been rapidly increasing. But actually the increase in supply is relatively limited given the fact that during 2022 to 2023, there has been a reduction of CapEx within the industry. On the other hand, we have maintained our CapEx for the sake of mutual long-term competitiveness. And based on that CapEx, we are planning to continue to expand the supply of our cutting the advanced node products without any downward adjustment in production. So this would include products such as the 1A, 1B nano DRAM and the V7, V8, NAND. And by increasing the supply share of these advanced node products, we plan to further strengthen our position within the market. Unknown Executive: [Interpreted] To answer your second question about the Digital Appliance profitability, we have been working on various fronts to further improve our profitability, such as increasing the revenue, especially around the premium products. Number two, working through the component inventory that we had built up during COVID, which had been a burden. And #3 is to improving the competitiveness of our material costs, for example, by signing competitive contracts with shipping companies and logistics contracts. We have also been continuously working on streamlining our models, increasing the share of components that are standardized or common used also introducing more manufacturing automation and improving our supply chain. And with these operational efficiency initiatives becoming more visible, we are looking forward to a turnaround next year in 2024. You've also asked about our AI-related plans and strategies. We have several initiatives going on that front as well. For example, we are planning to roll out our AI energy mode to a wider range of our products. This will help respond to the increasing demand for high-efficiency appliances. Also, we are planning to launch the Bespoke with AI care solution globally, in all of our products that Bespoke with AI care solution actually senses the situation autonomously, learn the user's usage pattern and provides customized functions and features. We're planning to launch this in all our product groups globally at the same time. Also on top of that, we want to connect various digital appliances, mobile devices and TV so that in the home the consumer is able to enjoy a very simple, easy, but also healthy and convenient lifestyle by, for example, having the devices connected and operate according to process of shopping groceries, storing, prepping, cooking and also cleaning. Operator: [Interpreted] The next question will be presented by Young-gun Kim from Mirae Asset Securities. Young-gun Kim: [Interpreted] I have one question regarding the mobile device. Can you give your outlook for the foldable market next year? And also whether you're planning to leverage your success experience on the mobile form factor to other devices such as tablets and PCs? Daniel Araujo: This is Daniel from MX again. The foldable market in 2024 is forecast to continue on last year's growth in all regions, as well as continue expanding its portion of the premium market. Demand in the super premium segment, which is less affected by economic fluctuations should continue to be strong and we'll see polarizing demand patterns as the foldable technology becomes more widespread and the mass market segment also sees high growth. We pioneered the foldable category. And as you know, our foldable phones have been well received by the market. So going forward, we plan for foldables to be a key engine for our flagship growth with their clear differentiation and usability, experience and refined product quality tailored to these form factors. The Z Fold 5, which was released in the second half of the year, improved on the multitasking and productivity experience enabled by the large screen. And together with the gaming experience, it's attracting new user inflow and upgrades by customers who prefer high performance and large screen viewing. The Z Flip 5 with its icon design and color selection, the FlexCam selfie, and bigger cover screen to help users express their individuality is expanding its base among the younger generation and female customers in particular. So we're strengthening tactile marketing in order to withstand interaction points of foldable experience and enhance product appeal as we also improve sell-out platforms like trade-ins, equipment installment plans and student offers to reduce the purchase burden on our customers and broaden our customer base in the long run. And designs of the traditional EIP or Equipment Installment Plan, we're also offering various new payment options like Buy Now Pay Later. And considering the high retention rate of current foldable customers, [indiscernible] upgrades by providing additional trading incentives for target customers who are more likely to purchase. And lastly, on the last part of your question, we're open to the possibility of expanding the foldable category from only smartphones into other product groups like wrap tops and tablets. [Foreign Language] Operator: [Interpreted] The last question will be presented by Minsook Chae from Korea Investment & Securities. Dana Chae: My first question is about the NAND business. The NAND business profitability has declined. What is your plan of responding to this? Second question is we, for the Foundry and the packaging side, in addition to the -- so with the growth of demand related with generative AI, there is a market view that there will be a shortage of not only advanced node foundry but also advanced packaging capacity. In this context, does the company have any plans of increasing its capacity? Gibong Jeong: [Interpreted] So I think, your first question about our NAND. I think during the recent downturn, it was very much highlighted that in the business, cost competitiveness and also the product competitiveness is very critical. We are also putting a priority on these 2 aspects and therefore, accelerating our node migration to V7 and V8, especially the recent VU approval from the U.S. government has resolved quite a lot of uncertainty around the [indiscernible] fab node migration. And so we expect that our migration towards the advanced nodes will actually accelerate going forward. While we go through that migration, we're also working very hard on the development of V-NAND to give us additional cost and also product competitiveness. In V-NAND, the core of cost competitiveness comes from being able to stack up a higher level, layers of cells with minimum stacking numbers. And with our unique etching technology, we have been able to implement 160 layers on a single stack, and so with this, we have been able to successfully secure a mass production operational chip V9 at around 300 layer levels with only a double stack process. And so compared to what the industry offers, we have the advantage in terms of superior mass producibility and shorter manufacturing lead time. We expect to carry this into our V9 offering so that we will be able to further enhance our cost competitiveness and market response. Also, as the client on device AI grows and the server market continues to adopt PCIe gen6, there will be a greater market demand, we believe, for a high-performance, low-power NAND. And therefore, our V9 will adopt a new technology that would give a 20% improved right performance and also 15% improved power performance versus the previous generation. This is an example of how we continue to provide products that meet market demand. While investment environment remains challenging due to the unprecedented weak market situation, we will continue to make investments and challenges to secure new future products that will give us the advantage in terms of cost and performance. To answer your question, with the large increase in demand and interest into generative AI, especially the large language module AI, there has been a shortage of supply of 2 data centers related with AI. The accelerator module actually consists of 4 large elements. One is the advanced node that's used for the AI chip itself, then there are the mature nodes that are used for the silicon interposer, then there's the HBM memory and the 2.5D package. And within the supply chain what seems to be currently the bottleneck is the HBM and the 2.5D package. And so given the situation, we are focusing on quickly increasing the supply ability around the key bottlenecks at the HBM and the 2.5D packaging. While we continue to monitor the supply situation to plan out further investments and increases if necessary. Ben Suh: Finally, we will answer questions that were submitted online in advance. We have been accepting questions via our web page in advance of an earnings release as part of our efforts to strengthen communication with individual investors and also enhanced understanding of the company. We received a wide variety of questions for this quarter as well. I believe majority of the questions were sufficiently answered during the Q&A session and we will answer one more question on a topic that garnered a high level of interest from our shareholders but were not addressed during the Q&A. The question is following: It appears that generative AI is spreading globally and bringing many changes in our daily lives. So anticipation is growing that AI will be integrated into devices like smartphones and tablets. Could you please tell us how Samsung is preparing for developments related with on-device AI? And this question will be answered by VP, Daniel Araujo, representing the Mobile Experience. Daniel Araujo: So smartphones are poised to be some of the most important access point for AI. So based on our device strength and our global installed base of 1.1 billion, we want to establish a new standard for experiences that mobile devices can provide through hybrid AI, which encompasses both on-device and server-based AI solutions. AI technology, which continues to evolve is progressing both on the cloud and on-device, especially around generative AI or Gen AI. And recently, on-device AI is gaining traction. How these gen AI models have the strength of being able to provide a very wide range of services, but there are some difficulties in reflecting the characteristics of edge devices. On-device gen AI solutions, on the other hand, can be fine-tuned for product characteristics like input data and device usage patterns and also have scalability to expand our services since they can be linked as needed to cloud-based solutions. So we recognize the possibilities and importance presented by on-device AI technology, and we continue to work to use it to realize new experiences for our devices. We expect to apply gen AI technology to the core functionality that our users interact with every day in order to be more creativity and convenience to their daily lives. And beginning in 2024, we plan to offer meaningful and innovative experiences optimized for our users, most important functions based on their individual usage patterns and preferences. Thank you. [Foreign Language] Ben Suh: I would like to thank everybody who shared their valuable opinions, and we will be sure to refer them in our decision-making process. And with that, completes our conference call for this quarter, and we wish all of you and those close to you to stay strong and in good health. Thank you. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]

Operator: Good morning and good evening. Thank you all for joining this conference call. And now we will begin the conference for the fiscal year 2023 second quarter earnings results by Samsung Electronics. [Operator Instructions]. Now we shall commence the presentation on the fiscal year 2023 second quarter earnings results by Samsung Electronics. Ben Suh: Welcome, everyone. This is Ben Suh, Head of Investor Relations. Thank you for joining Samsung Electronics' Second Quarter 2023 Earnings Call. For additional details regarding our quarterly results, please refer to our earnings presentation which is available on our IR website at www.samsung.com/global/ir. Joining me on the call today are EVP, Jaejune Kim, representing Memory. VP, Hyeokman Kwon for System LSI; EVP, Gibong Jeong for Foundry; EVP, Casey Choi for Samsung Display Corp., which I will refer to as Display during today's call. VP, Daniel Araujo for Mobile eXperience and VP, KL Roh for Visual Display. I want to remind you that some of the statements we will be making today are forward-looking statements based on the environment as we currently see it. They are subject to certain risks and uncertainties that may cause our actual results to be materially different from those expressed in today's discussion. I will start with our results for the second quarter of 2023. Although we delivered a slight recovery in revenue for the DX division in the second quarter, consolidated revenue declined 5.9% sequentially to KRW 60 trillion, mainly due to a decreased smartphone shipment number. Consolidated gross profit increased to KRW 18.4 trillion, up KRW 0.6 trillion quarter-on-quarter due to our continued focus on sales of high value-added products as well as reduced inventory valuation losses in Memory. Gross margin also increased sequentially, rising 2.8 percentage points to 30.6%. SG&A expenses increased by KRW 0.6 trillion quarter-on-quarter to KRW 17.7 trillion despite the drop in revenue, primarily due to investments in R&D. As a percentage of sales, SG&A expenses increased by 2.7 percentage points to 29.5%. R&D expenses hit a record high for the third quarter in a row as we continue to invest for the future, even amid a very challenging business environment. Operating profit increased slightly quarter-on-quarter to KRW 0.7 trillion despite a decline in smartphone shipments, mainly as DX narrowed its losses and display and digital appliances improved their profitability. I will now provide high-level overviews of our results and outlooks and representatives of the business units will provide more details following my presentation. For the DX division in Memory, we improved our results quarter-on-quarter as our preparations for robust demand for AI-centric products such as HBM and DDR5 led to higher-than-guided DRAM shipments. However, our system semiconductor businesses saw a profit decline due to lower utilization rates attributable to sluggish demand from main applications. For Display, the mobile panel business reported similar profit sequentially, even in the seasonally weak second quarter, thanks to solid sales centering on premium panels. The large panel business continue to focus on expanding QD-OLED's presence in the premium market. Despite continuing overall weak demand, the DX division achieved strong profitability mainly due to increased sales of premium TVs and digital appliances, and improved cost structure and enhanced operational efficiency. For the network business, revenue declined in major overseas markets including North America and Japan. The Digital Appliances business improved its profitability amidst strong seasonality mainly attributable to increased sales of premium products and lower costs, including shipping. Harman reported growth in both revenue and profits, bolstered by consumer audio demand which centered on portable and KWS products and via cost management throughout the businesses. Harman also continued to solidify its foundation for strong growth by winning the largest automotive order ever in its history. In terms of currency, the Korean 1 showed weakness against the U.S. dollar, the euro and major emerging currencies in the second quarter. This resulted in an effective gain in operating profit compared to the previous quarter in both the component and the finished product businesses. Next, I would like to share our business outlook for the second half of the year. We expect global IT demand in the business environment to recover gradually, driving improved results especially in our component businesses. However, challenges associated with a demand recovery are also likely to persist due to macro risks and other factors. For the DX division, amid expectations of a gradual recovery in demand as inventory adjustments wind down, we will focus on sales of high value-added products such as DDR5 and LPDDR5X and HBM while securing new orders. At the same time, we will continue to strengthen mid- to long-term competitiveness and secure future growth by continually increasing investments in infrastructure, R&D and packaging, while also enhancing the completeness of the gate all around process in Foundry. However, we do need to monitor the possibility of continued customer inventory adjustments, especially for legacy memory products. In Display, we expect the mobile panel business in the second half to deliver improved results by fully preparing for the launches of new smartphone models by major customers. The large panel business plans to actively address year-end seasonal demand, mainly by increasing the supply of super big panels. The DX division will sustain solid profitability with successful launches of new major models such as foldables and wearables, and by increasing sales of premium TVs and digital appliances. Network will seek to grow revenue by winning new projects, all while reinforcing its technology leadership in 5G core chips in software-based virtualized radio access networks. For Digital Appliances, we will continue to BESPOKE global expansion and increased operational efficiencies while growing sales of eco-friendly and high-efficiency products featuring energy savings mode under smart things. We expect Harman to post improved profitability on the back of expanding sales of consumer audio products during strong seasonality as well as through ongoing improvements in cost efficiencies, including from materials and shipping. Moving on to capital expenditures. CapEx in the second quarter was KRW 14.5 trillion, with KRW 13.5 trillion invested in the DX division and KRW 0.6 trillion in Display. For the first half of the year, total CapEx was KRW 25.3 trillion with KRW 23.2 trillion invested in the DX division and KRW 0.9 trillion in Display. Similar to the previous quarter, Memory CapEx concentrated on facilities in Kentek which included completing P3 infrastructure and P4 framework progress for mid- to long-term supply and also on equipment to prepare for advanced node demand. In addition, we continued our R&D and back-end investments to further bolster future competitiveness. Foundry investments continue to focus on Taylor, Texas and Pantech to address the demand for advanced nodes, while display investments remain focused on infrastructure and module production enhancements. Next, I would like to address the second quarter dividend. Today, the Board of Directors approved a quarterly dividend of KRW 361 per share for both common and preferred stocks. Based on the annual dividend payout under the current dividend policy, the total quarterly payout is KRW 2.45 trillion, which will be paid in mid-August. Finally, in sustainability, I will summarize some of the key items from our sustainability report 2023, which was released in June. Regarding the environment, the DX division completed its transition to 100% renewable energy at all DX operational sites in Korea and at our manufacturing bases in Vietnam, India and Brazil. We also increased our use of plastic with recycled resins by 3x to reinforce resource circularity. In the DX division, we continually increased the number of installations of our regenerative catalytic system, an integrated greenhouse gas treatment facility and reduced the use of semiconductor process gases. Through these efforts, we lowered our greenhouse gas emissions by 10.16 billion tonnes and on a corporate level reached a renewable energy transition rate of 31%. On the human rights front, the company established Samsung's Global Human Rights Principles, a policy based on international standards, which we announced in February. And we ranked second in the ICT manufacturing sector in the most recent corporate human rights benchmark and assessment of human rights management at global companies as measured by the World Benchmarking Alliance, a global alliance for sustainability. For more details, please refer to the sustainability report 2023, which is available on our sustainability website and via disclosure website DART and kind. I will now turn the conference call over to the representatives from each business unit to present second quarter performances and outlooks for their respective business segments in more detail. We will start with EVP, Jaejune Kim of the Memory business. Thank you. Jaejune Kim: Good morning. This is Jaejune Kim from Memory Global Sales and Marketing. The memory demand in the second quarter showed some different aspects for each application. For servers, due to strong demand for generative AI, investment from data center area was concentrated on AI service in limited CapEx. As a result, our demand for general servers and storage was relatively limited. And in particular, given our continued inventory order by server customers, overall processor demand has not yet recovered. However, our consumer-oriented applications such as TCM Mobile showed relatively stable demand, with customers having made substantial progress with their inventory [indiscernible] as expected. In this situation, we achieved the growth guidance despite the limited price drop for both DRAM and NAND. As a result, our Q2 performance has been improved compared to the previous quarter, and it was confirmed that our inventories for both DRAM and NAND also picked out in May. Looking at each product, in the case of DRAM, we exceeded the growth guidance by expanding our sales and application of consumer, graphic and automotive in addition to expanding sales focusing on servers. For server applications, in particular, our analysts indicated that our supply growth for server exceeded that of the industry. Thanks to our overall sales expansion and active response to rising demand for DDR5 and HBM for generative AI application. For NAND, while continuously strengthening our cost competitiveness by expanding the portion of cutting edge node, we actively responded to the demand, for -- especially for a flagship smartphone with our competitiveness in UFS for that. In addition, we achieved big growth guidance by increasing sales of gaming devices, branded products for retail and so on. Meanwhile, the price decreased by a percentage in the mid- to high single digit, which is considerably less than the high teens decline shown in the previous quarter. Now let me tell you about the market outlook for the second half of the year. We expect that the market will be getting stable in the second half, considering increasing production costs in the industry, while inventory by customers are likely to wind down, especially in mobile and PC applications with the normalization of major customer set inventory levels, said demand is expected to improve due to the launch of a new smartphone and PC promotion in the second half of the year. In addition to this, for Memory, we expect to see a continuation of the trend towards high density based on price elasticity. In sub application, although customer inventory orders began relatively late compared to mobile and PC, inventories are likely to become increasingly depleted in the second half of the year. Therefore, we expect server demand to recover gradually and by product demand for DDR4 product as well as DDR5 is also expected to gradually improve compared to the first half of the year. Given this, we expect to see a gradual recovery of the memory market in the second half of the year, but the pace of the market rebound is likely to depend on our macro variables. Thus, based on supply flexibility linked to market condition in the second half, we will optimize our portfolio by focusing on high value-added and high-density products, especially to strengthen leadership in high-performance service and mobile flagship segments in DRAM, we will accelerate the increase in the portion of leading-edge products such as DDR5, DDR5 and HBM. Additionally in that, while expanding the portion of nodes, such as V7 and V8, we will actively respond to demand for new interface such as PCI Gen 5 for servers and UFS support on all for flagship mobile device. Thank you. Hyeokman Kwon: Good morning. This is Hyeokman Kwon from the System LSI Business. In the second half, demand for premium smartphones with low price and sensitivity was solid under the influence of the economic downturn and inflation. But demand in other segments continues to be sluggish. As a result, there was a delay in the recovery of semiconductor demand, and we posted our expected improvement in our performance due to inventory adjustments by customers. Despite the difficulty situation, we will receive design automotive sources with a domestic OEM for their 2025 premium model. And we continue to work to expand the associate application and strengthen business competitiveness their active discussion regarding mid- to long-term cooperation with European customers. In addition, we are expanding our applications in the security business into fingerprint authentication cards and in the power business to better manage the system worldwide, building various other business spaces. In the second half, although the recovery of demand for major applications such as mobile has been delayed due to weak consumer sentiment caused by inflation and high interest range and weak impact China in the opening. We expect to improve our performance over rebounding demand for parts, such as SoC and DDIs driven by peak seasonality. And as inventory by customers are coming to an end. Also for mobile services, we are seeking to resume supplying major customers by securing product performance, product privacy model and will continue to make effort to secure new business solutions beyond the smartphone while strengthening cooperatively our relationships. In addition, automotive resources will continue to diversify their applications by winning other orders per project in 2026 from OEMs in Europe. Thank you. Gibong Jeong: Good morning and good evening. This is Gibong Jeong from the Foundry business unit. Our revenue for the second quarter showed a quarter-on-quarter increase, but experienced a year-on-year decrease. This trend was influenced by global economic conditions and ongoing inventory adjustment made by our customers, which subsequently weakened the demand for major applications such as mobile and PC products among end users. Gross margin faced significant challenges, mainly reflecting lower capacity utilization due to fab expansion and anticipated uncertainties in short-term demand. To manage profitability in 2023, we will prioritize cost improvement efforts while consistently highlighting the value of our products and services. Despite near-term inventory cycle, our commitment to supporting customers' growth remains solid. We will continue to work closely with our customers to plan our long-term capacity. Our long-term capacity is expected to be filled by the industry megatrends of HPC and 5G. The current increase in AI-related demand is driving the greater need for performance and energy-efficient computing, leading to our requirement for advanced node processes. Our GAA technology enables us to offer customers with optimal performance, power efficiency and cost effectiveness. This perfectly meets the rising demand for energy-efficient computing. We are witnessing significant customer interest and engagement in GAA coming from both HPC and 5G applications. Last year, we commenced mass production of 3-nanometer GAA products. And presently, our third product using the 3-nanometer GAA process is also in mass production. Simultaneously, we are developing the second generation of 3-nanometer GAA technology as per our plans. Additionally, the development of our 2-nanometer GAA technology is on track and progressing well with mass production scheduled for 2025. Last month, we achieved successful events with the SFF, Samsung Foundry Form and SAFE form 2023 held in the U.S. and Korea. These events serve as platforms to present our process road map and various technological innovations. Notably, we launched a multi-die integration alliance in collaboration with ecosystem partners, aiming to promote advanced packaging technology and deliver all-in-one solutions. During the second half of the year, there remains significant uncertainty surrounding the market's recovery intensity, primarily due to geopolitical risks, slower-than-expected demand recovery, and ongoing customer inventory adjustments. However, we anticipate gradual improvement in demand as consumer sentiment rebounds, inflation eases and customers complete inventory adjustments at a healthier and more sustainable level. We established a solid foundation for growth we will focus on advancing the development of our GAA technology with optimal performance and energy efficiency. Simultaneously, we are committed to expanding our product portfolio by continually developing mature processes like 8-nanometer EM ramp as well as 8-inch technologies tailored for automotive applications. This concludes my key messages from the Foundry business unit. Thank you. Casey Choi: Good morning. I'm Casey Choi from the Corporate Rate Team at Samsung Display. I will now brief you on our results for the second quarter of 2023. Amid high inflation and economic downturn, market conditions in the second quarter remained unfavorable across the board, including for the display industry. With the mobile display business, despite a decline in market demand for smartphones, our strategic customers achieved stable results in the premium product segment. We maintained our market share and generated similar results quarter-on-quarter by supplying OLED panels equipped with a differentiated performance and technology. For the large display business, we improved our business fundamentals by continuing to enhance yield and productivity with a focus on high value-added products, centering on those for ultra large 77-inch TVs, we have been solidifying the premium status of our QD-OLED lineup. Next, I will share our outlook and strategy for the second half. For the smartphone market, with new product release from several customers line up and we expect our earnings to improve compared to the first half. Notably, we will use our accumulative technology and know-how in not only foldables but also our other new functions such as whole display and hybrid oxide polysilicon and leverage our technical completeness to stay ahead of our competitors and seamlessly accommodate the mass production of our customers' new products in a timely manner. In the TV market, there is uncertainty over demand due to the sluggish economy and the effects of the shift due to the pandemic. We will collaborate with our customers to boost sales of ultra-large TVs, which are expected to perform relatively strongly. Finally, in May, we acquired Imaging, micro display maker. We strive to make -- take the lead in the promising excel display market by proactively developing advanced technologies. Thank you. Daniel Araujo: Hi, everyone. This is Daniel Araujo from the Mobile Experience division. I'd like to share our results for 2023 Q2 and the outlook for the second half. In Q2, smartphone market demand weakened sequentially due to continued effects of factors in the overall macro environment, such as interest rate hikes and inflation. Our sales decreased quarter-on-quarter due to a decline in the portion of premium smartphones as to the effect of the S23 launch faded, and to a delayed recovery of the mass market attributable to the continued economic downturn. However, looking at the entire first half of the year, the S23 Series achieved growth compared to its predecessor series in terms of both volume and value. In the A Series, we improved our model mix in Q2, thanks to upselling within the series and by focusing sales on new products. In addition, our efforts to optimize and enhance operational efficiencies throughout R&D, manufacturing and logistics, underpinned by stabilized prices of major raw materials led us to maintain a double-digit margin. Next, let me share the outlook for the second half of 2023. The smartphone market is forecast to return to Y-o-Y growth in the second half, especially in the premium market. However, market research institutes have been lowering their forecast for market growth and there is potential for additional cuts if they reflect risks of a further prolonged global economic downturn. Regarding tablets, we expect the market to stay mostly flat, but demand is expected to increase in the high-end segment including for premium and large screen products. For wearables, the smartwatch market is forecast to contract given the difficult comparison caused by last year's surge in demand while the TWS market is likely to grow slightly, led by the expansion of the low-price segment, mainly in emerging markets. As for the MX business, in line with our principle of sales growth centered on flagships and upselling, we are striving to successfully launch the Z-Flip 5 and Z-Fold 5, which feature even more refined and differentiated user experiences that are specifically tailored to their form factors. With stable inventory management and close collaboration with our partners, we will boost sales right from launch to further fortify our leadership in the global foldable smartphone market. For the S23 series, we will extend sales in the second half by sustaining our marketing campaigns and actively leveraging regional seasonality. With the A Series, will enhance upselling into the mid, high product segment and improve customer retention by closely collaborating with our partners and actively implementing sales programs tailored to customers in each region. In tablets and wearables, while focusing on boosting sales centering on our new high-end models will strengthen our product competitiveness and the premium ecosystem experience, and expand sales through efforts such as the joint Unpacked event, thus enhancing our position in the premium segment. Through this, we aim to grow annual revenue in 2023. And as we strive to secure solid double-digit profitability by enhancing operational efficiencies in response to the changes in market conditions. Thank you. Kyungle Rho: Good morning. This is KL Roh from the sales and marketing team of Visual Display. First, I would like to review market conditions and our performance in the second quarter of 2023. TV market demand contracted quarter-on-quarter, mainly due to seasonality. On a year-on-year basis, the trend of demand decline has been lessened due to the base impact of several issues last year, including the Russia Ukraine conflict outbreak. For Samsung, we improved our profitability year-on-year by focusing on sales of high value-added products such as OLED, TV to enhance our leadership in the premium market and by reducing overall cost, including those involving material and logistics. Now let me go over the outlook for the second half 2023. In the second half, we expect seasonal strength to lessen the decrease in overall TV demand amid various business environment, uncertainties and risks, and the premium super big TV market is likely to remain robust. Samsung will capture the upcoming peak season demand by strengthening sales program, mainly focusing on strategic product line, including, OLED and lifestyle screen, and continue to lead the premium market by leveraging innovative products such as in [indiscernible] TV, microLED and the world's first large-sized gaming monitor featuring OLED. In addition, we will further solidify our position as an industry leader by actively marketing features linked to earlier that are highly valued by our consumers, such as environment, security and content. Thank you. Ben Suh: Thank you. That sums up the second quarter results presentation. Before we move on to the Q&A session, I would like to share several data points in key business areas. Considering the continuing macro uncertainties, we will not be providing annual guidance at this time. Comparative figures are on a sequential basis for quarterly data. And as an added clarification for these data points, we define teens as 10 to 19, that's literally 13 to 19 range. For DRAM, in the second quarter, our bit growth increased by a percentage in the mid-teens and ASP declined by a mid- to high single-digit percentage. For the third quarter, we expect market bit growth to be in the mid-teens and we should be similar to the market. For NAND, our bit growth in the second quarter increased by a mid-single-digit percentage, while ASP fell by a percentage in the mid- to high single-digit range. For the third quarter, we expect market bit growth to increase by a mid- to high single-digit percentage and our bit growth should somewhat exceed the market. For Display in the second quarter, the small panel portion of revenue was in the high 90% range and small panel sales volume grew by a percentage in the low single digits. For MX in the April quarter, sales volumes of smartphones and tablets were approximately 53 million units and 6 million units, respectively, and smartphone ASP was USD 269. In the third quarter, we expect shipments of smartphones and tablets to increase and smartphone ASP to rise. For TVs in the second quarter, sales volume decreased by a percentage just into the double digits, and for the third quarter, we expect it to grow by a percentage in the high single digits. Now I will move on to the Q&A session. First, we will start taking questions from the conference call. Operator: [Operator Instructions]. The first question will be presented by Dongwon Kim from KB Securities. Dongwon Kim: I have two questions. The first question is a Memory question. Can you share with us your second half memory demand and supply outlook? Second question is a Display question. Currently, you are pursuing an ITC litigation in order to protect your display OLED-related technology IP and also enhance your competitiveness. Can you give us an update on that ITC case and whether there's a possibility of that expanding? Jaejune Kim: To answer your question, first of all, if you look back in the first half, there was definitely a price decline during the first half. This was driven to the heightened macro uncertainty and also customers going through inventory adjustment in order to secure their financial health. That said, I think during first half, we definitely saw a leveling off of the price decline in terms of both pace and magnitude in second quarter versus quarter as customers have made significant progress in their inventory adjustments. Regarding second half outlook, we think that in the second half, there would be improvement in demand versus first half, especially around PC, mobile and these applications that have relatively made more progress in terms of set level inventory adjustments. Also on the supply side, given the overall production cuts in the industry, we think that there would be some market changes happening during the second half. To give you a bit more detail. In the case of DRAM, we think that there will be an increase in demand for products that use special processes such as TSV or HKMG. On the other hand, the capacity of these products are rather limited. And so these products could lead the market price rebound earlier than other products. Also compared to DRAM, we think that the market change in NAND will probably come later. Casey Choi: I'll take your second question about the ITC complaint and litigation going on regarding our OLED IP. As you have probably heard through the media reports, we have filed a complaint with the ITC and currently, we're engaged in patent infringement litigation against the competitor in U.S. and China. We were the first to pioneer the OLED market, and we have spearheaded this into a huge industry. And during that process, we have been commercializing numerous innovative technologies that had not existed in the world before. This was possible because we invested huge amount of time, human as well as financial resources. And therefore, this IP is -- this IP needs to be thoroughly protected as a company's valuable asset through patent registration. However, with the competition in OLED market becoming more intense, the -- there has been an increase in the unauthorized use as well as infringement of our IP, which is the fundamentals of our competitiveness. Such infringement activity has gone beyond what we could tolerate and therefore, the company has been looking into various ways, including legal measures. Patent infringement is not just an issue in terms of harming the competitiveness of an individual company, patent infringement undermines the rules of competition and eventually the entire industry ecosystem. And therefore, going forward, we will continue to do our best as the leader of the OLED industry to not only develop technology, but also protect our technology and intellectual property and also build a healthy and fair industry ecosystem. Now regarding the ITC case that you've asked about because that is a case that is still undergoing, we are not able to provide you with any specific comments. Operator: The next question will be presented by Sung Kyu Kim from Daiwa Securities. Sung Kyu Kim: I have two questions. The first question is a Memory question. During the earlier part of last quarter, the company announced its plans to downward adjust production and to go through a meaningful production downsizing. Can you give us an update on your current situation as of second quarter and also your plans regarding production levels for the second half? Also, with this meaningful reduction in production, what would be the inventory implications for your Memory business in the second half? Second question is an MX question. Yesterday, you unveiled the new foldable phone during the Unpack event. With that in mind, can you give us a bit more detail of your market outlook for the foldables as well as your growth projection and also some specifics about the strategies of how you plan to increase sales of the foldable phones? Jaejune Kim: To answer your first question about the Memory, even though our inventory levels as of end of first half was rather high due to the sluggish demand, a positive note is that for both DRAM and NAND inventory has peaked out in May and has since been declining rapidly. Now regarding our production plans for the second half, we are planning to maintain the downward adjusted production even in the second half. And also on top of that, to further accelerate our inventory normalization, we're currently undergoing additional production adjustments selectively on certain products for both DRAM and NAND. And especially, we are planning to adjust a larger adjustment for the NAND side. Now in terms of our business, our approach to the market in the second half, the focus will be on profitability. This will be achieved by improving our portfolio in a qualitative effort by increasing the share of high and high-value products within our sales mix, specifically that would include products such as HBM, DDR5, LPDDR5X, uf4.0 PcIE Gen5 SSD. Also, in addition to that, as we are increasing the sales volume of our advanced node products, such as V1A, V7, this will happen together with a downward adjustment of production in our legacy nodes. And so this would result in the increase in share of the advanced node products, and we think that, that increase of leading nodes -- advanced nodes will be more noticeable during the second half. Daniel Araujo: On your second question, so we pioneered the foldables category and our products are receiving high rates from the market for their competitiveness. And we plan to continue developing foldable devices as a new growth driver for our flagship devices. We expect the foldable market to continue to grow in 2023 and also to keep expanding its portion in the premium market. As we viewed that at Unpack yesterday, the Z Flip-5 has a slimmer, more refined design with a larger cover screen and an enhanced user experience that's optimized to the form factor as a whole. For example, using the cover screen, users can take high-definition selfies using the rear camera from any angle they want. And they can use the flex window to express their individuality as well as to take care of a variety of tasks quickly and continually. As for the Z Fold-5 we made it thinner and lighter than its predecessor with the application of the Flex change. We also equipped it with a high-performance AP along with better heat dissipation and optimized software to further enhance the gaming experience. And in addition, we improved the multitasking functionality that many of our food users take advantage of and also productivity functions via the slimmer S-Pen. So as we continue to refine these products, we're also enhancing our marketing and sales strategies to firm up our leadership in the global foldable market. Yesterday's Unpack was held for the first time and so a city that's not only within history and tradition, but also at the forefront of global trends and innovations. And so through this event, we intend to keep creating buzz by providing more in-depth product information and experiences to global media and tech influencers. We're also strengthening our market collaborations with partners, 1 of our strengths to help boost sales right from the launch. And by branding our differentiated Galaxy foldable experience as Flex being to improve our position as an aspirational brand. Operator: The next question will be presented by Peter Lee from CT Group. Peter Lee: I have two questions. Both are related with the sudden increase in AI computing and attention to that. First question is about the memory implications. With the growing AI market, there -- the HBM market is expected to be positively influenced. In that context, can you give your market outlook for HPM and how you are responding that? Second question is more of a foundry or packaging-related AI computing question. The -- with the emergence of generative AI, the computing structure is expected to shift from a phone structure to a different AI computing structure, which would have implications in not only the memory, but also logic and packaging. During your presentation, you mentioned the launching of a multi-die integration alliance, so in that context, can you give us your strategy regarding AI-related foundry as well as packaging business? Jaejune Kim: To answer your first question about HBM, as you mentioned, with the growth of the generative AI market, we are expecting there to be a rapid increase in demand for performance memory that can support large-scale data processing, especially HBM. In terms of the HPM demand outlook, if you look at some third-party sources, they are expecting HBM mid- to long-term demand to report around mid- to high 30% CAGR over a 5-year period. That said, if you just look at the near term, especially with the heightened competition among hyperscalers for generative AI services, there is -- we are receiving quite a lot of demand from such customers. And so if you just look at the near term of that curve, I think this year and next year, there could be quite a steep demand growth in HBM. Now in line with that market growth expectations, we have also been expanding our HBM business to cover that from a more of a product perspective first. As you know, as the leader of the HBM market, we have a track record of exclusively supplying HBM2 to a major customer. And as a follow-up, we're also in business with HBM2E. Now the next generation will be HBM3, and in HBM3, we're currently undergoing customer qualifications with the industry top performance and density or capacity. And we have already started shipment of layer 8-layer 16-gigabit and 12-layer 24-gigabyte products to key AI SoC companies and cloud companies. The subsequent generation will be HBM3E, and we're planning to launch that product in the second half based on 20-20 template. We are preparing this to be once again industry's best performance and capacity in order to actively capture the increasing AI market demand. Now to give you a bit more detail about our HBM supply capabilities, as a major supplier within the HBM market, we have been continuously investing in our production capabilities and have been maintaining 1 of the top industry HBM production capabilities. Based on that, we have already booked around 1 billion or mid billion gigabit level of customer demand, which is around double what we had last year. And to prepare for additional order bookings happening throughout the second half, we are in the process of further increasing our supply capabilities through productivity enhancements. That said, the HBM demand is expected to increase quite rapidly. And to capture that, we are planning to further increase our production and supply capacity. Currently, we're in the process of investing in additional HBM capacity in 2024. So by 2024, we're planning to increase our HBM capacity by at least double 2023 level in order to additionally respond to future demand changes. We are the leader in HBM, and we will continue to maintain the industry leadership by maintaining not only the industry's top level technology but also securing timely supply of HBM products, in line with the upcoming surge of HBM demand. Gibong Jeong: To your question about the foundry side. With the rapid emergence of generative AI, we're expecting there to be increase in various AI chip-related demand, including CPU, GPU and AI accelerators at least for the next 5 years. Now these AI chips, especially the parallel processing chips that you mentioned, the -- critical in these parallel processing chips is high performance and energy efficiency. Actually, the GAA process, where we were able to go into mass production for the first in the world last year, is the optimized advanced node for delivering the high performance and energy efficiency needed for an AI chip. And we plan to maintain the leadership in AI chip market through a technology leadership by achieving 2-nano GAA process mass production in 2025. Also another implication of the AI chip is that usually AI chips are combined integrated into a single package together with HBM memory and hence, advanced packaging technology and capacity is becoming more and more important. And from the customer's perspective, they want to have everything done in 1 place, the foundry, memory and packaging. Our strength is that we all -- we have the technology for GAA process, the HBM memory as well as advanced packaging technology in 1 house. And this is the background to which last month, we launched the multi-die integration alliance together with ecosystem partners in various areas, including EDA, IP, substrates and testing. And through this, we will have a strategy of providing that one-stop all-in-one service that customers are looking for on time to further develop our business. Operator: The next question will be presented by J.J. Park from JP Morgan. J.J. Park: I ask two questions. The first question is again about your HBM. On the back end, you're using a technology called NCF for the TC bonding. According to my understanding, the competitor is using a different technology called MRM. Can you compare the 2 or at least give us some highlights on what are the differences? And what are the advantages of the NCF technology that you're using for the TC bonding on HBM production? Second question is about the acquisition of Imagine that you mentioned during the presentation. Can you give us a bit more color and background to that acquisition? And in that context, what is your overall strategy in micro displays? Ben Suh: To answer your first question about our packaging or assembly technology, the NCF. As you know, the ATVM actually vertically stacks DRAM chips and then connects these chips through a TSV and micro bump is used to connect the TSV of the upper and lower stack chips. Here, what is critical is to fill the gaps between the micro bumps. Now NCF, which stands for the nonconductive film technology, was developed by us proprietarily and it uses a film to fill that gap. And therefore, fundamentally, there can be no gap or there cannot be -- no void can happen within that gap. And also the thermal compression, the TC, which uses heat and pressure to connect -- integrate the chips. That process is also being used in proven over multiple years in mass production to have no issues in yield or quality. To give you a bit more detail, we've recently newly developed an advanced NCF material that has better characteristics. This new NCM film is currently being used in mass production of our HBM3 product and it gives us better quality and also mass production performance. We're using this technology to ship and deliver products to our customers. Now in terms of performance, because the HBM operates at high speed, it is important to reduce the gap between chips, so that heat dissipation performance can be improved during operation. And NCF, because it is a witless processing technology is very effective in reducing that intrachip gap. And so based on this technology, in the case of our HBM3 12-stack product, we have been applying first in the world, a 7 micro technology that has advantages in terms of reducing chip gap and also improving the thermal characteristics. Also, the NCF process has advantages in terms of productivity, because the NCF process actually inherently includes a process and function of removing the oxidation layer on the solder, which is the bonding material. And therefore, we do not need to go through an additional separate process such as cleaning or heating that will be required to separately remove an oxidation layer from the solder that is created during bonding. Also, we have designed an optimized process and equipment that separates the high-speed precision stacking of the chip from the soldering and bonding process and that's why we are able to achieve competitive productivity even with a 8-stack product. Even going forward, the NCF technology, we expect will give us a competitive advantage, even in the 12-stack HBM product, which will probably be adopted wider as we go into 2024. When the number of stacks increase, the chips -- each chip becomes thinner, which makes it more susceptible to cheap bending, which may lead to various technical issues. However, in the case of our NCF technology, because the heat and pressure is applied on the entire surface of the chip during the bonding process, we are able to relatively more easily control the chip bending. And we think that, therefore, the NCF technology that have, the competitiveness of it will become even more noticeable as we move up to the 12-stack product. To go further down our HBM product road map, there would be the HBM4 16-stack ultra-high-density product. In that case, the thickness barrier has to be overcome. And in that case, we're currently in the process of developing a new process that would actually directly bond chip-to-chip and would actually remove any gaps between chips in order to address this height restriction. By developing such core and fundamental technology, we are preparing to capture future market demand and we will continue to strengthen our leadership as the HBM leader by continuously adding on such new technology. Your second question was, which was about our Imagine acquisition. As you mentioned, it was last May that we signed the contract to acquire Imagine, which is a U.S. microdisplay company, at around KRW 290 billion. Currently, we're in the follow-up process, for example, going through the merger approvals with various country authorities, and we expect to completely close the deal and acquisition process by around October this year. The key purpose of this acquisition is to enhance our technology preparedness for the XR device market. The XR device ecosystem has picked up activity, especially most recently. Some are saying that once the XR devices become widely penetrated, it would bring fundamental change to the way people live beyond what had happened by the smartphone. To give you a bit more information about the company, Imagine. Imagine is a U.S. company that has been developing microdisplays from around 2001. As you know, microdisplay is 1 of the key components in an XR device. Also Imagine has the basic and core technology patents and processing technologies that are necessary for manufacturing ultra high-resolution OLED on silicon or OLED. Actually, the company has brought -- organized a dedicated development team since last year. That's we have been -- we organized the development team since last year to look into the development of various micro display technology, such as OLEDOS or LEDOS. And the Imagine acquisition has been achieved by -- as a part of that activity. We think that the Imagine acquisition will help enhance our XR business competitiveness and provide micro display solutions, innovative solutions to a wider range of customers. Going forward, we will continue to sense out various technologies that were necessary to secure our leadership in future technology and give us a differentiating competitive edge, and we'll continue to make investments as well as partnerships as necessary. Operator: The next question will be presented by Min Suter from Korea Investment and Securities. Unidentified Analyst: My question is about automotive memory. I think within the larger memory market, the automotive application had accounted for a small quantity. Also, however, it required very high quality. And therefore, compared to other applications within the memory market, it has received less importance up till now. But with especially the emergence of autonomous driving, I think even from the memory industry's perspective automotive is becoming a more and more important application. With that background, can you give us your outlook on the automotive memory market and how you're preparing to capture that? Jaejune Kim: To answer your question about automotive memory, yes, as you mentioned, with the advent of EV and autonomous driving the demand for automobile memory has been very strong. I think there are projections that say that the automotive memory market in terms of value would grow in, on average, a mid- to high 30% range for the next 5 years. And in fact, automotive memory demand is expected to grow quite rapidly. At this pace, it would actually be larger as a business opportunity than the PC application by early 2030s. And therefore, we're also strengthening our business competitiveness related with automotive memory demand. But then the vehicle has a direct impact implication on human lives, and that's why when it comes to automotive application products, reliability and stability is most important. Under that policy, we were the first among Korean companies to receive the API CL2 process and product certification from a major German Tier 1 customer in April 2023 using our automotive UFS 3.1 product. Also in late June, we were -- we actually received certification using a product that we're actually supplying to our customer from C & B Corporation, which is a globally recognized automotive certification body. So to sum the two up, our automotive UFS 3.1 product has received full feature certification from not only the customer but also from a third-party certification body. A5 is a development standard that assesses the reliability and capability of automotive software development process. And our automotive memory product has received a CL2 certification under A5, and that shows that we have been internationally tested and recognized for the high level of stability and quality that is required by the automotive semiconductor market. Another focus of our automotive memory technology development is power efficiency. For example, the infotainment application focused UFS 3.1, which we started mass production earlier this month, has 1 of the lowest power consumption in the industry that would help enhance the power operation efficiency of the EV battery and we think that this can be used to create the optimal memory solution for EVs or autonomous vehicles. So in addition to preparing 1 of the industry's best full automotive lineup that supports the differentiated needs of the automotive markets such as product stability, reliability and power consumption, we also have a very strong relationship with key automotive customers that have been built up during the past 8 years, which was when we first started our automotive business. And during that period, we have not had a single supply issue. So we have a very strong relationship with our customers in terms of trust. Also, as you know, we are present in all of the major OEMs and Tier 1 companies. So our future direction in terms of our automotive memory business is to continue to maintain a very competitive product lineup and continue to work together with our customers to maintain our leadership. Operator: The next question will be presented by Nicolas Gaudois from UBS. Nicolas Gaudois: So coming back to AI memory. So as AI and cloud demand grows, there will be effectively more needs for comprehensive technical requirements in memory products beyond just HBM, you already talked about quite a bit. So on your side, what are the efforts you're currently making to actually prepare for this longer-term industry trend in the future? And how -- what are the key technology avenues we'll basically seek to get ready to effectively monetize this significant opportunity? Jaejune Kim: Yes, as you mentioned, with the recent growth in cloud and AI, we are actually seeing a rapid shift and change in the market demand what they require from memory -- from various applications, including servers and graphic applications. As the memory industry leader, we are actually securing various future technologies on multiple avenues to meet market demand. To give you a bit more detail, I think the first 1 we can introduce is the 32-gigabit DDR5 product that we're planning to launch. This will address the high-density module demand that's necessary for data center AI. The high core CPUs that are used for the high-performance computing for AI actually needs larger memory capacity and bandwidth versus existing CPUs. In this process, for the sake of optimizing the speed rather than using multiple DRAM modules on 1 channel, it's much more advantageous and effective to use a single large density module per channel. And that's why recently, there has been an upsurge in market need for high-density modules. We are planning currently to launch the 32-gigabit DDR5 product within this year based on our advanced node process and this can be incorporated into a high-density module to address the rapidly increasing high-performance computing demand. The next to highlight is our graphic DDR, the GDDR, we are continuing to maintain the industry leadership in GDDR as well. Recently, we developed the GDDR7 with 32-giga bps, which is the industry's top performance. Versus the previous generation, which is a GDDR6, the GDDR 7 offers 1.4x faster data speed with 20% improved power performance. So based on these improved performance, we believe that the GDDR7 can be used not only for PC or gaming applications, but widely in high-performance computing and AI. Another product to introduce would be the LLW, which is low latency wide IO DRAM, which would be specialized for the on-device AI. Currently, even though generative AI is mainly designed around the server infrastructure, for efficiency as well as security reasons, there's also a movement to develop on-device AI technology that would implement AI on the device itself. LLW not only has low latency and low power characteristics, but also has a significantly wider bandwidth versus the existing LPDDR and is capable of real-time processing the data that is generated on device. And so we're currently working with the on-device AI market, working together with various key partners in developing our product with the target mass production of late 2024. We're also currently developing advanced packaging technology, which will be specialized for data center AI, the packaging technology -- using this advanced packaging technology, we're developing a DRAM product that can be directly integrated with the logic. This would be more economical versus an SRAM solution and also can be used to implement higher densities, which will be effective in processing the data, which is rapidly increasing with the introduction of larger AI models. We have already talked with a major CPU customer. And so the detail of product specifications have already been defined for the DRAM product. And based on that, we are preparing to provide a differentiated solution. We've also developed the LP-CAM, which is an LPDDR-based module. As you know, up until now, the low-power LPDDR product was mainly used stand-alone on a mobile device. But recently, major client PC customers as well as some server customers are showing strong interest in using an LPDDR-based module instead of the existing DDR module in order to further reduce power consumption. And based on that need, we were the industry's first to develop the LPDDR module, which is called LP-CAM. We are currently planning to start pilot mass production of LPCAM first half of next year to actively capture the low power demand that is happening in the client PC and server markets. In addition to that, we're also working on developing new memory semiconductor solutions, including the HBM PIM, processing in memory, as well as CLXL, Compute Express link-based PNM or processing near memory that are more optimized for processing large AI models. Basically, these concepts -- the technology concept is to position the processing either within memory or near the memory to minimize any data bottlenecking between the CPU and memory. We have been conducting some performance benchmark tests. And for example, if we use the HBM PIM, there is a performance improvement, so compared to the existing GPU accelerator, the AI model's performance under HBM PIM improved by roughly 0.4x. Also, when a CLX based PNM solution is used, additional memory can be added, which would increase the capacity -- memory capacity around 4x versus the existing GPU accelerator. And then lastly, there will be implications on the storage side as well. With data becoming larger and larger, there will be an increased demand for high-density storage. And so as part of our future technology development approach, we are planning to launch a 64-terabyte server SSD. This will be the highest density, highest performance TLC-based product. We're planning to launch that early next year. This will be the first in the industry in order to address the increasing demand for high-density storage. So that was a brief introduction to some of the key future technologies that we are preparing. As the leader of the memory market, we will continue to remain focused on not only strengthening our technology competitiveness, but also leading the development of the memory ecosystem by presenting new technology standards. So going forward, we will continue to actively sense out future market needs and develop technology to back it to strengthen our market leadership. Operator: The last question will be presented by Subin Lee from CGS CIMB Securities. Subin Lee: My question is to the VD business. There was a media report on adoption of WOLED. With that in mind, can you give us your strategy in the premium OLED TV product lineup and your second half outlook for TVs? Kyungle Rho: To answer your question, even though, yes, the overall global TV market is somewhat sluggish, we think that within that overall market, the demand for premium products such as QLED, LED and the super big TVs will remain solid. And so our strategy and approach is to diversify our premium lineup to give consumers a wider range of choice. Now to give you a bit more detail about our second half product lineup, the Neo QLED, which is the backbone of our premium lineup, in the second half, we will focus on strengthening the communication about the product competitiveness of Neo QLED. And in the case OLED, which actually we see very good responses in sales of key areas, especially around the 65- and 55-inch last year, for OLED this year, we will additionally add the super big lineup. That's 83 and 77 inches, and continue to appeal the differentiating factors of Samsung OLED. In the case of even larger screen size segments, in the case of the 98-inch, in addition to the existing NEO QLED offering, we will be additionally adding the 8K and the QLED lineup in the 98-inch segment. For the micro LED, in addition to the existing 110-inch, we will be supporting that with an 89-inch offering to continuously create markets in the super large, super high-end premium TV market. At the same time, we offer the lifestyle screen products, which is a differentiating product group. And therefore, we will use also this to satisfy the wide variety of consumer needs. Ben Suh: Finally, we will answer questions that were submitted online in advance. We have been accepting questions via our web page in advance of an earnings release as part of our efforts to strengthen communication with individual investors and also to enhance understanding of the company. We received a wide variety of questions for this quarter. I believe that a majority of those questions were sufficiently answered during the Q&A session. So we will answer 1 more question on a topic that garnered a high level of interest from our shareholders, but was not addressed during the Q&A session. And so the question is the following: Recent launches of MR devices suggests the industry believes this area is poised for growth. So does Samsung have any plans to launch related products or create an ecosystem? This question will be answered by VP, Daniel Araujo, representing the Mobile eXperience. Daniel Araujo: Immersive content has already expanded beyond virtual gaming into media and work and we expected to become a mainstream technology. We see the XR market as a large new growth opportunity, and we're working systematically to the groundwork for an ecosystem that includes core hardware software technology R&D and content. Productively investing to create a high-quality innovative device and a differentiated user experience that is unique to Galaxy. And to do so, we set up a dedicated organization for immersive product planning and R&D. And we're also collaborating closely with affiliate companies and other partners. In particular, this includes a mid- to long-term collaboration with leading partners like Google and Qualcomm. We're well aware that many companies have recently released VR-based devices, and we will offer an XR device in MX's Galaxy ecosystem to provide a new and differentiated form factor experience where consumers can spend more time communicating, working or enjoying their leisure time, and we're working to create a fully developed product and XR ecosystem. And so we're preparing to release a product when it's at the point where it will fulfill consumer expectations. Ben Suh: I would like to thank everyone who share their valuable opinions, and we will be sure to refer to them in our decision-making process. And on that note, our conference call for this quarter comes to an end. We wish all of you and those close to you stay strong and in good health. Thank you.

Operator: Good morning, and good evening. Thank you all for joining this conference call. And now we will begin the conference of our Fiscal Year 2023 First Quarter Earnings Results by Samsung Electronics. This conference will start with the presentation followed by a divisional Q&A session. [Operator Instructions] Now, we should commence the presentation on the fiscal year 2023 first quarter earnings results by Samsung Electronics. Ben Suh: Welcome, everyone. This is Ben Suh, Head of Investor Relations. Thank you for joining Samsung Electronics’ first quarter 2023 earnings call. For additional details regarding our quarterly results, please refer to our earnings presentation, which has a new format and is available on our IR website at www.samsung.com/global/ir. Joining me on the call today are EVP, Jaejune Kim, representing Memory; VP, Hyeokman Kwon, for System LSI; EVP, Gibong Jeong, for Foundry; EVP, Casey Choi, for Samsung Display Corp, which I will refer to as Display during today’s call; VP, Daniel Araujo, for Mobile eXperience; and VP, KL Rho, for Visual Display; and VP, Sang-Kyun Kim for Digital Appliances. I want to remind you that some of the statements we will be making today are forward-looking, based on the environment as we currently see it and are subject to certain risks and uncertainties that may cause our actual results to be materially different from those expressed in today's discussion. I will start with the results for the first quarter of 2023. The business environment in the first quarter continued to deteriorate with overall consumer sentiment weakening due to rising concerns over an economic slowdown amid persistent global macro uncertainties and geopolitical issues. As a result, our consolidated revenue for the quarter declined by 9.5% sequentially to KRW 63.7 trillion. Although, revenue for the Memory business and other component businesses declined considerably, due to the repercussions of decreased demand, the DX division increased revenue on the back of strong sales of new flagship smartphone models. Our consolidated gross profit decreased by KRW 4.1 trillion sequentially to KRW 17.7 trillion, mainly due to the continued price decline and inventory valuation loss in memory. Gross margin also decreased by 3.2 percentage points to 27.8%. SG&A expenses declined by KRW 0.4 trillion quarter-on-quarter to KRW 17.1 trillion, primarily due to reduced advertising and promotional spending. However, as a percentage of sales, they increased by 1.9 percentage points to 26.8% due to the decline in sales. R&D expenses exceeded last quarter's record amount and reached a new high as we continue to invest in the future. Operating profit in the DX division increased, thanks to gains in the MX business, but operating profit declined significantly in our component businesses amid sluggish demand, causing our consolidated operating profit to fall KRW 3.7 trillion sequentially to KRW 0.6 trillion. Operating margin also fell 5.1 percentage points to 1%. For the following results and outlook section, I will provide brief overviews for DS, Display and DX and includes specific business unit results only for those that are not covered in separate speeches. The DS division in the first quarter, profits decreased considerably quarter-on-quarter due to an increased inventory valuation loss in memory, which newly included DRAM, a decline in utilization at foundry and continued overall impacts of weak demand and customer inventory adjustments. For display, the mobile panel business recorded a decline in earnings amid a market contraction, the large panel business slightly narrowed its losses. The DX division delivered improved results, thanks to strong sales of premium S23 models and enhanced sales mix focusing on premium TVs and improved operational efficiency. The network business sites revenue decrease due to weakness in major overseas markets, such as North America and Southwest Asia. The Digital Appliances business reported similar earnings sequentially, amid still sluggish demand and continued cost burdens. Regarding currency effects in the first quarter, the Korean won strengthened against the US dollar, Euro and most major emerging currencies. The relative weakness of the US dollar had the effect of a company-wide quarter-on-quarter operating profit reduction of approximately KRW 0.7 trillion centering on our component businesses, which are more sensitive to the US dollar. Next, I would like to share our business outlook. In the second quarter, under expectations of continued weakness in demand, DS will remain committed to boosting our technological competitiveness, including the two-nanometer gate all around process, while meeting the demand for DDR5 and LPDDR5x and other high-end products. For display in the seasonally weak second quarter, the mobile panel business will focus on preparing for second half demand. The large panel business is expected to increase its sales. DS will maintain solid profitability by expanding sales of A-Series smartphones and new TV models while fully preparing for strong seasonality of digital appliances and improving cost efficiencies. Network will keep solidifying its business foundation, particularly in North America and Korea, as it explores new business opportunities. Digital appliances will focus on securing profitability by improving its sales structure and cost efficiency, while continuing the global expansion of bespoke products as we enter a seasonal up cycle. The second half of 2023, there is a general expectation for market conditions to gradually recover amid projections for a rebound in global demand. Yes, we'll stay on top of the demand for high-capacity server and mobile products and continued to reinforce its leadership in differentiated technology, which includes preparing for next-generation flagship mobile SoCs and increasing orders for our leading GAA processes. Display's mobile panel business will remain -- will maintain its unparalleled position in the high-end market based on its differentiated technology. And the large panel business will push to expand its presence in the premium market and improve profitability. DX will further solidify its leadership in the premium segment, which includes foldables and Neo QLED. At the same time, it will increase its market share by cooperating with partners and enhance profitability by continuing to improve operational efficiency. Network will pursue revenue growth through its major overseas contracts by promptly addressing customer needs and winning new orders, all while reinforcing our technology leadership in 5G core chips and virtualized radio access networks. The digital appliances will boost our product competitiveness via SmartThings, while pursuing growth by increasing sales of high-value products and further promoting package sales. Now, moving on to capital expenditures. CapEx in the first quarter was KRW10.7 trillion with KRW9.8 trillion invested in the DS division and KRW0.3 trillion in Display. Memory CapEx concentrated on facilities and Pem-Tech, which included completing P3 infrastructure and P4 framework progress for mid to long-term supply and also on equipment to prepare for advanced node demand. In addition, we continued our R&D and back-end investments to further bolster future competitiveness. Foundry investments continue to focus on Taylor Texas and Pem-Tech to address the demand for advanced nodes, while display investments focused on infrastructure and module production enhancements. Next, I would like to address the shareholder returns. Today, the Board of Directors approved a quarterly dividend of KRW361 per share for both common and preferred stocks. Based on the annual dividend payout under the current dividend policy, which applies until the end of this year, the total quarterly payout is KRW2.45 trillion and it will be paid in May. Finally, I would like to share some of our key activities in sustainability management. First, by applying innovative technologies, we have continued our efforts to ensure that using our products and services contributes to a low-carbon and sustainable future. As prime examples of our everyday sustainability, we increased the adoption of recycled materials in our products, especially in our latest Galaxy S23 phones. We have also enhanced the energy efficiency of the key components used in our large digital plant models, which contributed to 75% of our new models in Korea, achieving top energy efficiency ratings. And we have further enabled energy savings through the AI energy mode and our SmartThings Energy service. Finally, following a successful release in Europe last year, we introduced the microplastic reduction cycle in the Korean market. The BESPOKE Grande AI model developed in collaboration with Patagonia, can reduce microplastic release by up to 60% compared to a regular cycle. On another front, we announced Samsung's Global Human Rights Principles policy based on international standards such as the UN Guiding Principles on Business and Human Rights in February. This announcement was part of Samsung's ongoing efforts to respect and promote the labor and human rights of employees, Samsung Electronics and its partners in all aspects of our business. The principles comprehensively encompass all of Samsung's pre-existing policies related to human rights, such as our child labor prohibition policy, antidiscrimination and harassment policy to name a few. Meanwhile, Samsung Electronics ranked seventh in the 2023 digital inclusion benchmark as measured by the World Benchmarking Alliance, a global alliance for sustainability management. We achieved the highest ranking among Asian companies, garnering this special recognition for our efforts to support open source, the standardization in the industry and foster an ecosystem for tech start-ups. Last but not least, the Alliance for Water Stewardship awarded our Hwaseong campus with certified Platinum status, the organization's highest certification level for water resource management. This is the first such recognition in Korea, and the award recognizes the outstanding Water Management System in our semiconductor sites. We will continue our efforts to enhance sustainability in all aspects of our business. I will now turn the conference call over to the representatives from each business unit. To present first quarter performances and outlooks for their respective business segments in more detail. We will start with EVP, Jaejune Kim of the Memory business. Thank you. Jaejune Kim: Good morning. This is Jaejune Kim from Memory Global Sales and Marketing at Samsung Electronics. In the memory market over the first quarter, while the macroeconomic continued to slow down, and customer purchasing sentiment was weakened. Overall demand decreased as many customers continued inventory adjustments to improve their financial health. As a result, our performance fell significantly compared to the previous quarter. If you look at each product in DRAM, while customer inventory is still at a high level for servers, the demand for servers was sluggish with inventory adjustments by customers are mainly hyperscalers affected by shrinking IT spending of many enterprises under economic uncertainties. Mobile and PC applications, although customer inventories of finished goods in distribution channel are relatively improved. The demand situation was sluggish with purchasing delays and set few deductions as consumer sentiment has not recovered yet. Under this market environment, we preemptively expanded to demand for high-density mobile products, which was boosted by strong sales of new smartphones by major mobile customers. As for server applications, while customers continue to adjust their component inventories, we focus on capturing DDR5 server demand in line with the adoption of new CPUs. As a result, the price fell less than the market forecast due to our focusing on selling high value-added ease of products, but our big growth couldn't meet the previous guidance. Next, I will talk about NAND market. The slowdown in demand for server and storage applications has been more clearly observed compared to the other applications. And as I previously mentioned for DRAM, our analysis revealed that the demand sluggishness is linked with reduced enterprise IT spending. Actually, in addition to this, server SSD demand showed a further contraction due to customer inventory adjustment. For mobile and client SSD, the demand continued to remain sluggish as well. Because the sell-out recovery was not visible, as overall consumer sentiment has not recovered yet despite China’s reopening. In spite of this weak demand, we actively responded to the trends toward the high-density across overall applications, such as, i.e., storage of 512 gigabyte and above for our major mobile consumers and client SSDs over 1 terabyte and above for PC OEMs. As a result, our bit growth exceeded instead of previous guidance. Moving on to the outlook for the second quarter. First of all, let me tell you about the market by applications. As major hyperscalers are conservatively investing in servers and customers are continuing to adjust inventories, demand recovery is expected to be continuously limited following the first quarter. For mobile and PC, consumer inventories for component and finished goods are expect to be healthy, but consumer sentiment trends seems to be important variables for set demand due to macroeconomic conditions. That includes China’s reopening and the follow-up economic stimulus packages. On the other hand, the transition trend to high-density products are based on price elasticity, is expected to continue. In DRAM case, in order to align with this market situation, we will timely respond to the increasing demand for DDR5 and high-density modules led by the launch of new CPUs for servers and increased demand for AI. And we will also actively respond to LPDDR5x demand for mobile high-end products, such as new competitor smartphones. For NAND, based on our cost competitiveness, we plan to actively address demand for high-density products across all applications, while responding to customers' need for high-density storages by creating a mobile QLC market and diversifying product portfolios. Moreover, as we announced in our preliminary first quarter result, we have already started rolling down our productions. Therefore, our inventory levels are expected to start to decline from the second quarter, and such reduction is expected to expand in the second half. Now, let me tell you about the outlook for the second half of the year. Demand is expected to gradually recover in the second half of this year, as customer inventory levels will have declined due to inventory adjustment that have been occurring since last year. This demand recovery is expected to begin with consumer products such as mobile and PC, for which inventory or the just month by customer began earlier than they need for commercial applications such as software and studies. First of all, for mobile and PC, we finished good inventory level decreasing in completion rate of first half, safety is expected to improve with the launch of new smartphone and PC promotion in the second half of the year. In addition, the trends toward high density based on overall price electricity is expected to continue. Thus, we are expecting to see our demand pattern over weak in the first half and strong in the second half. For server, the timing of demand recovery may be later than for server and mobile since customers' inventory orders started relatively late. However, proportion of DDR5 is expected to increase due to the expansion of new CPU reduction and content per box will continue to grow as the transition to high core CPUs will accelerate. Demand will continue to recover in the second half of the year, but it is expected to grow mainly with the new memory products. Due to factors such as CPU platform convergence scheduled for the second half of the year and customer inventory adjustment plan. Therefore, we are lowering is a production mainly for [indiscernible] products for which demand is expected to be relatively sluggish, while responding to the market with an increased portion of cutting-edge nodes and higher value-added products. From a product standpoint, for DRAM, we plan to accelerate the conversion of cutting-edge node for DDR5 and LPDDR5x and actively respond to the strong market demand for HBM and enterprise. For NAND, we are going to strengthen supply operations, focusing on products which customers need by creating our mobile creation market and expanding the portion of cutting-edge nodes such as 37 and 38. Under these trends, we will maintain a similar available CapEx compared to last year and continue to expand the infrastructure and R&D portion of investment to secure mid- to long-term competitiveness. Thank you. Hyeokman Kwon: Good morning. This is Hyeokman Kwon from System LSI business. In the first quarter, [indiscernible], the demand for SOC, sensors and DDI dropped sharply due to sluggish demand for the major applications such as wire and cable resulting in a sharp drop in sales. However, from mobile SOC, volume zones sales increased with the launch of a new volume zone product and in order to expand the new application, we launched UWB-based short range wireless communication semiconductor product called U100. In addition, we have solidified our technological leadership by supplying various 200 million sensors to major global customers at home and abroad. In the second quarter, even though the overall demand continues, customers' inventory reductions are showing further products as sensors and DDIs and inventory accumulation is expected in preparation peak season in Q3. As a result, earnings are expected to improve slightly Q-o-Q. In addition, to strengthen the GPU competitiveness of mobile resources, we will expand our switch partnership with AMD in the Grid Peak IP period and we are in the final stage of commercializing and communication modem. For second half, [Indiscernible] related customers inventory is exhausted and starting with the vitalization of the Chinese domestic market, overall mobile demand is expected to recover. As the market is expected to recover in the second half of the year, we will make sure that there is no problem with the supply of parts. In addition, we are planning to enter partnerships that we wanted to strengthen the product business competitiveness of wireless SoC business. And we also expect to expand our business area and so customize the plan to commercialize the fingerprint authentication based credit card with more enhanced security. Thank you. Gibong Jeong: Good morning and good evening. This is Gibong Jeong from the Foundry business unit. In the first quarter, demand has contracted due to the global economic downturn caused by macro uncertainties. Impacts included high inventory levels and major fabless companies and set makers, the ensuing drop in orders resulted in revenue decline. Meanwhile, we are mass producing the first-generation 3-nanometer process using GAA, Gate All Around technology, leading semiconductor device technology currently in production, with yields remaining stable into and throughout the quarter. And based on our experience with the first generation, we are making solid progress in the development of the second-generation process to secure even greater mass production capabilities. In addition, we focused on securing new orders from major customers who need high-performance, low-power characteristics in mobile and HPC applications, aiming for mass production in year 2024. Moreover, by completing the development of the advanced package with 12 stacks of HBM memories, we have secured the foundation to support server products for generative AI segment. In the segment in the second quarter, we expect revenue to improve quarter-on-quarter basis as set makers' inventories recover to normal levels and customer demand recovers. In the second half of this year, the market is expected to recover around the HPC sector and the automotive sector, which requires advanced process technologies. We expect our revenue to rebound following our investment strategy, focusing on the advanced nodes. Based on the stable development of the second generation, 3-nano GAA, we will expand our customer base through active communication with customers and strengthen our technical leadership by smoothly proceeding with the development of the next-generation 2-nanometer technology. Lastly, we will lay the foundation for sustainable growth by evolving specialty and mature processes, so that we can expand to various applications, such as mobile, HPC, automotive, and IoT. Thank you. Casey Choi: Good morning. I'm Casey Choi from the Cooperative Strategy team at Samsung Display. Even in the face of unfavorable market conditions, we continue to generate stable results in the high-end smartphone business based on our differentiated technology performance and IP superiority. I will now brief you on our results for the first quarter of 2023. For the mobile display business, even though market demands continue to contract due to persistent inflation and high interest rates, we fortified our market leadership thanks to the robust sales of flagship products with differentiated features and expansion of foldable model. For the large display business, we solidify our position in the premium market on the back of the full-fledged launch of new QD OLED products by our major customers and diversification of product size and other specifications. Next, let me share the outlook for the second quarter of 2023. We expect results to contract year-on-year due to the global economic slowdown, excavating seasonal effects, but we will maintain our dominant position in the high-end market based on the stellar technology and the performance of our products. At the same time, building on our unrivaled product quality, we plan to maximize sales by delivering on our customers' needs and expanding the adoption of OLED panels in their mid-end lineups and by accommodating our mass production of new products in the second half. For the large display business, we expect to see a slow recovery in demand due to the economic slowdown and effects of the pandemic, but sales should grow as new products for 2023 roll out in earnest. Finally, I'll share our outlook for the display market and our strategy for the second half. Concerns over market uncertainties and the economic downturn co-exist with the hopes for the potential demand recovery, based on anticipation of improving market condition in China, prompted by its potential stimulus program in the second half. We will maintain our leading market position by leveraging our differentiated technology in our customers' new offerings, and ramp up sales by enhancing the performance of foldable products in the relatively solid market for high-end smart phones. For large panels, demand is likely to be soft due to prolonged economic uncertainties. However, we will further strengthen our presence in the premium market by offering a wide range of size and supplying rollouts in an increasing number of countries and diversifying our customer base. Despite uncertainties surrounding future markets, we believe it's an optimal time to prepare for the future and will invest in 8.6-generation OLED. With this investment, starting this year, we'll strive to scale up the OLED market by steadfastly increasing the share of OLED panels in the laptop, tablet, and automotive markets, and eventually recreate the success we have achieved in the smartphone market. Thank you. Daniel Araujo: Hi, everyone. This is Daniel Araujo from the Mobile eXperience division. I'd like to share our results for 2023 Q1 and outlook for Q2 and the second half. The macro environment remain uncertain throughout the first quarter of 2023. And in the smartphone market, overall demand weakened, but the premium market grew in terms of both volume and value compared to one year ago. Despite the market contraction, our sales increased quarter-on-quarter and our profitability recovered reaching double digits. The S23 series launched in Q1 achieved strong sales, led by improved product competitiveness. Overall sales growth was driven by the large S23 Ultra portion of sales and marketing that centered on models with high storage capacity. Our efforts to enhance operational efficiencies throughout R&D, manufacturing and logistics, led to a major boost in operating profits from flagship devices, Series A and tablets, which contributed to the strong first quarter performance. Next, let me share the Q2 outlook. For smartphone, we expect demand to recover in the low to mid segment, and the overall market should increase slightly in volume, but declined in value compared to Q1. In the MX business, we will continue to generate steady sales of the S23 series, which has been well received by the market and re-boost marketing of foldables to continue sales of current models and drive awareness of the upcoming launches of new models in the second half. As for the A Series, we will actively address recovery mass market demand by propelling the new A54 and A34 into global mega-hit models by delivering a stronger premium experience through upgrades to key specs and the application of the Galaxy design identity. In Q2, we will drive sales expansion with flagship devices and mid to high A Series models with contributions also expected from our ongoing efforts regarding efficient management of region-specific product lineups, our upselling strategy and a variety of sell-out programs. Moreover, we aim to maintain double-digit profitability, thanks to additional gains in operational efficiency. Next is the outlook for the second half of 2023. In the second half, we expect to see signs of a global economic recovery, including an easing of inflation. The smartphone market is forecast to witness increases in both volume and value, especially in the premium market, alongside the recovery of purchasing power. We expect the tablet and wearable markets to stay mostly flat due to difficult compares following significant growth during the pandemic. The MX business will unveil new foldable models that offer even further differentiated and refined user experiences. Our close collaboration with partners is a strength and we will use that strength to boost sales right from launch to further fortify our leadership in the global foldable smartphone market. For the S23 Series, we will continue sales in the second half by sustaining our marketing campaigns and actively responding to regional seasonality. With the A Series, we will expand our overall share of the smartphone market by collaborating closely with our partners and actively implementing sales programs tailored to our customers by region. We will strengthen the product competitiveness of our tablets and wearables and highlight our premium ecosystem experience via a joint Unpacked event in order to continue to outpace the market. In sum, we aim to achieve annual revenue growth in 2023 and secure solid profitability by improving our product mix and enhancing operational efficiencies. Thank you. KL Rho: Good morning. This is KL Rho from the sales and marketing team of Visual Display. First, I would like to review the market conditions and our performance in the first quarter of 2023. TV market demand contracted both quarter-on-quarter and year-on-year as we exited and the peak seasonality and help continued effect of global economic downturn. For Samsung, we improved our profitability quarter-on-quarter and year-on-year by focusing on sales of differentiated high value-added products to enhance our leadership in the premium market and by reducing overall cost. Now, let us look at the outlook for second quarter and second half of 2020. In the second quarter, we expect negative growth in the TV market to decelerate, while demand for premium products such as QLED and ultra large screen model is expected to keep growing. Samsung will focus on improving profitability by expanding sales strategic products with a differentiated launch of new model over 2023, while also strengthening each area of operation management. Regarding the TV market in the second half, demand is expected to recover gradually with the LIBOR of peak seasonality, but we expect competition to intensify with the continued uncertainties in the external environment. We will actively capture peak season demand by strengthening our differentiated promotional activities centering on strategic products such as Neo QLED, OLED and also targeting consumer needs, utilizing our differentiated life tire screens. In addition, we will secure a new growth engine by continuously diversifying sales channels and continue to lease the TV market by expanding the 9 and 8 inches [ph] superlarge screen and micro LED lineups. Thank you. Ben Suh: Thank you for the presentations. That sums up the first quarter results presentation. Before we move on to the Q&A session, I would like to share several data points in key business areas. Considering the continuing macro uncertainties, we will not be providing annual guidance at this time. Comparative figures are on a sequential basis for quarterly data. For DRAM, in the first quarter, our bit growth decreased by a percentage just into the double digits, and ASP decline by a percentage in the low to mid-teens. For the second quarter of this year, we expect market bit growth to increase by a low double-digit percentage, and our EBIT growth should be similar to the market. For NAND, in the first quarter, our bit growth increased by a low single-digit percentage, while ASP fell by a percentage in the high teens. For the second quarter, we expect market bit growth to be in the mid-single-digit range and our bit growth should be similar. For display in the first quarter, the small panel portion of revenue was a percentage in the high 90% range. And a small panel sales volume decreased by a percentage in the mid-20s. For MX in the January quarter, sales volumes of smartphones and tablets were approximately 60 million units and 7 million units, respectively, and smartphone ASP was $325. In the second quarter, we expect to see declines in shipments of smartphones and tablets as well as in smartphone ASP. For TVs in the first quarter, sales volume of TVs decreased by a percentage in the low to mid-teens. And for the current quarter, we expected to contract by a percentage in the high single-digits. Now, I will move on to the Q&A session. First, we will start taking questions from the conference call. Operator: [Foreign language] [Operator instructions] The first question will be presented by Sung-kyu Kim from Daiwa Capital Market. Please go ahead with your question. Sung-kyu Kim: [Foreign language] My first question is about the Memory division. In the first quarter, your DS division recorded an overall loss and it appears that the Memory business is accounting for a large share of this loss. In that context, can you give us some more details behind the poor performance of the Memory business this quarter in the first quarter? Second question is about the Digital Appliance business, still in the first quarter, the Digital Appliance business performance relatively is still disappointing. Can you explain the reason why the poor performance is continuing? And can you give us some outlook on your second quarter bottom-line? Jaejune Kim: [Foreign language] I'll enter the question about the Memory business first quarter results. In the first quarter, as you mentioned, our results of the Memory business decreased significantly due to demand weakness -- memory demand weakness continuing and that also being coupled with additional fall in prices. To give you a bit more detail, many companies facing macroeconomic uncertainties have been operating conservative investment stands and this has resulted in a reduction in IT spending overall. So we have seen a slowdown of demand especially around servers and storage. Also, customers have been continuing to adjust their inventory to improve their financial conditions. This has lead to a decrease in purchasing demand and this has driven to an additional price decline versus the previous quarter. Price changes are an item that has a direct impact on earnings and so during the first quarter, the additional price decline had a direct impact on our profitability as well. Another factor in our first quarter results is the inventory valuation loss. Actually, in Q4, the inventory valuation loss started to kick in from the NAND product, but with the additional price decline recently in DRAM, there was a larger inventory valuation loss recognized this quarter, and that had an additional impact on our performance The second question was about the details behind the performance of the digital appliance business. During the first quarter, the revenue of the digital appliance business decreased on a year-on-year basis, as we saw a decrease in global digital appliance market demand and also impact of inflation. Also, on the cost side, there was an increase of fixed cost nature costs that were for example, logistics infrastructure that had been executed in response to the supply chain issues we saw in 2022. Also, there was an impact of global inflation on our labor and utility expenses, so overall expenses increased also on a year-over-year basis. On the material cost side, while material cost did improve versus last year, the raw market – a certain raw material such steel, plates, or resins performing agents have actually been seeing strong demand and so the amount of decreased – the degree of decease in material cost has not been as large as we had expected. Now looking toward the second quarter, what we expect in terms of our bottom line is that, we expect our revenue to be similar in second quarter to what we saw last year, and that our profitability, our bottom line would also improve in the second quarter. That said, we are still watching some downside factors. For example, there is still risk of our performance being below what we expect if the market contracts or inflation continues. Also, we think that there's a risk of possible increase of material costs versus the first quarter, given the fact that the raw material market turnaround came faster than expected. Operator: [Foreign language] The next question will be presented by Ricky Seo from HSBC. Please go ahead with your question. Ricky Seo: [Foreign language] I'll ask two questions. The first question is about the foundry. During your presentation, you mentioned about plans of the second-generation development of the 3-nano node. Can you give us a bit more detail of your plans of developing the cutting-edge nodes and also the roadmap for mass production? Also, can you give us an update on your customer order situation? Can you give us a bit more update on how new customers are being engaged? Second question is regarding the US CHIPS Act that was announced. I think there is growing concern in the market of this bringing also increased risk given the detailed requirements such as upside sharing or the requirement to share technology information and the guardrail system. Given this, can you share the company's plans on how to -- how the company plans to respond to the CHIPS Act. Gibong Jeong: [Foreign language] I would like to answer your first question by starting with a description of the key features of our 3-nano node. Samsung foundry was the first in the world last year to adopt the GAA architecture through the MBC fab. MBCFET stands for Multi-Bridge-Channel. And we did this because of the tradition of Samsung Foundry of emphasizing customer satisfaction and technology leadership. You've also asked about the customer order updates and engagements. Our orders for the cutting-edge advanced nodes are mainly being consisted of mobile as well as HPC customers. And that is because we are the company that offers the only renal product with GAA. We are currently running the 3 nano promotion and some of the customers have been creating test chips. We're also developing the 2 nano with mass production targeted 2025. And our goal is to stay ahead of the competition and to maintain our technology leadership in 2025. Thank you. Your second question about the US chips actually cover several business units and, therefore, will be addressed by the IR team. The chipset took effect with the signature of President Biden last August. Since then, there was following announcements of detailed rules in February and also the detailed card rail rules announced in March. And they include several obligation clauses tied to the incentives offered under the Chipset. You've asked about the market being concerned of these requirements and applications being tied to the incentives offered, the US government regarding that has expressed that it will collect opinions and feedback from the industry and also carry out negotiations with individual companies to iron out the details of such obligation clauses and we, Samsung also plans to participate in such procedures. Also, the company currently is studying various possibilities and scenarios and we'll continue to work on minimizing the geopolitical risk on our business. Operator: [Foreign language] Your next question will be presented by Nicolas Gaudois from UBS. Please go ahead with your question. Nicolas Gaudois: Good morning and thanks for taking my questions. The first one relates to memory. Could you provide more color and context on the memory production cuts you have announced earlier this month, how sizable is of a production cuts that you ultimately plan to do and for which products? And secondly, it is well understood that this year, your flagship smartphone models, including the Galaxy S23 are solely using Qualcomm System solutions. Should we expect the Exynos to come back in 2024, starting with Galaxy S24? And also, could you please elaborate more broadly on the overall Exynos strategy going forward? Thank you. [Foreign language] Jaejune Kim: [Foreign language] First, to answer your question about the memory production cut. As you know, in terms of operating our memory production, our focus has been on maintaining stable supply capabilities of the products that the customers want from a mid to long-term perspective rather than a near-term perspective. And we have been operating our production in order to secure sufficient inventory availability to respond to future demand. Now, the rationale behind our production approach has been because while on the demand side, mid to long-term demand is expected to be solid, given the growth of several markets such as automotive applications and also the expected growth of the data-driven computing such as AI or ML. On the production side, we do see big growth restrictions given the fact that there is a die-sized penalty as part of the switch towards the new interface products. Also, there is growing difficulty with the advanced nodes in terms of technology and also increased production lead-times. That said, we were looking into our production by product lineup and found -- determined that in certain products, we have already secured sufficient volume to supply and meet customer demand changes and therefore, decided to lower production in these products. Therefore, the lowering of production that has been announced, what we mean is being carried out mainly around the legacy products that we have already secured sufficient volume to meet mid to long-term demand and this comes on top of the line optimization that already started in Q1, and so we expect the size of the reduction to be far more meaningful. And we expect our inventory levels to start to decrease from Q2. Also going forward, in the second half, we will continue to monitor the market demand and operate our production flexibly. And so we expect our inventory normalization speed to accelerate in the second half. Now to be clear, many outside research firms are forecasting that as customers complete their inventory adjustments during the first half, demand will gradually start to recover from the second half and based on such outlook, we will maintain our advanced new production without any adjustments given that the advanced new products will be leading the demand growth. And going forward, we will continue to flexibly adjust our business strategy based on mid-to long-term demand and also continuous sensing of our -- continuous sensing of mid to long-term demand and also our supply ability. Hyeokman Kwon: [Foreign language] Your second question was about the System LSI Exynos business. As you know, the MX business is a major customer of the system LSI, and our goal is to develop our business with a full lineup that can be applied in all of the Galaxy series segments, and we are currently pursuing reentry to the flagship segment. [Foreign language] Now that said, growth rate of the mobile market as a whole is on an decreasing trend, and we do see the need for us to be prepared for that. And so, while in the short term, while we focus on building the SoC competitiveness for mobile SoCs, at the same time, we are focusing on expanding our non-mobile business, including automotive SoC. And also to enhance our ability to rapidly respond to the market changes from a mid to long-term perspective, we are also continuing to focus our efforts on the market research and business feasibility studies in order to develop new business areas. Operator: [Foreign Language] The next question will be presented by Peter Lee from Citigroup. Please go ahead with your question. Peter Lee: [Foreign Language] My first question is about the Memory business. You have announced plans of reducing your production, but also you've announced that you plan to maintain your CapEx to a similar scale as previous years. Can you give us a bit more detail behind why your CapEx would still remain similar, even though your production would be reduced? Second question is about the MX division. Actually, you have come in with better profit results than the market expected in the first quarter. Can you give us a bit more detail behind that and also your plans of how to expand your profitability in the second quarter? Jaejune Kim: [Foreign Language] To answer your question, this year, we plan to maintain investments similar to the previous year. The reason why we have decided to maintain CapEx at similar levels as previous years is, because our key goal of the business is to maintain sustainable market leadership by strengthening our future competitiveness rather than operating based on a near-term strategy. And therefore, based on that business goal, despite our decision to lower our production, we are going to maintain CapEx at level similar to last year, because we believe it is necessary for us to concentrate our investment capabilities preemptively from now in order to secure future competitiveness. The semiconductor business by nature requires consistent large-scale fab investment. Also, it takes quite a long time for the fab to go into mass production since the start of the investment itself. Therefore, given the fact that mid- to long-term demand is expected to be solid, in the future, in order to have the supply ability, stable supply ability to capture that solid demand in the mid to long term, we need to make the infrastructure investments that have longer lead times ahead of that from a mid to long-term perspective. That's why we plan to continue our infrastructure investments for the Contech [ph] Phase 3 and 4 lines in order to secure the necessary essential clean rooms that will give us the ability to timely respond to the growth of the mid to long-term demand. Also in addition to that, we are planning to increase the share of R&D investments, as the memory nodes become -- are further scaling, as we approach the cutting edge nodes, the difficulty of development is increasing rapidly. And given the situation, we believe that we need to increase the investments preemptively from the R&D phase in order to strengthen our quality and also develop our cutting-edge products timely. And this will be another way to enhance our competitive edge in responding to mid to long-term supply. So in sum, while we have lowered our production in the short term, we will continue to thoroughly prepare for mid to long-term demand by continuing to make infrastructure investments to secure the necessary essential clean rooms. And also, we will be increasing the share of R&D investment that will strengthen our technology leadership. Now that said, we do recognize that there will be some impact of geopolitical issues and the macro economy on demand for some time. And therefore, in terms of equipment investments, we will execute that flexibly by carefully watching the industry situation. Daniel Araujo: I'll take a question on MX. So, in Q1, year-on-year declines in market demand, mainly concentrated in the mass market segment were attributable to rising global interest rates and adverse economic indicators. But demand in the premium segment remained solid with slight growth. Our total smartphone shipments in Q1 decreased Y-o-Y, but grew quarter-on-quarter, and our revenue held up well compared to the market decline, thanks to a higher proportion of premium products and increased ASP, owing to flagship-oriented sales, especially the 23 series. The S23 series achieved higher sales in Q1 compared to its predecessor series with favorable reviews from the market for the improved Nightography Camera, gaming performance, and sustainability factors, all boosted by our Share the Epic campaign. And within the S23 series, the S23 Ultra portion of sales increased, and we continue to upsell by strengthening communication around our high storage models. Regarding profitability, we secured a double-digit operating profit margin through continued efforts on increasing operational efficiencies throughout the whole R&D manufacturing and logistics processes. Tablets and wearables also contributed to the improved overall profitability in Q1 with continued solid sales and operations streamlining, even though no new product was launched. In Q2, we will continue to proactively address the premium and mass market segments with sufficient product lineup operations in each geography and our upselling strategy together with continued optimization and efficiencies, we are aiming to maintain double-digit profitability. [Foreign language] Peter Lee: [Foreign language] Operator: [Foreign language] The next question will be presented by JJ Park from JPMorgan. Please go ahead with your question. JJ Park: [Foreign Language] I have two questions. The first question is about the DDR5 demand. Can you give us a bit more update on the DDR5 especially? Have you seen an uptick on demand since the release of Sapphire Rapids? Second question is about the OLED 8.6-G line, you've mentioned the investment into this during your presentation. When would be mass production from this line? And how much capacity are you planning. Also, I think that, I'm wondering whether there will be some overlap in terms of product coverage by this line and your existing lines for TV. So this new 8.6-G investment that you're planning, would it only be addressing IT applications? Or would it also cover TVs? Casey Choi: [Foreign language] Regarding your question about DDR5 demand, there is a bit of uncertainty still around DDR5 demand given that customers plans of adopting the new CPU platform that supports DDR5 is still fluid. As of now, we are seeing a low 20% growth. We are seeing growth of DDR5 demand. So as of now of the entire demand for deep DRAMs, that's for PCs as well as server DRAM, DDR5 share has come up to around low 20% as of second quarter, which is in line with original expectations. Now this switch to DDR5 does come with inherent production reduction because of the chip size penalty. But on the demand side, because it's a new product, there is still a low initial market inventory, and we expect there to be an increase – additional increase in demand in the second half. And in line with this expected growth of DDR5 demand, we are planning to accelerate the node migration for DDR5 products to further enhance our product competitiveness. Your second question was about the 8.6G OLED investment. I would like to give you a bit more background to why we decided this investment before answering your questions about specific schedule, mass production schedules or how this will work with our existing QD-OLED TV capacity. In the case of OLED for IT products, as people spend more time consuming content on IT products and also as they do more work that requires higher picture quality, there is a rapid demand growth. And even the OEMs are continuing to adopt OLEDs more on their IT products as a differentiating feature. Also, it's that users are demanding for similar picture quality as they are used to on their smartphone. They want to see the same picture quality on their IT products. Given this expected demand growth, we have been developing for several years of production -- mass production technology that has cost competitiveness. We have been working for several years on developing, for example, the large size substrate technology, low-cost technology, eco-friendly technology and oxide technology to do this. And we have decided to make this investment, believing that we have reached a certain level of mature technology. You've also asked about details of time line. And given that this is the technology is -- we are the first to try this technology first time in the world, rather than setting a fixed milestones in terms of future time line, we are estimating considering the level of technology we have developed that we will be able to operate this line on a full-fledged scale within a two to three-year time line from investment. In terms of capacity, the product that we will be producing in terms of size is roughly around two times the size of a 6G glass. So in terms of capacity, we are expecting that we will be able to produce volume that would be corresponding to around 10 million notebooks or tablet, PC laptops or tablets, PC OLEDs a year. We also are planning to make our production cost competitive on the 8.6G line versus our existing 6G production line. We have learned from our smartphone experience at such preemptive investments give us the advantage over competitors by allowing us to -- by allowing us to get the head start in terms of completing the core supply chain management and also gaining the know-how of materials and development. And so in addition to the smartphones by making this both investment, we will focus on successfully expanding the OLED to other applications, including IT products. Operator: [Foreign language] The last question will be presented by Dong-Won Kim from KB Securities. Please go ahead with your question. Dong-Won Kim: [Foreign language] My first question is about the Memory business. In terms of technology competitiveness, what kind of preparations are you making? Where are you focusing on in terms of technology competitiveness? And what are you preparing for the next-generation memory technology? Second question is about the display business. Recently, Samsung announced an MOU with a European OEM, and there is growing interest into the displays automotive business. Can you give us some update and future outlook on your automotive display business? Jaejune Kim: [Foreign language] To answer your question about our technology competitiveness, as you know, we have continued to strengthen our competitiveness around the cutting-edge nodes. And in the case of DRAM, the focus has been on preparing for the mass production of D1b products based on our EUV know-how and that preparation for mass production is almost at the completion phase. And so we are planning this year to go to mass production within the year with the D1b based 32-gigabit DDR5 product to lead the industry. On the NAND side, we have -- we -- our schedule is to complete preparations for mass production for the 8th generation V8 node for not only 1 terabit, but also the 5, 12 gigabit within the second quarter, and that will give us the condition to -- we will be prepared, therefore, to address not only the performance, but also the value markets within second quarter. Also on the solutions side, we have prepared the full lineup for the enterprise as well as the data center server PCIe Gen 5, and we were the first in the industry to do so. Now, regarding future markets, we're all continuing to make the necessary technological preparations to capture future markets. As you know, recently, the generative AI has become the very hot topic in the IT industry. And as a part of this, we are seeing an increased demand, especially around the high-performance and high-density DRAM. And so given this trend in order to provide the best performance and highest-density products on time and in line with the AI market needs and technology trends, we have already supplied the HBM2 and HBM2E products to customers. And we're currently delivering samples for the ultra-low power HBM3 8-layer and 16 gigabytes and the 12-layer 24 gigabytes and have already completed mass production. And the HBM3 will be followed in the second half with the HBM3P product, which is the next-generation that offers higher performance and density that the market is demanding. Now there's also -- with the generative AI server, there is a need for the high-density TSV modules. And regarding the TSV modules, by using our high-density product that uses the cutting-edge node technology, we are planning to strengthen our competitiveness of high-density products for servers that 128 gigabytes and above. Another area that we are looking at with quite a lot of interest is the CXL Memory, with the data processing volume expected to rapidly increase going forward. There is a growing need for CXL memory that has higher density and larger bandwidth as the industry starts to adopt this aggregated computing architectures. In fact, starting from this year, we are seeing increasing sample inquiries from customers for CXL products and overall growing interest in the market. And as market interest in CXL increased, we have already completed development of the 512 gigabyte CXL DRAM last year, first in the industry. And also are currently preparing a lineup of CXL products based on CXL 2.0 across different densities. We're also currently developing an SSD based on CXL. And so this is an example of how we continue to diversify our memory solutions in – according to customer demand. And we will continue to focus on enhancing our technology competitiveness to respond to future market opportunities. Your second question was about the automotive OLED, the display business. As you know, recently, with the increase of electric vehicles, EVs, there is a rapidly increasing adoption of OLED panels on the vehicle itself. Also, with the increased penetration of EVs, the vehicle itself is changing from a means of mobility to a smart space where the passengers can enjoy entertainment. Also, the most recent vehicle designs are adopting end-to-end full size displays and the display itself is becoming a more important part of the vehicle interior. Regarding our plans of developing the automotive display business, we are planning to pursue that by leveraging the technology we have already secured by our smartphone display business. We're currently in active communication with key global automotive OEMs, including those in Europe, US, China and Japan. And we are planning to actively promote the technologies that we have already developed and have been proven in the smartphones on auto applications. For example, this will be whole displays or under panel cameras and other technologies that have been adopted in the foldable displays. The automotive industry, we believe, emphasizes stable supply, given that an auto project is a very long-term business. And in terms of such stable supply capabilities and sustainable business ability, we believe that we have an advantage compared to competitors. For example, we have the largest OLED capacity in the world and have very stable financial strength, and this is an advantage compared to competitors. And by leveraging the advantages and strengths that we have, that I've just described, we plan on securing firm market leadership in automotive area by increasing the adoption of OLEDs in automobile. Ben Suh: [Foreign Language] Finally, we will answer questions that were submitted online in advance. We have been accepting questions via our web page in advance of an earnings release as part of our efforts to strengthen communication with individual investors and enhanced understanding of the company. And we have received a wide variety of questions for this quarter. I believe the majority of the submitted questions were sufficiently answered during the Q&A session. So we will answer one more question on a topic that garnered a high level of interest from our shareholders, but was not addressed during the Q&A session. And that question is the following. What are the major ways to strengthen competitiveness such as raising the company's hardware specifications to cope with the mid to low-priced market? Please explain a major strategy such as price and marketing to boost demand. And this will be answered by VP Daniel Araujo, representing the mobile experience. Daniel Araujo: Sure. So we're strengthening our product competitiveness in several ways that consumers will really be able to feel, including raising the hardware specifications of the A Series and expanding our premium software experience and design. We're upgrading the AP and all models, which is core to the smartphone experience. We are also upgrading the camera and display by model, especially for the 5G which has a big pixel camera sensor that's usually deployed in our flagships, which enables a high-quality and low light camera experience. We're strengthening the Galaxy's core software experience which is based on One UI 5 and the Galaxy Design identity is being applied to all models of the 2023 A Series. In Q2, in particular, we respond to the market and traction by focusing on the new 854 and 834, which can become agents with their improved product experience and in upselling strategy centered on high-capacity storage. We'll also collaborate more closely with local mobile carriers to highlight the fast 5G connectivity of the A Series for our customers, focused scenarios where the 5G conversion rate is high, like Europe, Southeast Asia, Southwest Asia and Latin America. In terms of marketing, we're running our awesome campaign to communicate in the fund and intuitively to MC consumers about core experiences like our large displays, high-end cameras, high-capacity batteries, waterproofing and dust proofing, security and OS upgrade support. We will continue to reduce the purchase burden on consumers, while also boosting demand by setting competitive retail prices and operating purchase support programs like Samsung trading and student offers tailored to each model and region and considering exchange rate effects and the local situation. [Foreign Language] Ben Suh: [Foreign Language] I would like to thank everyone who share their valuable opinion, and we will be sure to refer to them in our decision-making process. That completes our conference call for this quarter. We wish you and those close to you, stay strong and in good health. Thank you.

Ben Suh: Welcome, everyone. This is Ben Suh from Investor Relations. Thank you for joining Samsung Electronics' Fourth Quarter 2022 Earnings Call. For additional details regarding our quarterly results, please refer to our earnings presentation which is available on our IR website at www.samsung.com/global/ir. On today's earnings call, other than for Display, I am joined by new representatives from each business unit due to our reorg at the end of last year. We have EVP Jaejune Kim representing memory; VP Hyeokman Kwon for System LSI; EVP Gibong Jeong for Foundry; EVP KC Choi for Samsung Display Corporation, which I will refer to as Display during today's call; VP Daniel Araujo for Mobile eXperience; and VP KL Rho for Visual Display. I want to remind you that some of the statements we will be making today are forward looking based on the environment as we currently see it and are subject to certain risks and uncertainties that may cause our actual results to be materially different from those expressed in today's discussion. I will start with the results for the fourth quarter of 2022. The business environment deteriorated significantly in the fourth quarter, showing weak demand amid an economic slowdown triggered by global macro and geopolitical issues. As a result, our consolidated quarterly revenue declined sequentially by 8.2% to KRW 70.5 trillion. However, we delivered a second straight record for annual revenue, thanks to our performance in this year's first 3 quarters. Although the Memory business revenue declined due to extremely challenging market conditions, Foundry business reported record quarterly revenue. Gross profit decreased by KRW 6.9 trillion sequentially to KRW 21.8 trillion, mainly due to the impact of a significant price decline and an inventory valuation loss in Memory, coupled with weak sales of smartphones. Gross margin also decreased by 6.4 percentage points to 31%. SG&A expenses declined by KRW 0.3 trillion quarter-on-quarter to KRW 17.5 trillion primarily due to reduced advertising and promotional spending. However, as a percentage of sales, they increased by 1.6 percentage points. R&D expenses reached a record high as we continue to invest in the future. Operating profit declined KRW 6.5 trillion sequentially to KRW 4.3 trillion, as Memory profit dropped significantly due to the aforementioned issues and as MX profit decreased due to softened new product effects. Operating margin also fell 8 percentage points to 6.1%. I will now briefly review the results of each business unit. Please note that all results mentioned refer to sequential quarter-on-quarter changes unless otherwise specified. For the DS division, in Memory, results were down sharply due to a large ASP decline as customers continue to adjust inventory and there was also a significant inventory valuation loss. In System LSI, earnings decreased as sales of key products were weighed down by customers' inventory adjustments. Foundry delivered record high quarterly revenue thanks to increased sales to its major customers. Profit increased year-on-year based on expanded advanced node capacity as well as a diversification of the customer base and application areas. For Display, the mobile panel business earnings declined due to reduced demand from smartphones. Nonetheless, the business delivered unrivaled results among industry peers through its strategic focus on the high-end segment. Large panel business narrowed its losses as sales of QD-OLED for TV grew amid strong year-end seasonality and as the business fully depleted its LCD inventory. For the MX business, both revenue and profit declined due to the waning launch effects of new products and weak demand in the mid- to low-end segment. The Network business recorded revenue growth led by domestic demand for 5G installations and business expansion overseas, including in North America. In VD, both revenue and operating profit grew as we actively addressed year-end seasonal demand and increased sales centering on premium products, including Neo QLED and super big TVs. In Digital Appliances, profit decreased as market conditions further deteriorated, while material and shipping costs remained high and competition intensified. Harman delivered a record-high quarterly profit for the second consecutive quarter, driven by increased revenue in the automotive business and solid sales of consumer audio products. Regarding currency effects against the Korean won in the fourth quarter, the positive impacts of a strong U.S. dollar on our component businesses had the effect of a company-wide gain of approximately KRW 0.5 trillion in operating profit when compared to the previous quarter. Regarding our corporate tax rate, Korea recently reformed several tax measures, including the introduction of dividends received exclusion for dividends from subsidiaries. Under this new exclusion measure, our corporate tax for the fourth quarter decreased, resulting in a net income of KRW 23.8 trillion for the fourth quarter. Previously, the company conservatively deferred corporate tax liabilities under the assumption that the entire earnings of our subsidiaries would repatriate in the form of dividends. The recent reform that prevents the double taxation on subsidiaries' dividends eliminated the need for such deferrals. As a result, the corporate tax rate expense for the fourth quarter became a negative number under the Korean International Financial Reporting Standards. Please note this is a onetime consequence of the recent tax law changes. It does not mean that the company received a corporate tax refund nor is it related to the company's actual tax payments. Next, I would like to share an overview of our business outlooks. In the first quarter, we expect global IT demand in the memory market to remain weak. DS will minimize adverse impacts by addressing the demand for high-end products, such as DDR5 and LPDDR5X and 200-megapixel sensors. However, concerns over continued customer inventory adjustments do persist. Display will actively engage to meet the demand for our major customers' new products, and DX will increase revenue and profits by expanding our leadership in the premium segment via Galaxy S23, for example, and improving operational efficiency. I will now brief you on the outlook for businesses that are not covered by separate speeches as those will follow shortly. Network will focus on expanding our domestic and overseas businesses, including North America and address new opportunities. Digital appliances aims to increase sales in the premium segments by launching new models such as Bespoke Infinite Line despite continued earnings pressure due to the poor economic conditions. For Harman, we expect earnings to decrease, mainly affected by weak seasonality for consumer audio products. Now let's move on to our outlook for 2023. Although macro uncertainties are expected to remain high, we anticipate demand to start to recover in the second half, following continued weakness in the short term. DS will further reinforce its market and technology leadership as we optimize our line operations to strengthen future competitiveness while also expanding the proportion of its advanced nodes and products such as DDR5, LPDDR5X and Gate-All-Around technology. Display's mobile panel business is expected to deliver solid earnings based on its competitiveness. In the large panel business, we'll focus on growing the QD-OLED business and improving profitability. DX will enhance its competitiveness by leveraging our technology leadership to strengthen the premium lineups, and the division will further expand the SmartThings ecosystem based on differentiated technologies and diverse partnerships that will provide customized hyperconnected experiences. As for the businesses not covered later, network will sustain revenue growth momentum by actively responding to major opportunities, particularly in our overseas business. And we will reinforce our technology leadership in 5G core chips and virtualized radio access networks. For Digital Appliances, we will continue to lead the market in providing hyperconnected experiences by further enabling our products with SmartThings. And at the same time, we will enhance the competitive edge of our premium products centered on Bespoke. Moreover, we will accelerate the growth of high-margin products such as system air conditioners and expand B2B and online sales in order to promote revenue growth. For Harman, both the automotive and consumer audio markets are projected to grow slightly in 2023. The audio business will strive to increase both on and off-line sales based on the competitiveness of our differentiated products and brands, and the automotive business will push to increase its sales in digital cockpits and car audio products. Turning to capital expenditures. CapEx in the fourth quarter was KRW 20.2 trillion, of which KRW 18.8 trillion was invested in the DS division and KRW 0.4 trillion in Display. Memory CapEx concentrated on preparations for advanced technologies, which included investing in P3 and P4 infrastructure to provide readiness for mid- to long-term bit supply as well as in EUV to further bolster future competitiveness. We also invested in securing infrastructure for future generation R&D. Foundry investments focused on expanding the production capacity of advanced nodes at our Pyeongtaek site as well as on initial capacity for 3-nanometer and infrastructure for our Taylor site to address future demand. Display investments covered flexible display production capacity expansion as well as facility improvements in infrastructure. The annual CapEx was KRW 53.1 trillion, with KRW 47.9 trillion invested in DS and KRW 2.5 trillion in Display. Although the CapEx plan for 2023 has not been finalized, I can share some high-level directions. In Memory, we will continue to invest for the mid- to long term to prepare for future demand and further enhance technology leadership. In addition to continuing with our EUV differentiation, our midterm plan includes investments for the transition to advanced technology nodes to address the markets for high-performance, high-density DDR5, LPDDR5X products, which are expected to be in high demand starting in the second half of 2023. For the longer term, we will also invest in infrastructure for P4 in multiple R&D capabilities, including a new dedicated semiconductor R&D fab as well as in capacity for the development of future generation processes. Foundry investments will continue to center on expanding the production capability at our Taylor and Pyeongtaek sites to address the demand for advanced processes, which is in line with our Shell-First strategy that enables us to respond swiftly and flexibly to customer demand. Next, I would like to address shareholder returns. Today, the Board of Directors approved a quarterly dividend of KRW 361 per share for common stock and KRW 362 per share for preferred stock. Based on the annual dividend payout under the current dividend policy, the total quarterly dividend payout is KRW 2.45 trillion, and it will be paid after final approval at the Annual General Meeting of Shareholders. As we close out the results for 2022, I would also like to share that the annual free cash flow was KRW 9.8 trillion and the shareholder return pool at 50% of the free cash flow is approximately KRW 4.9 trillion. Considering the projected annual dividend for 2022 is KRW 9.8 trillion, there was no additional pool for an earlier return. In 2023, as we set out to implement large investments for our future growth and differentiation, amid a challenging business environment, we will be especially more conscious about continuing to enhance our capital management efficiency. Next, I would like to share some of our key activities in sustainability management. First, as we recently showcased at CES 2023, we are committed to enhancing resource circularity throughout our product's life cycle and improving their energy efficiency such that using Samsung products contributes to a low-carbon and sustainable future. As prime examples of everyday sustainability, our SmartThings energy service allows users to effectively manage the energy use of all devices linked through this service. And through collaboration with Patagonia, we have developed and introduced a laundry cycle that can reduce microplastic released by up to 54% based on results from the European market. Finally, we applied innovative technologies to transform discarded fishing nets into recycled plastic components for use in our smartphones. Through these recycling efforts, we were honored with the SEAL Sustainable Product Award in acknowledgment of our commitment to a sustainable future. Moreover, we are joining forces with like-minded global partners to create ecosystems that enhance sustainability. For example, we are working together with Carbon Trust and other industry leaders to establish an industry standard to measure and reduce carbon emissions in the use stage of connected devices. Moreover, as part of our advocacy efforts to increase the supply of renewable energy in Asia, we are participating in the Asia Clean Energy Coalition as a member of the steering committee. Last but not least, to address the challenges faced by the semiconductor industry, we have joined the Semiconductor Climate Consortium as one of its founding members and have also been elected as a member of the governance -- the governing committee. Furthermore, Samsung Global Goals, an application on Galaxy smartphones, raised more than $10 million to contribute to the United Nations' development programs efforts to implement the Sustainable Development Goals. Meanwhile, Samsung ranked fifth for the third consecutive year in Interbrand's Best Global Brands, achieving the highest growth in ranking among non-U.S. companies. We will continue our efforts to enhance sustainability in all aspects of our businesses going forward. I will now turn the conference call over to the representatives from each business unit to present fourth quarter performance and outlooks for the respective business segments in more detail. We will start with EVP, Jaejune Kim of the Memory business. Thank you. Jaejune Kim: Good morning. This is Jaejune Kim from the Memory Global Sales and Marketing. For the memory market in the fourth quarter, demand weakened as customers continue to adjust inventory under increased uncertainties in the external environment. Our bit growth outgrew the market by expanding sales focusing on several applications aided by the base effect of coming in under market last quarter. However, memory price fell further as deepening macro issues eroded customer -- consumer incentive. Additionally, with the impact of meaningful loss from the valuation of inventory, our results decreased significantly compared to the previous quarter. In DRAM, for server, as you know, is that component supply issues gradually eased. However, demand growth was limited because of our decline in Set build caused by economic uncertainties and customer stance to maintain their inventory adjustments. Mobile and PC, it seems that our demand was muted because of continued inventory adjustment at major customers and a reduction in Set builds, amidst shrink consumer sentiment coming from concerns of economic slowdown. While decline in demand was steepening across the overall industry, we expand the portion of cutting-edge node by optimizing our product portfolio. In addition, we actively responded to demand for high-density products focusing on major data centers and several OEM customers and our quarter-on-quarter bit growth exceeded market. Next, I will talk about the NAND market. For server SSD, despite continued growth in our contents per box, customers continue to delay purchases because of their inventory adjustments and demand was somewhat stagnant. As for mobile, while consumer sentiment remained weak due to the economic slowdown, demand was sluggish, especially in China because of Zero-COVID policy until early December and production disruption at some customers. Also for client SSD with reduction of Set build at some customers, the burden of inventory adjustment increased and demand for memory purchase somewhat slowed. As demand continued to weaken due to macro issues, we actively addressed demand for high-density products across all applications and diversify our product and customer portfolios. As a result, Q-o-Q bit growth exceeded market. Now let's move to the outlook for the first quarter. For DRAM, in server, as economic uncertainties continue, our customers have maintained their stance on inventory adjustment so far. Thus, under concerns over weakening momentum for a demand recovery in the short term, we should monitor if demand will improve in accordance with macro variables such as interest rate policies. And for mobile and PC, under the effect of slow seasonality and weakened consumer sentiment due to concerns of deepening economic slowdown down, there is a possibility that demand will shrink. However, we need to keep watching for signs of demand recovery along with developments in China's COVID-19 recovery situation and economic stimulus packages. As a new CPU launches, we will work to prepare for our expected fast-growing DDR5 demand for server and PC. And in mobile application, we will actively address demand for high-density LPDDR5X for high-end products. For NAND, in server SSD, there is a possibility that demand will drop significantly -- slightly compared to previous quarter as customers continue to adjust their inventory due to Set build constraint under concerns overall deepening economic slowdown. However, considering the hybrid cloud trends of enterprise area can positively influence demand and we need to monitor [retail] impacts. For mobile, although we expect continued high-density trends based on price elasticity, we expect demand to be weak as customer sentiment continue to be sluggish because of inflation and interest rate hikes. Also for client SSD, even though demand for high-density products is expected to increase steadily, our purchase activities are projected to be delayed as OEM customers deplete accumulated Set inventories. Based on our cost competitiveness, we plan to expand the sales portion of high value-added products by addressing demand for high-density server SSDs. Also we will actively accommodate the high-density trends of smartphone and PCs to strengthen our market leadership. Now let's move on to the outlook for 2023. While the industry's overall inventory level has increased due to the lowest ever demand bit growth last year, our customers are likely to maintain their stance on inventory adjustment in the near term. We expect customer purchasing sentiment to recover after inventory of those months are complete, but it's necessary to monitor whether change in economic conditions and consumer sentiment result in improved demand. Looking at by each application. First of all, for server, for the time being, our customers are expected to keep adjusting inventories due to economic uncertainties. However, we expect fundamental demand to remain solid given the investment in core infrastructure such as for AI and machine learning. In particular, demand for DDR5 is projected to increase in [earnings] in the second half of the year, thanks to increasing contents per box and the launch of new CPUs. For mobile, consumer sentiment is likely to keep muted due to various macro issues. However, demand may recover relatively in the second half of the year, thanks to the high-density trends and the spread of new competitors in smartphones. Considering our numerous barriers affecting demands, such as inflation and interest rate trends as well as China's easing COVID-19 policy and economic stimulus packages, we will continue to observe market conditions for variable scenarios. For PC, similar to mobile, the surge in sales induced by COVID-19 is likely to cause the replacement cycle to take some times, and shipment are focused to weaken for the time being. However, we will continue to watch for factors that positively affect demand, such as launch of new CPUs and increased adoption of high-density products. While actively addressing to the demand for DDR5 with the rising adoption of new CPUs, we will respond to demand growth in a timely manner, focusing on high-density products for server and mobile by optimizing our product mix. Moreover, to strengthen our future competitiveness, we are going to optimize line operations. In addition, we will increase the portion of essential R&D investments, including the expansion of engineering [land] for further process stabilization, and we believe that it will bring us enhanced market and technology leadership. Furthermore, under the market uncertainties, we will carefully keep monitoring the market demand changes from both short and mid- to long-term perspective. Thank you. Hyeokman Kwon: Good morning. This is Hyeokman Kwon from the Systems LSI business. In the fourth quarter, System LSI earning declined due to sluggish sales caused by inventory adjustment in the industry and a decrease in sales for major components. However, even under difficult conditions, the mobile Soc business achieved its highest still ever full year revenues, and it has continued to increase market share by expanding sales over volume zone products. Furthermore, the automotive SoC business has solidified its mid- to long-term growth base by supplying initial sample on schedule for a European premium OEM and by signing an MOU for product development with autonomous driving solution company in the U.S. Additionally, our fingerprint authentication card product won the Best of Innovation Award at CES 2023. In the first quarter, impact of sluggish demand and inventory adjustments are expected to continue for the time being. And it may be difficult to avoid weak sense of major component such as SoCs and sensors. In order to minimize the drop in earnings, we will strive to expand the sales of low to mid-priced volume zone SoCs and 200-megapixel image sensors. And for automotive SoCs, we will try to sustain growth momentum through additional orders from European premium OEMs and for self-driving products. For 2023, we expect the impact of the economic downturns to continue for the time being. However, analysis over smartphone purchase patterns suggest that demand will continue to polarize between premium and low-priced mobile phones. In order to respond to this divided market for SoCs, we will expand the sales in the volume zone while also reinforcing the position of our product for flagship devices. Furthermore, we will ensure our major smartphone OEM customers successfully launch flagship models by smoothly supplying and expanding the line of our differentiated 200-megapixel sensors. Thank you. Gibong Jeong: Good morning, and good evening. This is Gibong Jeong from the Foundry business unit. The Foundry business in the fourth quarter once again set a new record for quarterly revenue. Our full year sales also reached an all-time high. This was thanks to increased contribution from the advanced nodes, an increased portion from the HP sector and the continuous evolution of our mature processes. Nonetheless, our capacity utilization started to decline in relation to inventory adjustment at the customer side. In the mobile and HP sectors, customers' interest in our next-generation Gate-All-Around, GAA, processes has increased meaningfully. Regarding GAA processes, the 3-nanometer first-generation process is currently being mass produced with stable yield. The development of this 3-nanometer second-generation process is progressing rapidly based on our first-generation mass production experience. In the automotive sector, we started to develop 4-nanometer process following the mass production of the 5-nanometer for our future growth in advanced nodes. In the first quarter of 2023, we expect our capacity utilization to decrease and our earnings decline accordingly. It is due to weak demand amid slowing global economic growth, inventory adjustment of customers. In 2023, on the whole, demand may fall temporarily in the first half of the year due to the economic slowdown and inventory adjustment by customers. In the second half, however, we expect market demand to recover in the HPC and automotive sectors. Customer interest in multi-sourcing is ever growing amid geopolitical uncertainty. To address such demand, we aim to invest in advanced processes and outperform market growth. Based on the competitiveness of our GAA processes, we will win new customers for the 3-nanometer second-generation process. We will strengthen technological leadership by focusing on the development of the first-generation 2-nanometer process. In addition, we will continue to develop specialty and mature processes in order to increase share in automotive and IoT sectors. Finally, we have established an advanced packaging business team within the DS division. It is reflecting the rising importance of next-generation packaging technology in the HPC and mobile markets. This will expand our package business and bolster synergies between business units. We will strengthen our end-to-end advanced packaging processes from development to mass production, testing and shipments. And we will strive to preemptively address future demand and expand our advanced packaging business in this newly growing area. Thank you. Kwon Young Choi: Good morning. I'm KC Choi from the Corporate Strategy team at Samsung Display. I will now summarize our results for the fourth quarter of 2022. For the Mobile Display business, the market demand continued to contract due to continued global unfavorable factors despite the peak season, but we have achieved solid results by focusing on high-end smartphone products. For the Large Display business, sales improved due to increased TV sales during the year-end peak season. The deficit has also eased. In addition, inventory was exhausted, and the company switched to a full flagship security center business. Overall, 2022 can be said to be a year in which we achieved a tangible result from preemptive business restructuring, such as all the exit from LCDs, strengthening portfolios focused on high-end smartphones and conversion to large-sized securities. Next, let me share the outlook for the first quarter of 2023. For the Mobile Display business, smartphone demand is expected to show negative growth compared to the previous year due to economic slowdown in major regions as well as the off-season effect. We continue to maintain our strategy in performance by actively responding to the launch of major customer flagship products. For the Large Display business, we will secure additional demand and promote and only ramp up by introducing a new item of both the large TVs and large size monitors. Finally, I will share our outlook for the display market and display business strategies for 2023. Although a difficult business condition environment is expected due to unstable market conditions such as inflation and tight monetary policy and at the entry of competitors in [Indiscernible]. We plan to strengthen our market dominance by taking advantage of the technological performance gap in the relatively solid high-end smartphone market. In addition, we will actively utilize market changes that accelerate to the transition to OLED to maintain our leadership in the market with cost competitiveness, which is a result of preemptive investment. Demand for large size panel is expected to be decreased, continued -- due to continued economic uncertainty, but we will continue to improve profitability by strengthening our sales base in the premium market base on stable yields. Thank you. Daniel Araujo: Hello, everybody. This is Daniel Araujo from the MX division. I'd like to share our Q4 results and the outlook for the MX business. In Q4, demand for smartphones remained sluggish, with the mass market contracting sharply due to continued inflation and geopolitical instability. The MX business sales and profit fell sequentially, due to speeding, new product effects of flagship models and the drop in smartphone sales and weak demand stemming from the economic slowdown. In particular, the impact of the decline in sales of mass market smartphones was greater than previously expected, but our flagship sales held up well relative to market projections despite the difficult macro situation. Next, let me share the Q1 outlook. In Q1, we expect demand across all smartphone segments to decrease Q-on-Q due to the continuing economic slowdown and other lingering factors contributing to macroeconomic instability. For the MX division, we will push to expand flagship sales with the successful launch of the S23, which we prepared thoroughly and will be in dealed at Samsung Galaxy impact tomorrow. With smooth supply in place to confidently respond to initial demand will actively promote our maximized competitiveness in areas like camera and gaming performance and expand revenue centered on sales of flagship products through a variety of sales programs tailored to regional characteristics. As for Galaxy ecosystem devices, such as premium tablets and wearables, we will continue marketing activities that are linked to our smartphones in order to expand sales. In addition, as competition in the market intensifies and the economic downturn persists, our continued efforts and effective resource management will help secure solid profitability. Now I'd like to discuss the outlook for 2023. Amid prolonging geopolitical issues, continued inflation and the continued global economic slowdown, we expect the smartphone market to contract in 2023, with the mass market impacted the most. Although we expect the overall tablet market to stay similar year-on-year, the consumer preference for premium tablets and smartphones should remain solid. As for the wearables market, growth is forecast to decelerate. To press ahead with the high growth of foldables and revenue expansion of the S series, MX will further enhance the completeness of our flagship experience, based on actual user experiences by focusing our technology capabilities on strengthening the competitiveness of flagship products. With these efforts, we will further expand our premium customer base and thereby improve the sales mix and sales growth. In addition, based on the strength of our collaborations with mobile carriers, we will actively facilitate a variety of sales programs to expand sales of 5G smartphones in the mass market segment in order to overcome negative market growth. For tablets, we will continue to pursue sales growth by strengthening our lineup of premium products in line with a large screen trend and by upgrading experiences through features such as the S Pen. In wearables, we will expand sales by strengthening product competitiveness through an improved multi-device experience. Through these efforts, we will achieve sales growth in 2023 and with continued progress on operational efficiencies in response to the macroeconomic instability, we will secure solid profitability. Thank you. Kyungle Rho: Good morning. This is Kyungle Rho from the sales and marketing team of Visual Display. First, I would like to review the market conditions and our performance in the fourth quarter of 2022. TV market demand increased quarter-on-quarter, thanks to year-end peak seasonality, but it contracted year-on-year, led mainly by declines in developed market due to a global economic downturn. For Samsung, we improved our performance quarter-on-quarter by proactively addressing regional peak season demand such as Black Friday and by expanding sales centering on high value-added products including NAND strategy and lifestyle promoters. However, our performance declined year-on-year due to a contraction of consumer sentiment caused by high interest rate and inflation and also impact from currency movement. Now let's look at the outlook for first quarter and 2023. Market demand in the first quarter is expected to decline both quarter-on-quarter and year-on-year due to seasonality and continued impact of global economic downturn. Samsung will capture premium demand utilizing our 2023 NAND strategy, which provide a richer and more valuable user experience. We have enhanced device-to-device connectivity on top of its high definition, high performance. To this end, we will strengthen partnership with major channel partners by region and maximize the performance of various marketing promotions for each country by utilizing strategic products. At the same time, we plan to focus on securing profitability by continuing to optimize operation and manage its cost. Regarding the TV market in 2023, along with various external uncertainties that are expected to continue in 2023. Overall TV demand is likely to remain stagnant, but demand for premium products, including QLED, OLED and Super Big TV should keep growing. We will continue to lead the ultra large screen market with our 98-inch NAND strategy, and we plan to release Micro LED models in various sizes so that more consumers can enjoy what appears is the world's best picture quality and screen experience. For OLED TV, we will provide consumers with a wide range of options by adding 77-inch models to the current 55-inch and 65-inch models in our line. And we will continue innovation in premium products, including the release of 57-inch and 49-inch OLED gaming monitors. At the same time, we will continue to strengthen sustainable, eco-friendly management throughout the life cycle of all our products and provide a new consumer experience that connects screen and other products or to product solidify our position as an industry leader. Thank you. Ben Suh: Thank you. That sums up the fourth quarter results presentation. Before we move on to the Q&A session, I would like to share several data points in key business areas. Considering the continuing macro uncertainties, we will not be providing annual guidance at this time. Comparative figures are on a quarter-to-quarter sequential basis. For DRAM, in the fourth quarter, our bit growth increased by a percentage in the high single digits and ASP declined by a percentage in the early 30% range. For the first quarter of 2023, we expect market bit growth to decrease by a low single-digit percentage and our bit growth should be similar. For NAND, in the last quarter, our bit growth increased by a percentage just into the double digits. Our ASP fell by a percentage in the high 20%. In the current quarter, we expect market bit growth to decrease by mid-single digit, and our bit growth should slightly outperform the market. For Display in the fourth quarter, the OLED portion of revenue was a percentage in the mid-90s, and OLED sales volume increased by a high single-digit percentage. For mobile in the October quarter, shipments were approximately 58 million units for smartphones and 8 million units for tablets. Smartphone ASP was USD 240. For the first quarter of this year, we expect smartphone shipments and ASP to rise but shipments of tablets to decline. For TVs, sales volume of LCD TVs in the fourth quarter increased by a percentage in the high teens. For the current quarter, we expect sales volume to contract by a percentage in the low to mid-teens. I will now move on to the Q&A session. First, we will start taking questions from the conference call. Operator: [Operator Instructions] The first question will be presented by Sung Kim from Daiwa Capital Market. Sung Kim: My first question is about the Memory business. There is quite a lot of concern in the market about memory demand. I think the expectation is that the shipments at the set level will remain weak. However, I think one upside that we can look forward to is that perhaps the significant drop in prices that has been continuing since second half of last year may continue to drive increase in content per box. And so in that context, could you share with us your outlook in content per box increase by application? Second question is about the digital appliance side, overall logistics as well as raw material prices have been coming down and stabilizing. What kind of impact do you think that would have on your digital appliance profitability this year? And in connection with that, what kind of strategy is the company planning to secure better profitability in its DA business. Jaejune Kim: To answer your question about content per box by application, it is true that we are also observing a trend of increasing content per box mainly driven by price electricity, especially around consumer devices, such as smartphones and PCs. Jaejune Kim: Especially in the case of mobile, we expect this increase in content -- memory content to continue driven by price elasticity. We're actually seeing an increase of competition around memory specifications, especially around the high-end smartphones. With all of that considered, we are currently expecting that this year, memory content growth rate would be around 10% year-over-year for DRAM and around high-teen growth for NAND. On the other hand, for the server side, the upside from price elasticity would be relatively more limited. However, what we can look forward to on the server is the demand that will happen from the conversion, the switching over to the new platform. The new platform that will be launched this year has more number of cores. And therefore, we think that the rate of high-density memory adoption will increase by around 20% year-over-year for both DRAM and NAND, and also, at the same time, we think that the adoption of DDR or migration to DDR5 will happen at the same time. Especially this conversion to DDR5, there are things to keep in mind, for example, because of the chip size penalty, bit productivity decrease is expected also because this is an initial new product, market inventory levels are currently low. And so initially, we can expect there to be build demand. And on top of that, demand to secure initial inventory. And so actual purchasing demand may pick up faster than expected. Daniel Araujo: To answer your question about the digital appliance and impact of logistics cost and raw material prices. As you mentioned, raw material prices overall have been on a declining trend in second half of last year. But with the increase in raw material demand tied to China's reopening and also expectations of a possible recovery of global economic sentiment, raw material prices recently have been rebounding. And so considering that the amount of decrease we can expect may not be as large as expected. Our ocean freight has definitely been decreasing since second half of last year, but still compared to pre-COVID levels, it is relatively high. And so while these factors would have a positive impact on profitability this year, overall situation remains fluid. And so it is too early for us to make any definitive calls. And that is why the focus of our profitability strategy is, number one, minimizing the impact of any market volatility and changes by strengthening our production hub competitiveness for better cost savings and also to leverage the long-term supply contracts that we enter with raw material companies at attractive terms. Also, on the sales side, we're focusing on expanding our premium sales, such as the Bespoke Infinite Line and also expanding our B2B and online channel sales. Operator: The next question will be presented by TuanChe from SK Securities. Unidentified Analyst: I only have one question, and that's about your memory supply plan, which I'm sure many people on the call are interested about. Given the fact that market environment is worsening and continuing to stay weak, does the company have any plans of reducing or delaying its equipment investment plans or any plans of reducing its production through line adjustments or adjustment of its utilization rate? Jaejune Kim: Yes, I'll answer that question about our investment and production plans for this year in connection with this year's market situation. As you mentioned, with recent inflation, higher interest rates, consumer sentiment remains soft, also due to concerns of a weak economy going forward, even businesses, companies are placing top priority on maintaining their financial soundness, and this has resulted in a prolonged inventory adjustment cycle by customers that started from second half of last year. While this situation is not immediately favorable for our business performance, on the flip side, this is a great opportunity for us to prepare for the future. And our CapEx approach this year is to continue to make the infrastructure investments that are necessary to respond to mid- to long-term demand and to make the -- and to secure the essential clean rooms that we would need to do that. So in conclusion, this year's CapEx plan is expected to be similar to previous year. Now at the same time, in order to secure best quality and also line operation optimization. We have strengthened our production line maintenance efforts and are going through some equipment layout adjustments, which and also we are efficiently pursuing the migration to future cutting-edge nodes. Also, in order to increase our process technology competitiveness and also to stabilize our process technology early on, we have been increasing the share of engineering runs and as a result of that, within our total CapEx, the R&D-related portion is expected to increase versus previous years. And so in the process of carrying out these initiatives, we think that impact on our bit at a meaningful scale in the near term would be inevitable. However, if you look at the long term, these are all essential activities that are necessary to enhance our competitiveness and responsiveness to the market. And that's why we will be carrying these activities out at a brisk pace as part of our preparations for future growth. Lastly, market uncertainty, including geopolitical issues, is a given. And therefore, we will continue to carefully monitor any changes in the mid- to short term or mid- to long-term market demand. Operator: The next question will be presented by Dongwon Kim from KB Securities. Dongwon Kim: My one question is about the display side, the smartphone OLED display, with market competition becoming more intense in that segment, there are concerns in the market that Samsung displays market share in the mobile OLED segment may decrease. Can you share with us your starting on how to respond to this intensive market competition? Gibong Jeong: To answer your question about our smartphone OLED, which does account for a large share of our both revenue and profitability, the company has always -- already been aware of the possibility of competition becoming more intense in the mobile OLED market. While on one side, the smartphone device demand is weak with economic recession and Chinese market demand remaining sluggish, the competitors in the OLED supply side have been increasing their utilization. However, actually, the -- because the competitors' capacity has surpassed market demand some time ago, the risk of overheated competition in this segment has always existed. So despite this very intensive and difficult competitive environment, we have been able to respond very effectively during the recent several years. And I think that's explained by several factors. The most important being our development capabilities, especially our time-to-market capability, which is critical in the smartphone market, which has a shorter replacement cycle versus other IT or TV devices, for example. We have more than 10 years of mass production experience and leveraging that, we have been able to continuously be the first to market with products that have more superior characteristics. And we think that this edge that we have in competition will remain effective this year. One thing we are watching carefully is how customers are demanding for differentiating technology. And in order to keep that demand for differentiating technology strong, we are actively preparing new technologies, such as UPC, the under-panel camera, or extreme narrow bezels or low -- ultra-low-power display that actually appeal to consumers, and we'll continue to very carefully and closely cooperate with our Handset OEMs. Operator: The next question will be presented by Jong Jin Park from JPMorgan. Jong Jin Park: I have a question about the mobile side. If our information is correct, the new flagship that will be launched this year would be using a third-party AP and the extreme nodes would not be used on the flagship to be launched this year. On the other hand, we're also hearing news that an application solution development team has been created under the MX division. And so can you just clarify what that implies in terms of where the AP development effort will happen going forward within Samsung Electronics, would it belong under MX? Or with the AP solution development belong under System LSI? I think also what we can read from that is that the extreme nodes then would mainly be used on the volume zone, would it be possible to share with us what kind of percentage within the volume zone the extreme nodes would have as a share? Unidentified Company Representative: Sure. So for each of our products, we select the AP chipset with the most appropriate price and performance for that product. And going forward, we will continue to maintain an open stance on procurement based, of course, on the competitiveness of VJP. We release every product only after undergoing thorough verification and all APs are optimized for each device in order to give customers an exceptional user experience and performance. And in the future, we will continue to select the best AP for each model after considering factors like market demand, release timing and regional needs. Unidentified Company Representative: So the AP is a highly important component that determines product performance as well as the customer experience. So taking that into account, in December of last year, we set up the AP solution R&D team, who is in charge of AP optimization and next-generation advanced research. This AP solution R&D team will work on developing AP solutions that are more optimized for Galaxy products in collaboration with our chip side partners. And through this, we will continue to strengthen not only our product competitiveness, but also Galaxy's differentiated user experience. Operator: The next question will be presented by [Indiscernible] from Korea Investments and Securities. Unidentified Analyst: My first question is about the Memory business, especially the Xi'an fab. The U.S. government is continuing to heighten its sanctions against China. And in that context, even though the company received a 1-year grace period from the Department of Commerce for the Xi'an fab, can you share with us what the company plans to do in terms of how to operate the Xi'an fab going forward on a longer-term basis? And what kind of impact do you expect? Looking from outside, you also have, for example, a base in Taylor, even though that is a foundry. Would the company be considering any plans of establishing memory capacity at sites within the U.S. such as Taylor in response to that? Second question is about the Foundry business. I think looking at the Foundry, 2 key items going forward for you would be the development of your 3-nano second-generation GAA and also the new fab in Taylor that's being built. Can you give us updates on both the second-generation 3-nano development status, order win status as well as an update on Taylor? Jaejune Kim: To answer your question about Xi'an, as you know, we have put in quite a lot of time, effort and investments to bring the Xi'an fab into a level of stable operation. And so in terms of deciding our plans going forward, we need to be carefully considering various factors, including the long-term market outlook, global customer demand, economics and profitability. And our focus is on finding the plan that would enable us to provide optimized customer response. You've also asked about whether we're considering memory capacity in places such as Taylor. In the near term, the plan that we have for Taylor is around Foundry capacity. And so I'm not able to give you a clear answer on that specific question at this point. Now that said, regarding securing any new production bases, whether it is in Korea, overseas, we are planning to take into account various factors, with open possibilities and under various conditions. Unidentified Company Representative: To answer your question, first of all, our 3-nano GAA, second generation, to give you an update on the development, we're currently on schedule with targeted mass production in 2024. Also, you talked about the order situation. Currently, we are in collaboration. We're talking to a large number of mobile as well as HPC customers, they are showing quite a lot of interest. I think best way for me to explain our second-generation GAA 3-nano is to explain the technology, the MBCFET technology. The MBCFET technology has various advantages versus FinFET in terms of performance, power efficiency and also design flexibility. That is why customers are highly interested in this new technology, and we also have a track record of mass producing this generation -- Gen 1 3-nano with MBCFET technology first in the world. And our Gen 1 3-nano MBCFET technology is currently in mass production at stable yield. And so our second-generation technology will offer gains in terms of size, performance, power efficiency and our development is actually making quite good pace based on our mass production experience of Gen 1. Now regarding the update on Taylor, we are on schedule for 4-nano mass production during second half of 2024 in Taylor. Operator: The last question will be presented by Peter Lee from Citigroup. Unidentified Analyst: My first question is about memory. Actually, the impact to memory demand that we can expect from the increase of various AI technology, especially ChatGPT recently is attracting a lot of attention. Is there's a wider adoption of ChatGPT and other AI-based natural language processing technology in the market? What kind of implications do you think that would have on overall memory demand? Second question is about the display side. I think last year during occasions, including the earnings conference call, you mentioned that Samsung Display will be strengthening its IP. Can you give us any update where -- are there any visible achievements since then? Jaejune Kim: To answer your question about impact on memory demand by these AI natural language processing technology, we also agree that the increase of the natural language-based, conversation, style, AI services would have a positive impact on future memory demand I think especially meaningful with the adoption of ChatGPT is that now these large-scale language models have finally reached a level where it can be now commercially used. In order for these AI-based models to train and also infer, there needs to be, number one, high-performance processors that can actually do large-scale computation, and also combined with this processor, you need high-performance, high-density memory to support that. And therefore, we think that with the wider adoption of large-scale language model AI-based services, there will also be an increase in hardware demand. More specifically, the areas within the memory that we can expect there to be long-term demand growth would be the high-performance HBM that provides data directly to GPUs and AI accelerators as well as the high-density server DRAM, such as the 128 gigabyte and plus that would support the CPUs that process the AI learning data. And that is why we are planning to actively capture the increase in demand related with AI services by developing high-performance, high-density memory products. Gibong Jeong: To answer your question about the efforts to strengthen our IP, intellectual property, at Samsung Display level, Samsung Display considers is widely practiced patent infringement within the Display industry. It's a serious problem. And since last year through various channels, including, for example, IR events, we have mentioned that the company is preparing various response strategies. Within the smartphone ecosystem, it's very important that technology use fairly and that its value is protected. However, what we are seeing, for example, out in the market, is just quite concerning. For example, the Diamond Pixel, which is one of our signature technology patents, we're finding products being sold online that latently infringed upon this technology. When we looked into the details, it was even unclear where this product was being manufactured. And that is why we filed a complaint against a total of 17 U.S. component wholesalers against the U.S. International Trade Commission. This is the start, and we will continue to actively fight to protect our intellectual property. Finally, we will answer questions that were submitted online in advance. We have been accepting questions via our website in advance of an earnings release as part of our efforts to strengthen communication with individual investors and enhanced understanding of the company. And we received a wide variety of questions again this quarter. I believe a majority of the submitted questions were sufficiently answered during the Q&A session, but we will answer one more question on a topic that garnered a high level of interest from our shareholders but were not addressed during the Q&A session. The question is as follows. What are the major innovation points of the new S series product in terms of performance and design? And what are the marketing strategies to boost the sale? This question will be answered by VP Daniel Araujo, representing the Mobile Experience division. Daniel Araujo: Sure. So the S23 series, which will be viewed at Samsung Galaxy impact tomorrow or the day after, is a product that combines the best in features and performance. And we believe we'll establish a new standard for smartphones that consumers can trust and use for a long time. In order to solidify best in the industry positioning, we'll focus on appealing to consumers with the best camera and gaming performance centered on the ultra-model, which inherits the user experience of the Galaxy Note. We will also continue to carry out privacy campaigns, make ESG advances like applying more eco-friendly materials to our products. And we're also strengthening marketing of the Galaxy's unique experience, especially via the social channels that are linked to our customers' daily lives. And considering that many consumers' disposable income is decreasing during this difficult time, we plan to expand programs like Samsung Trade-in that reduce the purchase burden of our products. So with all this thorough preparation from securing sufficient volume for our product launch, all the way to the go-to-market strategy, we'll strive to expand sales of flagship products. I would like to thank everybody who share their valuable opinion and we will be sure to refer to them in our decision-making process. That completes our conference call for this quarter. We wish all of you and those close to you stay strong and in good health. Thank you very much.

Ben Suh: Welcome, everyone. This is Ben Suh from Investor Relations. Thank you for joining our Third Quarter 2022 Earnings Call. For additional details regarding our quarterly results, please refer to our earnings presentation which is available on our IR website at www.samsung.com/global/ir. On the call today, I'm joined by the following representatives from each business unit: EVP, Han JinMan, representing Memory; VP, [indiscernible], for System LSI; EVP, Kang Moonsoo, for Foundry; EVP, Choi KwonYoung, for Samsung Display Corp, which I will call Display in the presentation; VP, Kim SungKoo, for Mobile eXperience; and VP, Kim Young Moo, for Visual Display. I want to remind you that some of the statements we will be making today are forward looking based on the environment as we currently see it. All such statements are subject to certain risks and uncertainties that may cause our actual results to be materially different from those expressed in today's discussion. Before reviewing our quarterly results, first, I want to confirm the third quarter dividend. Today, the Board of Directors approved a quarterly dividend of KRW 361 per share for both common and preferred stock. Based on the annual dividend payout under the current dividend policy, the total quarterly payout is KRW 2.45 trillion and it will be paid in mid-November. Now I will move on to the results for the third quarter. Despite a challenging business environment, marked by global inflation and sluggish demand, we still delivered our highest ever third quarter revenue of KRW 76.8 trillion. We have set new records for total revenue in a respective quarter in each quarter so far this year, and we expect annual revenue to surpass the all-time high mark that we set last year. While Memory business revenue declined as customer inventory adjustments caused our bit growth to fall short of guidance, each of the foundry and mobile panel businesses delivered a new quarterly record for revenue. Sales of flagship smartphones were solid, helping drive our overall revenue performance. Gross profit decreased by KRW 2.2 trillion sequentially to KRW 28.7 trillion, mainly due to the impacts of a significant price decline in memory. Gross margin decreased by 2.7 percentage points. SG&A expenses increased KRW 1 trillion quarter-on-quarter to KRW 17.9 trillion as we continue to actively invest in R&D and increased advertising and promotional spending. As a percentage of sales, they increased by 1.4 percentage points. Operating profit declined KRW 3.2 trillion sequentially to KRW 10.9 trillion. Display set a new record for quarterly profit led by increased demand for major customers' new products and MX improved its profit thanks to solid flagship sales. However, the gains were overshadowed by weak results in the Memory business. Operating margin also decreased, falling 4.1 percentage points to 14.1%. I will now briefly review the results for each business unit. For the DS division in Memory, results declined quarter-on-quarter as customers' inventory adjustments exceeded market expectations and demand for consumer products remained sluggish, including for mobile products in China. In System Semiconductors, profits decreased amid weak demand for mobile and TV, but foundry delivered a record result with ongoing yield improvements in advanced nodes and increased revenue contributions from derivative processes of mature nodes. For Display, results in the mobile and panel business significantly improved both quarter-on-quarter and year-on-year, with the release of major customers new products, including foldables. Also, our differentiated technology drove increased share in a major customers' new flagship smartphones. Losses in the large panel business continued amid weak TV and monitor markets. The MX business recorded solid profitability, driven mainly by strong sales of flagship smartphones including foldables as well as new wearable products. MX also benefited from effective resource management in the face of continued foreign exchange headwinds. The Network business delivered improved results led by its overseas businesses, and it secured a deal with Comcast in the United States, a testament to our continued pursuit of new opportunities. In VD, profits declined amid a combination of decreased demand and increased costs. But still, we reinforced our leadership position by expanding sales of premium products. In digital appliances, despite an enhanced product mix, persistent materials and logistics challenges, along with sluggish consumer demand, affected our performance. Harman delivered a record high quarterly profit, driven by strong demand for connected car technologies and solutions, and also by strong sales of consumer audio products. Regarding currency effects against the Korean won for this quarter, the positive impacts of a strong US dollar on component businesses surpassed the adverse impacts of the DX division, resulting in an approximately KRW 1 trillion companywide gain in operating profit compared to the previous quarter. Next, I would like to share our business outlooks. In the fourth quarter, while global IT demand and the memory market looked to remain weak, we plan to keep improving earnings in foundry and display and continue our efforts to secure profitability in the DX division. Now for each business unit's outlook. In Memory, even though we expect fundamental server demand to remain, backed by continued investments in core infrastructure, impacts of inventory adjustments are likely to persist. We will actively address the demand for high density products and, at the same time, continue to place a priority on DRAM profitability by transitioning our product mix towards a more cost competitive lineup. For System LSI, we expect our SOC revenue to grow following the launches of new products from our mobile customers, and we will work to expand sales of 200 megapixel sensor products. For foundry, we anticipate that demand from our global customers will remain solid, and that additional yield enhancements will help maintain earnings momentum. For display, the mobile panel business is expected to continue to grow on the back of strong smartphone demand for premium OLED panels, in which we have a clear competitive advantage. The large panel business will expand the presence of QD-OLED by capitalizing on year-end seasonality and growing our customer base. For the MX business, we will continue to focus on sales of premium smartphones and expand the sales of tablets and wearables. And we expect the sales volume to grow after releasing new mass model smartphones. Even though macro uncertainties are likely to persist, we will continue to focus on profitability. Network will continue to expand overseas businesses, including in the North America and Japan regions. For VD, our priorities are capturing demand in the premium market during strong seasonality and enhancing profitability through improving cost efficiency. Digital appliances aims to expand revenue by increasing sales in the premium segment and online channels during the year-end seasonality, focusing on our bespoke lineup. Now let's move on to our outlook for 2023. We expect demand to recover partially, but macro uncertainties are unlikely to dissipate. The DS division will actively address the demand for high value-added products, expand the advanced node portion of production, and increase adoption into new application areas. The DX division will continue to reinforce our leadership and expand lineups in premium segments, while enhancing user experiences by expanding multi-device connectivity for mobile, TVs, home appliances and others based on smart things. For the Memory business, although geopolitical uncertainties are likely to dampen demand in the first half, we expect demand to rebound, centering on server, driven by resumed expansion of data centers. We will align our supply strategy with our mid-term outlook, taking into account the limited overall production growth in the industry. In addition, we will reinforce market leadership by actively addressing the demand for new interfaces, including DDR5 and LPDDR5X and the rising demand for high density products. System LSI, through the reorganization of its SoC business, will be in position to bolster its competitiveness and solidify the position of our flagship products. And in Foundry, we will establish a foothold to narrow the gap with our lead competitor by reinforcing technology leadership in advanced nodes and increasing new orders in HPC and automotives, among others. For Display, in the mobile panel business, we will continue to focus on expected strong demand from premium smartphones and on expanding into new application areas such as IT and gaming. So large panel business will increase sales of QD-OLED by expanding our lineup and further enhancing performance, while also working towards profitability. The MX business will seek to grow revenue by enhancing the product mix and expanding the sales of flagship products based on the high growth of foldable devices and increased sales of the S Series. Furthermore, we will secure a solid profit margins through our efforts to continue upgrading premium large screen tablets, sustain high growth of wearables and enhance operational efficiency. For Network, we will pursue continued revenue growth with timely responses to major overseas business expansion opportunities and reinforce our technology leadership in 5G core chips in virtualized radio access networks. BD should continue to lead the ultra large screen and premium market segments. We will continue solidifying our industry leading position by enhancing user experiences as we link more products seamlessly to our screens. For digital appliances, we will keep innovating highly efficient, eco-friendly products and aim to achieve revenue growth centering on the premium segment through global expansion of our bespoke lineup. Now turning to capital expenditures. CapEx in the third quarter was KRW 12.7 trillion, of which KRW 11.5 trillion was invested in the DS division and KRW 0.5 trillion in Display. The cumulative total CapEx at the end of the third quarter is KRW 33 trillion, with KRW 29.1 trillion invested in DS and KRW 2.1 trillion in Display. We expect full year CapEx to reach approximately KRW 54 trillion, with KRW 47.7 trillion allocated to the DS division and KRW 3 trillion to display. As a reminder, the full year numbers are projections and the actual figures may differ depending on factors such as future market conditions and the timing of equipment deliveries. We expect Memory investments to concentrate on infrastructure at P3 and P4, as well as on advanced technologies such as EUV to enhance our market competitiveness. Foundry investments will center on expanding the production capability of our Taylor and [indiscernible] sites to address the demand for advanced processes using EUV. This is in line with our Shell First strategy that enables swift and flexible responses to customer demand. Display will expand the capacity of flexible displays for mobile products and enhance the efficiency of large QD-OLED panel production. Next, I would like to share some of our key activities in sustainability management. First, I would like to recap the September announcement of our new environmental strategy. This strategy contains our commitment to combating the climate crisis and our ambition to achieve net zero carbon emissions by 2050 as the world's largest IT manufacturing company. More specifically, we target reaching net zero carbon emissions by 2030 for the DX division and by 2050 for all global operations, including the DS division, but we will strive to achieve this earlier. In conjunction, we also joined the global RE100 initiative, under which we will run all operations outside Korea as well as DX division on renewable energy within five years and aim to match electric power needs with renewable energy by 2050 for all operations globally. Furthermore, we will reduce power consumption in the product use stage through the development of innovative ultra-low power consumption technologies. And we will bolster resource secularity throughout the entire lifecycle of our products, from raw materials to disposal. For semiconductors, we will secure ultra-low power technology by 2025 to significantly reduce the power needs of memory products used in data centers and mobile devices. Moreover, we will apply low power technologies in major models of seven consumer products, with the goal of lowering power consumption by an average of 30% by 2030 versus comparable models released in 2019. To enhance water resource efficiency, we will endeavor to maximize water reuse to keep actual water withdrawals in 2030 to 2021 levels despite the growing number of production lines at domestic semiconductor worksites. Further, we will actively develop carbon capture and utilization technologies to help tackle global environmental challenges and reduce particulate matter. Next, on October 11, 2022, Samsung Electronics topped the Forbes list of The World's Best Employers for the third consecutive year. To compile the ranking, Forbes surveyed 150,000 workers from 57 countries. This is a meaningful and proud achievement, the recognition of our efforts on social responsibility, product and services improvements for our customers and corporate culture enhancements for employees. Last, but not least, in September, we received the highest ranking on the 2021 evaluation from the Korea Commission for Corporate Partnership for the 11th consecutive year, an unprecedented achievement among Korean companies. It is a recognition of our ceaseless efforts to foster win-win partnerships not only with our primary, secondary and tertiary partners, but also with non-partner SMEs also. We will continue to reinforce ESG management going forward. I will now turn the conference call over to the gentlemen from each business unit to present third quarter performances and outlooks for their respective business segments. We will start with EVP, Han JinMan, of the Memory business. Thank you. JinMan Han : Good morning. This is Han JinMan from the memory global sales and marketing office. For the memory market in the third quarter, on the continued macro uncertainties, the scale of customers inventory adjustment exceeded market expectations and demand for consumer products continued to slow down. As a result, DRAM and bit growth were both below guidance and our performance declined compared to the previous quarter. In DRAM, overall demand for servers decreased as customers reduced their purchasing budgets and strictly managed inventory levels, while some components' supply issues remained. For mobile, customer sentiment worsened amid ongoing macro issues such as inflation and COVID-19 lockdowns and demand declined due to high inventory levels at customers. And for PC, while overall purchasing sentiment weakened because of the economic slowdown, demand decreased due to inventory adjustment at major OEM customers. In the face of a worsening slowdown in demand across the industry, we maintained the disciplined sales strategy focused on profitability and our inventory levels increased. Consequently, bit growth was below guidance due to impact of weak demand across the market. Next I will talk about the NAND market. For server SSD, overall demand slowed due to component supply issues starting last year and expanding stance of customers' inventory adjustment, triggered by increased macro uncertainties. For mobile, although the high density portion of products kept increasing, consumer sentiment shrank due to macro issues and demand weakened because of factors such as COVID-19 lockdowns. For client SSD, despite a continuously increasing need for high density products, memory demand decreased as set shipments weakened and customer inventory increased. We strengthened our product portfolio by consistently increasing the high density portion in mobile in several OEM applications. But our overall bit growth was below guidance due to high inventory levels at major customers and weak set demand, mainly mobile customers, which accounts for a significant portion of our sales. Now let's move to the outlook for the fourth quarter. We expect the impact of various macro issues continue until the end of this year, and that our customers will maintain their stance towards inventory adjustment. Even under these market conditions, we aim to deliver bit growth that exceeds market for both DRAM and NAND, mainly due to base effect, focusing on high density and high performance products in line with the needs of our customers. For DRAM, we will maintain our strategy of prioritizing profitability by considering cost competitiveness in determining product mix. Additionally, compared to last year, CapEx for the year is likely to increase slightly as we plan to preemptively invest in infrastructure and leading technologies to ensure readiness for the mid to long term demand and strengthen our technological competitiveness. I will now go over the outlook by each product. For DRAM in server, while the shortage of some components is easing gradually, we expect fundamental server demand to remain steady, given key infrastructure investment in AI and 5G, et cetera. However, our customer stance on inventory adjustment is likely to remain until the end of this year due to economic uncertainties. For mobile, we expect memory demand to pick up thanks to the mass production of new flagship and high end models by major manufacturers. And if the economy recovers progressively towards the end of the year, we may see a rebound in demand, although we should keep checking on uncertainties such as the potential for additional COVID-19 lockdowns. For PC, while consumer sentiment continues to slow, customers are likely to remain conservative on spending as OEM companies are increasingly burdened with inventory adjustments. However, we need to observe how company's end of the year promotions affect consumption. We will keep strengthening our cost competitiveness and securing profitability by expanding cutting edge node migration for several products, and we will also focus on preparing 16 gig based products to cope with demand for high density products of 64 gigabyte and higher. Moreover, we will continue to strengthen our market leadership by responding to LPDDR5X demand for new flagship mobile models. For NAND, we expect our customers remain disciplined on inventory for server SSD, at least until the fourth quarter, amid worries of a global economic slowdown and geopolitical issues. On the other hand, demand is solid for server OEM SSDs that are linked to the hybrid cloud trend, so we are monitoring demand relative to improvements in market conditions. For mobile, it seems that demand for high density products of 256 gigabyte and above will remain solid, driven by a combination of new smartphone launches in fourth quarter and a continued preference for high end models. Also, there is potential for year-end promotions to spark a temporary rebound in demand, considering the fact that recovery of consumer sentiment for IT devices is a key to set shipments. However, we need to keep track of the scale of the effect. For client SSDs, a sluggish sell out weighed on demand from PC, inventory adjustment at customers are likely to continue. As a result, we expect the effects of peak seasonality in fourth quarter to be somewhat limited. However, in terms of storage, high density demand is projected to keep increasing. We will actively respond to the demand for high performance and high density products generated by customers who strive for securing growth momentum in the market, while also capitalizing on NAND's high price elasticity to steadily unlock new demand and continue to expand market leadership. Now let's move on to the outlook for 2023. Ongoing macro issues such as the war in Ukraine and austerity measures in various countries to deal with inflation are expected to partially impact demand in the first half of next year. Looking at each application, first for server, demand should improve gradually throughout the year as we expect the adoption of DDR5 for new CPUs to expand and high density trends to widen. Moreover, cloud companies are projected to resume construction of data centers that were previously delayed. However, as various micro issues have weakened demand, we will keep preparing for various scenarios in observing market conditions. For mobile, it is highly likely that demand will remain soft – slow in the first half of the year, with consumer sentiment expected to remain somewhat sluggish on top of effects of weak seasonality. On the other hand, as we enter the second half, we believe the adoption of high density products in new models and the expansion of new form factors will partially help boost mobile demand, which has been suppressed. For PC, similar to mobile, set inventories that accumulated due to sluggish sell out would be depleted in the first half of the year, but we are likely to see a dramatic recovery in demand. If the macroeconomy stabilizes as we move into the second half, we will continue to watch for signs of improving in demand. While striving to secure a reasonable level of strategic annual supply contract, mainly with major customers, we plan to proactively address demand for products showing relatively higher demand growth, such as servers. Moreover, through our ongoing efforts to optimize our portfolio, we will also address the growing and diversifying demand of our customers in various applications. Additionally, we'll focus on planning to link our supply operations to our mid-term plans, as we expect the recent increases in complexity of tech migration to cutting edge nodes and growing lead times to constrain bit growth across the industry. Also by responding to rising demand for new interfaces, such as DDR5 and LPDDR5 and LPDDR5X, as well as for high density products, we will continue to secure our sustainable market leadership. Thank you. Kenny Han: Good morning. This is Kenny Han from the System LSI business. In the third quarter, System LSI earnings declined due to a decrease in demand for major components, resulting from a slowdown in mobile, TV and PC demand, triggered by an economic downturn. However, SoC revenue grew, thanks to an increased portion of 5G and higher sales of products for use in premium segments. In addition, we signed our long-term supply agreement for modem products with a tier one Android smartphone customer. And we reinforced the basis for mid to long term growth for automotive SoCs by winning OEM orders from a number of premium European brands, including one in the UK, and by expanding strategic cooperation with them. In the fourth quarter, we expect sales in the SOC business to increase due to the effects of a new product launch by the tier one Android smartphone company. Furthermore, our new low to mid-priced SoCs targeting smartphones are scheduled to start mass production, which will contribute significantly to the revenue in 2023. In addition, we expect imaging sensors to deliver improved earnings, with a number of smartphones featuring our 200 megapixel sensors being released in August. For 2023, visibility in mobile, a major application, is becoming increasingly limited due to heightened economic uncertainties. However, analysis of smartphone purchase patterns suggest that demand will continue to polarize between premium and low price performance. In order to respond to this divided market, we will expand sales in the value zone [ph] while also strengthening the competitiveness of flagship products. Furthermore, we will work closely with foundries in order to smoothly supply various 200 megapixel sensors, helping ensure our major customers successfully launch flagship models. Thank you. Moonsoo Kang: Hello. This is Moonsoo Kang from the Foundry business. In the third quarter, we achieved our highest ever quarterly revenue and operating profit due to steady yield improvement in advanced process and increased revenue contributions via the enhancement of matured process. [indiscernible] of the world's first 3 nanometer GAA product, we will further strengthen our technology leadership by developing 2 nanometer and 1.4 nanometer process technology. In particular, we presented 2 nanometer and beyond node plan as vision for future innovation to follow GAA with introducing new processes such as backside power delivery network, which can efficiently deliver power inside a semiconductor chip to enhance performance and early adoption. In the first quarter, revenue is expected to see double-digit growth sequentially on solid demand from various applications, maximum production with optimized product mix and increased advanced node portion. In addition, we expect to deliver record high revenue and operating profit on annual basis in year 2022. In 2023, demand in the first half is expected to be slow temporarily due to macro uncertainties, economic slowdown and inventory adjustment at customer side. However, since we expect to recover in the second half of the year due to the increasing production contributed by orders from new customers and continuing strong demand in HPC and automotive, we will keep momentum of steady growth on annual basis. We will focus on expanding new customer engagement in advance node and enhance our presence in automotive and IoT applications by developing specialty and mature processes for stable future growth. Thank you. KwonYoung Choi : Good morning. I'm KwonYoung Choi from the corporate strategy team at Samsung Display. I will now summarize our result for the third quarter of 2022. In the third quarter, for the Mobile Display business, we improved our result quarter-on-quarter, thanks to growth in demand attributable to launches of new models by major smartphone brands. We achieved record high quarterly earnings, thanks to our business strategy, which concentrates on premium OLED products amid increasing polarization of the smartphone market between the low end to mid-range and high end segments. For the logic display business, sales of QD-OLED products continue to rise, driven by expanding launches of QD-OLED monitors by global IT brands and ongoing improvements in our yields. However, the business deficit remained similar quarter-on-quarter due to initial investment costs. Next, let me share the market outlook and Samsung Display's strategy for the fourth quarter and for 2023. In the fourth quarter, we expect market growth to be weaker than normal due to the sluggish consumer spending amid high interest rate and high prices despite continued strong seasonal effects for the smartphone and IT products. However, Samsung Display will try to maintain earnings growth quarter-on-quarter by utilizing our competitiveness in the high end market in which demand is relatively stable and by capitalizing on favorable exchange rates despite a challenging business environment. In 2023, while macroeconomic challenges may persist, we will focus on solid earnings through preemptive investments, development of differentiated technologies and effective management to ensure stable quality and yield, all of which has been by delivering our differentiated results. We will strive to collaborate more closely with our customers to increase our OLED market share by promoting the advantages of OLED in the new application areas, such as IT, automotive and gaming, an endeavor that Samsung Display has long been preparing in order to diversify its business. In particular, in the AR/VR market, which is projected to enjoy full flagship growth from 2023, we'll develop the technologies that our customers need and we'll complete our upstream, downstream SCM in order to fortify our innovative leadership in the development industry. Thank you. SungKoo Kim : Good morning. This is SungKoo Kim from the MX business. I would like to share our results for Q3 2022 and the outlook for the MX business. In Q3, amid continued inflationary pressure and geopolitical instability, the market grew slightly compared to seasonally weak Q2. For our MX business, both revenue and operating profit increased Q-o-Q, driven by launches of new models. As for smartphones and wearables, the new models launched in Q3 have recorded strong sales, backed by smooth supply, driving solid sequential growth in revenue and operating profit. In particular, Fold 4 and Flip 4 launched in Q3 have made great strides compared to their predecessors despite the challenging environment. And we believe the mainstreaming of foldables is on track. Keeping pace with the foldables, the S22 series, launched in the first half of this year, also maintained solid sales momentum and saw significant Y-o-Y revenue growth. In addition, through our continued efforts to enhance the efficiency of our resource management, we secured solid profits, despite high market uncertainties, which included currency effects. Let me now move on to the Q4 outlook. In Q4, macroeconomic instability and geopolitical issues are likely to continue. We expect market demand for smartphones and wearables to increase Q-o-Q due to year-end seasonality. As for our MX business, we will strive to sustain strong sales of flagship products, such as new foldable series and the S22 series. We also seek to expand the sales of Galaxy ecosystem devices, such as tablets and wearables through various sales initiatives during year-end peak seasonality. Also, successful launches of new mass market smartphone models will help drive sales volume and further solidify our position in emerging markets. Amid intensifying market competition and persistent macroeconomic challenges, such as currency headwinds, we will also focus on profitability through flagship driven sales and efficient resource management. Now, let me share the outlook for the next year. In 2023, the global economic environment is likely to remain unstable. We expect the smartphone market to grow Y-o-Y, led by growth in flagships. Wearables, which provide rich digital life experience and value to customers, are expected to continue to see high growth in the double digits. As for tablets, we expect the market for mid to low priced products to contract slightly as the world transitions to an endemic and consumer demand softens. But the market for premium tablets should stay solid. To strengthen our leadership in the market, our flagships are becoming increasingly important. MX will further bolster the completeness of their flagship experience, leveraging our technology leadership to press ahead with high growth of foldables and increased sales of the S series. Through the efforts, we will consistently expand our premium user base, improve our product mix and continue flagship centered revenue growth. As for tablets, we will continue to increase revenue by reinforcing our lineup of premium products, in line with the trend toward large screens and by enhancing the tablet experience, such as features using S Pen. When it comes to wearables, we will strive to maintain high growth momentum centered on new models and outperform the market in revenue growth. Moreover, by advancing consistent and convenient multi device experiences based on smart things, we endeavor to keep enhancing the role and value of the Galaxy ecosystem that our users enjoy in their daily lives, further solidifying Samsung as a premium brand, while also boosting profitability through growth of Galaxy ecosystem business. With these efforts, we will achieve revenue growth in 2023 and secure solid profitability supported by our continued efforts on operational efficiency to respond to unstable market conditions. Finally, we will invest with a view to the mid to long term and continue open collaboration to secure advanced technologies and build an ecosystem of future growth drivers, such as digital health, digital wallet, and more. Thank you. Young Moo Kim : Good morning. I'm Young Moo Kim from the sales and marketing team of Visual Display. First, I'd like to review the market conditions and our performance in the third quarter of 2022. TV market demand increased quarter-on-quarter based on the seasonality, but it contracted year-on-year caused by decrease in consumer confidence resulting from high interest rate, inflation and other macroeconomic factors. For Samsung, our performance declined due to intensifying competition caused by decreasing market demand with a subsequent increase in cost and currency movement effects in some regions. However, we improved our sales structure qualitatively and further strengthened our market leadership, centering on the premium segment. Now let us look at the outlook for fourth quarter and year 2023. Although we expect market demand in Q4 to increase quarter-on-quarter due to year-end peak seasonality and global sporting events, several macroeconomic risks are likely to continue to cast uncertainties on our TV demand. Through strategic partnerships with major channel partners, Samsung will proactively utilize sales opportunities, such as Black Friday and global sporting events, to capture peak season demand with high value-added products, such as Neo QLED, super big and life size screen. We also focus on securing profitability through optimized operations and efficient cost management. Regarding the TV market in 2023, along with various external uncertainties that are expected to carry over into 2023, overall TV demand is projected to remain stagnant, but demand for premium products, including super big TVs, should keep growing. We will continue to innovate premium products and lead the ultra-large screen market, while also strengthening sustainable, eco-friendly management and providing new customer experiences that connect screens and various products, all to further solidify our position as an industry leader. Thank you. Ben Suh: So that sums up the third quarter results presentations. Before we move on to the Q&A session, I would like to share several data points in key business areas. Comparative figures are on a sequential basis for quarterly data and a full-year basis for annual data. For DRAM, in the third quarter, our bit growth declined by a percentage in the high teens and ASP fell by around 20%. For the fourth quarter, we expect market bit growth to be in the high-single digit range and our bit growth should be above market. On a full-year basis, market bit growth and our bit growth should be similar in the low to mid-single digit range. For NAND in the third quarter, our bit growth decreased by a percentage in the high-single digits, while ASP saw a decrease in the low 20% range. In the fourth quarter, we expect market bit growth of a mid-single digit and we should be above market. For the year, we expect market bit growth to be in the mid-single digit range and our bit growth should be similar. For display in the third quarter, the mobile portion of revenue was a percentage in the high 90s and sales volume declined by a percentage in the mid-single digits. In mobile in the third quarter, shipments were approximately 64 million units for smartphones and 7 million units for tablets. Smartphone ASP was $282. For the fourth quarter, we expect shipments of smartphones and tablets to rise, but smartphone ASP is likely to decline. For TVs, sales volume in the third quarter increased by a percentage just into the double digits. For the fourth quarter, we expect sales volume growth to be in the high 20% range. On a full year basis, sales volume will likely decline by a percentage in the low-single digits. I will now move on to the Q&A session. First, we will start taking questions from the conference call. Operator: The first question will be presented by Peter Lee from Citigroup. Peter Lee: I have two questions. The first question is about the overall company inventory. We're noticing that two quarters in a row the company's inventory has significantly increased. Can you give us some details about the reasons and how you plan to address the increased inventory? Second question is about the mobile, the smartphone business. Overall, there has been issues regarding certain supply of parts and also increased intensity of competition. Considering all of that, can you give us, first of all, the smartphone market outlook for next year, how the company plans to secure the MZ, the generation MZ customers, and also your strategies regarding expanding sales of your flagship models. Ben Suh: To answer your question about the inventory, to just give you the inventory at the corporate level, third quarter, inventory was KRW 57.3 trillion and this is a KRW 5.2 trillion increase quarter-over-quarter. As we mentioned before, a part of that is the DX inventory where we have, during the first half of this year, been expanding our inventory in order to ensure stable supply of our products despite the disruptions in the global supply chain. And as we mentioned during the last call, the DX related inventory is continuing to stabilize during the second half of this year. That is why most of the inventory increase that occurred in the third quarter is related with the memory business and, therefore, Mr. JinMan Han of the Memory division will be answering your question further. JinMan Han: Now, to answer your question from the memory side, we are aware that there is concern in the market about our higher level of inventory due to worsening market conditions. And, yes, I agree that it is a fact that our inventory levels have increased due to weak demand, driven by various macro issues this year. That said, I do like to emphasize once again that we have to consider the change in the production constraints. Especially in the case of DRAM, we're seeing longer equipment lead time, also the migration – new migration is becoming more and more difficult. And also, there is a chip size penalty that occurs with the expansion of DDR5 production. And so, we think that there is a greater amount of production constraint on bit growth. And we will start to see and feel this impact starting gradually from next year. And that is why, considering all of that, we actually think that the level of balanced inventory should be set higher than past levels in order for us to be in a good position to effectively capture market demand. And that is why I think that it is a bit unreasonable to judge current inventory levels using past yardsticks. That said, the customer's inventory adjustments that happened in the third quarter did go beyond what was originally expected. And our inventory did rapidly increase during the third quarter and we are continuing to work to manage our inventory to balanced levels. Ben Suh: First of all, to answer your question about smartphone market outlook next year, we do think that the smartphone market at a general level will be able to grow slightly on a year-on-year basis and that the flagship segment will actually record a higher growth rate than overall smartphone market. Accordingly, we will be focusing our growth strategy next year around the flagship segment that is further expands the foldable and also provides even better and enhanced Galaxy S series that embodies all of the innovation and values that we pursue. I think what is also important in the smartphone business going forward is to understand that there is a shift from a smartphone standalone to an ecosystem experience emphasis. And that is why we are also working on providing a more consistent experience across all Galaxy devices based on a one UI and also provide services that our users find very useful in their everyday lives, such as digital wallet and digital health in order to provide customers a more rich and enjoyable digital life through our offering. You've also asked about how we plan to appeal to the generation MZ. And I think we can do that in two main directions. One is design and the other is in terms of marketing. In terms of design, the key word will be essential design identity. This concept focuses on simplifying just the key factors in the design, but then achieving a higher level of completeness in the details. Also, developing new colors for our devices would be a way of capturing women as well as gen MZ users. In terms of marketing, in order to appeal to the younger generation, we will emphasize social media communication that showcases the Galaxy experience within the everyday lives of our customers and also emphasize our ESG activities, for example, by adopting ecofriendly material on our products, which are values that the MZ generation feels are important. Also, we will be highlighting our security functions such as the Samsung Knox metrics. Operator: The next question will be presented by Nicolas Gaudois from UBS. Nicolas Gaudois: This question is about memory. Unlike some of the prior cycles, it appears that all major memory makers have taken early steps to reduce peak production growth, including lowering wafer starts or wafer outs, reduced CapEx and [indiscernible] spending budget into next year and delayed tech migration. Could you add some color on what you are doing on your side? Ben Suh: I recall that it was in early October. It was at the Tech Day event held in the US when I said that we're not considering any artificial reduction of production. And I have felt that that comment did attract quite a lot of attention. First of all, I would like to say that we stand behind that position that we're not considering any artificial reduction in our production. And I think I can go into a bit more detail about what I mean. And as I mentioned during the speech, there is weak demand. And we think that the current weak demand is explained, number one, by the macro issues that are currently persisting, as well as the inventory adjustments that the customers have been going through, the magnitude of that inventory adjustment has been larger than what was expected. But then looking towards next year, there are plans for increase of server data centers. And we do expect there to be a greater adoption of DDR5 coupled with a new CPU. There are actually some third-party sources that are saying that they expect the second half market to improve around the DRAM next year. So, given that, what we're looking at, even the strategical level of operation that I was explaining in the previous question – answer to the previous question. So even though we agree that the current market demand is contracted, if we think at a strategical level, we do see that there is a need for us to be prepared for demand recovery from a mid to long term perspective. And that is why when we say that we are not considering any artificial reduction in production, it means that we're not considering artificial reduction of production for the sake of short term supply and demand balance. That said, we are carefully watching the possibility of any rapid changes in the market situation. To give you a bit more eye color about CapEx, we still stand behind our overall CapEx policy which is to continue an appropriate level of infrastructure investment for responding to mid to long term demand, but flexibly operate our equipment investment to be in line with industry situation. That is how we are able to create a sustainable foundation for profit. And so, regarding CapEx this year as well as next year, what we need to keep in mind is that CapEx spending this year or next year does not directly lead to a bit production the following year. And that is why we plan to stand behind our original infrastructure investment plans, which will enable us to respond to mid to long term demand. Also, to give you some more color on our CapEx spending this year, as you know, we were the first to adopt EUV in DRAM, starting from 50 nano, and we have been rolling out EUV, going full EUV to advance nodes. And that is one of the reasons why we have a relatively large equipment CapEx size. And on top of that, we have been going through a large scale infrastructure investment in P3 and P4, and that explains why our CapEx this year has increased versus the previous year. Now, even that increase in CapEx year-over-year is on a Korean won basis, which does reflect the strong dollar. And therefore, if you convert our CapEx spending this year to dollar terms, actually, it appears to have decreased year-over-year. Since we're on the topic of CapEx, if we look towards next year's investments, we're currently discussing next year's CapEx plans, but we're actually considering various multiple scenarios in the mid to long term, given the high level of market uncertainty and also various macro issues out there. That said, as we mentioned, because we're planning to stand behind our original infrastructure investment plans to get the clean rooms ready for mid to long term demand, the only room for adjustment for our CapEx plan next year will be within the equipment investment, which would be a limited amount of flexibility there. And so, once again, I would like to emphasize that regarding CapEx, the total overall CapEx number is not as relevant in forecasting short-term production and supply as it was before. Operator: The next question will be presented by Ricky Seo from HSBC. Ricky Seo: I have two questions. The first question is about the QD-OLED, you've launched the QD-OLED TV and monitor. Can you give us some initial customer and market responses to the QD-OLED based products? I've also been hearing that you are planning to increase capacity going forward. Does that mean that you are planning to take QD-OLED as your mainstream technology? Second question is about the NAND market. The market situation in NAND is even worse than memory and competition is becoming even more fierce. Even though NAND does have a price elasticity, the situation is deteriorating, and I would like to know how the company plans to respond to the deteriorating NAND market conditions. Ben Suh: Well, to answer your question about the QD-OLED, the QD-OLED that we had launched earlier this year as our response to the premium large display market has received very positive responses from customers as well as end consumers. We have also launched the OLED based monitor in the second half. And therefore, we are very well positioned to significantly increase our QD-OLED business next year. We had closed down our LCD operation in the first half and this was in part to concentrate our resources on the QD-OLED. This has worked. Our yield is rapidly climbing. And we have also been diversifying our customer base and product lineup. What we're noticing in the market is that, since the pandemic, the consumers are having a stronger demand for high quality displays, a smartphone level, high quality display even in large displays, so that they can watch videos and also play games even on a large size display as if they are doing on a smartphone. And that is why we think that, given this market demand, we will be able to significantly increase sales volumes and expand our market share starting from next year. Regarding additional investment plans, given the uncertainty in the market, we are looking into additional investment plans while closely collaborating with our customers and also carefully watching market demand, so that we are able to supply demand without disruptions. Regarding your question about NAND, yes, we agree that compared to DRAM, the possibility of market conditions improving, recovering next year is relatively low for NAND. And that is why we also feel the need to manage our NAND inventory levels to balanced levels. And as you know, in NAND, Samsung has a very favorable cost competitiveness. And by leveraging the price elasticity that you've mentioned, we are planning to preemptively create demand for NAND. We also agree that the market conditions are challenging. But also, we actually sense that at the end user level, there's a relatively strong demand for storage and solution products, especially the higher density products. For example, you would notice that, in the market, even the low end smartphones now have around 256 gigabytes of content. And flagship models are now ranging from 512 gigabytes to 1 terabyte of content, and even storage and servers are – actually, we've confirmed that there is a need for up to 16 terabytes. And so, we will be focusing in the case of NAND on creating market continuously by continuing to reduce our cost base internally and also collaborating with customers based on our wide range of product portfolios. And we will use this as an opportunity to further expand our position in the large density market and across various applications. Operator: The next question will be presented by [indiscernible]. Unidentified Participant: I have a question about foundry. I think there's some different opinions about what the foundry market outlook would be. I wonder what your outlook is for foundry market conditions next year and also in the mid to long term? And how does Samsung plan to respond to that market outlook? Ben Suh: First, our market outlook for foundry market outlook for next year is that there will be demand uncertainties at least until the first half due to continued slowdown in global economy. But based on the customer demand data that we currently have, we expect the foundry market to improve next second half as the inventory is consumed and also demand becomes solid around key applications such as HPC and automotive. Even though that is the outlook we have based on our customer demand data, there is still a possibility that the macroeconomy may not have a soft landing. And so, given that uncertainty, we continue to carefully monitor the market and have prepared strategies regarding that. Now regarding the mid to long term foundry market outlook, we do think that especially in the advanced nodes, demand in the mid to long term will remain solid. And that's why we will be focusing our resources on the advanced nodes in terms of investments, creating multipath for rapid ramp up, improving yield, and also leveraging the customers' multivendor strategy. So we will be focusing on increasing our market share around the advanced nodes. But also in terms of the matured nodes, we will respond flexibly to customer demand by developing customized value-added processes. Operator: The next question will be presented by SK Kim from Daiwa Capital Markets. Sung Kyu Kim: I have two questions. The first question is about the memory division. We noticed that the Memory division's third quarter profitability has decreased significantly overall in the market. ASP is declining. But on the other hand, today, you seem to be very confident and proactive about your forward CapEx plan and how you plan to address the NAND inventory. Would that have any negative impact on the profitability of the division going forward? Second question is about the display. I do notice that you delivered very strong results in the third quarter, especially it seems small to mid-size OLEDs have overperformed quite significantly competition. That is quite noticeable. But given that overall smartphone market is expected to be stagnant, do you think such significant outperformance can be sustained? Ben Suh: As you know, the Memory business, the market environment changes and with that the profitability also goes up and down. And right now, I agree that we are in a period where profitability is on a declining trend. The other factors that impact profitability of the Memory business, the price is a factor that is beyond our control. And that is why we have always emphasized cost competitiveness as a way of us ensuring stable profitability, regardless of what situation unfolds. And as a result of our focus on cost competitiveness, I can say that, in the industry, we have a cost structure that is by far superior than any competitor. And this is a huge and powerful strength to have. We're also noticing that, unlike before, the customers' demands are becoming more diverse. And that's why having the right product mix in advanced, the right product mix planning across various product groups are becoming that much more important, especially as new product market such as DDR5 and LPDDR5X expands. By having the right product mix planning, we're able to capture the customer demand, especially around the high end and high density products. And this is another way for us to secure profitability by capturing the demand without missing any of it. We do notice that it is a rapidly changing market environment. But our focus has always been to secure sufficient profitability that would enable us to sustain our investment program for future businesses. Because we have maintained that position despite the difficult environment we currently see, we have been able to maintain good profitability. To answer your question about the mid to small size OLED, yes, we have achieved quite a strong performance in third quarter versus competitors. You asked whether that will be sustainable. Our strong performance in the third quarter, we attribute to two main factors, one is a change in the market. In the past, I think the display market moved in sync regardless of application. However, recently, we're seeing a divergence of demand patterns across different applications and segments. And our focus on mobile and premium OLED has been one of the reasons why we were able to produce a stable business result. The second reason of our stronger performance is explained by our outstanding technology and mass production capabilities that has enabled us to produce and supply the OLEDs that customers want on time. As you know, we have a very long track record of producing OLED. We have the technology, the know-how and very experienced experts in-house that has provided us with a competitive advantage. And also, on top of that, having made the preemptive investments has given us the benefits of economies of scale. And this, I believe, is now showing up in visible results. Regarding whether our advantage and our performance is sustainable, we are looking at fourth quarter and next year markets are with grave concern. It may be a very challenging market. And if the market deteriorates further from now, it may be difficult for us to stay immune from the challenging market conditions. But that said, we believe that even if the market becomes more challenging, the advantages I've just described would still remain valid. Our advantages being the focus that we have placed on the high end segments, the OLED technology and know-how that we have, our capabilities in mass production and execution, and also the cost competitiveness we have achieved by the preemptive investments and achieving economies of scale would still remain valid. And therefore, we are confident that even if environments become more challenging, we would be able to deliver strong results. Operator: The last question will be presented by Dongwon Kim from KB Securities. Dongwon Kim: My first question is about the EV memory market. The overall EV market is expanding and so will the EV memory market. What is your EV memory market outlook and your business strategies regarding the automotive memory business? Second question is about the TV next year. What is the company's TV demand outlook for next year? And there are various different technologies in the next generation premium TV segment, such as micro LED, Neo QLED and the QD-OLED, what is the overall strategy of the business division for growth in the next generation premium TV segment? Ben Suh: Well, first of all, I would like to thank you for asking a question that is not about short term market situation, even though I agree that the current market situation is challenging. I think these are the times when we actually need to focus more on developing new demand sources and applications, and I think your question actually hits on that point. We have been expecting the importance of automotive semiconductors to increase in line with the growth of the EV market. And that is why we have been implementing a mid to long-term strategy to address that. Regarding the EV market, you would have noticed that the EV market has been exponentially growing since around 2020. Also, per vehicle, we're not only seeing increase in memory content per vehicle, but also the memory that is being used on vehicles, the specification itself is being raised. Also, when we think forward, when there are more autonomous vehicles out there, we can think of, for example, a data center that will be necessary for these vehicles. That would also be another source of demand. We think that, by around 2030, automotive may become one of the three main pillars of applications together with server and mobile. Since we first started to supply memory to automotive applications, we've actually been recording new revenue records for seven consecutive years based on a very strong relationship and trust from the customers. And this is because, initially, we have placed a special focus on technology and quality, such as LPDDR4X and high capacity UFS 2.1. Going forward, we will focus on preemptively expanding the automotive product lineup we have, especially around the high performance and high specification products such as LPDDR5X, GDDR7 and server class SSD. The concept that we have is server on wheels for automotive applications and we will make this into a reality. So, regarding the automotive semiconductor market, we plan to actively contribute to its growth by focusing on quality and also safety. Regarding the TV market outlook next year, while the overall TV market is expected to be somewhat stagnant as the various internal and external risks continue into next year, we think that within the TV market, the ultra large and premium demand will continue to grow. And so, looking forward to next year, under that market outlook, we will continue to maintain our sales strategy focused on the premium segment, especially focused around the Neo QLED, but also in order to provide consumers with a wider range of choice, we will strengthen the sales competitiveness around OLED. Also next year, we will also start to boot up sales of micro LED, which is currently the top level display technology yet. We will implement this into various sizes and provide differentiated customer experiences to increase sales. And so, overall next year, we will focus on actually creating a new market demand around the ultra-high end segment, together with the ultra large size 98 inch premium TV. Together with these new products, we will focus also on providing high quality content and services by actively cooperating with global partners and also providing new customer experiences by connecting the TVs with other screens and various products in order to maintain the leadership we have in the global TV market. Well, we will now answer questions that were submitted online in advance. As you know, we have been accepting questions via our website in advance of the earnings release as part of our efforts to strengthen communication with individual investors and enhance understanding of the company. And we've received a wide variety of questions for this quarter. I believe the majority of the questions were sufficiently answered during the Q&A session. And so we will answer one more question on a topic that garnered a high level of interest from our shareholders, but were not addressed during the Q&A session And the question addresses our mobile division. The question was the strong dollar is expected to persist for some time being. Considering that, what is the possibility of raw material prices or logistics cost decreasing? And how do you plan on securing a double digit profitability? On the raw material side, other than memory, the visibility is still low for other raw materials. For logistics costs, the situation has eased somewhat, especially as the port traffic congestions that were caused by COVID has been eased. That said, the impact of the weak Korean won, the strong dollar is expected to be quite strong. And so, even though the market outlook next year is expected to the challenging, we think that within the overall mobile market, the flagship segment will continue to grow. And that is why next year, we will continue to focus our resources on the flagship and premium segments. We will focus on providing an even more complete customer experience, enhancing our brand equity, improving our product mix as a way of improving our ASP. Also, in addition to the smartphone itself, we have to look towards the Galaxy eco experience that provides seamless connection with between our smartphone, tablet and wearable. This is an opportunity for us to not only provide greater value to our customers, but also is a way of us to improve our profitability, and we will further improve our profitability or make our profitability more solid by improving our operational efficiency across development, manufacturing, logistics and sales. And by these internal and external efforts, we plan to secure solid profitability next year. I would like to thank everyone who shared their valuable opinion and we will be sure to refer to them in our decision making process. Ben Suh : That completes our conference call for this quarter. We wish all of you and those close to you, stay strong and in good health. Thank you

Company Representatives: Ben Suh - SVP, IR Han JinMan - SVP, Semiconductor Business Memory Pyee Jae Geol - System LSI Kang Moonsoo - EVP, Foundry Choi Kwon Young - VP, Samsung Display Sung Koo Kim - VP, Sustainability Management Office, Mobile Communications Business Young Moo Kim - SVP, Sales & Marketing of the Network Division Operator: Good morning and good evening. Thank you all for joining this conference call. And now we will begin the conference of the Fiscal Year 2022 Second Quarter Earnings Results by Samsung Electronics. [Operator Instructions]. Now we shall commence the presentation on the fiscal year 2022 second quarter earnings results by Samsung Electronics. Ben Suh: Welcome, everyone. This is Ben Suh from Investor Relations. Thank you for joining our second quarter 2022 earnings call. For additional details regarding our quarterly results, please refer to our earnings presentation, which is available on our IR website at www.samsung.com/global/ir. On the call today, I am joined by the following representatives from each business unit. EVP, Han JinMan, representing Memory; EVP Pyee Jae Geol for System LSI; EVP Kang Moonsoo for Foundry; EVP Choi KwonYoung for Samsung Display, which I will call Display in the presentation; VP Kim SungKoo for Mobile eXperience; and VP Kim Young Moo for Visual Display. I want to remind you that some of the statements we will be making today are forward-looking based on the environment as we currently see it. All such statements are subject to certain risks and uncertainties that may cause our actual results to be materially different from those expressed in today's discussion. Before reviewing our quarterly results, I want to confirm the second quarter dividend. Today, the Board of Directors approved a quarterly dividend of KRW361 per share for both common and preferred stock. Based on the annual dividend payout under the current dividend policy, the total quarterly payout is KRW2.45 trillion and will be paid in mid-August. Now I will move on to the results for the second quarter. Despite a highly challenging business environment marked by inflationary and supply chain issues, we recorded the company's second highest quarterly revenue and a new all-time high for a second quarter at KRW77.2 trillion. The DS division led such performance was a new quarterly revenue record for a second quarter in a row by actively adjusting the product mix to meet solid server demand and increasing the supply of system semiconductors. In addition, the DX division posted significant year-on-year growth on solid sales of premium smartphones along with strong sales of seasonal digital appliances such as air conditioners. Gross profit increased by KRW0.2 trillion sequentially to KRW30.9 trillion mainly due to profit-focused memory sales and yield improvement in foundry. Gross margin also increased slightly to 40.1%. SG&A expenses increased KRW0.2 trillion quarter-to-quarter to KRW16.8 trillion as our continued investments in R&D outpaced reductions in advertising and promotional spending. As a percentage of sales, they were also up slightly. Although profits in the DX division declined due to macro issues, such as increased material and logistics costs and currency effects, we delivered a similar operating profit quarter-on-quarter at KRW14.1 trillion. Operating margin improved moderately, thanks to across-the-board improvements in the DS division. On a year-on-year basis, operating profit increased by 12% or KRW1.5 trillion, also led by the DS division. I will now briefly review the results of each business unit. In memory, although bit growth came in below guidance due to weaker-than-expected mobile and PC demand, results improved both quarter-on-quarter and year-on-year as we maintained ASP by preemptively shifting our focus to meet solid server demand and by maintaining our disciplined sales strategy. The positive effects of a strong dollar also contributed. In system semiconductors, operating profits were up 61% quarter-on-quarter, achieving a record high as System LSI expanded sales of DDIs in volumes on SoCs and foundry yields entered our targeted trajectory also for advanced nodes as we increase supply to global customers. In addition, we further improved our technology competitiveness through the world's first mass production of the GAA process and supply of 200 megapixel image sensors. For Display, the mobile panel business delivered its highest ever second quarter revenue and operating profit, thanks to continued solid demand by our major customers for their flagship models despite weak seasonality for smartphones. The large panel business surpassed its yield target for QD display, but its results still weakened due to initial ramp-up costs of QD display and a decline in LCD ASP. For the MX business, earnings decreased sequentially due to elevated operating costs, mainly in material and logistics and adverse currency effects. But revenue rose year-on-year as an improved component supply enabled increased sales of new premium models such as the Galaxy S22 and Tab S8 Series. The network business saw its revenue grew slightly compared to the previous quarter with consistent sales as it also continued to pursue new opportunities, highlighted by the addition of DISH Network as our newest U.S. customer. In VD, earnings decreased due to a decline in revenue caused by sluggish global TV demand and a rise in sales costs, but we reinforced our market leadership by focusing on the premium segment including QLED and Super Big TVs. Digital appliances saw its profits decline due to lingering cost burden issues, but it achieved record high quarterly revenue for a second consecutive quarter, thanks to the increasing global expansion of Bespoke products and a strong start of seasonal air conditioner sales. Regarding currency effects relative to the Korean won, the component business benefited from the strong dollar, resulting in an approximately KRW1.3 trillion company-wide gain in operating profit compared to the previous quarter. The DX division, however, experienced some adverse currency impacts. Next, I would like to share our business outlook for the second half of the year. Under expectations that macro uncertainties are unlikely to dissipate, we will actively monitor demand trends to respond swiftly and flexibly. DS will focus on operating a high value-added portfolio, expanding advanced nodes and adopting new applications. DX will continually reinforce our leadership and lineups in premium segments. And we have started full-fledged expansion of multi-device experiences based on SmartThings, which has a global user base of KRW230 million. Now for each business unit's outlook, in Memory, we expect fundamental server demand to remain solid, the macro issues are likely to cause continued weakness in PC and mobile demand. While closely monitoring impacts on the demand side, such as releases of new mobile products by our major customers, we will continue to focus on our high value-added and high-density portfolios. For System LSI, we plan to further increase our volume-zone SoC business and strengthen our leadership position in image sensors by expanding our customer base for 200 megapixel products. For Foundry, we aim to exceed market growth by adding new global clients, while we continue to reinforce our technological competitiveness, including through the development of the second-generation GAA process and by evolving derivative processes of existing nodes. For Display, in the mobile panel business, we anticipate that earnings will grow driven by new smartphone launches and increased entry into new application areas such as automotive and gaming. In the large panel business, we expect earnings to improve with the shutdown of LCD production and increasing demand for QD display. The MX business will work to secure solid profitability on multiple fronts. We will target sales of foldable products to surpass those of the Galaxy Note series as we fully mainstream the segment by delivering a differentiated consumer experience enabled with global partnerships. We will also expand the Galaxy ecosystem through successful launches of wearable products and boost overall operational efficiency. For Network, we plan to maintain revenue growth momentum by actively expanding our overseas businesses and by meeting domestic needs for 5G installations in a timely manner. We will also continue to reinforce our technology leadership in 5G core chips and virtualized radio access networks. For VD, we aim to capture demand in the premium market during strong seasonality by expanding sales of strategic products such as Neo QLED, Super Big and Lifestyle Lines. For digital appliances, we will focus on improving profitability by increasing sales of premium products, strengthening the B2B and online sales and working to further enhance cost efficiencies. Now turning to capital expenditures. CapEx in the second quarter was KRW12.3 trillion, with KRW10.9 trillion invested in the DS division and KRW0.8 trillion in Display. CapEx in the first half of the year totaled KRW20.3 trillion with KRW17.6 trillion invested in DS and KRW1.5 trillion in Display. Similar to last quarter, memory investments concentrated on infrastructure at P3 and on capacity expansions and process migrations at fabs in Hwaseong, Pyeongtaek and Xi'an to address future demand. Foundry investments focused on increasing production capacity of advanced processes of 5-nanometer and below. Next, I would like to share some of our key activities in sustainability management. To start, in June, we published our 2022 sustainability report, which includes our key activities and achievements for the past year, such as the reinforcement of the Board's oversight function of sustainability management, expansion of sustainability management activities by businesses and our joining of the UN Global Compact, or UNGC. For more details, please refer to the sustainability report, which is available via our website. Meanwhile, in recognition of our efforts to enhance the energy efficiency of our products and work sites, we were honored at the beginning of May, with our ninth Sustained Excellence Award for product brand owner, the highest level of recognition in the manufacturing sector in the U.S. Environmental Protection Agency's ENERGY STAR awards. And we also received the Partner of the Year Award for Energy Management, the highest level of EPA recognition. In addition, 11 models of our new TV products for 2022, including our Neo QLED 8K earned reducing CO2 certification as part of the Carbon Trust Carbon Footprint labeling. The DS division achieved a waste recycling rate of 97.5% through its multipronged approach towards recycling. It received global recycling standard certification by developing eco-friendly clean room garments using waste plastic bottles. And it brought two more of its work sites to the platinum level for zero waste to landfill. Additionally, to reduce GHG emissions, we developed and then installed process gas treatment equipment at our domestic work sites. We expect to reduce greenhouse gas emissions by approximately 190,000 tons monthly through this in-house technology. Along with such activities, we are currently establishing a comprehensive mid- to long-term environmental strategy that includes a climate change response and we expect to be able to share detailed plans in the near future. We will continue to systematically promote sustainability management and are committed to transparently communicating our ESG direction and achievements with our stakeholders. I will now turn the conference call over to the representatives from each business unit to present second quarter performances and outlooks for their corresponding business segment. We will start with the Memory business. Thank you. Han JinMan: Good morning. This is Han JinMan from the Memory Global Sales and Marketing Office. For the Memory market in the second quarter, server demand remains solid but demand for consumer products such as mobile weakened due to widening impacts of macro issues. As a result, DRAM and NAND shipments were below the guidance. However, our performance improved both year-on-year and quarter-on-quarter as ASP stayed at a better-than-expected level. Thanks to our disciplined sales strategy to meet the market demand and also the benefits of a strong dollar. In DRAM, for server, there were some disruptions in set builds due to supply issues for certain components, with continued expansion of the proportion of high core CPUs kept fundamental end demand on a solid trend and memory demand on an upswing. Inventories increased at major PC OEM companies due to low sellout amid intensifying macro issues such as inflation and demand weakened accordingly. Mobile experienced weak demand trend as well as consumer sentiment worsened due to lockdowns in China and price instability caused by the prolonged Russian-Ukraine war. We achieved the high sales of server products in the industry for any quarter by optimizing our portfolio and actively responding to solid demand centering on servers. However, we missed guidance for total bit growth due to weak demand for consumer products such as PCs and mobile devices. Next, I'll talk about the NAND market. For server SSD, along with continuously rising demand for high-density products, thanks to investment by data center customers, demand extended to low-density products as customers be to minimize set build disruptions caused by a shortage of active passive components. For client SSD, such shipments were flat due to weak purchase demand for PCs attributable to macro issues such as inflation, but SSD content per box and attach rate kept growing, thanks to the rising proportion of high-end products. For Mobile, despite the continued trend towards high density, demand weakened as overall consumer sentiment deteriorated due to the persisting Russian-Ukraine war and lockdowns of major cities in China. We continue to expand the proportion of high-density products of 512 gigabit and higher for server SSD and actively responded to the high-density trend in client SSD mobile, helping us maintain a decent ASP. However, overall big growth came in below guidance as mobile demand was much weaker than expected. Now let's move on to the outlook for the second half. For server, even though server demand and macro issues show a relatively weak correlation, there is a possibility of customers' temporal inventory adjustment amid some IC component supply problems as well as a concern of a widespread economic recession and geopolitical issues. However, centering on major data center companies investment in core infrastructure and new growth areas such as AI and 5G are expected to keep expanding the fundamental demand to stay solid. On the other hand, consumer products like PC and Mobile are more sensitive to macro factors than servers are, and current forecast indicates that related demand is likely to weaken in the second half of the year. And for PC, it is possible that the risk may spread to enterprise segments. They are expected to remain relatively solid. But we cannot rule out chances of positive effects on consumer demand during the year-end promotional season. For Mobile, changes of a recovery in consumer sentiment toward the end of the year are likely to depend on various factors such as economic policies of major countries and the stabilization of commodity prices. In addition, high-density adoption is expected to continue given launches of new mobile products by major customers. Amid highly volatile market situation, we are planning to maintain our stance of operating an optimized portfolio that centers on high-density, high value-added solutions based on supply flexibility in accordance with market conditions and customer needs. For product-specific strategies, as always DRAM improve the quality of its business by staying disciplined against excessive expansion of sales and flexibly managing supply in line with demand. NAND will focus on creating demand mainly for high-density products while considering characteristics of high price elasticity, and we will continue to strengthen our market leadership by actively responding to demand based on our excellent cost competitiveness. Finally, as an industry leader, we are sustaining our efforts to reinforce ESG management. For example, based on our accumulated product technology as a leading memory company, we are working to establish a recycling business model that will produce a virtuous cycle and streamline resource use. Moreover, as our customers' business patent shift from ownership to usage based will make great efforts to develop business models that reinforce our customers' agility and flexibility and also improve the future investment efficiency of our memory business. Thank you. Pyee Jae Geol: Good morning, this is Pyee Jae Geol from Systems LSI business. In second quarter, demand for products in major applications was sluggish due to unfavorable economic conditions such as the geopolitical issues and inflation. However, System LSI second quarter earnings has improved quarter-on-quarter, owing to exchange-rate movement and growing supply of major components such as volume-zone SoCs and TDI. We further also solidified our leadership in mobile image sensor technology by supplying the world first 200 megapixel sensors. Furthermore, we have also established a foothold to extend our automotive SoC business by securing these customers in addition to our ones in Europe. Also in the second quarter, our DDI reclaimed the top market share position in revenue. In the second half of this year, despite high uncertainties such as weak demand for consumer electronics and manufacturers inventory adjustments, we aim to exceed revenue and profitability growth year-over-year by expanding our 5G SoC lineup and increasing customer base to maximize the supply of our technology-leading 200 megapixel image sensors. Thank you. Kang Moonsoo: This is Kang Moonsoo from the Foundry business. In the second quarter this year, we achieved our highest ever second quarter revenue, thanks to solid demand for advanced processes, especially from HPC applications, sustained demand in matured processes and overall yield improvement. In addition, we also achieved our highest ever second quarter profit through price realization and cost reduction, taking one step closer to securing future self-investment capacity. We have strengthened our technological competitiveness through the world's first mass production of the 3-nano GAA process accomplished in June. Although we have expanded application areas through continuous evolution of both advanced and matured processes, such as preparing advanced automotive process, developing processes for RF or radio frequency applications and optimizing performance, power and area of our technologies. In the second half of the year, we expect that HPC and 5G-related demand will continue to be solid, but uncertainties related to geopolitical issues and inflation exists. We are aiming to exceed market growth this year through yield improvement of advanced processes alongside a proper pricing strategy while responding flexibly to demand predictions we are close cooperation with our customers. Additionally, we will strive to improve the maturity of second gen GAA process, which will be our base for future growth, and to expand our customer base for large scale orders. Lastly, in October, we will host off-line forums for the first time in 3 years. We aim to strengthen networking with our customers through our Samsung Foundry Forum in the U.S., Europe, Japan and Korea, and our Samsung Advanced Foundry Ecosystem, in short, SAFE Forum in the U.S. Thank you. Choi Kwon Young: Good morning. I'm KwonYoung Choi from the Business Planning department, Samsung Display. In the second quarter, for the mobile display business, overall demand for the smartphone market declined due to deteriorating consumer sentiment attributable to inflation and rising inflation rate -- interest rate, sorry. However, we achieved solid earnings growth, thanks to strong sales for flagship smartphone models based on our proprietary technologies and product performance. Our profit increased year-on-year backed by positive effects of foreign exchange movements with the continued increase of OLED adoption by laptops and portable gaming devices also contributing to the growth. For the large display business, losses persisted due to a decrease in LCD ASP and initial cost of QD display development. However, we expect an increase in sales and profit margin from the second half of 2022, driven by rapid improvement in QD display yield and a rising number of brands adopting QD display products. Next, let me share the market outlook and Samsung display's core strategies for the second half of 2022. In the second half for the smartphone market, we expect earnings to improve half on half as a number of major customers plan to release new products. However, we expect earnings to be more volatile than they were last year due to a number of difficult to predict external factors. We expect our OLED panels to continue to record sales growth, given the higher demand for their use in premium products, which are relatively unaffected by economic fluctuations. Laptops, although we forecast that the market will contract due to an overall downturn in consumer markets. We expect our OLED display sales volume to keep growing, driven by rising consumer equipments for displays featuring high resolution and a fast response time. Meanwhile, for the large display market, our QD display we feature in TV and monitor market makers, new products, which are scheduled to roll out in earliest around the globe. Samsung Display will channel all of its efforts to promote the excellence of QD displays to consumers by launching joint promotion with our customers, aiming to lead the premium market. Thank you. Sung Koo Kim: Good morning and good afternoon. This is Sung Koo Kim from the MX business. I would like to share our Q2 results for 2022 and the outlook for the MX business for the second half of the year. In Q2, geopolitical issues and concerns of our inflation on top of continued seasonally weak demand, smartphone market to decrease compared to the previous quarter. For MX, revenue and operating profit decreased Q-o-Q due to the market situation, but revenue was up compared to Q2 last year. Even though total revenue of smartphones and tablets decreased Q-o-Q, smartphone surge of flagship models remained solid. The supply disruption in Q1 was mostly reserved in Q2 and that contributed to the sequential increase in the Galaxy S22 series, which were driven by the Galaxy S22 Ultra, the tab model in the series. Also, the flagship Galaxy Tab S Series, which embraced growing demand for big screen premium tablets continued strong sales. However, profitability decreased Q-o-Q due to increased material costs caused by recent price increases for components and logistics as well as headwinds from exchange rates. Let me now share the outlook for the second half of this year. Given the persistent geopolitical volatility and economic uncertainties, we expect market demand for smartphones in the second half to stay similar Y-o-Y or grow by a low single-digit percentage. Despite the challenging market conditions, MX plans to expand sales with a focus on flagship products. In particular, through our successful launch of new foldable models, we will strive to solidify foldable products as a key category in the flagship market. To that end, we are committed to preparing thoroughly in all areas, including product completeness and supply. The new foldable models feature upgrades in design and durability and in addition, close collaboration with global leading partners has helped us provide richer experiences tailored to the form factor. We will secure sufficient supply in advance to ensure we can meet the demand of every customer who wants to experience our products right after release. By doing so, we are striving to make our foldable domain stream that our customers love even more than they did the Note series and achieved continued high growth to drive flagship centered revenue growth. Meanwhile, also the Smart Watch market in the second half of 2022 is forecasted to fair effects of economic uncertainties in the short term. We will try to maintain high growth momentum with the release of new watch models. The new watch models will be impacted alongside the new foldable models in the second half and there are more intuitive and convenient Galaxy connected experience will help us expand sales of Galaxy Ecosystem devices. Going beyond providing customers with convenient technology and devices, Samsung will add value over experiences and in which customers everyday life through services such as Samsung Wallet, which was introduced in Q2. Moreover, in collaboration with the overall DX businesses, we are making broad efforts to provide a richer, multi-device experiences based on SmartThings, including through the introduction of various life scenarios customized to individual life patterns. Finally, given the expectations that the market will remain uncertain for some time, we will endeavor to maintain profitability in the double digits in the second half by improving our product mix centering on flagship products through fully mainstream foldable and by continually enhancing operational efficiency to respond to challenges such as adverse currency effects. Thank you. Young Moo Kim: Good morning. I'm Young Moo-Kim from Sales and Marketing team on Visual Display. First, I'd like to review the market conditions and our performance in the second quarter of 2022. Market demand for TV contracted both quarter-on-quarter and year-on-year, former caused by entering weak seasonality and the latter due to the base effect of the last year's pent-up demand as well as decreasing consumer confidence resulting from high interest rates, inflation and other factors. For Samsung, our performance declined due to a decrease in revenue amid declining market demand and cost increases related to the intense market competition but we improved the quality of our sales mix and are maintaining our leadership by focusing on expanding series of premium products such as New QLED and Lifestyle. Next, I'd like to talk about our outlook for the second half of 2022. For TV market, although there are opportunities to expand sales such as fixed seasonality and global sporting events, several macroeconomic risks are likely to continue to test uncertainties on overall TV demand. Samsung will closely observe the rapidly changing market, and we will capture peak season demand and secure profitability by focusing on strategic products such as Neo QLED Lifestyle and through strategic partnerships with major channel partners. At the same time, we will proactively target signage market, where B2B demand has been more active recently, while also further solidifying our status as a market leader with innovative products such as Micro LED and Odyssey Ark. Thank you. Ben Suh: Thank you. That sums up the second quarter results presentations. Before we move on to the Q&A session, I would like to share several data points in key business areas. However, once again, we will not be providing annual guidance considering the persistently high macro and geopolitical uncertainties. First, for DRAM, in the second quarter, our bit growth increased by a mid-single-digit percentage, and ASP was flat quarter-on-quarter. For the third quarter, we expect market bit growth and our bit growth to stay flat compared to the second quarter. For NAND, our bit growth compared to the first quarter decreased by a percentage in the high single digits, while ASP increased by a low single-digit percentage. In the third quarter, we expect market bit growth and our bit growth to both rise by around 10% quarter-on-quarter. For Display in the second quarter, the mobile portion of revenue as a percentage in the high 90s and sales volume declined sequentially by a percentage in the high single digits. In Mobile, in the second quarter, shipments were approximately 62 million units for smartphones and 7 million units for tablets. Smartphone ASP was USD 281. For the third quarter, we expect smartphone shipments at ASP to both rise quarter-on-quarter and tablet shipments to stay similar. For TVs, sales volume in the second quarter declined sequentially by a percentage in the mid-20s. For the third quarter, we expect sales volume to increase by a high single-digit percentage. I will now move on to the Q&A session. First, we will start taking questions from the conference call. Operator: [Operator Instructions]. The first question will be presented by Ricky Seo from HSBC. Ricky Seo: I have two questions. The first question is about the inventory. It seems that the company's inventory has increased by about 9% Q-o-Q. With that in mind, can you give us some details about the reasons for the inventory increase? The company's position regarding the higher inventory and also your expectations going forward about your inventory levels? Second question is towards the MX business. The company has been emphasizing connectivity, for example, that connects the mobile device with other devices such as tablets, wearables or PCs. The company I've been told is expecting this to be a source of additional synergy and has been focusing on actively developing new products. With that in mind, can you give us some more details about what kind of solutions the company is developing its strategy and some updates on new products? Unidentified Company Representative: To answer your first question about inventory, as you will recall, there was the sort of a serious global supply chain issue last year and watching that, the company has since been continuously looking for ways, first of all, minimizing the impact on our business and also allowing us to supply products without disruption to our customers. And strategically, since end of last year, we have been securing inventory around the key components through close cooperation with the key suppliers. Now the supply chain situation actually worsened as we passed through this year with the Russia-Ukraine war and also some lockdowns in parts of China. And so watching that, we have been increasing our inventory levels this year. And this was actually one of the key factors of why we were able to continue stable supply of products throughout the first half. Regarding our outlook on inventory, we do expect that our inventory would be adjusted to fair balanced levels during the second half, especially around the DX business. But that said, given the fact that these macro uncertainties are continuing to exist, we will, at the same time, maintain a flexible approach while closely monitoring the situation. We will also be implementing a fair or a balanced inventory policy at the DS business in connection with market situations. To answer your second question about the connectivity, we see that the competitive paradigm in the market is shifting from the smartphone, the mobile device stand-alone to an ecosystem experience that is centered around the smartphone. And that is why we have been continuing to strengthen the connectivity experience between ecosystem devices such as tablets, laptops and wearables. This effort to strengthen the connectivity experience is not just within the MX business, but also, it is at a corporate level, including the VD and our domestic or digital appliances business. For example, now customers are able to control and manage various home appliances such as TVs using the SmartThings from their smartphone. They are, for example, able to continue to watch a video from their smartphone seamlessly onto their TV opening the buzz case would trigger a window on either a TV or smart monitor or the freestyle projector so that the user can connect the buzz to these devices with just one click. These are some of the very examples of how we are providing a very convenient user experience that covers multiple devices in the home. Actually, our concept of this SmartThings connectivity goes beyond connectivity between our own devices. We have been carrying out do the SmartThings, the SmartThings daily lives campaign, where we show our customers the various scenarios that they can actually experience themselves by connecting not only our products and services, but also third-party devices such as light or power curtains in the home to provide a customized experience that fit for everyone. And so based on the SmartThings, our aim is to go beyond just providing convenient technologies or devices, but to become recognized as a premium brand with stronger position and value that actually makes life richer through a multi-device experience. Operator: The next question will be presented by Peter Lee from Citigroup. Peter Lee: I have two questions. The first question is about the Memory side. You did miss your second quarter bit growth guidance by a significant margin. Can you give us some background to why it came in so low? Second question is to the VD side. I think the market is concerned quite a lot about TV demand going forward. Can you share your second half outlook for TV demand, your plans about the premium segment lineup, and also how you plan to defend your profitability? Unidentified Company Representative: To answer your first question about the Memory, actually, in second quarter, our performance, our business results in terms of both revenue and profit grew on a quarter-on-quarter and year-on-year basis, thanks to healthy pricing and also positive impact from FX. But that said, second quarter Memory market conditions were not easy. They were very challenging. It was not so in the case of server where server demand continued to remain solid, but it was on the consumer products that were hit due to various macro issues, including the rising commodity prices due to the extended war going on. Within the consumer products the demand for mobile was lower, particularly more than expected. And so that was the main reason why our shipments for DRAM and NAND came in lower than what we had originally expected. And between DRAM and NAND, NAND, which has a higher exposure towards consumer products had a more prominent decrease in shipments. Now looking towards the second half, we think that the second half, there will be a mix of upside and also risk factors. So given this uncertainty, we think that the best approach would be to continue to carefully watch the market and respond flexibly. In the case of NAND, I think the outlook is that demand for consumer products would be somewhat weak consumer products such as PCs or mobile. But then when we sense the market, at least at the end user level, there is definitely a very clear demand for more storage capacity at the device level. So we are currently discussing ways of tapping that together with our customers. To answer your question about the VD. You've asked, first of all, about our outlook for the TV market. Currently looking towards the second half, it would be seasonality positive. There will be positive seasonality and also there are some sports events, which would be an upside factor. But then there are various other macro variables that are difficult to predict. And so overall, the visibility about demand in the second half is limited. And so given this uncertainty of market demand, our focus is to gain a stronger edge in the premium segment and also to secure profitability by continuing to expand our high-value high-end products and also optimizing our internal operations. And so our strategy towards the premium segment is, #1, to continue focus on premium sales around the Neo QLED products, but also same time, VD Ultra super large size 90-inch plus market by increasing the sales of our 98-inch offering. And also to introduce new sizes using Micro LEDs, which currently is offered in 110-inch, we'll be adding new sizes, such as 89 inches in order to open up new territory within the premium market. Operator: The next question will be presented by J.J. Park from JPMorgan. J.J. Park: My first question is on the System LSI, the Exynos business. There are, I think, concerns about the competitiveness of that business in the market. We've been hearing some rumors that the company may fold up that business. Can you confirm whether those rumors are true? And if not, how does the company plan to increase the competitiveness of its Exynos business? Second question is towards the foundry. The foundry has been making significant investments over the past several years, and that has resulted in growth of its top line above market growth rates. But I guess the profitability-wise, it's not at a satisfactory level from the market perspective. And so can you give us how -- what you expect in terms of the foundry business profitability in the future? Unidentified Company Representative: To answer your question about the Exynos business, the rumor that we may fold the business is completely not true. We're currently in the process of reviewing, revising our SoC business model with the focus on gaining mid- to long-term competitiveness by efficiently delegating or dedicating our resources appropriately. Within this new resource plan, the focus is on strengthening the competitiveness of the next-generation mobile Exynos. And currently, we are focusing on expanding the market share of our key customers by increasing the level of cooperation with the leading IP holders for each area and also starting the development cycle early on so that we have the core competitiveness. Also to further strengthen the competitiveness of the SoC, we are looking into improving the business model, which is currently more relying on the -- dependent on the mobile side. So we're trying to expand that to other applications such as wearables, laptops and WiFi products. Also at the same time, we are focusing on expanding the ecosystem partnership around the SoC by building stronger partnerships and new cooperation models with various companies within that value chain, such as OEMs, ODMs, the module companies and software vendors. To answer your question about the Foundry profitability, at least we think that the demand will remain solid, especially around the advanced nodes. And so our plan is to continue our investments by analyzing multiple factors, including mid- to long-term market, global customers demand, economic outlook, profitability so that we're able to continue a stable supply. In terms of timeline, our plan is to start operation of our Pyeongtaek new line in 2023 and in Taylor in 2024, we also think that we will be able to continue to improve our profitability by introducing healthier prices and also improving our cost side so that we're able to fund our investments from our operation. So if we are able to continue our growth momentum that we see, we expect that we will be able to reach a level of profitability where we will be able to source the funding of investments from our own operations. Operator: The next question will be presented by Dongwon Kim from KB Securities. Dongwon Kim: My first question is about the Memory, the server demand visibility. I think there are some concerns in the market that in the second half, even server demand be slowed down. Can you give us your views of the server demand in the second half? Second question is about the Display. While the overall Display market globally is going through a difficult period, SDC relative was able to deliver positive results. Can you give us some more detail on how that was possible? Unidentified Company Representative: You've asked about server demand. I think one thing we've noticed about server demand is that it's relatively less sensitive to geopolitical issues or macro issues and that's because servers have sort of an nature in infrastructure that enables a lot of the things we do in daily lives and at work that we take for granted. And so there is that nature as an infrastructure essential. And then there are some new growth areas such as AI, where investments into core infrastructure is continuing to expand. Another thing we've been noticing in the market is that many enterprises are now adopting what's referred to as a hybrid server that combines their on-prem servers together with the data center, public cloud servers in parallel. And so that is also adding to a solid support for our fundamental server demand. And so despite the resilience in server demand, I think it's difficult for us to say that everything would be optimistic because as you mentioned, there are some reasons to be concerned, such as that there are some still IC parts that are going through a supply disruption. And also, if the global economic recession occurs, as some are concerned, I think at that point, even the server customers will have to go through an inventory adjustments, which may impact the memory demand at our end. And so our assessment of the server market is that uncertainty is at high levels and that is why actually we are updating our forecast and outlook at any time in order to improve the fidelity of our forecast. And an example of how that works is what we did in the second quarter where we were able to optimize our product portfolio earlier on so that we are able to fully capture the demand on the server side and report the highest quarterly server sales in the industry. Looking towards the second half, there are some upside factors. For example, the mass production of DDR5 at full scale, market is expected to, therefore, expand and therefore, server markets are expected to record meaningful increase in share. And so our approach to that is to continue to maintain and optimize product portfolio around the high-end and high-density solution products but maintain a supply that's flexible and fit to the demand. To answer your question about the display and the relatively better performance compared to competitors. Well, first of all, if you just look back on the market, as you mentioned, overall, the economic environment is challenging. The display market this year has been going through a decrease in demand and also a decline in ASP. So it's a challenging market. We are concerned about these market volatilities as well as the possibility of an economic recession. And so we are carefully monitoring market demand and also the supply chain. Despite these challenging environments, as you mentioned, there seems to be a divergence of company results. And the reason why we are pulling away from the other competitors and staying healthy, I think it's mainly explained by the fact that we were able to preemptively start to readjust our business strategy. Well, as you recall, based on our market analysis and analysis of consumer needs, we had decided to fold our LCD business several years ago and have been going through that process. We completely closed down the LCD business as of the first half of this year. And we were able to actually focus our resources and are building a full lineup of OLED offerings that covers not only the mobile but also IT and also the QD display. And that has actually given us the fundamentals to weather through various disruptions that we've been going through the past several years, including the pandemic and the rapid decline in market demand. And despite that maintain a stable performance. Going forward, we will continue to focus on building our competitiveness on these different applications such as mobile, IT, auto and QD displays and focus on providing -- focus on developing our technologies and providing greater customer satisfaction. Operator: The next question will be presented by Nicolas Gaudois from UBS. Nicolas Gaudois: The first one is on Memory. In light of on demand uncertainty in the market, we believe that Memory makers are reconsidering and reducing the initial capital spending budget into 2023. Does this actually apply to Samsung as well? And could this imply a reduction in overall CapEx and with a public spending in relatively to next year? And secondly regarding the Foundry Business, for the 3-nanometer get around second generation, i.e., 3GAP what is the development status now and mass production time? And how are you executing in winning large-scale customers for 3GAP? Unidentified Company Representative: I'll first start your -- to answer your question about Memory, I guess a good place to start with is about our Memory market outlook. As we've been talking, we do agree that there is a possibility that memory markets may be somewhat weak in the second half. But we are, as we mentioned, updating our demand forecast weekly and even daily basis. So I think at this point, the best approach we can take is to not be too optimistic or too pessimistic about the memory market, but to just continue to check all of the factors we can both internally and externally and respond flexibly to what we see. Now despite all of that uncertainty and changing forecast, our overall investment principles still stands. As we have mentioned several times, our basic principle and approach towards investments is to continue to meet the appropriate level of inventory and advanced node investments in order for us to capture mid- to long-term demand, but at the same time, manage our facility equipment investments more flexibly, closely tied to the actual industry situation. So that principle still stands valid. Now that said, with the huge amount of uncertainty in the market, driven by a wide variety of macro issues, we will place priority on using inventory to continue our supply. And also regarding our short-term equipment-related investments, wouldn't you agree that at this point, the best to just flexibly respond by revisiting the situation. You've asked about the update of our 3GAP, the 3-nano second generation GAA development process. As you know, compared to first generation, the second generation further improved the size, performance and power efficiency. Also, we have adopted an improved development process so that we're able to do checks from stage to stage during the development phase. And also, we have designed the development process so that resources are intensively invested in the upside of the first part of the development process so that we're able to ramp up the initial yield. And so our overall development is on track with mass production aiming for 2024. Regarding the orders, we have already secured several mobile application customers, and we're currently under discussion, negotiation with a large number of mobile customers, and we expect that the size will continue to grow. Operator: The last question will be presented by Sung Kyu Kim from Daiwa Capital Markets. Sung Kyu Kim: The first question is about memory supply outlook for second half and next year. I do agree that currently, at least the second half demand, there's a lot of uncertainty around that. Another factor regarding supply side is that there are some disruptions in the equipment supply, the lead time. And that, according to us is slowing down the process migration of especially the DRAM nodes. Given all of those factors, what is your outlook on DRAM supply, memory supply for this year and next year? Second question is about the Display side. As you mentioned, Samsung Display has taken the preemptive initiative to restructure its businesses and preparing for future. With that in mind, can you give us more details of which specific business areas Samsung Display is preparing for? Unidentified Company Representative: To answer your question about DRAM supply, yes, given the high level of uncertainty that we see going forward, our basic approach is to continue to maintain an optimized product mix so that we're able to stably supply products that the customers actually need. Now looking towards next year, as you mentioned, there are possibilities of equipment lead times being delayed due to continued issues in the component parts supply. If there are delays in the equipment deliveries, this would cause delays in migration to the advanced nodes. And also considering the difficulty at the advanced nodes in terms of production, this is causing already some restrictions in bit growth throughout the industry. So with that structural constraint in production, we expect there may be actually a quite low level of bit growth in the DRAM at an industry level. What's happening at the same time is that the new product markets are opening up, especially around the new interfaces, such as DDR5 and LPDDR5X. And so with the variety of products being introduced, it's going to be critical for the Memory companies to start with the right product mix in place, and so that is why we have been focusing on sensing the market demand and closely cooperating with the customers. Now with that outlook, our basic policy towards supply next year would be to maintain a flexible inventory policy based on close collaboration with our customers and also to carefully monitor the market with a very wide product lineup prepared so that we are able to emphasize profitability in terms of our supply. To answer your second question, which was about the Samsung Display's future growth and business strategy. As you mentioned, we have been sensing market changes in the mid- to long-term perspective and have taken the preemptive initiative to change our business structure. Now going forward, we will continue to take this mid- to long-term strategic approach that tries to look at, for example, market and technology changes, at least with a 5-year horizon. Some of the key areas that I can emphasize within that strategy would be: #1, trying to find new applications for OLED. Currently, smartphone OLED penetration is already around 40% levels, and that's why we are trying to find other applications where OLED can replace LCDs. This will be, for example, in IT, automotive or gaming, could be new OLED applications, so we're focusing on emphasizing the advantages of OLED versus LCD and also preparing the technologies to actually implement OLEDs in these application areas. The second area that we're focusing on is areas that would grow significantly as a part of this fourth industrial revolution that's basically metaverse or, in other words, AR and VR applications. These applications actually demand extreme level display performance. And so we are preparing the technology, including micro displays. Well, especially in the case of metaverse, it's not a market that's already existing where we will be entering, but actually, it's going to be a new market that's created from ground up. And so it's important to not only have the display right but also both have the upstream and downstream infrastructure well prepared. And that's why we are actually getting ready to play a leading role in creating this infrastructure, this supply chain ecosystem around the metaverse by developing the technology and also contributing the display business know-how that we have accumulated as a leader in that space. Unidentified Company Representative: Finally, we will answer questions that were submitted online in advance. We have been accepting questions via our web page in advance of our earnings release as a part of our efforts to strengthen communication with individual investors an enhanced understanding of the company. And we have received a wide variety of questions for this quarter. I believe the majority of the submitted questions were sufficiently answered during the Q&A session. And so we will answer one more question on the topic that garnered a high level of interest from many of our shareholders but were not addressed during the Q&A session. And so that question is, amid the heightened concerns over an economic slowdown in the second half of this year, what is the company's outlook for smartphone demand? And against this backdrop, what are the company's sales strategies and measures to secure profitability in the Mobile side? And so that will be answered by VP Sung Koo Kim, on behalf of the Mobile eXperience, the MX. SungKoo Kim: Yes, to answer your question, I think I can start from the outlook of the smartphone demand. Actually, at the start of this year, the smartphone market in the second half was expected to record a mid- to high single-digit growth in terms of both revenue and volume. But recently, our outlook has been revised. And as we stand today, we believe that in the second half due to various market uncertainties, the smartphone market would either be flat or record only a small amount of growth. However, we think that still in the mid- to long term, growth will continue, especially around the flagships. And the reason we believe that is, number one, because there is a greater need from consumers for premium experiences and also in the emerging market countries, disposable income is increasing. And also, there is a greater penetration of new technologies such as foldable. And so overall, we think that on a full year basis, smartphone shipments, we think that at our level would slightly decrease given the shrinking market. But then actually we will focus on increasing our revenue as well as ASP on a year-on-year basis, on a full year basis by increasing the sales of our flagship. To translate into specific details in the second half, we will continue to maintain the sales momentum of our S Series and also use the new foldable series that will be launched in order to deliver sales volumes that are above the sales volumes we used to record using the Note series. Also, the shift towards the premium segment will continue on our EKO devices as well as we increase sales around the large screen size premium tablets and wearable new models. So with all of that, we're expecting that our overall product mix will be further enhanced. So while we meet those advances on our sales side internally, we will continue to work on optimizing and raising the efficiency of our overall process across development, manufacturing and logistics to deliver double-digit revenue growth on a full year basis year-over-year Korean Won and also focus on maintaining a double-digit operating profit. Unidentified Company Representative: I would like to thank everyone who can share their valuable opinions, and we will be sure to refer to them in our business making process. And that completes our conference call for this quarter. We wish all of you and those close to you stay strong and in good health. Thank you.

Operator: Good morning and good evening. Thank you all for joining this conference call. And now we will begin the conference of the fiscal year 2022 first quarter earnings results by Samsung Electronics. [Operator Instructions]. Now we shall commence the presentation on the fiscal year 2022 first quarter earnings results by Samsung Electronics. Ben Suh: Welcome, everyone. This is Ben Suh from Investor Relations. Thank you for joining our first quarter 2022 earnings call. For additional details regarding our quarterly results, please refer to our earnings presentation, which is available on our IR website at www.samsung.com/global/ir. On the call with me today are the following representatives from each business unit. We have EVP, Han, Jin Man, representing Memory; VP, Kenny Han, for System LSI; EVP, Kang, Moonsoo for Foundry; EVP, Choi, Kwon Young for Samsung Display; VP, Kim, Sung-Koo for Mobile Experience; and VP, Kim, Young Moo for Visual Display. I want to remind you that some of the statements we'll be making today are forward-looking based on the environment as we currently see it. And all such statements are subject to certain risks and uncertainties that may cause our actual results to be materially different from those expressed in today's discussion. Also, please note that last December, we merged the IM and CE divisions to form the DX division. However, the earnings call materials provided today are based on the business structure before the reorganization to prevent investor confusion regarding our results. Before reviewing our quarterly results, I would like to address the first quarter dividend. Today, the Board of Directors approved a quarterly dividend of KRW 361 per share for both common and preferred stock. Based on the annual dividend payout under the current dividend policy, the total payout for the first quarter is KRW 2.45 trillion or 1/4 the annual total for 2022. It will be paid in mid-May. With that, I would like to present the results for the first quarter. We once again delivered record results despite a highly challenging external environment, thanks to the hard work and dedication of our employees and strong cooperation with our partners to deliver the products in demand by our customers. Total revenue in the first quarter grew 1.6% sequentially to KRW 77.8 trillion, setting a new all-time quarterly high for the third consecutive quarter. We raised the bar again by delivering solid growth across all our businesses with the DX division registering its highest revenue since 2013, thanks to our premium focused strategies and the DX division setting a historical high for quarterly revenue by actively meeting strong server memory demand. On a year-on-year basis, revenue grew 19% driven mainly by the Memory and Visual Display businesses. And I would also like to highlight that there was at least 10% growth in all of our business units, except for large panels in which we are ramping down LCDs. Gross profit decreased by KRW 0.9 trillion sequentially to KRW 30.7 trillion, mainly due to increased material and logistics costs affected by macro issues. Gross margin also declined slightly compared to last quarter, falling 1.8 percentage points to 39.5%. SG&A expenses were lower by KRW 1.2 trillion quarter-on-quarter to KRW 16.6 trillion, mainly due to a reduction in R&D combined with more efficient advertising and promotional spending. As a percentage of sales, they declined by 1.9 percentage points. Although R&D was down sequentially, this was due to the record levels set in the previous quarter and R&D spending reached an all-time high for a first quarter as we continue to invest in future growth. Both operating profit and operating margin increased quarter-on-quarter with operating profit reaching KRW 1.4 trillion due to solid sales of S22, the new flagship smartphone and premium TVs despite a decline in memory ASP. On a year-on-year basis, both operating profit and operating margin increased substantially rising by 51% and 3.8 percentage points to KRW 14.1 trillion and 18.2%, respectively. I will now briefly review the results of each business unit. In Memory, we outperformed market expectations amid a milder-than-expected price decline. We also achieved record high quarterly sales for server due to an active portfolio shift to meet solid demand from server and PC. In System LSI, the results improved sequentially as positive impacts from favorable exchange rates and higher ASP outweighed the effects of a decline in SoC and CIS supply amid a weak mobile season. In Foundry, demand was solid across all applications. Despite concerns around delivery issues, we increased our advanced process portion of production and were able to align on a stable yield trajectory. For the Display segment, the mobile panel business delivered historically high results for a first quarter, driven by strong sales at major smartphone customers and increased sales in new application areas such as gaming. In the large panel business, the production yield of QD displays improved faster than projected, and monitors featuring QD display were released during the quarter. For the MX business, although we faced component shortages, geopolitical issues and adverse currency effects, we delivered sequential increases in both revenue and profitability. This was mainly due to strong sales centered on S22 Ultra, which integrates specialties of the Note, positive responses to new mass market 5G models that offer flagship experiences and solid sales of device ecosystem products such as premium tablets and watches. The network business expanded its sales overseas while meeting domestic 5G expansion needs. In VD, revenue and profit grew year-on-year even amid declining market demand with increased sales of premium, high-value strategic products such as Neo QLED and Super Big TVs. In Digital Appliances, we achieved record high quarterly revenue based on growth trends across our entire premium lineup centering on BESPOKE despite an increased cost burden. Regarding currency effects relative to the Korean won, positives related to the strong dollar for the component businesses outweighed adverse impacts from a strong dollar and weakness in some emerging currencies for the finished product businesses. All in all, the net result was positive resulting in an approximately KRW 300 billion gain for operating profit compared to the previous quarter. Next, I want to share our business outlooks. In the second quarter, we expect that macro uncertainties and logistics issues will persist. For a company-wide business outlook, DS will work to meet expected solid demand and DX will focus on securing profitability by expanding sales of new smartphone and TV products while strengthening its leadership position in the premium segment. Now for each business unit's outlook, in Memory, we will focus on meeting expected solid demand centering on server while maximizing the quality of our portfolio by expanding sales of high value-added products, leveraging our market-leading technologies. For System LSI, we will mainly focus on maximizing the supply of key components such as SoCs and image sensors. For Foundry, we will solidify our technology leadership position with the world's first mass production of the 3-nanometer gate all around process and prioritize increasing supply to our global customers. We also expect to continue to win new business opportunities and new customers. For the Display segment, in the mobile panel business, despite macro uncertainties, we expect to maintain solid results compared to last year. Thanks to continued solid demand from major customers for their flagship smartphones and demand for gaming and other applications. The large panel business, we expect revenue to increase with the release of TVs featuring QD display and losses to narrow. LCD production will be ramped down as planned. In the MX business, we made improved availability of key components. We expect solid sales of S22 and expanded sales of new 5G models for the mass market to fuel significant year-on-year revenue growth, and we expect to achieve solid profitability despite macro impacts by utilizing our global supply chain management capabilities. For Network, we will deliver a stable supply of products to our telecommunications customers and also work to win new business opportunities. For VD, we will focus on selling new models, including Neo QLED and The Freestyle and capture demand for premium products to help counter an expected market slowdown. For Digital Appliances, we expect to increase revenue and profitability by improving the product mix with increased availability of BESPOKE premium products in the global market and by expanding sales of air conditioners amidst strong seasonality. Now let's move on to our outlook for the second half of the year. For a company-wide business outlook, as we project uncertainties related to the macro environment and geopolitical issues to persist, our component businesses will prioritize increasing the portion of our advanced processes and expanding into new application areas. New products introduced in the market should help conditions to improve during this period. In the DX division, we will continue to strengthen our premium lineup leadership position, while working to enhance multi-device experiences via seamless connectivity between different products that encompass home, including TVs and digital appliances, mobile and automotive. We aim to create customer experiences on a level that only Samsung can provide. Now for each business unit's outlook, for the Memory business, we expect server demand to remain solid, backed by an accelerating shift to high core CPUs. We also anticipate a recovery in mobile demand on effects of new model launches later this year. Thus, we plan to extend our leadership position by increasing sales of next-generation interfaces such as DDR5 and LPDDR5X and by focusing on a high value-added product portfolio. System LSI will focus on reinforcing its lineup of SoC models targeting the volume zone. For Foundry, we will push to outperform the market and also achieve meaningful profit by raising the yield and increasing the portion of our advanced processes. Meanwhile, we will adopt pricing strategies to enable continued investments and solidify technology leadership in the GAA process. For Display, in the mobile panel business, we expect sales to increase driven by expansion of foldable products and the accelerated adoption of OLED in new application areas such as IT, gaming and automotive. The large panel business will establish its leadership position in the premium segment in narrow losses with QD display. The MX business will target to maintain a solid level of profitability. First, we will expand our premium user base by improving flagship experiences. Second, we will maximize sales of new foldable products via strengthened cooperation with our partners and offer an undisrupted supply to meet the market demand. Lastly, we will increase sales of new device ecosystem products that will enhance customer experiences. For Network, we intend to maintain our growth momentum by meeting domestic needs for 5G installations in a timely manner, and actively expanding our business in overseas markets. We will also continue to reinforce our leadership position in vRAN or virtualized radio access network technology. For VD, we will strengthen our premium market position by expanding sales of our differentiated strategic products such as Neo QLED 8K and Lifestyle products during a seasonally strong period, and by sales of innovative products such as Micro LED and Odyssey Ark. For Digital Appliances as issues related to material costs and logistics are likely to persist, we will continue to focus on increasing sales of premium products and enhancing local production capabilities of our global manufacturing base. Now turning to capital expenditures. CapEx in the first quarter was KRW 7.9 trillion with KRW 6.7 trillion invested in semiconductor and KRW 0.7 trillion in Display. Memory investments concentrated on infrastructure at P3 and on process migrations at fabs in Hwaseong, Pyeongtaek and Xi'an to address growing future demand. Foundry investments focused on developing and establishing the production capacity of advanced processes under 5-nanometer. Next, I would like to share some of our key activities and sustainability management. In the first quarter of this year, we released the Galaxy S22 Series, which features specific components made from high-quality recycled plastic created from discarded fishing nets. We are committed to preserving the environment. By 2025, all new Galaxy products will use recycled materials and single-use plastics will no longer be used in packaging. Meanwhile, the Memory business is portable SSD T7 acquired a Low Carbon Product Certificate as it reduces carbon emissions. In particular, it uses eco-friendly pulp rather than plastic for the tray in the packaging material and consumes less energy in the usage stage. We will strive to achieve Low Carbon Product Certification in all -- in our subsequent products and add to our certified green Low Carbon Product portfolio. Next, in February, Samsung joined forces with the Ministry of Small and Medium Enterprises and start-ups to alleviate a domestic shortage of COVID-19 self-diagnostic testing kits by supporting a local kit manufacturer. Our collaboration helped improve production by early stabilization of new facilities and by supporting logistics firms and partners to improve the local response to COVID-19. We are committed to finding new ways to strengthen ESG management and incorporating them into our business. To learn more about our latest ESG initiatives and priorities, please visit our corporate sustainability website. I will now turn the conference call over to the representatives from each business unit to present first quarter performances and outlooks for their corresponding business segment. We will start with the Memory business. Thank you. Jin Man Han: Good morning. This is Han, Jin Man from the Memory Global Sales and Marketing Office. In the first quarter, price declines in Memory were modest relative to market expectations, thanks to solid demand mainly from server and PC. As a result, our performance exceeded market forecast. However, results declined slightly quarter-on-quarter due to a one-off special incentive and mild seasonality in some applications. In DRAM, overall server demand continued to show a favorable trend. Thanks to increased DRAM content related to rising adoption of high core CPUs and alongside still strong demand from data centers. Starting in the fourth quarter of last year, Set Build momentum for enterprise PC has been recovering, thanks to improvements in component shortages and demand for high-end products has been solid, which have -- impacts a weak seasonality to a degree. Mobile demand was somewhat tappet as launches of new models by major manufacturers weighed on by effects of the crisis in Ukraine and China's lockdown in major cities amid weak seasonality. We preemptively identify shifts in demand through our own machine learning-based marketing system and actively responded to server demand. As a result, we exceeded our bit growth guidance and achieved record high quarterly sales for server. Next, I will talk about the NAND market. Demand for server SSD from data centers remained solid, thanks to pent-up demand from last quarter, in which Set Build was partially influenced by disruptions in IC component shortages. Our server OEMs contributed to strong demand for server SSD related to increased investments in new IT infrastructure. The demand trend for client SSD was solid, backed by robust demand for enterprise PCs as companies increasingly follow back to office trend and expand hybrid work models and by increasing SSD penetration in conjunction with growing adoption of high-end PCs. In Mobile, despite ongoing partial improvement of supply for low to mid-priced APs and events such as launches of flagship models from major manufacturers, memory demand slowed somewhat due to weak seasonality and inventory adjustment by some customers. Considering the limited inventory situation and future market conditions, we have maintained our business strategy, which is to refrain from excessive expansion of sales and continue to increase our proportion of high-density, high value-added products as we remain focused on improving the quality of our business. Ultimately, we exceeded our bit growth guidance due to regions above, including the base effect from last quarter. Now let's move on to the second quarter outlook. In DRAM, for servers, Set Build will likely depend on the pace as to how quickly supply chain issues get resolved. Thus, we need to continue to monitor the situation meticulously. Meanwhile, we expect the server demand centering on high-density products to be relatively solid, aided by continuous penetration of DDR4 8-channel CPU. As for PC, there are some demand uncertainties caused by inflation as well as economic slowdowns and reduced consumption influenced by the crisis in Ukraine. On the other hand, there is also a potential for solid demand based on the continuing trend towards high density, combined with the rising penetration of DDR5. In Mobile, a surge in raw material prices caused by the Russian-Ukraine war may add pressure to inflation and affect smartphone consumer sentiment, while supply chain issues also present risk factors. However, we see changes of a demand recovery -- chances of a demand recovery, depending on the pace of reopening in some countries, so we need to monitor the situation carefully. Despite a variety of supply constraints, we will continue to pursue the highest quality portfolio by expanding sales of high value-added high-density products while actively responding to demand for applications, they show the most growth potential. In NAND, amid shortage in chip production provoked by external issues and impacts of short supply of active pass components, we expect server demand centering on high-density products to grow based on the investment expansion mainly for data centers. However, we should keep an eye on possible demand changes considering uncertainties, including macro issues. Meanwhile, due to various macro issues, we expect to see some effects on demand in consumer-oriented product lines. First, for client SSD, consumer PC demand is likely to shrink amid global inflation and the effects of the crisis in Ukraine. The enterprise PC demand is likely to be solid and high-density trend of SSDs backed by increased sales of high-end PCs will continue, which should ease some effects of weak demand. For Mobile, the short-term market environment is unfavorable due to lockdowns in major Chinese cities amidst low seasonality. The consumer sentiment has potential to recover later in the quarter with the launch of new form factor models. With people spending more time outside, following gradual easing of quarantine regulations in some countries and with the resumption of investment in 5G infrastructure. Amid impacts of shortages of active pass components, we will maintain our efforts to promptly address customer demand including strong SSD demand for enterprise sector by our business competitiveness. Coming to the full year outlook, we will share our prospect for each application for the year. However, the situation requires continuous monitoring as it is an immense challenge to predict the duration or market ripple effects of various macro issues such as the Russia-Ukraine war and global inflation. Server demand is expected to be relatively solid compared to other applications resulting from increased demand for DDR5 and high-density trend as high-core CPU transition grows, but the pace of improvement in component shortages, which can affect Set Build needs attention. For PCs, demand for consumer-oriented products is projected to be weakened somewhat due to macro issues and the base effect from last year. For enterprise demand should be relatively solid as companies normalize operations and expand hybrid working patterns. Moreover, considering growth and changes in the utilization of PCs rising portion of high-end products and growing content per buck should help partially offset weak consumer demand. For Mobile, it seems that the macro issues mentioned previously will have a greater impact on mobile than on the other applications. However, as the visibility clears on the recovery of the issues, there is potential for a sooner-than-expected demand recovery. In particular, as major manufacturers are scheduled to release new products in peak seasonality in the second half, we anticipate the Set Build will recover. In addition, demand central on high-density products in the LPDDR5X, which is a cutting-edge interface is forecast to increase as manufacturers strengthened flagship lineups. Under the circumstances of extremely high uncertainties, we're continually upgrading our machine learning-based marketing system of allocating more resources to improving the accuracy of our demand predictions in order to secure flexible supply capabilities linked to market conditions. By maintaining a product mix oriented towards sovereign high-end PCs, we will respond to new demand in a timely manner by expanding supply of cutting-edge interfaces such as DDR5 and LPDDR5x. In addition, while we closely observe changes the market demand, we'll center our portfolios on high value-added and high-density solutions while steadily realizing cost reductions based on our industry-leading technologies and strengthening our market leadership. Thank you. Kenny Han: Good morning. This is Han Yuhan from the System LSI business. In the first quarter of this year, the supply of major components such as SoC and image sensors decreased due to weak seasonality of the mobile industry and inventory adjustments at manufacturers in China. However, earnings improved quarter-on-quarter, lifted by benefits of foreign exchange movements and increase in ASP. DDI sales increased by over 30% year-on-year for both large panel and mobile display. And despite a weak TV market, TV DDI demand has remained strong, keeping shipments at a steady level. To secure our second quarter earnings, we have started shipping SoCs for the volume zone and commenced mass production of new 5G FR2 RFICs as well as 0.64 micrometer 108-megapixel image sensors. In the second quarter, we expect our SoC supply to grow significantly led by yield improvements for flagship SoCs and the addition of midrange products to our lineup. Meanwhile, demand for high-resolution image sensors in both Korea and China is expected to stay steady. For DDIs, we expect the price to stay solid, given there's still tight foundry supply and relatively low driver IC inventory at customers. In the second half of this year, we plan to further expand our lineup of 5G SoCs and supply our cutting-edge ultra-high 108- and 200-megapixel sensors as planned to meet our customers' request. We expect to deliver higher growth than we have in previous years, thanks to new product launches and lineup extensions and to achieve improvements in both profitability and sales. Thank you. Moonsoo Kang: Good morning. This is Moonsoo Kang from the Foundry business. In the first quarter, we achieved our highest ever first quarter revenue, which increased 35% on a year-on-year basis, thanks to solid demand across all applications, improving yields and increasing revenue share from our advanced process nodes. In particular, through close collaboration with our semiconductor R&D, we have stabilized the yield trajectory of our advanced process nodes while continuously improving our production capability by stabilizing new equipment. Additionally, we continued our effort to diversify and secure future growth by adding new orders in HPC and consumer segments, where revenue increased 75% and 57% on a year-on-year basis, respectively. We are also improving our ability to respond to future demand with new investment in Taylor U.S.A. as well as in domestic fabs and by optimizing our currently operating lines. In the second quarter, we expect market conditions to remain tight with demand exceeding supply across all process nodes. We will continue to improve yields of our advanced nodes to actively address demands from the major customers while striving to expand supply and secure more new orders from global customers. Additionally, we aim to secure technology leadership by completing qualification of the first-generation GAA process and entering high-volume manufacturing being the first in the industry. In the second half of the year, although we expect uncertainties due to a slowdown in economic growth and continued geopolitical instability, we forecast foundry supply remains short of demand due to rising penetration of 5G and a strong demand for HPC. We will continue to widen the gap in technology leadership by improving the yield and maturity of our first-generation GAA process. We also aim to exceed market growth in the second half through yield improvement, and ASP increase due to the expansion of our business in the advanced nodes, along with the proper pricing strategy to secure future investment. Thank you. Kwon Young Choi: Good morning. I'm Kwon Young Choi from Samsung Display. In the first quarter, although earnings of mobile display business declined quarter-on-quarter, influenced by inflationary pressure and geopolitical issues. They improved year-on-year, boosted by solid demand for our premium products and in effects of foreign exchange movements. In particular, the increasing adoption of OLED displays in the notebook PCs and gaming device segments contributed to the results. In the large display business, we recently rolled out QD monitors and TVs and their outstanding picture quality and performance gained high praise from the market. Additionally, we are quickly improving and stabilizing yield of QD displays. Next, let me share the outlook for the second quarter. Despite risk factors such as a prolonged geopolitical conflicts and the lockdowns in some regions in the wake of resurgence of COVID-19, we expect the performance of mobile display business to remain strong. Thanks to the continued demand for the smartphone adopting whole displays. For the large display business, we expect earnings to improve as we ramp down LCD production and expand our shipments of QD products in earnest. Next, let me turn to the outlook for the display market and our core strategies for 2022. While we expect business risk to linger due to growing uncertainties in the external environment, the overall size of smartphone market is likely to stay at the 2021 level, owing to the economic recovery led by the advanced countries. As the smartphone market continues to adopt new technologies such as whole display, UPC and LTPO. Samsung Display will further widen the gap with competitors through development and all the stabilization of such technologies. Additionally, the oversize of OLED display market is likely to expand continuously owing to the growing demand for OLED displays in markets ranging from IT to automotive and gaming. This expectation is attributable to IT market that has grown by increased demand from non-face-to-face services since the outbreak of the pandemic. The automotive market that has high demand for premium displays for electric vehicles and the gaming markets that gravitated towards portable gaming devices, offering high picture quality. With the addition of larger QD displays to our rich and flexible mobile OLEDs that are already leading the premium display market, Samsung Display now has a full lineup of solutions with which we can deliver self-luminous displays to wherever they are needed. Moreover, capitalizing on our competitive edge that are no match for competitors, we will actively target new OLED display markets and secure mid- and long-term growth engines by satisfying both ever-growing expectations of consumers and diversifying market demands. Thank you for your listening. Sung-Koo Kim: Good morning. This is Sung-Koo Kim from the MX business. I would like to share with you our Q1 2022 results and outlook for the MX business. In Q1 2022, the mobile market decreased Q-o-Q and Y-o-Y due to seasonality and political instability in certain regions. At Samsung, the MX business delivered sequential revenue growth and profitability improvements despite supply shortage issues and a decline in demand in the mobile market. The Galaxy S22 series, which we launched in Q1, generated strong sales and in particular, the Galaxy S22 Ultra, the type of the series that features the S-Pen has garnered great feedback from our loyal Galaxy Note customers. As a result, the Galaxy S22 Ultra accounted for a higher portion of sales than its predecessor did, helping drive revenue growth. Furthermore, our mass market 5G smartphones, including new A Series models to further strengthen premium experiences, so sequential sales growth with their improved profitability also contributing to the Q1 performance. We expanded sales of tablets and continue to generate solid surge of wearables through marketing that highlighted our device ecosystem products, which included our event where we unpacked our new premium tablet, the Galaxy Tab S8 together with Galaxy S22. Next, I would like to discuss the outlook for the Q2 2022. We expect the smartphone market to decrease Q-o-Q due to seasonality and a prolonging of the COVID-19 situation and geopolitical uncertainties. For the MX business, we will try to reserve supply shortage issues affecting key components by strengthening cooperation with partners and forming long-term agreements in order to achieve Y-o-Y revenue growth. Basically for the Galaxy S22 series, we expect to reserve supply issues of key components, and we will closely monitor supply balance of other major processes in order to maintain strong sales of flagship smartphones. In addition, our marketing centered on core experiences of the new 5G mass market models that we released in Q1 led to positive feedback. So we will actively address demand in the mass market and expand sales of these models. Amid uncertainties related to COVID-19 and the macro environment, we will strive to minimize impacts on our business and secure solid double-digit profitability by stabilizing supply of flagship products and by enhancing the efficiency of our SCM capabilities. Now let me share the outlook for the second half of 2022. While risks related to COVID-19 and purchase supply are likely to persist, we expect the smartphone market in 2022 to continue to grow annually, and the wearable market is projected to post another year of high growth in the double digits. The MX business will continue to offer customer-centric, innovative experiences that increase customer satisfaction and loyalty and thus expand our customer base in the flagship market. For the new foldable models, we will thoroughly prepare to ensure seamless supply of key parts so we can fully address market opportunities and maximize sales from the moment they hit the market. In addition, we will further optimize experiences tailored to the form factor through collaboration with partners. With these efforts, we will strive to achieve significant growth of the foldable phones following its successful mainstream. Also for device ecosystem products, we will work to increase sales by leveraging enhanced customer value. And following the integration of the DX division, we will cooperate intimately with the VD and DA businesses to further advance seamless connected experiences across Samsung products and ensure they add value to our customers' daily lives. With these efforts, we aim to achieve sales growth in 2022 and also continue solid profitability with improved product mix and operational efficiency. Thank you. Woojune Kim: Good morning, I'm Young Moo-Kim from Sales and Marketing team of Visual Display. First, I'd like to review the market conditions and our performances in the first quarter of 2022. Market demand for TV contracted both year-on-year and quarter-on-quarter. The former is due to the base effect of last year's pent-up demand, and the latter was caused by entering weak seasonality following year-end peak season and also by effects of geopolitical issues, including those involving Russia. By closely cooperating with channel partners, we expanded revenue year-on-year by taking advantage of various sales promotion opportunities in each country and intensively targeting demand for high-value premium products. Furthermore, we improved our profit by enhancing the cost efficiency of sales activities. Next, I'd like to talk about the second quarter and second half forecast of 2022. We expect TV demand in the second quarter to contract both quarter-on-quarter and year-on-year due to acceleration of a trend in which demand shift from home entertainment to outdoor activities and travel led by easing restrictions, mainly in advanced markets and also due to pressure from continued uncertainties spurred by geopolitical issues involving Russia. Against this backdrop, Samsung plans to focus on capturing premium demand with new models. In particular, the Neo QLED for 2022 has garnered price for providing an incredible immersive experience with a new level of picture quality and sound and also for its minimal design. And The Freestyle praised for its innovation is creating a significant buzz in market. We will achieve growth in revenue by continuously driving sales of these strategic products. Moreover, we will further optimize our operations by establishing preemptive plans of sales and supply to address market risks such as raw material and logistics issues. For TV market in the second half, although there are opportunities for us to expand sales, including peak season and sporting events, macro risks are likely to continue to cast uncertainties on overall TV demand. Samsung will closely observe the rapidly changing market conditions and take preemptive actions against uncertainties by capturing demand of peak season and sporting events, while also expanding sales of our own differentiated strategy products such as Neo QLED and Lifestyle Screens. At the same time, we will solidify our status as the market leader through innovative products like Micro LED and Odyssey Ark. Thank you. Ben Suh: Thank you for the presentations, and that sums up the first quarter results presentations. Before we move on to the Q&A session, I would like to share several data points on key business areas. However, due to continued macro and geopolitical uncertainties, we will not be providing annual guidance at this time. In the first quarter for DRAM, our bit growth increased by a low single-digit percentage. And ASP also declined by a low single-digit percentage compared to the prior quarter. For the second quarter, we expect market bit growth to be in line with mid-teen percentage range, and our bit growth should be similar. For NAND, our bit growth increased sequentially by a high single-digit percentage, while ASP declined by a mid-single-digit percentage. In the second quarter, we expect market bit growth of high single-digit percentage, and we should be similar to the market. For Display in the first quarter, the mobile portion of revenue was in the mid-90% range, and sales volume declined sequentially by a percentage in the high teens. In Mobile, in the first quarter, shipments were approximately 74 million units for smartphones and 8 million units for tablets. Smartphone ASP was USD 278. For the second quarter, we forecast that we will see a decline in sequential sales volume for both smartphones and tablets, but an increase in smartphone ASP. For TVs, sales volume of LCD TVs in the first quarter declined by a mid-single-digit percentage compared to the previous quarter. For the second quarter, we expect sales volume to decline sequentially by a percentage in the low to mid-teens. With that, I will now move on to the Q&A session. First, we will start taking questions from the conference call. Operator: [Operator Instructions]. The first question will be presented by Nicolas Gaudois from UBS. Nicolas Gaudois: The first one relates to memory and specifically DRAM. There has been some recent discussions on Samsung possibly skipping 1-beta nanometer to go straight to 1c nanometer. Is that the case? And if so, could you elaborate as to what is actually driving this? If not, could you recap for us where we actually are on the development of 1-beta nanometer? And when is the intended timing for mass production? And the second question is for MX. Obviously, the current geopolitical situation is directly impacting sales for smartphones, for instance, in Russia. But beyond this, could you -- how do you consider indirect impact that high inflation may have on smartphones sell-through as well as possibly product mix? And what is your current expectation for flagship smartphone unit shipments from the second quarter onward and how can Samsung mitigate the impact? Unidentified Company Representative: To answer your question, first of all, I can confirm that it is not true that we have any plans of skipping 1b that's 12 nano and our mass production schedule is on schedule without any disruption. Regarding the DRAM, as you know, the difficulty of process shrinkage does increase quite steeply. And the adoption of EUV, which the rest of the memory industry has just started to adopt on a larger scale is also the purpose of EUV was to overcome and break through the limitations of the process and node difficulties. That is why we have -- we were the first in the industry to adopt EUV on DRAM, and we have already proven the overwhelming technology competitiveness as well as cost competitiveness of DRAM on EUV. In the process of adopting new technologies such as EUV, some changes to the original plan would be involved. But we think that part of being a leader in the industry is taking on these challenges of adopting new technology and to incorporate that into our technology road map. I think what's also becoming quite important is that as IT infrastructure accounts for a larger share of memory demand versus the existing consumer applications, the importance of the ability to supply with core technology products at the right timing is becoming more critical than ever before. I think the process of optimizing the design rules, considering yield, stability, cost and other factors overall is a natural part of developing the advanced nodes. Similar situations have existed before. And right now, we are going through this process of optimizing the design rules of this node considering various priorities. So I think it's fair to say that our 12 nano development plan is being carried out stably, and the subsequent nodes would also be developed according to our mid- to long-term technology road map. To answer your second question, yes, as you mentioned, even during the first quarter, there were difficulties, including the unstable geopolitical situation and also a shortage of the key component for the S22 Series. But actually, we were able to deliver very positive sales, especially around the S22 Ultra which incorporated the experience from our Galaxy Note Series. With the increase of Ultra within the S22 Series, our product mix improved, our ASPs also went up. And so overall, in first quarter, our flagship revenue increased quarter-over-quarter. You've asked about second quarter and onward. And we also expect uncertainties, including the SCM disruptions related with COVID-19 as well as the international political instability to continue. And there's a possibility that these factors may remain for the long term. We do expect, though, we will respond by strengthening our cooperation with partners and also by using long-term contracts to address the supply issues of key components. We do expect that from second quarter, our supply -- part supply difficulties would be resolved. Also, we will try to minimize the impact of any market uncertainty by carefully monitoring the balance situation of the supply and demand, balancing situation of our key components and also by focusing on stabilizing the supply of the S22 Series. With these responses despite the market uncertainties, we will focus on continuing the positive sales of our flagship smartphone so that we will be able to grow both top and bottom line again in the second quarter. Operator: The next question will be presented by Peter Lee from Citigroup. Peter Lee: I have two questions. The first question is about the Memory. Actually, data center demand, which has been expected to be weak since end of last year, has actually turned around and proven to be quite solid. Also, we're sensing that inventory at the OEM level have also increased since. Do you think that such a solid demand on the server side may continue in the second half of this year? Or do you see a possibility of an oversupply as the industry all focus on the server segment? Second question is a foundry question. There is some concern regarding your foundry orders. There's talk that your key customers are moving over to competitor foundries. And so in that context, I'm wondering if you can share your current status of new order wins on your advanced nodes for the Foundry? And what are your future outlook? Unidentified Company Representative: To answer your question, first of all, yes, I can confirm that there is a relatively strong demand on the server side versus other applications. And this strong server application demand is driven by multiple factors. One is that companies are also increasing their IT infrastructure investments. But at the same time, many cloud service providers are also increasing their investments as they move into new growth areas such as AI and machine learning. At the same time, there's also an increase in memory content with the adoption of high-core CPUs. So given the fact that the strong server demand is backed up by fundamental demand drivers, I think that there isn't much of a high possibility of there being an excessive memory inventory buildup. And so even in the second half, I think these fundamental drivers are supporting the server demand will continue. And so while the underlying server demand appears to be relatively more solid. How that will materialize and actual demand will be dependent on factors, including the supply issues around certain components that have caused that build disruptions. And that may have an impact on second half server demand. Given that, we will continue to very carefully check the demand changing situation so that we're able to provide supply that is in line with market demand. You've also asked about our opinion about a possible oversupply towards server applications. And our answer is that we do not, the possibility of our oversupply to servers is low. And the reason why we think that an oversupply towards server, the possibility is low is the following. Number one is that server companies use a very wide range of different CPUs. And for each CPU, the memory product also has to go through qualification for each node. Also in the process of switching across nodes or density or different applications, there are restrictions on how much supply can be increased when you consider issues such as material, capacity restrictions and also the switching efficiency. On top of that, you also have to think about the match of customer requests and supply between DDR4 and DDR5. So considering all of these operational constraints, even though we will try to do our best to respond and meet the customer and market demand, there are some constraints into the increase of supply for servers. To answer your second question about Foundry, even though you've mentioned that there is some concern, actually, the demand of our key customers are above our capacity. It's very solid. And so we expect the tight supply situation to continue for some time. We have entered into long-term contracts, LTAs with our key customers. And through this, we are able to gain comfort in terms of stable fab operation and supply stability. Also, if you look at our order book for the next 5-year period, that order book size is around 8x our previous year revenue. And because we are also driving our promotions, especially around our advanced nodes, we expect our order book to continue to grow. And so to answer your question, we think that if there is any concern in the market, it is excessive and unfounded. We are actually establishing very solid partnership with our key customers. Key customers ranging not only in the mobile segment but also HPC, network and automotive Tier 1s. And so we're continuing to improve our customer portfolio and business structure. And with very solid demand behind our advanced nodes, we are very confident that we will be able to continue sustainable and stable growth going forward. Operator: The next question will be presented by Dongwon Kim from KB Securities. Dongwon Kim: I have two questions. First question is a foundry question. As you would remember, there were a lot of concerns about your 4-nano yields since last quarter. In that context, can you share with us the current status of your yield for 5-nano and 4-nano respectively, which are your advanced nodes currently in mass production? Also, can you share with us the yield of 3-nano that you're seeing under development and also the production timing, if you can please share? Second question is about the display, the OLED side. Recently, competitors have announced new investments into OLED capacity. And so we're seeing more competitors entering the OLED market. Given that competitive situation, how do you plan to maintain your technology leadership and market share? Unidentified Company Representative: To answer your question first about our foundry yield, the 5-nano node is currently in mature yield stage. It is delivering stable yield, and we are maximizing our supply to our key customers. In the case of 4-nano nodes, there was a bit of a delay in the initial yield ramp-up, but currently, we are back on the expected yield improvement curve since we have been focusing on early stabilization. You've also asked about our 3-nano nodes. Actually, we've improved the node development system from the third -- from 3-nano. And so we actually now have a verification for each stage of development. This will help us reduce the yield ramp-up period later on, improve our profitability and also ensure a stabler supply. Also in order to accelerate our development process, we're preparing to secure a new R&D line. To answer your second question, which was about the OLED and how we plan to maintain our technology competitiveness and then market share, to just describe the OLED market, OLED became the standard in high-end smartphones. Recently, it's been penetrating to mid- and low-end products. And so overall, the OLED market size is continuing to grow. But on the other hand, as the market grew, as you mentioned, competitors have also been picking up their investments in OLED. And so competitively speaking, the OLED competitive environment has become quite fierce. Now in order to maintain our gap against the competitors, despite this fierce competition, we have shifted the competitive paradigm from a quantitative competition towards a quality competition by continuing our technology innovation on technologies such as under panel camera, UPC, whole displays, embedded touch and also LTPO. Looking forward, the OLED market is expected to have very positive outlook as it expands beyond smartphones to other IT applications, automotive as well as gaming. And we will maintain our market leadership by continuing to develop innovative new technologies, such as form factor innovations, ultra-high picture quality and also low power technologies such as echo square. Also, we will make timely investments to further widen the gap between us and the competitors so that we're able to maintain the status and position we have in the smartphone market onto these new applications. Another focus that we will be placing is IP protection. As I mentioned during the last conference call, we will continue to bring in and implement various measures to protect our OLED technology-related IP and also to have it recognize its fair value. Operator: The next question will be presented by J.J. Park from JPMorgan. J.J. Park: I have two questions. First question is about the MX. The foldable that you launched last year actually was sold more than originally expected. Also this year, competitors are also lining up foldable models for launch. Given all of that, what is your outlook for foldable market growth this year? And with that market, what is your goal in terms of position? Second question is about the VD side. I think during your presentation, you provided cautious guidance for second half market outlook. In that context, can you share with us your global TV demand outlook for the second half? Unidentified Company Representative: To answer your first question about foldable market growth, we expect this year foldable market will grow around 2x versus last year and that going forward, it will continue to grow at high levels. Also regarding our goals and position, we are currently all hands on deck regarding preparing the new foldable model scheduled for launch in the second half. This involves not only making the supply and production, preparation so that there are no disruptions, and there's smooth supply from the beginning of the launch, but also this involves maximizing the effects of the new model launch by finding ways of more effectively delivering the foldable experience to our customers. Our goal in terms of foldable is to continue the increase of Z-Series sales so that Z-Series becomes another main pillar next to the S-Series within our business. In addition to enhancing the completeness of the foldable product based on our technology leadership, another emphasis is to further widen the cooperation and collaboration programs that we have with partners so that the user experience becomes more optimized for the foldable form factor. To answer your question about second half global TV demand outlook, in the second half, there are some upside factors in terms of demand, including the fact that second half is usually the strong season, their seasonality for TVs in the second half. And also, there is some sports events in the second half that would be upside factors to TV demand. But also it's more difficult this year to forecast demand than usual years, given that there's many variables, including the possible change in consumption patterns as some countries go back to reopen and ease their social distancing policies, and also, there's many variables in terms of macroeconomic side. Now despite that demand -- overall demand uncertainty, we do expect that there will be solid demand still around the premium and ultra large-sized screen segment, and that is why our plan is to continue to lead market demand in the second half around the premium product segments, such as our Neo QLED 8K, ultra-large size and also Micro LEDs. Also, we would continue to strengthen our market-sensing activities within the rapidly changing environment to able to preempt supply and sale side risks. Operator: The next question will be presented by Do-Yeon Choi from Shinhan Investment. Do-Yeon Choi: I have one question regarding the semiconductor demand. Recently with so much macro uncertainty, I think there is increasing concern that there will be weak demand in second quarter for smartphone and PC semiconductor demand. In that context, can you share with us your outlook for PC and smartphone-related semiconductor demand for second and third quarter and also the reasons why? Unidentified Company Representative: To answer your question, well, I guess there was always uncertainties in the market, but the type of macro issues that we're currently experiencing, I think, particularly more difficult for us to forecast in terms of its ramifications or how long it may last. Especially the PC and mobile applications that you've mentioned, consumer applications account for a large share of PC and mobile. And therefore, it's more directly affected by issues such as inflation or lockdown related with COVID-19. Now to answer your question first on the PC side. Within the PC, we think that the demand for high-spec PCs and commercial PC demand would remain solid. Now the consumer PC application that we're expecting the demand to be somewhat weak or soft given the impact of various macro issues we've been talking about. But even within the consumer PC segment, there is a drive towards higher spec PCs from gaming or hybrid work needs. Also, there is this consistent trend of higher density in PCs, which may partially offset the softness in consumer PC demand. Regarding the mobile memory outlook, it is true due to the impact of various macro issues, mobile memory demand is somewhat soft. That is true. But looking towards the second half, there will be continued penetration of 5G and also the introduction and wider penetration of new form factors. So given that if economy recovers and consumer sentiment also improves, this may actually work together to drive a rebound of mobile demand, especially what we're looking forward to in the second half is that adoption of LPDDR5x, which is the higher spec product, will become more large scale. And therefore, this will continue to drive the higher density trend on the mobile side. And so considering that, we think that the basic needs towards mobile memory is sufficiently there. Operator: The last question will be presented by Sung Kyu Kim from Daiwa Capital Market. S. K. Kim: I have two questions. First question is about the memory side. You've talked about the macro factors and the supply issues with certain parts impacting the demand side of the memory business. We're also seeing that it's impacting the supply side of the memory business due to longer equipment lead times and also difficulties in sourcing raw materials. I wonder if you can share with us the current situation that you're seeing of these supply chain issues on the supply side of your memory business and how you plan to respond to this going forward? Second question is about the displays. I think during the first half, we'll see many of your OEM customers launch products with a QD display incorporated in them. Can you share with us the initial customer response to the QD display? Also, can you share with us your latest yields on the QD display? Also, I have a question about the LCD, large panel LCD business. I think previously, you mentioned that the plan is to close that business down completely during the first half. Can you confirm and give us some details of that? Unidentified Company Representative: To answer your question of the supply side impact of these macro issues and raw material supply, first of all, yes, the supply side instability has been increasing. In the case of raw materials, we are responding to this by further strengthening our existing supply chain management and also using our built-up inventory and also possibly looking into additional -- adding additional supply chains to our supply side so that there is minimum disruption in our production. And so when it comes to impact due to the raw material side, I don't think there is a need for you to be concerned. You've also mentioned the impact of longer equipment lead time. And yes, we can confirm that equipment lead times, we're seeing longer lead times now. We're responding to this by actually widening, extending the horizon according to which we establish and execute our investments. Basically, our investments, as we have described before, is to make the appropriate level of infrastructure and advance node technology investments in response to mid- to long-term demand but keep our equipment investments flexibly in line with the industry situation. To answer your question about the QD display, the QD display, which is our next-generation large-sized display business was launched as a 34-inch monitor in March and also in the form of a 55-inch and 65-inch TV product in April. It received very positive reviews and responses in terms of picture quality, including color, luminescence and wider viewing angle in the case of the TV. It also was referred to as one of the most exciting products to look forward to this year. Also, in the form of a monitor, the QD display delivers excellent picture quality and response speed and is considered to have set a new standard for gaming monitors. With the such positive response, we were also able to quickly resolve the production yield issues, and we're quickly removing the supply constraints that we were under and we think that the QD display will become the game changer in the large-sized high-end segment. Now that said, the QD display market and demand for it is also subject to various external factors, and is also part of the overall supply chain management situation. And so while we are preparing the QD display business, we're carefully watching the market environment. While you've also asked about the LCD, large-sized LCD business. And as we bring online the QD display business, we will be closing down the LCD business as originally scheduled. To just recap, it was in 2004, that we were the first to operate a 7th generation LCD line to open the era of large-sized flat panel displays. We continued with continuous technology innovation to deliver new consumer experience and also enhance the value add in the overall display industry. Even though we'll be closing down the LCD business, the business capabilities that we have built during that experience stays with us, and we will leverage that to make the QD display another success story in the overall display industry. Also with the QD display, we will place emphasis on IP protection and technology differentiation. Unidentified Company Representative: Now finally, we will answer questions that were submitted online in advance. We have been accepting questions via our web page in advance of an earnings release as part of our efforts to strengthen communication with individual investors and to enhance understanding of the company. A variety of questions were submitted this quarter as well. I believe a majority of these questions were sufficiently answered during the Q&A session. So we will answer 2 more questions on topics that garnered a high level of intention -- interest from our shareholders, but were not addressed during the Q&A session. Now the first question is that Samsung Electronics is maintaining its leadership in memory technology, but there are opinions that the gap with other competitors in terms of technology and cost efficiency is narrowing. Now against this backdrop, what kind of strategies does the company have to sustain its lead in memory? And this will be answered by EVP, Jin Man Han, representing the Memory side. Jin Man Han: Well, first of all, thank you for that question. While I would like to say that when the level of technology becomes more difficult and suppliers overall are converging towards a higher technology level, it's only natural that the gap in terms of us and the competitors in technology and cost appear to decrease. However, I can confirm that we are maintaining leadership as a leader in the industry despite this competitive environment. A good example would be DRAM and our adoption of EUV. With EUV in DRAM, we were able to preempt the inflection point in technology. Of course, this preemptiveness in technology innovation does involve its set of challenges but we believe that this is the right approach to deliver us not only our own competitiveness but also to contribute to the development of the overall IT industry. I would also like to share with you that we're also looking into developing new markets and also new business models. For example, for both DRAM and NAND, there is a greater market and customer demand for solution-based products, and we are one of the leaders in providing DRAM- and NAND-based solution products. For example, in the case of DRAM, CXL is actually attracting quite a lot of attention as the next-generation memory solution, especially with future AI-related needs. And we have introduced only CXL memory hardware, but also software solutions, and we're also expanding the overall technology infrastructure in CXL through formats such as the CXL Consortium. The same goes for NAND. For example, in the NAND, the solution product competitiveness is becoming quite critical. Examples of NAND-based solution product would be SSD, which combines the controller and software as well as mobile storage. And based on our overwhelming competitiveness, we have continued to supply high value-add products that meet the market needs. In addition to that, we will continue to focus on collaboration with a wide-ranging -- wide range of partner companies, which will further strengthen our market leadership. I appreciate your question and I would also like to ask that you continue to give us your trust and also frank feedback going forward. Unidentified Company Representative: The next question is the following. There are projections that the tablet market, which has been on a growth trajectory recently, we'll be contracting this year. Does the company have any strategies to address the issue in terms of lineup or pricing? And this will be answered by VP, Sung-Koo Kim of Mobile eXperience. Sung-Koo Kim: Yes. To answer your question. As you've mentioned, the demand for tablets have grown quite a lot across 2020 and 2021 with COVID-19 and more people working and studying from home. So compared to the previous years, the overall tablet market is expected to slightly decrease. But given the fact that working or studying from home is becoming a part of our everyday lives, we think that even with the overall market slight decrease, the demand for large size and premium tablets will maintain at high levels. And so we launched the Galaxy Tab S8 Ultra, which was the first Ultra model for the tablet and is quite in line with this trend of larger size, even in the tablet market. We're overall strengthening our premium product lineup for tablets. We will continue to record positive sales for the Tab S8 Series, and grow the premium tablet revenue to contribute more to our overall business profits. Also during the most recent on path, we actually unveiled the Tab S8 Ultra together with the S22 and that was very effective in attracting consumer attention. We will continue to place our marketing focus on highlighting the convenient connectivity experience across the overall Galaxy ecosystem that encompasses, for example, the Galaxy Tab, or smartphones, laptops and buzz in order to drive the momentum behind our tablet and Galaxy ecosystem business. Unidentified Company Representative: Due to time constraints, we're unfortunately unable to answer every question. However, I would like to thank everybody who shared their opinion, providing us with valuable information that we will refer to in our decision-making process. And that completes our conference call for this quarter. We wish all of you and those close to you stay strong and in good health. Thank you very much.

Operator: Good morning, and good evening. Thank you all for joining this conference call, and now we will begin the conference of the fiscal year 2021 fourth quarter earnings results by Samsung Electronics. This conference will start with the presentation followed by a divisional Q&A session. [Operator Instructions]. Now we shall commence the presentation on the fiscal year 2021 fourth quarter earnings results by Samsung Electronics. Ben Suh: Welcome, everyone. This is Ben Suh from Investor Relations. Thank you for joining our fourth quarter 2021 earnings call. For additional details regarding our quarterly results, please refer to our earnings presentation, which is available on our IR website at www.samsung.com/global/ir. On the call with me today representing each of our business units are EVP, Han, Jin Man, representing Memory; VP Kenny Han for System LSI; EVP Kang, Moonsoo for Foundry; EVP Choi, Kwon Young for Samsung Display; VP Kim, Sung-Koo for Mobile Experience or MX, which is a previous Mobile Division; and VP ST Chung for Digital Appliances. I would like to remind you that some of the statements we will be making today are forward-looking based on the environment as we currently see it. And all such statements are subject to certain risks and uncertainties that may cause our actual results to be materially different from those expressed in today's discussion. Also, please note that last December, we merged the IM and CE Divisions to form the DX Division. However, as this was just announced in December, we have maintained the IM and CE distinction in our earnings call materials as well as in portions of this presentation for consistency with our Q1 to Q3 results. With that, I would first like to present the results for the fourth quarter. I'm pleased to report that we once again delivered record results by leveraging our differentiated products and technology leadership despite the challenging macro environment. Total revenue in the fourth quarter grew 3.5% sequentially to KRW 76.6 trillion, setting a consecutive all-time quarterly high, driven mainly by our finished product businesses. We expanded sales of premium smartphones, including foldables, as well as TVs and home appliances amid year-end peak seasonality. We set records for total revenue in a respective quarter for each quarter in 2021, resulting in a record annual revenue of KRW 280 trillion. Gross profit increased by KRW 0.5 trillion sequentially to KRW 31.6 trillion, led by expanded sales of premium smartphones, but gross margin decreased slightly primarily due to a decline in memory prices. SG&A expenses were up KRW 2.5 trillion quarter-on-quarter to KRW 17.8 trillion, mainly due to increased spending on R&D and advertising and promotional activities. As a percentage of sales, they increased by 2.6 percentage points. Operating profit was KRW 13.9 trillion, down from the previous quarter due to a special bonus payment to employees, a decline in memory prices and a seasonal rise in marketing costs for smartphones. On a year-on-year basis, however, both operating profit and operating margin increased substantially, driven by our Semiconductor Businesses. I will now briefly review the results of each business unit. In Memory, results declined versus the prior quarter as ASP edged lower. Bit growth for the quarter came in below guidance as considering our low inventory levels and the market outlook, we refrained from excessive bit shipment efforts. Compared to last year, results improved significantly driven by solid demand across overall applications as well as increases in our advanced node portion and ASP. In Foundry, even though increased overall supply resulted in a new high for revenue, profitability decreased slightly quarter-on-quarter due to a rise in costs associated with advanced processes. On a year-on-year basis, results improved due to the start of operations at the S5 fab in conjunction with price adjustments. In display, earnings continued to improve for the mobile panel business driven by a continuation of solid demand from key customers' new smartphones and increased sales in new application areas. However, the large panel business saw its losses widen considerably due to declines in LCD ASPs and initial costs related to QD display. For the MX Business, revenue increased slightly, led by expanded sales of premium products such as foldables and solid sales of Device Ecosystem products. Profit decreased quarter-on-quarter due to an increase in year-end marketing costs, including for foldables, but increased year-on-year. The network results improved sequentially as revenue grew both at home and abroad. In the CE Business, composed of visual display and digital appliances, we delivered record high quarterly revenue on the back of strong sales of premium products during year-end seasonality, but profits declined slightly quarter-on-quarter amid rising costs, including full logistics. Regarding currency effects, negatives from overall weakness in major emerging currencies against the Korean won, mainly affecting the finished product businesses, were eclipsed by positives from a strong dollar, which mainly affects the DS Division. The net result was a positive impact of approximately KRW 300 billion on operating profit compared to the previous quarter. Next, I would like to share our business outlook. In the first quarter, for Semiconductor Businesses, Memory will actively address a projected recovery of demand, and Foundry will push to stabilize yield and increase supply of key components for flagship products. Our finished product businesses will focus on maintaining solid profitability by strengthening leadership in premium segments with launches of new smartphones and TVs. In Memory, although there are lingering uncertainties, we will concentrate on optimizing our business portfolio including through increased sales of advanced node products to support the server and PC demand recovery and also via sales growth of high value-add products. For System LSI, we will focus on supplying essential SoCs and CISs for our key customers' flagship products. And for Foundry, we will continue to prioritize expanding supply by improving production and yield at advanced processes. In display, despite weak seasonality for smartphones, we expect the mobile panel business to deliver improved results year-on-year, driven by releases of new smartphones by major customers and an expansion of the foldable display customer base. The large panel business losses are likely to be partially mitigated with the mass production of QD display. In the MX Business, despite supply constraints, we expect to deliver revenue and profit growth as well as solid margin led by releases of new flagship models, expanded sales of 5G smartphones for the mass market and increased sales of tablets and wearables. For Network, we target to win new opportunities from European and other global customers. For CE Businesses, amid weak seasonality for TVs and a predicted dip in demand for home appliances, we will endeavor to improve profitability by focusing on sales of premium products, expanding our new category product lineup and increasing the portion of online sales. Now let's move on to the outlook for 2022. Under expectations of a recovery in global IT demand, our component businesses will increase their advanced node portion of production and enhanced leadership in next-generation products and technology. And in the finished product businesses, we will continue to strengthen our leadership and lineups in premium segments as we strive to create new user experiences by enhancing connectivity and synergies between our devices. However, challenges associated with supply issues and COVID-19 are likely to persist. During this year, we will also promote partnerships, secure technology and execute the investments to gain leadership in future growth areas, such as 5G, AI, cloud, IoT and the metaverse. For the Memory Business, we expect demand to increase as enterprises ramp up IT investments, though there are uncertainties such as the extent to which supply issues will ease. In accordance, we will continue to enhance our leadership by expanding supply of high-performance products and increasing application of our industry-leading EUV technology. System LSI will grow its business by reinforcing its lineup of SoCs, including models targeting the 5G volume-zone. And Foundry aims to outpace market growth by extending our technology leadership with mass production of the first-generation GAA process, along with increasing supply to global customers. For display, in the mobile panel business, we expect demand for OLED to continue to increase based on rising penetration of 5G and growth of the foldable market. And we will further strengthen the foundation for stable growth by expanding OLED into new application areas as well. The large panel business will work to secure technology leadership in the premium segment with QD display, while it closes the LCD lines as planned. The MX Business targets increasing market share by concentrating on innovations and flagship products, further differentiating user experiences and also expanding our mass market 5G smartphone lineup. Moreover, we will seek to grow sales of Device Ecosystem products by enhancing the value delivered to customers. For Network, we will focus on capturing 5G network demand and winning new global customers. All as we continue to further strengthen our technologies, including custom development of core 5G chips. For CE Businesses, we will further solidify our market leadership and pursue growth by continuing to expand sales of premium product lines, such as Neo QLED and BESPOKE, and by diversifying the overall lineup with lifestyle and new home appliance products. Next, I would like to share some of our key activities and achievements in sustainability management. At the CES keynote address on January 4, we outlined our eco-friendly initiatives for a sustainable future. We believe that consumers and companies together can contribute to a better future by embracing sustainable products. To this end, we unveiled a range of ambitious eco-friendly activities. For example, in manufacturing displays, including for TVs, we are using 30x more recycled plastic this year than we did last year. And we are moving toward incorporating recycled materials in all mobile products and home appliances by 2025. In addition, our company ranked fourth in the digital inclusion benchmark as announced in December by the World Benchmarking Alliance, a global alliance dedicated to sustainability management. We earned this accolade thanks to our strong support for the technology innovation ecosystem through C-Lab Outside, an initiative aimed at nurturing start-ups in Korea as well as disclosing our AISC principles centering on equity, transparency and responsibility. Furthermore, we participated in a pilot project organized by Korea's Ministry of Environment to reduce work site waste. And on December 31, our Giheung campus received top honors for its efforts, which included strengthening recycling programs and offices, establishing a standard for minimizing the packaging for raw and semi-processed materials and expanding recycling of waste materials. Our work in this area demonstrates our commitment to creating environmental and social value in addition to achieving growth. And we will continue to strengthen our ESG management by fulfilling our social responsibility as a leading global company. Let me now move on to capital expenditures. The annual CapEx for 2021 was KRW 48.2 trillion, with KRW 43.6 trillion invested in semiconductor and KRW 2.6 trillion in display. By business, Memory concentrated its investments on capacity expansions and process migrations and fabs in Pyeongtaek and Xi'an to address demand for advanced nodes, including EUV-based 15-nanometer DRAM and sixth-generation V-NAND as well as on infrastructure at P3. Investments in memory increased year-on-year as we are at the lead of an inflection point in technology and are, thus, preemptively investing in application of next-generation technologies such as EUV. We are executing the investments with a focus on technology leadership. And as a result, we can maintain an efficient investment level when considering our bit share from a mid- to long-term perspective. For Foundry, investments concentrated on capacity expansions for advanced 5-nanometer EUV nodes in Pyeongtaek. Display investments centered on mobile modules and QD display. Finally, let me address the shareholder return. The Board of Directors today approved a quarterly dividend of KRW 361 per share for common stock and KRW 362 per share for preferred stock. The total payout for the fourth quarter is approximately KRW 2.45 trillion, which is in line with the totals in 2021's previous quarters. This represents 1/4 of the annual total of KRW 9.8 trillion in accordance with the current shareholder return policy. The dividend will be paid after final approval at the Annual General Meeting of Shareholders. When we announced the current 3-year shareholder return policy in January of last year, we said that we will disclose the annual free cash flow each year to enhance clarity on the shareholder return pool. And if 50% of the free cash flow significantly exceeds the annual dividend, we would consider an earlier return. The total free cash flow for 2021 was KRW 19.6 trillion, 50% of which is approximately KRW 9.8 trillion. Considering the annual -- projected annual dividend for 2021 is also KRW 9.8 trillion, there was no additional pool for an earlier return. While we achieved solid results in 2021, as I mentioned earlier, we required a considerable amount of CapEx to accelerate migration to next-generation technologies in memory and to secure competitiveness in foundry. And there were also impacts of increased working capital, such as the need to secure additional inventory amid uncertainties of component supply. Although we did not generate a surplus in 2021, we believe our efforts will lead to significant future growth and contribute to increasing shareholder value. In 2022, we will once again step up our efforts to improve our performance by extending our product and technology leadership, increasing cost competitiveness and improving profitability while also enhancing capital management efficiency. I will now turn the conference call over to the gentlemen from each business unit to present fourth quarter performances and outlooks for their corresponding business segment. We will start with the Memory Business. Thank you. Jin Man Han: Good morning. This is Han, Jin Man from Memory Global Sales and Marketing Office. The fourth quarter memory demand stand-alone server remained solid, but our performance declined somewhat compared to the previous quarter due to a continuation of global supply chain issues, a slight drive in ASP and payment of one-off special incentives. We came in below initial bit growth guidance as refrained from making excessive bit shipments in consideration of our limited inventory conditions and also the market outlook. In DRAM, impacts on set from global supply chain issues differed by degree that were felt throughout all applications. In server, however, demand remained strong, thanks to an increase in DRAM content per box with increased adoption of high core CPUs amid a continuation of solid end demand. For graphics, graphics card supply shortage remained as demand stayed robust, backed by strong demand for gaming PCs, along with rising demand for crypto mining. PC and mobile have felt relatively more effects of set build disruptions caused by component supply issues. For PC, consumers continue their tendency to adjust inventory. In mobile, major smartphone manufacturers released new 5G models with concurrent risk, such as the spread of a COVID variant, impacted memory demand to some extent. Based on preemptive product mix adjustment, we actively addressed an increase in server and graphics demand. And to enhance competitiveness, we continue to increase our cutting-edge portion of processes. Even so, we were below bit growth guidance as we tried to optimize supply plan, considering our inventory condition and market outlook. Next, I'll talk about the NAND market. For server SSD, fundamental demand from major data center customers was robust, but there were some market effects related to disruptions in the IC component supply chain. Demand for client SSD was somewhat stagnant because of inventory adjustment by some customers and set build disruptions caused by component supply issues. In the case of mobile, supply and demand of APs were disrupted, and memory demand fell slightly. But the high-density trend continued, thanks to impacts of peak end year seasonality. We focused on optimizing sales such as reducing wafer shipments as well as strengthening high-value solution businesses in consideration of our inventory situation, while identifying impacts on production caused by changes in line operation due to the lockdown in Xi'an. In addition, we continue to strengthen our competitiveness by increasing our cutting-edge portion of processes. And by expanding the server business, we are actively addressing growth in high-end, high-capacity demand. Now let me share the outlook for the fourth quarter. In the case of DRAM, some uncertainties are likely to persist, but we expect issues related to component supply and demand to dissipate gradually. We are seeing signs of improvement in set builds mainly by server and PC. For server, we expect demand to remain strong, thanks to the high-density trend alongside increasing investment centering on data centers, while the high-quality CPU portion continues to increase. As demand for PC improves, mainly for corporate-oriented, the high-end laptops, demand will increase for cutting-edge products such as DDR5. And as some customers complete inventory adjustment, with the impact of flow seasonality, it will partially ease. For mobile, we expect the demand base to be reasonably solid as major manufacturers launch products based on new form factors and increased the portion of LPDDR5. However, risks such as operational restrictions at some production sites due to the spread of COVID variant need to be carefully monitored. We will keep working to maximize the quality of our business portfolio by selling products of our cutting-edge node and expanding sales of high-value products, while actively addressing customer demand from overall applications. In NAND, for server SSD, we expect demand for server builds to be robust, thanks to continuing investment mainly data centers. We should keep an eye on corporate demand, along with the spread of COVID variants. In the PC market, we think build demand will recover mainly for laptops along with gradual improvements in component supply issues. And for mobile, despite being amid slow seasonality, we expect the high-density trend for storage to persist as manufacturers launch new 5G models. We plan to minimize risk of supply disruptions by securing a diverse product portfolio centered on high-value products while returning to normal production operation after the lockdown in Xi'an being lifted. Now let's move on to the full year outlook. Under the risk of demand fluctuations, such as ones related to the pace of mitigation of component supply constraints as well as changes of prolonged effects of a COVID-19 variant, we ask for your understanding in that it is difficult to provide specific annual bit growth guidance. Therefore, I'd like to share our view of the market situation for each application. First, for server, DRAM content per box is projected to keep rising, thanks to the adoption of new CPUs supporting DDR5 and the expansion of AI-oriented servers centered on data centers. In addition, coupled with the expansion of investment by major companies, set build demand deferred by last year's component issues should lead to solid set build growth. On the other hand, for PCs, we need to monitor detailed impacts on demand as a delayed return to daily life, driven by a new variant, would impact demand from contactless services such as education, gaming and others amid an expected increase in replacement demand in the content per box due to the spread of the new OS. For mobile, with the resumption of 5G infrastructure investment by countries and the strengthening of 5G lineups by manufacturers, content per box is likely to keep rising focusing on major manufacturers. And set shipments centering on the low- to mid-priced models are also anticipated to rise amid growth in emerging markets. Based on preemptively managing our product mix to align with market conditions, we will proactively address market demand by expanding our supply portion of high-performance products such as HPPM for graphic and cutting-edge interfaces like DDR5 and LPDDR5. Based on high-value, solution-oriented portfolio management and our industry-leading EUV capabilities, we will focus on qualitative growth through stable continued cost reductions and strengthened market leadership. Kenny Han: Good morning. This is Kenny Han from the System LSI Business. In the fourth quarter last year, we reached a record high for quarterly revenue, driven by an increase in demand for SoCs, DDIs and PMICs as major mobile customers launched new flagship products. However, operating profit fell slightly due to the influence of special bonuses. To improve our performance even further in the coming quarters, we have started to supply our flagship 4-nanometer SoC, featuring an AMD GPU for the first time as well as related products. In addition, our 108-megapixel image sensors have been increasingly selected by our customers for adoption in their upcoming major models. In the first quarter of this year, effects of year-end weak seasonality for the mobile industry and inventory adjustment by Chinese companies are likely to continue. But demand for OLED DDI, NFC/eSE and PMIC products is expected to stay strong. As major customers launch flagship smartphones, we plan to focus on expanding supply of SoCs with a significantly improved GPU, NPU capabilities as well as ultra-high-resolution image sensors. In 2022, by maximizing supply of volume-zone 5G SoCs and technology-leading 108- and 200-megapixel sensors, we expect revenue growth to accelerate year-on-year while profitability should rise on the back of price adjustment. Thank you. Moonsoo Kang: Good morning. This is Moonsoo Kang from the Foundry Business. In the fourth quarter, we outpaced industry growth and set a new high for Q4 revenue. In particular, we continue to increase sales to large-scale HPC customers and also established the base for future growth by securing orders from new large customers in HPC applications. In addition, we work to improve our response to customer demand with efforts to stabilize the global supply chain conforming new type investments in Taylor U.S.A. and in Korea. However, there were also headwinds as we're enable to fully satisfy customer demand amid the supply disruption, and profitability fell slightly due to delay in ramping our advanced nodes. In the first quarter of 2022, we expect the industry to remain in tight supply across all nodes and our advanced node portion, which increased significantly from Q4, to keep rising. Given this, we will focus on improving yield in advanced process nodes to enhance our supply stability and profitability. To strengthen our technology leadership, we will complete the qualification of first-generation GAA process 3GAE for mass production in the first half of this year, and we will continue to develop the second-generation GAA process, 3GAP, as scheduled. For the Foundry market in 2022, we expect supply to remain tight due to rapid penetration of 5G technology, solid HPC demand, growing outsourcing by IDM and the need to build up safety inventory amid prolonged pandemic. We will continue our technology leadership through mass production of the 3GAE process in the first half, and we aim to exceed market growth on a full year basis by expanding capacity of advanced nodes, normalizing prices to ensure future investments and adding new customers to our global client base. Thank you. Kwon Young Choi: Good morning. I'm Kwon Young Choi from the Business Planning Deployment at Samsung Display. In the fourth quarter, the mobile display business sustained upward trend in earnings following the previous quarter, backed by robust sales of smartphones with the OLED display, which are now mainstream in the premium segment and also by the competitiveness and the stability of Samsung Display supply chain management. In addition to smartphones, sales and revenues of products for notable PCs and gaming increased steeply quarter-on-quarter, contributing to our earnings growth. Meanwhile, in the logic display business, we have successfully mass produced and delivered our 3D displays for TVs and monitors, which have garnered positive reviews from our customers. Next, let me share the outlook for the first quarter of 2022. For the mobile display business, we project that release of our new products by major customers and increasing adoption of flexible displays will mitigate weak effects of weak seasonality. However, given persistent supply issues for some components, concerns linger over potential short supply of certain products such as DDI. For the large display business, where the QD display TVs and monitors having made their official market debut, we expect losses to narrow gradually. Finally, I will share our outlook for the display market in Samsung Display's core strategies for 2022. For the mobile display business, despite projected macro risks such as ones related to fast tapering as well as the Omicron's variant of COVID-19, we expect adoption of OLED displays to keep expanding this year, driven by rising penetration of 5G smartphones and the growth of OLED display markets. Such market trend should create a favorable business environment for Samsung Display. As for the IT market, we expect the growth to slow compared to last year, and rising sales in the premium segment are likely to accelerate penetration of OLED displays. We plan to strike a balance in the mobile display business structure with both flexible and rigid OLED. To that end, we plan to expand adoption of flexible OLED to more than just the high-end devices by providing its astounding technological capabilities to the midrange segment as well. We will also diversify application for rigid OLED, ranging from IT to gaming to automotive based on our unrivaled production capacity and cost competitiveness. For the large display business, we expect auto large displays and differentiated products to drive solid demand for premium TVs. And we will focus on securing leadership in the premium TV and monitor segments through QD displays. Thank you. Sung-Koo Kim: Good morning. This is Sung-Koo Kim from the MX Business. I would like to discuss the Q4 2021 results and outlook for the MX and Network Business. In Q4 2021, the market grew compared to the previous quarter due to year-end seasonality. As for the MX Business, despite the component supply shortage, revenue increased slightly Q-o-Q. In particular, in the new market that we created with an innovative form factor, our foldable Z Series model, Z Fold3 and Z Flip3, have garnered positive feedback for their nice design, durability and user experience that are tailored to foldable. This contributed to increased sales, and we believe foldables are smoothly entering the mainstream. Also, the Galaxy S Series maintained sales momentum, thanks to active marketing, enabling further enhanced user experience with the new One UI 4.0. Accordingly, our premium smartphone sales increased Q-o-Q. Solid sales of our Device Ecosystem products, including PC, tablets and wearable devices, with their enhanced and seamless connected experience also contributed to the performance. In the meantime, investments in active marketing to mainstream foldables and preparations to launch new models in Q1 2022 affected profitability to some degree. The Network Business improved its performance compared to the previous quarter, driven by the growth of domestic and overseas business. Now let me give you the outlook for Q1 2022. Demand for smartphone and tablets is expected to decrease due to seasonality as well as uncertainties around the component supply. In our MX Business, we will strive to expand the customer base for our flagship products by fulfilling customer needs with the Galaxy S21 FE, which preserves core user experience of Galaxy S21 and comes in a diverse range of color options or add on affordable price. Also, our new Galaxy S Series model, featuring the best Galaxy performance and experience, will enhance customer retention of our premium products. In turn, this will lift the standard for flagship products even higher and contribute to increased sales of our flagship smartphones as well as an increase in overall smartphone ASP. Also, our competitive 5G lineup for the mass market will add as a volume driver by addressing replacement demand and thus actively sees growth opportunities in the market. In addition, we will continue to focus on increasing sales of our Device Ecosystem products such as wearables, PCs and tablets by actively promoting the immense competitiveness and seamless connected experience across the product line. With these efforts, we will strive to secure solid profitability in Q1 2022 amid an unstable component supply situation. The Network Business aims to secure additional new contracts in the global markets, including from hereon. Next, let me provide an outlook for 2022. Despite current uncertainties, including prolonged pandemic and component supply issues, we expect the smartphone market to continue to grow in 2022 following substantial growth in 2021, while the wearable market is projected to see strong double-digit growth. In our MX Business, we will continue to pursue user experience-driven innovation to solidify leadership in the flagship market. We also strengthened the tailored experience of each product, including the ultimate flagship experience with the Galaxy S Series and optimized Galaxy Z Series experience to cater to various lifestyles and needs of our customers. In the mass market, we are not only strengthening our 5G lineup but also expand the application of our convenient and differentiated experience and enhanced product completeness. With these efforts, we aim to increase our smartphone market share. Also, we will keep enhancing customer value by continually adding to our differentiated user experience, which includes consistent and convenient connected experience across devices in our Device Ecosystem and by further strengthening product competitiveness. Furthermore, we expand such convenient connected experience beyond MX products to TVs and home appliances to enrich the value that our customers experience in daily lives. By doing so, we will strive to achieve material growth in 2022 and bolster our profitability with an improved product mix and enhanced operational efficiency. The Network Business will focus on actively expanding its overseas business while also responding to extension of the 5G network in the domestic market. Also, we will thoroughly prepare for the future with continued efforts to strengthen our technology and competitiveness including our own 5G chipset. Thank you for your attention. ST Chung: Good morning. I'm ST Chung from the sales and marketing team of Digital Appliances, and I will address business condition of the businesses. First, I would like to review the market conditions and our performance in the fourth quarter of 2021. The TV market grew Q-on-Q amid peak seasonality but decreased compared to the previous year when it was affected by the total pent-up demand. By working closely with the channel partner in advanced, Samsung preemptively targeted seasonal demand starting at end of October and expanded sales mainly of high-value products, such as new QLED models and life-size screen. However, operating profit decreased slightly quarter-on-quarter due to cost pressures such as global logistics issue. For Digital Appliance in the fourth quarter, market growth was slow due to diminishing impact of the pent-up demand and material and logistical who stayed on an uptrend seen in the previous quarter. Samsung actively addressed the various consumer needs. We improved our mix via increasing sales with our focus of premium products such as BESPOKE and new category products. In addition, through improving our operational efficiency and reducing costs, we achieved a better result compared to the previous quarter despite the nuance in the external environment. Now let us look at the outlook for the first quarter of 2022 and 2022 as a whole. We expect the overall TV market in Q1 to decrease quarter-on-quarter following the year-end peak season and also coming lower compared to the same period last year, when it was affected by a continuation of a strong impact of pent-up demand, mainly on advanced market. We plan to push, expand sales by capturing demand mainly for premium products by actively leveraging our number of promotional opportunities such as those associated with the major sporting events. Furthermore, we will lead the market by strengthening sales in the life-size screen category, including The Freestyle, which was released in CES this year and improved our returns. For Digital Appliance in the first quarter, we expect demand for home appliances to decline slightly year-on-year. Also, we expect to continue [indiscernible] of increases in logistics and material costs. We will target the premium market more aggressively by expanding the BESPOKE lineup mainly in advanced markets, such as North America and Europe. Also, we plan to expand sales by providing our customers with our differentiated experience, offering significantly expanded consumer contact points, both online and off-line. In addition, we will secure profitability by continuing to improve our cost efficiency throughout our operations. Regarding the TV market in 2022, we expect to market on [indiscernible] to consist, including those triggered by COVID-19, an external issue in driving supply and logistics. However, we also expect demand to keep rising for premium and super big TV, Samsung will focus on targeting demand for an increasing sales of innovative premium products, including our next-gen MICRO LED and new QLED model. At the same time, we will strengthen our sales of life-sized screen, our own differentiated product line and expand the TV accessory ecosystem while also providing different user experience and creating new demand through various services and platform, which is optimized for in-home activities like media and gaming. In the Digital Appliance market in 2022, market growth of home appliances will probably be sluggish year-on-year, but we expect to see demand edge up for the new category product that reflect changing lifestyle trend, also slight demand growth in the emerging markets. We will continue to grow by strengthening global sales via expanding the areas of -- we hope for -- we differentiated the stock product also by expanding [indiscernible] by region and improve the [indiscernible] market, we'll keep launching new category products that reflect the change in consumer needs brand. Furthermore, by expanding use of our model product and thus increasing productivity, we will enhance operational efficiency and also secure supply continuity to proactively manage the future external risks. Thank you. Ben Suh: That sums up the fourth quarter results presentations. Before we move on to the Q&A session, I would like to share several data points in key business areas. Considering the heightened macro uncertainties, we will not be providing annual guidance at this time. In the fourth quarter for DRAM, our bit growth decreased by a percentage in the mid-single digits, and ASP declined by a similar magnitude. In the first quarter of 2022, we expect market bit growth to fall by low single-digit percentage, and we should be similar to the market. For NAND, in the fourth quarter, both our bit growth and ASP declined in the low single-digit percentage range. For the first quarter of 2022, we expect market bit growth to decrease by a low single digit, and our bit growth should slightly outperform the market. In the display business, in the fourth quarter, our OLED portion of sales was in the high 90% range and OLED sales volume grew by a low single-digit percentage. Turning to wireless. Sales volume in the fourth quarter was approximately 72 million units for handsets and 7 million units for tablets with a blended ASP of USD 253. The smartphone portion of handset sales volume was in the mid-90% range. For the first quarter of 2022, we expect to see sequential increases in handset and tablet sales volume as well as in blended ASP. The smartphone portion of handset sales should stay similar in the mid-90s. In the TV business, in the fourth quarter of 2021, sales volume grew by a percentage approaching the mid-teens. And in this quarter, we expect sales volume to decline by a low single-digit percentage. With that, I will now move on to the Q&A session. First, we will start taking questions from the conference call. Operator: [Operator Instructions]. The first question will be presented by J.J. Park from JPMorgan. J.J. Park: Oh, I have two questions. The first question is about the Memory CapEx. You said that the Memory CapEx last year increased. Can you give us that divided into the NAND- versus the DRAM-related CapEx spending last year? Also, can you give us some guidance for CapEx Memory this year? Second question is about the shareholder return. During the presentation, you mentioned that 50% of the free cash flow for last year is roughly the same as the distributable profits for this year. And therefore, there would not be any additional pool of funds available for shareholder return. But I also noticed that the company does have on hand more than KRW 100 trillion of net cash. And so maybe not last year, but perhaps this year, can we expect any upside on the shareholder return? Is the company considering it's not -- that cash size when it decides shareholder return for this year? Jin Man Han: To answer your first question about the memory CapEx. Yes, as we mentioned, the overall memory CapEx in 2021 did increase year-over-year. It's difficult to give you the breakdown between DRAM and NAND. But overall, there was an increase in the facility equipment-related CapEx spending. To explain the reasons why there was an increase in CapEx, mainly it's explained by how we have expanded our advanced node-related equipment and also invested more in the node migration in order to respond to the increasing demand that was above what was expected during the start of last year. Also, another main reason for our CapEx is our preemptive investments that we're making in next-generation technologies, such as EUV, as we go through a technology inflection point. But this all is consistent with our CapEx policy of executing CapEx equipment investments flexibly in line with the market situation. And so we believe that the supply bit growth that we are achieving is in line with the market demand levels because we execute flexibly our equipment-related investments. We do pursue bit growth around the leading technology node. And I think that is why compared to at least a bit share that we have, our investment size, in a mid- to long-term perspective, is not high. You've also asked for some guidance for CapEx this year. Actually, given the various uncertainties, we are still actually discussing specific investments planned for this year, but our basic approach is that we will tap both investments and our productivity improvements in order to generate the bit growth this year. Also, as we prepare the planning and execution of our investment plans, we are aware that there is a tendency of equipment delivery lead times getting longer due to the supply chain issue. Unidentified Company Representative: To answer your second question, when the 3-year shareholder return policy that was announced early last year, covering periods of 2021 to 2023, actually took into account the global uncertainties and the expected increase of cash needs for the company. Now looking back at the past 1 year, the global uncertainty actually was more aggravated than we had anticipated, and cash needs increases -- increased as expected. And so even though last year the business results improved, our net cash position has stayed almost the same. On the other hand, as you know, we operate the largest and the highest level of a global production network in the IT industry, which requires a large scale of operating capital. Last year, we also went through some unexpected production disruptions in Austin and the Xi'an fabs. Also, we always need to keep the capabilities to execute inorganic growth opportunities in order to maintain consistent growth. So considering all of those factors, the company believes it is not appropriate at this point to bring any major changes to its shareholder return policy given the fact that conservative cash operation is necessary. Now that said, we think the efficiency of its capital management is something that the company continues to focus on. Operator: The next question will be presented by Sung Kyo Kim from Daiwa Capital Market. S. K. Kim: My first question is about the DRAM clean room space. You -- looking at the information, you may actually have a limited clean room space for your DRAM this year. Also, your inventory levels are relatively low. This may imply that you may actually, in terms of bit growth, underperform the market or your competitors on the DRAM side. There was a change of management at the end of last year. Considering all of that, can you share your opinion regarding the clean room space limitations and how you plan to respond to that? Second question is about the CE business. There is overall cost increasing factors, including raw material prices and logistics costs increasing. First of all, can you share, from the company's perspective, until when do you think the situation will continue? What will be the implications to your CE business? And how do you plan to respond? Unidentified Company Representative: To answer your first question about the clean room. Of course, securing enough clean room in order to meet the demand growth in the market is one of the key critical investment strategies for the Memory division. Clean rooms, this is actually quite large investments, and many factors need to be considered. So deciding a clean room investment is a decision that should be made based on a midterm, at least a 3- to 4-year horizon perspective. Looking towards this year, at the current levels, we do not expect any major problems in meeting the demand that's expected in the market this year. Unidentified Company Representative: Well, to answer your question about the heightened cost base for the Consumer Electronics business, of course, there are many reasons that are driving the elevated level of raw material and logistic prices. There's large demand for logistics, but there is a shortage of workers to man the ships and the ports, and there is overall inflation driving an upward trend of raw material prices. As we mentioned during the presentation, the company does expect this heightened level of raw material and logistics cost risk to continue throughout this year. In response to this assumption of heightened risk. First of all, we are thoroughly analyzing the situation of each of our key manufacturing hubs in order to improve the overall supply competitiveness by increasing the production efficiency for each region and also executing overall operational improvements. Also, we are preparing to respond to this on the sales side by accelerating revenue growth through the increased sales of premium products such as BESPOKE and continuously launching new models. Operator: The next question will be presented by Peter Lee from Citigroup. Peter Lee: My first question is about the memory side. Even though overall memory demand was quite solid last year. Fourth quarter, we noticed that both your DRAM and NAND shipments actually performed under the guidance and competitors. Can you give us some explanation as to why this happened, which appears to be quite unusual, especially given the -- given where the market and you were in the second quarter of last year? We do notice that the company's management was changed at the end of the year. Is this an implication of any strategy change on the part of the company? Second question is about the mobile side. From the market, we're also wondering what the exact demand would look like for smartphones in year '22. Can you share with us your demand outlook for smartphones this year? And do you expect to increase your market share by outgrowing the market again? Unidentified Company Representative: To answer your question of why our bit growth was below market in fourth quarter. As you mentioned, yes, in fourth quarter, demand was solid, but especially around the servers. On the other side, there were some downstream production disruptions due to the global supply chain issue, even though the degree of the disruption varies depending on the customer. And this did have an impact on memory demand in the fourth quarter. Seeing that, we also consider that our inventory levels were not at high levels. We also wanted to prepare against any production impact due to the Xi'an lockdown. And so we actually refrained from any aggressive sales in the fourth quarter. And this was the main reason why our bit growth was below guidance in fourth quarter. Now the reason why we made that decision was because of our insight into a change in the nature of the market that has been happening recently. We do notice that the memory market actually is becoming more diversified. The product lineup is much more diversified before. And given the wide diversity of product lineup, we thought that most critical capability was the ability to supply the products that the customer needs based on having an optimized product mix. And so I think the reason -- I think the best way of understanding what happened in fourth quarter was that it was our strategic choice in order for us to be able to supply the products that the customer needs stably from a long-term perspective. Unidentified Company Representative: To answer your question about the smartphones. First, our outlook for the smartphone market this year is that it will continue the growing trend continuing from last year. Main drivers being the mainstreaming of foldable phones and also the wider penetration of 5G mobile phones. Our strategy at the flagship level is to continue to expand the sales of flagships and to improve our product mix by, first of all, maximizing the user base through our foldable Z series which has been attracting not only the premium, super premium users, but the MZ generation of females as well as the customers of the competitors. Also, a part of our flagship strategy would be the S series, the new model of the S series, which will contribute to retention of existing customers and also to further widen the premium customer base through the S21 FE. Our strategy on the mass tier will be to actively absorb the mass tier 5G replacement demand globally by preparing a wider 5G full lineup and also to continue to produce global megahit models in the mass tier that provide core user experiences that the users appreciate. Therefore, we will use the mass-tier models to become clear volume drivers that can respond preemptively to mass-tier brands. By the 2 strategies, we plan to not only increase our entire market share in the smartphone market this year, but also further increase the leadership we have in the premium market. Operator: The next question will be presented by Do-Yeon Choi from Shinhan Investment. Do-Yeon Choi: I have a question for the mobile, the MX division. Last year, you successfully mainstreamed the foldable form factor, received strong response from the market, but you also have the Galaxy Series. And so combining the 2, can you share with us your overall strategy in the flagship this year? Unidentified Company Representative: To answer your question, actually, the key point of our flagship tier, premium tier strategy would be to further concentrate on strengthening our user experience. This will enhance the value of the flagship product by providing not only the best hardware but also software services and ecosystem. Also, therefore, we will further enhance the differentiated experience for each of our premium products. For example, S Series providing the best flagship experience, Z Series providing the optimized foldable experience, in order to satisfy the diverse lifestyles and needs of the consumers. Also, we will be refocusing our marketing strategy around customer experience and also continue a full year brand marketing campaign to make the brand more aspired and strengthen the premium brand position to maximize our flagship sales volume. Operator: The next question will be presented by Dongwon Kim from KB Securities. Dongwon Kim: My first question is about the DRAM prices. After DRAM price being increased in the first quarter, it's now back to a downward trend in 3 quarters' time. Are there different views as to where it will go further? Some are expecting that DRAM prices upturn again shortly. Others are saying it's not likely the prices to improve in the second half of this year. As a leader in this segment, what is your outlook on DRAM movement going forward? Also, it appears that the cycle itself is getting shorter. Do you think the cycle will stay this way in the future? My second question is about the QD display. I'm hearing that the customers have received a QD display supply. Can you share with us your customers' response to the QD display? And also, can you share with us some details about where you think your technology level is and how you compare in terms of cost competitiveness? Unidentified Company Representative: To answer your question about the market outlook. Of course, there are still various variables that could impact supply and demand this year, including at what pace the parts supply issue will be eased, the possibility of additional increase in raw materials and various geopolitical risk. But looking at the market, there are many factors that support a strong demand side. For example, there will be increased adoption of high core CPUs, launch of new CPU that supports DDR5 and also expected increase of IT investment by major companies. So this supports the view that there will be fundamental strong demand, especially around servers. Also, if we look at the mobile side, demand is expected to remain solid, given the likely penetration of 5G and also the adoption of new form factors by the major mobile OEMs. Now on the supply side, there is definitely the lead time for the equipment overall and the industry is getting longer. Also, it's becoming more and more challenging to maintain the node migration and investment efficiency. And so given that, I think it is much more important ever than before to maintain the ability to respond to customer demand in a timely manner by maintaining the right product mix. Regarding price, of course, it's difficult for us to also predict price at this point. But we also noticed, as you mentioned, a clear tendency of the memory market cycle height and also the length getting shorter than before. Also considering that our inventory remains to be at fair levels, these are all signs that indicate a possible stabilizing of the market. Also recently, a third-party agency did announce its view that the market may actually change direction during the first half. And so we are adding this as one of the possible scenarios. Unidentified Company Representative: To answer your question about the QD display, yes, we have heard the market has high expectations, but also some concerns about the QD display. We started mass production of the QD display fourth quarter last year and have made deliveries to the customers. The customer response is that the QD display has definitely advantages compared to competing products. We are currently working with customers to have TVs and monitors using the QD display be positioned in the higher end of the premium product lineup. We believe that as our utilization improves, we would also be able to increase the shipments of our QD display. We believe that the QD display definitely will take position as a premium display. And we believe that as we are able to increase our shipments with improving utilization towards the end of this year, we will be able to see an increase in demand, especially around the premium products by offering QD as a way of differentiating the performance in the ultra large-sized TV and monitor market. Operator: The next question will be presented by Wonsik Lee from Korea Investments and Securities. Wonsik Lee: My first question is about the foundry. There is continuous noise regarding the -- your foundry low yield in the advanced nodes. Can you give us an update of the yield and how you plan to address this? Second question is about the flexible OLED market. In the small and midsized flexible OLED market, competition is becoming more intense. How do you plan to respond to this? Unidentified Company Representative: To answer your first question, yes, as you know, in response to global demand for the advanced nodes, we have been going through unprecedented scale of investments and development and is maintaining the technology leadership in the advanced nodes. As we move on to the advanced nodes, the challenge of maintaining and securing initial stable yield has increased. Now in terms of response, even though there has been somewhat of a delay in our initial advanced node ramp up versus our plan, we do expect this to improve and stabilize gradually. And in order to address this, we are considering looking into, for example, establishing the multipath faster than originally scheduled by securing the infrastructure space and making the optimized timing of investments for ramp-up and also working with the research center, dividing roles in order to establish plans of better achieving yield early on in the advanced nodes. Unidentified Company Representative: To your second question, as you mentioned, the competition in the flexible OLED market is getting more intense. And we have been recognized the premium value in the OLED market with our continuous technology differentiation and performance improvements. And we are continuing to focus from various angles to maintain that leadership. We were the first company to succeed in mass production. We pioneered the OLED market. And during the past several decades of investments in R&D, we have accumulated a huge body of patents and know-how. Also, in order to protect our differentiated technology and further enhance the value, we have actually branded our proprietary OLED technology, such as Diamond Pixel or the ECO 2 display OLED for low-power technology, in order to establish our position and also to actively communicate to the market. We also believe that receiving the recognition for our IP and receiving the fair compensation for it is an important part of our obligations and responsibility. And currently, we're looking into various ways in order to get that guaranteed. Under today's ESG environment, it's important that proper business practices are honored, and we will do our best to have that happen. Operator: The last question will be presented by Nicolas Gaudois from UBS. Nicolas Gaudois: On NAND flash, there's been several announcements from your peers on seventh generation 3D NAND technology as well as QLC for bit sales for products recently. In that context, could you update us on Samsung's strategy and roadmap for both, please? Unidentified Company Representative: Yes. To answer your question, actually, we have been delivering for server and consumer applications starting from the fifth generation V-NAND that actually adopt the CTF QLC technology. And also, we have actually maintained the technology leadership in the market, especially for the enterprise QLC SSDs. Now for the seventh generation V-NAND, our focus is on establishing a technology leadership that satisfies the demands of all applications, including SSD and e-storage. And another focus is actually creating an ecosystem through cooperation with partners in preparation of a wider adoption of QLC. You've also asked about our roadmap. And for the seventh-generation V-NAND QLC, the launching timing will be decided based on customer schedules, priorities and also the market situation. For reference, we're expecting at the PC application level, the demands of our customers for QLC products will become more visible and tangible after this year. Unidentified Company Representative: Finally, we will answer questions that were submitted online in advance. Starting from the last earnings call, we have been accepting questions via our webpage in advance of an earnings release as part of our efforts to strengthen communication with individual investors and to enhance understanding of the company. A variety of questions were submitted this quarter as well. I believe the majority of the submitted questions have already been sufficiently answered during the Q&A session. So we will answer 2 more questions on topics that garnered a high level of interest from shareholders but were not addressed during the Q&A session. The first question is the following. The company has been treating the Foundry like a new business to nurture, but the market is fiercely competitive. I would like to hear your opinion on what distinctive advantage Samsung has over its competitors to accelerate growth. This will be answered by EVP Moonsoo Kang on behalf of Foundry division. Moonsoo Kang: To answer your question, as you mentioned, yes, in order to develop our Foundry business, we have been executing unprecedented scale of investments and also focused on developing technology. And in addition to securing the technology leadership through these efforts, another focus of our Foundry business is to further expand the ecosystem by building strong partnerships with other companies within the foundry industry. We believe this will help alleviate customers' concerns about foundry source concentration and also will be able to provide meaningful solutions for the entire foundry industry. Also, our focus is on developing a total system level solution using, for example, advanced packaging technologies, such as 2.5D and 3D which can maximize both the density and performance. Also, we're leveraging our collaborative relationship with the Memory division in order to provide solutions that are differentiated from other companies. Unidentified Company Representative: The last question is the following. The global market demand for 5G smartphones is expected to grow significantly this year. Against this backdrop, what are Samsung Electronics' strategy on the lineup and sales expansion? This will be answered by VP Sung Koo Kim of the MX division. Sung-Koo Kim: Yes, as you mentioned, the 5G smartphone market has been growing very rapidly. It is expected to continue this growth. Market outlook is that this year, 5G smartphones would account for more than half of the smartphone shipments in the entire market. Now in order to actively absorb this mass of 5G replacement demand, we have prepared a full 5G lineup across the entire price range starting from the flagship models of the S family and the foldable Z Series as well as the mass entry level. Our -- especially our focus in terms of strategy as we respond to the compete -- competition, the intense competition in the mass segment is to leverage the Galaxy experience that we have. We have the excellent S Series experience, which we will roll out even to the mass tier models so that all Galaxy users will be able to share and enjoy the premium Galaxy experience. Also, on the sales side, we will be proposing 5G handsets, mass 5G handsets to all of our channels, and also look into collaboration with the carriers in order to increase 5G handset sales, which will also benefit the carriers in terms of further upside in their ARPU. Through these initiatives, we will focus on continuing the high growth momentum versus market this year. Unidentified Company Representative: Due to time constraints, we are unfortunately unable to answer every question that was submitted. However, I would like to thank everyone who shared their opinion, providing us with valuable information to refer in our decision-making process. And that completes our conference call this quarter. We wish all of you and those close to you stay strong and in good health. Thank you.

Operator: Good morning and good evening. Thank you all for joining this conference call. And now we will begin the conference on our fiscal year 2021, Third Quarter Earnings by Samsung Electronics. This conference will start with a presentation followed by a dividend of Q and A session. . Now we share common stock presentation on the fiscal year 2021, Third Quarter Earnings reserves by Samsung Electronics. Ben Suh: Welcome everyone. This is Ben Suh from Investor Relations. Thank you for joining our Third Quarter 2021 earnings call. For additional details regarding our quarterly results, please refer to our earnings presentation, which is available on our IR website at www. Samsung. com/Global/IR. On the call with me today representing each of the business units are; EVP Han Jin Man representing Memory, VP Choi Young Kwon for system LSI SVP Han Shawn Loon, for Foundry, SVP Choi Kwon Young for Samsung Display. VP Kim Dongwon for IT and Mobile. And VP Song Won-Jun for Visual display. In addition, VP from Investor Relations is present on this call as well. I would like to remind you that some of the statements we will be making today are forward-looking based on the environment as we currently see it. And all such statements are subject to certain risks and uncertainties that may cause our actual results to be materially different from those expressed in today's discussion. Before we present our quarterly results, let me first address the third quarter dividend. Today, the Board of Directors approved a quarterly dividend of 361.11 per share for both common and preferred stock. The total payout for the third quarter is the same as it was for the first second quarters, which is W2.451 trillion or 0.5 of the 2021 annual totals of W9.8 trillion in accordance with the shareholder return policy we announced in January. The dividend will be paid in mid-November. Now, I would like to present the results for the third quarter. Despite numerous macro uncertainties in the third quarter, such as global supply chain issues and persistent effects of COVID-19, by actively leveraging our leading technology, outstanding product competitiveness, and differentiated global SCM capabilities. We once again delivered record results. Total revenue for the quarter was W74 trillion, up 16.2% sequentially. With all of our major businesses seeing revenue growth, highlighted by solid sales of foldables and other smartphones, as well as increases in both memory shipments and OLED sales. We have set new records for total revenue in a respective quarter for 3 quarters in a row, and we expect that annual revenue will be well above the previous all-time mark set in 2018. Compared to last year's results, which was our previous all-time high for any quarter, revenue grew 10.5% driven mainly by memory and OLED. Gross profit increased by W4.51 trillion sequentially to W31.11 trillion on the back of cost reductions in memory, mainly from advanced process migrations. The result saw a slight rise in gross margin. SG &A expenses came in at W15.31 trillion of W1.21 trillion quarter-on-quarter, primarily due to an increase in advertising and promotional costs. The percentage of sales, however, they declined by 1.4 percentage points as sales significantly outgrew the SG &A increase. Operating profit increased by W3.31 trillion quarter-on-quarter to W15.8 trillion, our second highest total ever, as a component business improved significantly backed by continued favorable conditions in the memory market and robust sales in the foundry and DP businesses. Our finished product businesses also delivered solid results. Operating margin improved by 1.6% points. On a year-on-year basis, both operating profit and operating margin increased substantially, propelled by our component businesses. I will now briefly review the results of each business unit. For memory, results improved significantly as we actively addressed customer demand, which led to record quarterly bid shipments, as well as the second highest ever revenue for DRAM. Also, costs were reduced by expanding sales of 15-nanometer DRAM and a 128 V-NAND. In Foundry, results improved backed by strong demand from our global customers. In display, mobile panel earnings improved sequentially on effects of product launches by major smartphone customers. However, the large panel business continued to post losses, mainly due to declines in LCD ESP. For the mobile business, results improved sequentially thanks to the expanded sales of our new foldable models and low-to-mid range smartphones, along with sales growth of products in the device ecosystem lineup. In network, we expanded our business overseas, including in North America, in Japan, as we continue to address 5G network demand in the domestic market as well. In CE division, despite a strong expansion of our premium TV and bespoke lineups, profitability declined due to rising material and logistics costs. Regarding currency effects, strengths in most major currencies against the Korean Won, especially the U.S. dollar, had a positive effect on the component business in particular, with a combined impact of approximately W800 billion on our operating profit compared to the previous quarter. Next, I would like to share our business outlook. In the fourth quarter, we will focus on actively meeting demand for memory and systems semiconductors, although, component shortages at some customers may have an effect. We will also maintain solid profitability in our finished product businesses by strengthening our leadership and lineups in the premium segment. For memory, there may be increased demand risks due to longer-than-expected components of high issues. But we will actively address strong fundamental demand for servers resulting from increased investments by major IT companies. For system semiconductors. We expect to increase supply of SOC and related products for mobile phones slated for launch in 2022. And for Foundry, we expect results to improve considerably as we aggressively address demand for advanced processes. For display, we expect the mobile panel business to achieve solid results backed by steady demand for smartphones and expanded sales in new applications. The large panel business, we are on track to begin mass production of QD display as planned. We expect losses to continue due to price declines in LCD panels. The mobile business we aim to secure robust profitability by expanding sales of premium products such as foldables, actively targeting replacement demand with expanded sales of low to mid-range 5G smartphones, and increasing sales of tablets and wearables. The CE division. We will endeavor to expand sales with a focus on promotion of premium products made seasonally strong year-end demand. Now, let's move on to our outlook for 2022. Amid anticipation that Global IT demand will recover, the component business will focus on expanding the advanced node portion of production and enhancing our leadership in next-generation products and technology. In the finished product business, we'll prioritize achieving solid profitability by continuing to strengthen our leadership in line ups in the premium segment. However, there are likely to be uncertainties related to components supply disruptions, and living with COVID-19 transition, as more people are vaccinated. For the memory business we will strive to boost cost competitiveness with volume production of 14 -nanometer DRAM. and seventh-generation V-NAND and also enhanced market leadership by expanding mass production of next-generation products based on our industry-leading EUV technology. System LSI will expand its business by reinforcing its lineup of SOC s, including for models in the volume zone. And we expect Foundry to continue to deliver a strong improvement in results by addressing growing customer demand through active investments and by technology leadership, such as bringing to production the industry's first 3-nanometer gate-all-around process. For Display, the mobile panel business, we expect OLED portion of the market to increase with the rising penetration of 5-key amid a recovery of smartphone demand. And we will closely monitor the supply of some components, such DDIs. Large panel business will strive to secure a position in the premium TV segment is QD display. The mobile business will pursue sales growth and profitability improvements by strengthening its presence in the premium market, with expanded sales of our flagship lineup, including our increasingly popular foldables, as well an enhanced lineup of 5G smartphones for the mass market. At the same time, we'll keep fostering the tablet and wearable businesses, while also continue to develop industry-leading technologies. For network, we will continue to enhance our hardware with custom 5G chips and strengthen software-based virtualization solutions for future growth. And we will also pursue continued expansion overseas. Per se, overall demand is likely to soften as the world transitions to living with COVID-19. But we will focus on proactively capturing growing demand from premium TVs and increasing global sales of bespoke products. Let me now move on to capital expenditures. Capex in the third quarter was W10.21 trillion, with W9.11 trillion invested in semiconductor, and W0.71 trillion in display. The cumulative total as of the end of the Third Quarter is W33.51 trillion with W30 trillion in semiconductor and W2.11 trillion in display. Looking at each business up to the end of the Third Quarter, memory concentrated, its investments on expected '22 demand growth and readiness for next-gen products such as DDR5, with capacity expansions and process migrations in our factory in ComTech in Xi'an. And it also invested in longer-term readiness, such as infrastructure and P3. For Foundry investments focused on capacity expansion for advanced UV notes in Comtech. Display investments centered on accelerating the transition to new technology, to expanding capacity for QD display, as well as mobile modules. We're maintaining our policy to invest flexibly in line with market conditions and given growing uncertainties, including those over component supply, we're carefully reviewing fourth quarter CapEx. And as such, we will not be providing a forecast for annual CapEx for 2021 at this earnings call. Finally, I would like to share some of our key activities and achievements in sustainability management. On October 20th, the leading brand consultant, Interbrand, announced this list of the 100 Best Global Brands, and our Company ranked fifth for the second consecutive year. Our brand was valued at $74.6 billion, a 20% increase compared to last year. We ranked the highest and saw the biggest growth among non-U.S. companies, and we also far surpassed the list average growth rate. Our reorganization to a customer centric management system, sustainability activities, and releases of innovative products were highly valued as we reaffirmed our position as a global Top 5 brands. On October 12th, Forbes released its annual list of the world's best employers and our Company took the top position for a second consecutive year. We believe this achievement recognizes our numerous positives including the Company's prioritization of employee's health and safety in a COVID-19 response, outstanding performance, strengthened DSG activities, healthy corporate culture, and professional development opportunities. In August, we unveiled Galaxy for the planet. The Mobile business' sustainability vision for the Galaxy ecosystem. The Vision outlines instead of initial goals that we aim to reach by 2025, including incorporating recycled materials into all of our new Galaxy products, and also achieving 0 waste to landfill in our mobile worksites around the world. Galaxy for Planet is a continuation of our efforts to create a sustainable future across the lifespan of our products, from production to usage, to disposal. As well as throughout our overall business operations to tackle climate change. Moreover, we aim to spearhead to transition to a circular economy through the reuse and recycling of resources. In August of 2021, the Ministry of Environment gave us incorporating company’s final approval for a new process to be defined as recycling technology under domestic law. This new technology involves the reuse of wastewater sludge generated during the semiconductor manufacturing to produce supplementary material in the steel-making process. Cooperative efforts between Samsung, Hyundai Steel, and Pos Ceramics began in August 2020 with the signing of a technology agreement and resulted in the successful production of steel in April 2021, Hyundai Steel's Dangjin site, by using 30 tons of fluorite alternative products. This new technology was approved after it was reviewed by the National Institute of Environmental Research. And because the technology enables replacing a mineral, it cannot be sourced domestically. It is recognized as the most exemplary case of ESG commitment towards resource circulation. since the Ministry of Environment established its Recycling Environmental Assessment System in 2016. In September, Samsung received product carbon footprint labels certification for four of our new flagship system LSI products. Joining previously certified memory chips from the UK's carbon trust. We now have certifications for 14 semiconductor products. Semiconductor manufacturing has a particularly challenging road to Certification due to its numerous complex processes and need for large quantities of various types of raw materials. However, we pass the strict international assessment standards. Backed by results of our various efforts to reduce carbon emissions. We will continue to strive to minimize carbon emissions with initiatives such as reducing the amount of gas required in our semiconductor manufacturing process, enhancing the efficiency of greenhouse gas treatment equipment, and applying solutions to reduce energy consumption throughout the manufacturing process. I will now turn the Conference Call over to gentlemen from each business unit to present Third Quarter performances and outlooks for their corresponding business segments. We will start with the memory business. Thank you. Han Jin Man : Good morning. This is Han Jin Man from the Memory Global sales and marketing office. Third Quarter, the prices reach remained favorable, in demand centering on software stayed strong. We improved our performance significantly, compared to the previous quarter by actively addressing customer demand and reducing costs, by expanding the portion of production using cutting-edge processes. In the case of DRAM for solar, demand continued to grow and as adoption of a new high core CPU that was released in the first half of the year, expanded. Demand from set sales stays solid. The content per box increase. For mobile, despite effects on set bills related to supply issues of some components such as application processors, a demand recovery has become more visible thanks to releases of new products by major manufacturers at the base effect of the second quarter, which was affected by somewhat weak demand. For PCs, demand from end-users has also been robust due to changes such as workplaces, opting for hybrid work patterns alongside strong seasonal effects. However, due growth has been limited by supply constraints and logistics issues for some components. In graphics, memory demand expanded on a rise in demand for Grafix cars due to a revitalization of crypto mining. And the continuing strong demand from game console, which is in peak-season. Despite a resurgence of COVID-19 in major production countries and component supply issues that led to disruptions in set builds along with weakening demand from customer PCs, we actively responded to demand by flexibly operating our plan mix. We set a new record for quarterly DRAM shipments and in particular by significant growth in server sales. And we met our original guidance, not to mention the enhancement we made to cost competitiveness by increasing the 15 nano portion of production. Next, I will talk about the end-market. For some SSDs, along with increased investments by major several customers, enterprise demand recovered. And based on the high capacity trends, spurred by new CPU adoptions, demand was strong from data centers for high capacity products. In the case of mobile, demand has been solid due to the launch of new models and increases in content per box by major customers as we enter strong seasonality. For client SSDs and demand was strong due to our resumption of office work. But memory demand was weak, due to a disruption in that field caused by component supply issues, and inventory adjustments by some customers. In response to growing demand for sub SSDs, we expanded sales of high capacity products of 8 terabyte and above. And increased our production portion of 128-layer products, which led to another quarter of growth. Next, let me tell you about our fourth quarter outlook. In the case of DRAM, we expect fundamental demand for Silva to stray strong thanks to the new CPU adoption and expansion of data center investments. However, we need to keep monitoring impacts of the longer-than-expected component supply issues on set build. For mobile manufacturer is likely to continue to launch new 5G models for there are chances that growth of purchasing demand could be limited due to inventory adjustment of some customers, along with impacts of supply chain issues, for PCs, we expect said Bill growth to stay similar compared to the last quarter. Given the ongoing uncertainties over the supply of some components, the impacts a weakening demand from consumer tree. We will actively address fundamental demand from major server customers and aim for full-fledged sales to PCs, adopting new CPU, and lead the formation of a market ecosystem that is based on mass production of DDR5 for high-end gaming. In addition, we will continue to strengthen our cost competitiveness by maximizing the portion of production using cutting-edge technologies such as 50 nano plus. In case of NAND or Server SSD as business activities normalized alongside increasing vaccination rates and continued growth in enterprise IT budgets, we expect the high capacity trends for Server SSDs to continue and demand to be robust. However, we should keep an eye on the components of lights. For mobile, demand is likely to be solid based on 5G market expansions and high capacity trends is to spend up new models. We also need to monitor impacts of supply chain disruptions on the In the PC markets, more and more companies are expected to resume office work in the second half, so we expect replacement demand for enterprise PCs to pick up. The demand for memory purchases may slow slightly due to the impact of inventory adjustments at some customers. We will secure a stable supply chain based on our strong SCM management system and maintain our differentiation of strategy by continuously expanding our portion of high-value products, while actively responding to overall server demand, and also expanding our lineup of mobile products. Now let's move on to the outlook for next year. First, considering macro uncertainties, adjust the timing of mitigating component supply issues, influences of living with COVID policies amid increasing vaccination rates and raw material pricing issues, we ask for your understanding in the -- it is difficult to provide specific prospect or guidance. Therefore, I'd like to provide a rough outline of the market based on our present forecasts. Although the mentioned uncertainties may impact demand in the memory market next year, the pandemic led -- global consumers to experience more online-based social activities and lifestyle which has been called a new normal. We think most of the demand s in the new normal will persist as a part of our lives. For server and PCs and those whole shifts, we expect fundamental demand to be robust, with the trend towards high capacity, following the expanding new CPU adoption and continued growth of enterprise IT investment. For mobile, we expect shipment growth in high capacity trends to continue with the increase in low to mid-priced 5G models, and also as manufacturers launched products with new form factors. However, since almost all applications are feeling effects of the longer than expected component supply issue. The timing of resolving such issues is the key to increasing visibility of fundamental demand in each application. Furthermore, we expect demand for consumer and segment also to be robust. As the Beijing Winter Olympics have potential to support increased penetration of premium TVs and the move to high capacity. While demand is likely to be strong for PGA in high end PCs, for AI accelerators in the HB market. As we continue to expand the portion 15-nanometer DRAM and 120 layers Venal based on preemptive product mix management, it is aligned with market situation. We will gradually address the server markets where demand is likely to grow, thanks to new adoptions of DDR5 with rising penetration of a high core CPU, and we will also preemptively secure demand for NAND solution products. Moreover, while expanding mass production of 14-nanometer DRAM - nano DRAM in 176 layers of demand, we will continue to strengthen our market competitiveness based on stable cost reductions through next-generation processes and products. Thank you. Harry Cho : Good morning. This is A - Harry Cho from the System LSI In the third quarter, earnings improved due to increased demand for SOCs and DDIs as the major mobile customers launch new products. In particular, the strong demand of DDIs amid continued the shared supply, contributed greatly to earnings improvements via efficient execution of pricing strategies. We affirmed our leadership in mobile image sensor market by introducing ISO sell ATP one, the industry's produced 200-megapixel energy sensor and 50-megapixel license GEN5 the industry's smallest dual-pixel image sensor, featuring faster and more accurate auto focus. Now, let me talk about the outlook of fourth quarter. In fourth quarter we expect earnings to continue to increase due to our higher mass production of mobile associated related products for launches of new 5G smartphone product in 2022 by major smartphone companies. The Company aims to achieve even higher double-digit annual sales growth by maximizing its chip supply capabilities via strengthening Foundry cooperation and flexibly adjusting product mix. In 2022, we plan to improve our performance through meaningful gains in the SoC business, such as by expanding supply of models, for the is always put a new latest model that feature enhanced CPU performance. Thank you. Shawn Han : Good morning. This is A - Shawn Han from the Foundry beginning. In the third quarter, we improved our earning sequentially and set a new record high for third quarter as we significantly increased supply of key products such as advanced process SoCs and GPU s to our global customers with the expansion of mass production at comtech as Fiber Line. In addition, we secured a stable sales base by winning new orders for advanced processes from global customers and we continue our technological leadership by completing the development of the first-generation of GAA, gate auto rolling process, design infrastructure for OLED mass production of 3-nano in 2022. In the fourth quarter, the demand for advanced and mature processes are likely to stay strong. And we expect to set new records for reserves by maximizing supply with revenue growing by more than 10% On top of that, the Company plans to continue its technological leadership by completing design of first-generation GAA, 3-nano products and developing second-generation GAA process, design infrastructure for 3-nano. In the Foundry market in 2022, we expect supply to remain tight due to increase silicon consumption for 5G mobile, solate GPU center demand for HPC, strong CPU demand due to intensifying competition, and solid demand for 8-inch legacy products and consumer applications. We aim to continue to grow by actively investing to expand supply for advanced processes of 5 NANO and below. And we also plan to pursue correlative growth by expanding global customers sales, and no more rising prices for sustainable future investments. Thank you. Kwon Young Choi: Good morning. I'm Choi Kwon Young from the Business Planning team at Samsung Display. In the third quarter, the Mobile Display business recorded a sequential growth in sales and profit and the smartphone sales remained brisk, owing to launches of new flagship phones by major customers. In particular, our profitability improved with the sales of expansion of high-end products, such as affordable points, leading us to achieve our highest ever third quarter profit. Meanwhile, the larger display business has been affected by dependent price declines. And it's a loss increased to some extent, quarter-on-quarter. However, the loss narrowed year-on-year as restarted, facing out sales from this year, in line with the tradition of production lines to be displayed. Next, let me share our outlook for the fourth quarter. For the Mobile Display business, we expect the demand for beta customers, new products to stay solid. And at the same time, series of laptops and gaming devices will co-emit effects of peak seasonality. As a result, we expect the Mobile Business -- Display Business to achieve solid revenue and profits in the fourth quarter. For the larger display business, given our plan to start mass production and supply of QD products, we will kind of all our efforts to ensure the successful debut of our HQ display. Finally, I will share -- I'll look for the display market in display business, the core strategies for 2022. For the Mobile Display business. we expect the environment for the OLED business to remain favorable, fueled by a recovery in smartphones demand. Thanks to an accelerating return to daily lives and wider availability of 5G networks. Moreover, we expect sales of already penance in applications other than smartphones, including laptops and tablets, and just start in earnest. Kwon Young Choi: In. 2022. We at Samsung Display will do our best to capitalize on such trends as new growth engines. However, there are still concerns stemming from a supply crunch of components such as DDIs. So, we'll totally monitor supply chain and take preemptive measures against the potential risks in order to provide products to our customers as scheduled. For the larger display business, we'll complete the reorganization of our business from HD to QD display as planned, and focus on securing leadership in the premium TVs segments with QD display. Thank you for listening. Sung Koo Kim : Good morning. This is Sung-Koo Kim from the mobile communications business. I would like to discuss the IM divisions Q3 results, and the outlook for Q4 in 2022. In Q3, 2021, market demand is expected to have increased quarter-on-quarter due to elevating influences of COVID-19. Our mobile business, revenue increased compared to the previous quarter despite supply constraints in the overall industry. have increased quarter-on-quarter, led by strong sales of the Fold3 and the Flip3, which are being very well received in the market with their distinct experiences, including sophisticated designs on the display camera and resistance, to name a few. As of our enhanced mass-market line up also contributed to the performance. In addition, device ecosystem products such as wearables have contributed to strong growth. We maintained all solid double-digit operating profit margin. Why? Increased marketing investments aimed at mainstreaming the foldable category has some effect on profitability. For the network business, we have enhanced our foundation for growth in 5G by expanding our business overseas, including in North America and Japan, and by actively responding to domestic demand for 5G network deployments. Now let me move on to the Q4 outlook. These tech market demand to increase quarter-on-quarter as a result of original year-end seasonality although uncertainties over component supply constraints are likely to linger. In our mobile business to continue to strive to further expense premium smartphone sales with BeSpoke edition to focus customer's aspirations on our affordable C Series, while also maintaining sales momentum of GalaxyS series. At same time, we will collectively target replacement demand and the growing five-year markets with our competitive 5G lineup for the mass market. In addition, we were increased series of device ecosystem system products, including wearables, PCs by promoting easier, more convenient, connected experience. By doing so, we expect to maintain double-digit operating margin. For the Networks Business, where you're push for business grows in global markets like North America and Southwest Asia. Now let me share our outlook for the next year. Although risk of continuing COVID-19 is likely to proceed, we expect the smartphone market to continue its growth and the market for the wearable devices, which provide consumers with new experiences in their values to maintain gross in the double-digits. For the mobile business, we will strive to strengthen our leadership in the premium market by furthering and seeing product attractiveness and differentiate the experiences of our flagship products. As for our full Double Z-Series, we'll continue to further the distinct competitive advantage based on our unmatched innovative technologies and outstanding user experiences. And also provide Samsung 's unique differentiation, such as BeSpoke addition. We will drive mainstreaming of the foldable category and establish it as a very important category within premium market. Regarding our mass market smartphones, we will continue to extend convenient and unique premium experiences and also actively address diverse regional demand. Rate of team might products such as mass-market 5G smartphones. Furthermore, we will strive to maximize customer retention and immense customer trust and aspiration on our products to solidify our position as a premium brand by providing Samsung 's unique value with consistent and convenient connected experiences, of course, our device ecosystem. With these efforts, we, will try to achieve solid performance growth in 2022. Al so for our foundation for growth in a longer term, we will persistently work on not only developing advanced technologies, but also collaborating openly and inclusively with global leading companies. For the network business, we will continue to address expansion of the domestic 5G network and continue to seek opportunities to grow in overseas markets, including North America, Japan, Southwest Asia, and Europe. In addition, we will proactively prepare for the future by strengthening product competitiveness based on our own 5G chips and further advancing 5G virtualization solutions. Thank you. Song Won Jun : Good morning. I'm Song Won-Jun from Sales and Marketing Team of Visual Display. I'd like to review the market conditions and our performance of business in the third quarter of 2021. In Q3, ahead of peak seasonality, the TV market demand increased quarter-on-quarter, but decreased compared to last year when affected by strong pent-up demand. With a focus of mixed improvements, Samsung expanded sales of premium products such as Neo QLED clearly and Lifestyle products. In particularly, newly launched Neo QLED has received good reviews from major magazines and consumers and we are seeing strong sales amid the related such positive responses. Also, lifestyle products are being recognized for data differentiated value in the market, which have also helped boost sales. Against this backdrop, Samsung focused on profitability by actively improving product mix and cost efficiency. However, because of the increase in the cost due to material prices and global largest issues, profit decreased both quarter-and-quarter and year-and-year. For digital appliances in our third quarter, market demand increased slightly year-on-year, thanks to the expansion of demand for new home appliances, led by our changes in consumer lifestyle. However, market growth slowed down quarter-on-quarter as effects of pent-up demand, decline with increasing vaccine supply. External environment also deteriorated because material prices and logistics cost rates. We responded to various consumers’ needs by expanding this lineup and launching in it even more countries, while also introducing new home appliances. Through this, we improved sales both quarter-on-quarter and year-on-year, despite the slowdown of market growth. Even so, profitability inched down due to the impacts of low material price and logistics costs. Now, let us look at the outlook for fourth quarter and for 2022. We expect demand in Q4 to rise quarter-on-quarter, thanks to the effects of strong end-year seasonality. However, reduced effects of pent-up demand, along with an increase in out-of-home activities, are likely to close TV demand to fall year-on-year. The market outlook for Q4 is very different from what it was pre COVID-19. While sales in offline stores are expanding again, with the move to living with COVID policy, meaning advanced monitors. Demand in a year-and-year, Shopping, seasonality -- it's shopping season, maybe dispersed throughout the quarter due to our reluctance by customers to gather in ours numbers and strengthening online and non-contact sales trend is expected to continue. Based on close cooperation with channel partners. We are establishing our sales strategy that can preemptively respond to such changes in the market. We will optimize promotion periods to align with Jesper, demand and offline stores and will induce of selling with premium focused promotion, thereby expanding sales of strategy products such as QLED and the lifestyle. Furthermore, by improving Samsung online sales infrastructure, we provide consumers with a more convenient and easier to use online purchase platform and extend on contact sales opportunities through online promotions teller to each country. Moreover, based on Samsung's global capabilities, we'll minimize the largest risks and focused on securing profitability through optimized operation and efficient cost management. For digital appliances in the fourth quarter, we expect increase in demand for home appliances to slow as more reason translated to our living with COVID policy, which has continued from the third quarter. Also, near material prices and logistics costs are likely to continue to run. We plan to accelerate the global expansion of Bespoke and continue its growth by blustering year-end promotions, and online marketing. In addition, we will optimize supply efficiency by region by responding to risk in the external environment, and pursue profitability improvements by expanding sales with the focus on premium products. Regarding demand for the TV market in 2022, the growth trend, which continue until the end of the first half over 2021 is expected to reverse. In social and economic uncertainties related to COVID-19 as well as the supply in large issues are likely to increase continually. However, we expect demand to premium products such as Super X-screen TVs, and OLED -- QLED products to keep growing in 2020. We will focus on improving our mix of high value-added products by targeting the rising demand via technology call innovation in premium products, including Neo QLED, 8-K and Micro LED. Furthermore, we will continue to add to grow momentum by creating sales opportunities with a differentiated lifestyle product. The active address consumers grow interest in diverse lifestyle value that emerged during COVID-19. In our digital appliances market in 2022, the market is expected to continue to slowdown in growth, following the second half of 2021. As consumer spend less time at home. However, we expected market demand stays as a similar level of 2021. Because of an increase in penetration rates of new home appliances. We will solidify brand planning’s of providing customized products that meet the needs of consumers by introducing a new lineup and expecting global sales of our differentiated products. In addition, we will enhance our supply competitiveness by improving productivity and strengthening our SCM competitiveness, so that we can respond the flexible to external changes such as an increase in logistics costs. Based on this, we will continue to grow and lead the home appliance industry. Thank you. Ben Suh: Thank you. That sums up the third quarter results presentation. Before we move on to the Q&A session, I would like to share several data points in key business areas. For DRAM in the third quarter, our bit growth was a percentage in the low single-digits and ASP increased by a high-single-digit percentage. For the fourth quarter, we expect market bit growth to be flat, and ours to be around the market level. For the full year, we maintain our forecast of market growth in the mid-20% range, and that our bit growth should be similar. For NAND, in the third quarter, our bit gross was a mid-single-digit, and ASP increased by around 10%. For the fourth quarter, we expect market bit growth of a mid-single-digit percentage and our bit growth should be slightly higher than market. For 2021 as a whole, we still expect market bit growth percentage to be in the low 40s. But now believe our bit gross was slightly outperformed the market. In the Display Panel Business in the third quarter, our OLED portion of sales was in the mid-90% range. In OLED sales volume growth was a percentage in the low 20s. The mobile business in the third quarter, sales volume was approximately 72 million units for handsets and 7 million units for tablets. The blended ASP, including tablets, was around $250. In the smartphone portion of handset shipments was in the mid-90% range. For fourth quarter on a sequential basis, we predicted handset shipments will decline and the tablet shipments in blended ASP will increase. The smartphone portion of handset shipments is likely to be in the mid to high 90% range. In the TV business sales volume in the third quarter increased by a mid-single-digit percentage. For the fourth quarter, we expect gross to be in the low 20% range for the full year. We forecast that sales volume will decline in the low 10% range. With that, I will now move on to the Q&A session. First, we will start by taking questions from the conference call. Operator: Now Q&A session will begin. The first question will be presented by Soonhak Lee from Hanwha Investment & Securities. Please go ahead with your question. Lee Soonhak : premium protective. Unidentified Company Representative: I have 2 questions. So, first question is about your CapEx. I think YTD, third quarter your CapEx this year has increase versus last year. Can you give us a detailed breakdown of that CapEx by each of the business divisions? You said that you're not able to provide a full-year guidance on your CapEx, but still, can you give us some color as to do your CapEx this year and what you expect to see next year. Second question is about the display business. First of all, the LCD is going through a down cycle, ASPs are falling. Would that mean that you may actually stopped your LCD production faster than were originally scheduled? And if so, when do you plan to stop your LCD production? Fourth quarter will also be the start of your QD display mass production. Can you give us some updates on how that is going? Song Won Jun : Unidentified Company Representative: Yes, to answer your first question, our YTD third quarter CapEx is currently at 33.5 trillion won. This is mainly attributed to the increase in semiconductor related investments, both our memory as well as foundry investments have increased versus last year. Song Won Jun : Han Jin Man : Unidentified Company Representative: To give us some details of the investments, in the case of memory, our investment or capex policy remains the same and that we do focus on being able to respond to mid to long-term demand. But also, in terms of executing equipment investments to make that flexible depending on the market situation. And so yes, we will continue to maintain flexibility as we execute our investments during the fourth quarter. Given the remaining uncertainties, we're not able to provide you a full-year guidance on our capex. But overall, when we look at the investments for this year, there are several areas where are these investments are being used. There are definitely investments that we're making in order to increase our capacity to respond to the expected increase in demand next year, but also some of the investments are being made in order to offset some of the decrease in supply that happens as we move up to more advanced nodes. And also, the die size penalty that happens with next-generation products such as CDR5. At the same time, another piece of that investment is being made to continue to maintain our technology competitiveness and as investments for the future in order to, for example, make successful process migrations to gain greater cost competitiveness, as well as, for example, the infrastructure investments we're making in P3 in order to have the capabilities to capture demand in the future. Some of the detail investments that we made on the foundry side includes investments necessary to increase the production scale of our new S5 Line, given the fact that we do see increased demand, especially for the advanced nodes. Also, we're making future investments to maintain our technology leadership. Also, the equipment investments to respond to future demand, as well as some preemptive preparations of essential clean room facilities. You've also asked for some color for next year, but we're still actually working on our business plan for next year, so we are not able to provide you with greater details about next CapEx expectations. Kwon Young Choi: Unidentified Company Representative: To answer your first question, yes, we are continuing to produce LCD panels. That is at the request of our customers. We are planning to at least continue our production until end of this year. The question is whether to continue production even next year. Currently we are reviewing that and we will actually exercise quite a lot of flexibility as we make that decision, considering both the market situation, whereas you mentioned the LCD panels ASPs is rapidly falling but also the demand from our customers. Song Won Jun : Unidentified Company Representative: As you mentioned also, we are on track to mass production and shipment of our QD display this fourth quarter. We are on track to -- with our original schedules, and according to this, TVs featuring QD displays maybe unveiled in the market next year. Our QD display have many advantages versus existing displays, such as in terms of color reproduction, viewing angle, and brightness, and therefore, we're quite confident that it would set the new standard, especially in the premium TV markets. Our current focus is on the successful unveiling of the QD display in the market. And also, to make this the start of a smooth transition of our large size business towards the QD display. Lee Soonhak : Operator: The next question will be presented by Peter Lee from Citigroup. Please go ahead with your question. Peter Lee : Unidentified Company Representative: My first question is about your NAND. Your NAND shipments was slightly below your original guidance. Can you give us some details of why? The second question is about the foldable. The successful launch of Galaxy Z Fold 3 and Z Flip 3 has shown that the growth potential of the foldable form factors. In that context, can you give us some your guidance for this year as well as next year of your foldable phone sales? Sung Koo Kim : Unidentified Company Representative: To answer your first question, yes, as you mentioned, our third quarter manned shipments came in slightly lower than the guidance that we had provided last quarter, which explained by several reasons. Number 1, on the client SSD side, while the PC demand actually remained solid throughout third quarter, there were some supply chain issues with other components that disrupted set build production. Also, some customers went through inventory adjustments. And so, there was a soft demand for client SSDs, especially around the low-end PCs. Also, on the mobile side, even though due to seasonality, the mobile demand itself was also solid. There were some API related component supply issues in the mid end levels. And so, there were also some impact due to delay of our MCP supply. Well, actually while this was happening in the market. We had actually ended the second quarter, came into the third quarter with extremely low inventories. And so, we thought that the best way to manage the situation was to focus during third quarter on increasing -- building in flexibility for the future by using third quarter to normalize our inventory levels, especially around the high-end solution products such as servers and e-storage. Harry Cho : Unidentified Company Representative: As you know, our focused strategy for our foldable has been to enhance user experience and also to lead the market in a foldables. And based on the strategy by introducing eye-catching designs and also optimizing the foldable usage experience, we have been able to bring up a very positive response from the customers. We think that we have succeeded in actually starting and leading this mainstreaming of foldables in the markets. On top of that, with BeSpoke edition, the zip, Flip3 s innovative user experience is combined with a wide range of customizing and personalization options, and this has generated quite a strong response from the younger customer segments. For example, generation MD. Sung Koo Kim : Unidentified Company Representative: You've asked about our sales this year and next year, this year our Foldable sales is expected to increase by several times versus what we had last year. And we expect to continue significant growth of our Foldable sales even next year. Also, while we continue to focus on further enhancing our technology and user experience, we will also work on creating stronger partnerships and ecosystem so that the foldable becomes a very important category within the flagship. Peter Lee : Operator: The next question will be presented by Ricky So from HSBC. Please go ahead with your question. Ricky So: Unidentified Company Representative: My first question is about the memory. It seems that the prices are falling faster than what the market is expecting. Can you share with us, therefore, the short-term market outlook for DRAM and NAND, as well as what you expect to see next year in terms of demand? There are some upside potentials next year as well as downside risks. Can you give us some details of how you perceive these upsides and downside for next year? Second question is about the network business. During the presentation, you mentioned some of the achievements you're making in North America and Japanese network markets. I'm wondering where -- was there any updates on Indian market where there are LTE and 5G auctions going on or being discussed. Can you share us -- share with us some details about what you are planning or doing in India? Han Jin Man : Unidentified Company Representative: To answer your question, I agree that there is quite a lot of uncertainty, especially around various macro issues, such as how the back-to-normal will pan out. Also, the component and supply chain issues, and the raw material price is increasing. However, even though there are these headwinds factors, we also need to think about some of the upside potentials that can come next year, as we prepare for next year's business. Currently, one of the key issues is the supply chain, the component shortage issue, which has disrupted our various applications in set fields. But when we look at the current component shortage versus supply-chain issues, we think that it's not an issue of just absolute shortage of production output of all components, but rather more of a mismatch of the supply chain. And so, compared to our case where the problem is caused by an absolute shortage of capacity, things could actually start to improve earlier than expected, even though it's difficult to say definitively, we're carefully hoping that perhaps the situation may start to somewhat ease from second half of next year. Another factor that may impact demand would be how the post COVID-19 or with COVID situation will unfold in various countries. With more vaccinations happening, many countries are now moving on to what could be referred to as back to normal or living with COVID-19 policies. There's what probably increase the amount of activities that people do face-to-face or in-person. But probably we will not be able to go back to the way we did business or lived before the pandemic, because during the past 2 years, our consumers have experienced the convenience and efficiency that comes with our digital-based new normal society and lifestyle. And I think that even after the pandemic ends, this will be part of our everyday lives and actually move up to the next level of digital transformation. So, given this social trend and also increased investments in new CPUS and major data centers, it is expected that the fundamental demand, especially around servers, will continue to remain solid. You have mentioned the software pricing and there are definitely various uncertainties in the market. And when we talk to customers, we do notice that there is a gap between how we expect the market to unfold versus what the customers are expecting, which also makes our pricing negotiations that much more difficult than before. But given the fact that the memory industry cycle is actually getting a weaker in terms of magnitude and also shorter in terms of cycle duration. And also, the fact that we're currently running at relatively low inventory levels. We do not think that the current price situation calls for concern. Harry Cho : Unidentified Company Representative: To answer your question about our network business, we have definitely been working in India. The Indian market just went through an auction of 4G frequencies -- seven bands of 4G frequencies were auctioned off during the first half of this year. And so, in India, in order to increase the 4G network capacity, there are new projects coming up. And so, we are creating business opportunities by proposing new base station equipment and network optimization solutions to Indian carriers. We also have in mind the 5G opportunities in India. So, leveraging the 4G large scale commercial networks to help track record that we would have. We are aiming to also expand this to continuous expansion of our 5G business in India. With that in mind, we are building a very strong partnerships with local carriers. The Indian 5G frequency option is scheduled for first half of next year. And so, once that is done, there will be a specific demand for 5G networks. And so currently we are doing the groundwork of our 5G business so that, we would be able to supply the necessary products in a timely manner. Ricky So: Operator: Our next question will be presented by SK Kim from markets. Please go ahead with your question. S. K. Kim: Unidentified Company Representative: My first question is about the recent media reports that the Company is planning to mass produce its 3 - nano GAA process earlier than competitors. According to the report, you're planning to go mass production in the first half of next year. Does the Company have any comments or can you offer some details about the technology roadmap for your Foundry business? Also, in that context, can you share with us some comments or plans regarding your mid to long term capacity expansion for the foundries. Second question is about the IM side. It seems that the supply chain, the component supply issues did have an impact on your third quarter business. Can you quantify that impact? And also, do you think that this will continue in your fourth quarter? When do you think the situation would ease? And how is the Company coping with the component shortage? Shawn Han : Unidentified Company Representative: So, to answer your first question, we are currently on track with target of mass production of our 3-nano GAA process during the first half of next year. And also, by further enhancing and innovating not only our process development, but also manufacturing infrastructure capabilities. We want to approve, once again, Samsung's leadership in GAA process technology by further enhancing our power performance area in the GAA process as we prepare for the second-generation 3-nano. In terms of our capacity plans, currently we're going through unprecedented investments in both infrastructure and equipment, with the aim of securing a sufficient mass production capacity to satisfy the customers’ needs as much as possible in the UV process by expanding our comtech capacity, but also studying the construction of a new fab in the US. If you compare some of our capacity numbers, our capacity as of 2021 has increased by around 1.8 times versus the capacity in 2017. Going forward, we're planning even steeper capacity increases by around 3 times over capacity by year 2026. And so, we are focused on securing as much as maximum mass production capacity to satisfy customer needs. Harry Cho : Unidentified Company Representative: Regarding the impact of the component that chip shortage on the IM production in third quarter, there was definitely a considerable impact on our third quarter sales volume. The situation does not appear to be easing, so it seems that even the fourth quarter will also have to bear with the part or component supply issues. It's difficult at this point to predict when situation would improve. But we have optimized our supply lead time by strategic partnerships with our partners, so that we're able to at least optimize the part of the time or supply chain that comes within our control, such as receiving the components, using that to produce the product and also shipping the finished products to the channels. At the same time, we're also focusing on minimizing the impact by diversifying our sources and also going through rebalancing of our component supply. And not just as a temporary response. Even after the situation stabilizes, we will actually strengthen our Proactive Response System to market changes through strategic partnerships and collaboration with the key vendors on an ongoing basis. S. K. Kim: Operator: The next question will be presented by to Kim Dongwon from KB Securities. Please go ahead with your question. Kim Dongwon : Unidentified Company Representative: My first question is about the Memory business. You mentioned that the memory downcycle is expected to be less in terms of magnitude and also shorter than before. Can you give us some of the reasons why you expect that? Second question is about the TV business. Even though there was this pent-up demand after COVID-19, at the tail of that it seems that there is a softness in consumer durable demand and overall TV demand outlooks are being downward adjusted. Of course, despite that overall TV market trend, the premium segment continues to do very well. So, given that market situation, can you share with us your strategy for the VD business? Han Jin Man : Unidentified Company Representative: The reason why we think that the down cycle or will be less in magnitude in shorter is three-fold. One is the fact that the applications have become much more diverse than before. Previously, the main source of memory demand was the PC, but now memory is being used in a far wider range of applications. Similar to portfolio, volatility decreases if it's well diversified. I think a similar situation is happening in the memory market. Another reason for the change in the down cycle is because we are now working with cutting-edge, very difficult memory processes because of the difficulties of the technology. It's not as easy to maintain the same level as bit growth as before. And there are restrictions and limitations in rapidly increasing memory output. I think we're currently experiencing a part of that impact. For example, our inventory continues to remain at very lean levels of past quarter, as well as this quarter. So, I think the type of -- the difficulty of the memory process technology, while also be a reason why the possibility of an extreme downcycle as what we saw in 2008 is low. And the third reason is that basically, both the vendors and the customers have learned their lesson during the past extreme shortage and also oversupply. That it's best for the entire market to maintain a level of rationality and soundness. And that has also improved the SCM and crisis management capabilities of participants in the memory market. And I think that would also contribute to improving the downcycle. Kim Dongwon : Song Won Jun : Unidentified Company Representative: To answer your question about the TV market outlook, as you mentioned, yes, there was that pent-up demand in the TV market that continued until around first half of this year. Some of that is leveling off and we expect that TV demand in Q4 will decrease slightly on a year-over-year basis. Another factor we have to expect is the impact the -- living with Corona policies may have on the TV demand with higher vaccination rates, especially around developed markets. They are easing off social distancing, people will spend more time outside and this may have an impact on TV demand. But also looking towards next year, there are some positive factors. For example, there is the global sports events happening in the second half of next year, which will drive the consumer needs for large size and high-quality TVs that gives that immersive experience. And this will be a great opportunity for us to expand our sales, especially in key markets such as Europe and Latin America. Despite the stagnation of the TV market, the premium TV demand is expected to continue to grow even next year. And so therefore, our strategy is to focus on Neo QLED 8-K and the strategic products to target the high-end segments of the market to overcome the software market demand. Also, our Neo QLED is already showing very positive sales performance, but we think that that will continue on next year because Neo QLED is a product that offers the markets best picture quality and design, and thus provide and -- differentiated in home activity value. The consumers were -- are now doing various activities at home. In addition to gaming, they're working and also doing home fitness at home. And Neo Q LED is the -- has been providing that value, especially to consumers in the premium segment. In addition to these are the lifestyle TV product groups would also be a major focus for us next year. It provides various values that are not provided by existing TVs. And so, the lifestyle product group would be another way we plan to create new demand among a stagnated TV market and deliver continued growth. Ricky So: Operator: The next question will be presented by Nicolas Gaudois from . Please go ahead with your question. Nicolas Gaudois : Good morning. Thanks for taking my question. So, we've got -- considering the recent trend in memory pricing, you restage, reconsidering your investment plans for 2022 for both DRAM and NAND flash, in terms of, number 1, the amount of new capacity of plan to . And number 2, the timing of the equivalent delivery. Thank you. Unidentified Company Representative: Han Jin Man : Unidentified Company Representative: To answer your question, given the large number of uncertainties that remain at this point, we are currently continuing to discuss our detailed investment plans. These are discussions for both in terms of the size of our investments as well as the detail direction. And so, we are practicing particularly high level of care and caution as we try to work out next year's investment plans. And so, our basic approach to investments remain the same. You referred before that our focus is to continue to maintain the investments in infrastructure at the right levels so that we're prepared to meet with the long-term demand. But in terms of equipment investment execution to do that flexibly, tied with the market situation, that approach still applies. And our basis of is to increase the foundation that we have for sustainable profit generation. And so, our investments, as well as capacity operation, will be adjusted according to that rule. Han Jin Man : Operator: The last question will be presented Wonsik Lee (ph.) from Korea Investment and Securities. Please go ahead with your question. Unidentified Analyst: Unidentified Company Representative: My first question is about the concern of the 1A - nano -- the 14 - nano production yields that is in the market. Can you give us some updates of where your yields currently stand? Second question is about the display, the OLEDs. It seems that your rigid and flexible OLED is running at almost full capacity. Do you -- what -- can you give us some detail, about your capacity expansion plans for the mid-to-small size and also how you plan to expand to new applications. Kwon Young Choi: Unidentified Company Representative: You've mentioned that the market is very worried about our 14 - nano production yield. But actually, internally, we're pleasantly being surprised by the fast speed of ramp up that we're seeing on our 14 - nano at least versus the previous generation. So, I don't think there is any reason to be concerned. As we've mentioned during previous conference call, the rationale behind our 14 - nano process is that leverages our UV but also uses the ecosystem that we have developed in order to give us stronger cost competitiveness. And as we just mentioned, we are ramping up quite fast, we are there. And so, we are confident that with their 14 - nano technology, we will be able to maintain or technology leadership. Harry Cho : Kwon Young Choi: Unidentified Company Representative: To answer your question about our OLED displays, as you mentioned, our OLED utilization is very good. Also given the fact that the customer demand is expected to remain strong next year, probably, this high level of utilization will go on until next year. However, we have seen some areas for improvements in terms of our efficiency, especially around the flexible OLED. For example, we're not able to use some of the capacity when we have to add in high performance as such as whole displays or touch features. And so, in order to improve that, we have continued to make supplemental investments to optimize our lines. And if necessary, we are considering the use of some of our idle LCD lines. Another area where we want to make capacity investments will be in the module lines for -- to capture the foldable demand. Foldable demand is rapidly growing, it is expected to continue growth. So, we are planning to make investments to expand our module line in a timely manner. This will enable us to supply to not only existing customers, but also diversify our customers to globally. Harry Cho : Unidentified Company Representative: You've also asked about how we're diversifying the OLED applications. And as -- unfortunately, as you mentioned, the OLED panels have recently been used, not only in smartphones, but in other devices such as laptops and game devices. We are currently trying to work out our output for each of these applications. We're still planning that. But roughly, we think that our OLED displays for laptops or tablet products would probably increase around two-fold, 2 times in terms of sales versus this year. And so, we are going to focus on capturing and maintaining OLED leadership in other high-growth applications, in addition to smartphones. And this diversification of the product mix will also help us better cope with the repeated seasonality that we have gone through in the mid to small size panel business. Also, I think it's meaningful to share the fact that this year we've also had some wins in the auto market, which is also rapidly growing with the adoption of EVs and autonomous driving. So, going forward, our OLED business will focus on supplying to various applications, including smartphones and also to winning the leadership in the auto market. Ben Suh: Unidentified Company Representative: Finally, we will answer questions that were submitted online in advance. As you know, starting from last Earnings Conference Call, we've accepted questions via our web page in advance. And this was part of our efforts to strengthen communication, especially with our retail investors and enhancing understanding of the Company. Variety of questions were submitted this quarter as well. I believe the majority of the submitted questions were sufficiently answers answered during the Q&A session. So, we will answer 2 more questions on topics that actually received a high level of interest from our shareholders, but were not addressed during the Q&A. So, the first question is recently global tech companies have jumped into the Unidentified Analyst: Unidentified Company Representative: Also, the first question goes to the Foundry business. The question is recently global big tech companies have jumped into the development of their own semiconductors. Against this backdrop, I would like to know in which areas Samsung has an advantage over the leading competitors and whether it has a separate vision to gain long-term technology leadership. This will be answered by Mr. Simon Han of the Foundry business. Unidentified Analyst: . Ben Suh: Unidentified Company Representative: In this age of the Fourth Industrial Revolution, the importance of foundries has actually increased because it is the foundry that implements the ideas from the valve companies into silicon. So, in order to meet the demand for especially the cutting-edge chips such as AI, autonomous driving, 5G, and Mobile SOC, it is critical for foundries to gain the cutting-edge leading process technology through intensive R&D. Shawn Han : Unidentified Company Representative: In order to grow the Foundry business, we think that there's 3 critical elements that need to be addressed. 1 is, as I just mentioned, to have that advanced cutting-edge process technology. Number 2, would also be providing the design solutions for different applications. Number 3, is of course, to support that with sufficient capacity. And in order to provide the optimized process solutions for our fabulous customers, we, for example, are planning to apply first in the industry in new architecture GAA, in the cutting-edge process of 3-nano, starting mass production next year. Also, we have been providing at the design platform to support the customers design efforts and our design platform is supported by not only for IP for each of the applications, but also a packaging technology that strengthened packaging technology based on a heterogeneous integration. Of course, to satisfy the third -- the sufficient capacity we have been making large-scaled investments and also optimizing our line operation. And we think that the results of these endeavors will become visible gradually by continuing to focus on these 3 key success factors. We will deliver stronger competitiveness of Samsung Foundry. Unidentified Analyst: Unidentified Company Representative: And the second question that we got from online was about the dividends. The question is Samsung gave a special dividend in the fourth quarter of last year, are you planning to give out a special dividend this fourth quarter as well? And is there a possibility of using that for buyback rather than a payout? Kwon Young Choi: Unidentified Company Representative: In January, we announced our three-year shareholder policy covering the period of 2021 through 2023. And we remain unchanged, that starting with this year's fourth quarter results, we will announce our annual free cash flow and seriously consider a partial payout if there is a sufficient surplus beyond the annual dividend. So therefore, we will share our free cash flow and whether we will execute as such early payout once the 2021 results are confirmed. However, we have not finalized the method of early returns, whether it will be through dividends or buybacks, or cancellation. But we plan to fulfill the policy in a way that provides the most benefit to our shareholders, stakeholders and the Company. Considering overall environment, including the market condition outlook by business, macro factors, and the stock market trend. Ben Suh: Unidentified Company Representative: Due to the limited time we're unfortunately unable to answer every question that was submitted, but I would like to thank everybody who shared their opinion, providing us with valuable information to refer to in our decision-making process. And that completes our Conference Call for this quarter. We wish all of you and those close to you, stay strong and in good health. Thank you.

Operator: Good morning, and good evening. Thank you all for joining this conference call. And now we will begin the conference of the fiscal year 2021 second quarter earnings results by Samsung Electronics. This conference will start with a presentation followed by a divisional Q&A session. [Operator Instructions]. Now we shall commence the presentation on the fiscal year 2021 second quarter earnings results by Samsung Electronics. Ben Suh: Welcome, everyone. This is Ben Suh from Investor Relations. Thank you for joining our earnings call for the second quarter of 2021. For additional details regarding our quarterly results, please refer to the earnings presentation, which is available on our IR website at www.samsung.com/global/ir. On the call with me today, representing each of the business units are, EVP, Han Jin-Man, representing Memory; VP, Harry Cho for System LSI; SVP, Han Seung-Hoon for Foundry; SVP, Choi Kwon-Young for Samsung Display; VP, Kim Sung-Koo for IT and Mobile; and VP, Song Won-Jun for Visual Display. In addition, VP, Kang Tae-Gyu from Investor Relations is present on this call as well. I would like to remind you that some of the statements we will be making today are forward-looking based on the environment as we currently see it, and all such statements are subject to certain risks and uncertainties that may cause our actual results to be materially different from those expressed in today's discussion. Before we present our quarterly results, let me first address the second quarter dividend. Today, the Board of Directors approved a quarterly dividend of KRW361 per share for both common and preferred stock. The total payout for the second quarter is the same as it was for the first quarter, which is KRW2.45 trillion or 1/4 of the 2021 annual total of KRW9.8 trillion in accordance with the shareholder return policy we announced in January. The dividend will be paid in mid-August. Now I would like to present the results for the second quarter. Total revenue in the second quarter came in at KRW63.7 trillion, down slightly sequentially, mainly due to lower smartphone sales amid seasonally weak demand and component supply shortages. However, we achieved a new all-time high for revenue in a respective quarter for the second quarter in a row where our active response to server-led memory demand and the solid performance of premium home appliances led such results. Compared to the same period last year, revenue increased by 20.2%, mainly due to strong sales of memory, TVs and digital appliances. Gross profit increased by KRW2.7 trillion sequentially to KRW26.6 trillion, as a significant increase in contributions from the component business, led by migration-enabled cost reductions in memory, more than offset declines in the IM division that were mainly due to disruptions in smartphone production. Gross margin grew considerably to 41.8% with improvement across all of our businesses, especially in the Semiconductor business. SG&A expenses came in at KRW14 trillion, down slightly quarter-on-quarter and also as a percentage of sales, largely due to a reduction in advertising and promotional costs. Operating profit increased by KRW3.2 trillion quarter-on-quarter to KRW12.6 trillion. As market conditions improved in the memory market, operations normalized at the Austin foundry fab and as a one-off gain and price increases lifted profits in the display business. Our finished product businesses also contributed to the strong results, maintaining solid profitability by effectively managing our global supply chain amid strong headwinds such as component supply shortages. Operating margin increased considerably to 19.7%. On a year-on-year basis, both operating profit and operating margin increased with improvement in all of our business units. I will now briefly review the results of each business unit. For the DS division, results improved significantly both quarter-on-quarter and year-on-year. In Memory, bit shipments surpassed bit growth guidance, price increases exceeded forecast, and we also improved our cost competitiveness. Profits in system semiconductors increased as production normalized at the Austin fab. In display, earnings improved quarter-on-quarter despite weak seasonality for mobile products, primarily due to a one-off gain as well as an increase in overall ASP. For the Mobile business, sales declined sequentially, influenced by a component supply shortage and COVID-19-related production disruptions amid weak seasonality. However, we secured solid profitability by effectively managing our global supply chain capabilities, improving our cost structure and marketing efficiency and with another quarter of solid contributions from tablets and wearables. The CE division once again generated strong results by expanding sales of premium products amid a continuation of pent-up demand. Regarding currency effects, slight strength in the U.S. dollar, the euro and major emerging currencies against the Korean won positively affected both the component and finished product businesses with a combined effect of approximately KRW200 billion to operating profit when compared to the previous quarter. Next, I would like to share our business outlook for the second half of the year. We expect to see favorable overall market conditions in the component business, and we will focus on enhancing our leadership position in both products and technology. As for our finished product businesses, we aim to keep profitability at a solid level by strengthening our leadership and lineups in the premium segment. However, risks of continued disruptions in the component supply and uncertainties related to COVID-19 are likely to persist. For Memory, we expect continued demand growth from server and mobile, propelled respectively by rising adoption of a new CPU and releases of new smartphones by major customers. We will improve our market leadership with bit growth driven from our accelerated migration to 15-nanometer DRAM and 6th generation V-NAND and by expanding the application of EUV in our DRAM production. In system semiconductors, we expect demand for system LSI products to increase as we enter strong seasonality for smartphones. And foundry will accelerate growth by expanding Pyeongtaek S5 Line capacity and by adjusting pricing to enable future investment cycles. For display, we expect the Mobile Panel business to improve its performance as major customers launch new flagship models. And we will focus on finalizing the mass production process for QD display to enable product shipments to start within the year. In the Mobile businesses, we will target achieving solid revenue and profits by boosting the competitiveness of our smartphone lineup with the launch of greatly enhanced foldable models and the expansion of our mass market 5G models. We will also continue to grow sales of our Galaxy ecosystem lineup. For Network, we will drive revenue growth in our key markets including North America and continue to explore new opportunities in Europe and other parts of the world. In the CE division, we will solidify our leadership in the premium TV market by expanding sales of high-value products such as Neo QLED and Super Big TVs. We also aim to increase DA revenue by bolstering global sales of our bespoke product line. Let me now move on to capital expenditures. CapEx in the second quarter was KRW13.6 trillion, with KRW12.5 trillion invested in Semiconductor and KRW0.6 trillion in display. The cumulative total for the first half of the year was KRW23.3 trillion, with KRW20.9 trillion in Semiconductor and KRW1.4 trillion in display. Memory investments concentrated on addressing growing future demand via capacity expansions and process migrations, including 15-nanometer DRAM and 128-layer V-NAND in Pyeongtaek and Xi'an. Foundry investments focused on capacity expansions for advanced processes such as 5-nanometer EUV to respond to customer demand. Finally, I would like to share some of our activities and key achievements in sustainability management. First, the Board of Directors today approved to reorganize the Governance Committee into the Sustainability Committee. The new committee, through its increased duties, will strengthen the Board's role and responsibility in sustainability management. The Sustainability Committee will assume the roles of the Governance Committee, which include practicing corporate social responsibilities and enhancing shareholder value. In addition, the committee will also address a broad range of ESG issues, including climate change, the circular economy, labor and human rights, diversity and inclusion, supply chain and ethical management, thus setting the direction for and monitoring the progress of the company's sustainability management. The committee will be composed entirely of independent directors to ensure its independence and will also receive reports on the main issues discussed at the Sustainability Council, a company-wide consultative body. The Sustainability Committee connects sustainability management throughout the company from each business unit right through to the Board of Directors, advancing our goal of making sustainability an inherent part of our business. Next, I will brief you on the key takeaways from our 2021 sustainability report released in June. We actively pursued company-wide initiatives to strengthen the sustainability of our products and services, including programs such as Galaxy upcycling in the Samsung Global Goals campaign in the IM division, the use of eco-packaging in the CE division and our commitment to increase energy efficiency of products in the DS division. We were recognized by the U.K.'s carbon trust for our management of water use at the Hwaseong campus, and we received zero waste to landfill validation of Gold level or above for all of our semiconductor sites. The sustainability report also summarizes our responses to COVID-19 and our commitment to our employees, partners, customers and communities, including our efforts through various partner support programs. For more details, the report is available on our IR website in the Sustainability Report section. Our company will continue to promote sustainability management and transparently communicate our direction and achievements with our stakeholders. I will now turn the conference call over to the gentlemen from each business unit to present second quarter performances and outlooks for their corresponding business segment. We will start with the Memory business. Thank you. Han Jin Man: Good morning. This is Han Jin-Man from the Memory Global Sales and Marketing office. In the second quarter, our shipments exceeded our bit guidance due to strong memory demand mainly from server and PC. Moreover, higher-than-expected increases in ASP for both DRAM and NAND combined with cost reductions from expanding the cutting-edge portion of processes contributed to a significant improvement in our results. In the case of DRAM, mobile demand was affected somewhat in the short term by the spread of COVID-19 in major smartphone-producing countries as well as by manufacturers production disruptions caused by component supply issues. On the other hand, for servers, on top of recovering investment sentiment in enterprise, new set builds at OEMs have increased due to the release of a new CPU, and demand from data centers stayed strong, backed by solid demand for cloud. In addition, a continuation of the stay-at-home trend kept PC demand at a strong level, while demand for Chromebooks for education has also increased ahead of a new semester. Consumer products such as TVs and set-top boxes also showed robust set demand, and the move towards high density has accelerated with the spread of 4K content and streaming trends. Demand in the graphics market has been strong, owing to increased demand related to cryptocurrencies, and growing demand for graphic cards for gaming PCs is a byproduct of widespread home entertainment usage. Thus, the market for game console showed robust demand, backed by initial sales successes and launches of new titles. By preemptively adjusting our product mix, we actively addressed strong demand from the server and PC markets, and exceeded our previous bit growth guidance. Next, I'd like to talk about NAND. For mobile, the set build growth was not significant due to component supply issues, but demand was solid from the high-density trend centering on major customers. For server SSDs, demand for 8-terabyte and 16-terabyte products was strong, thanks to increased server investment and high-density trend at major data center companies. Demand for client SSDs also stayed robust, primarily from laptops as online activities such as remote working and education continued. We achieved shipments that exceeded our bit guidance by actively addressing increasing demand for server SSDs and strong demand for mobile and client SSDs while expanding the sales portion of 128-layer 6th generation V-NAND. Now let's move on to the outlook for the second half. The market view for the second half is a mix of concerns and expectations. The spread of variant COVID strains requires urgent attention and supply issues of some non-memory chips are likely to persist and various geopolitical issues escalating, all of which are risk factors to market demand. Positively, however, we expect the fundamentals of market demand to be robust. First of all, in the case of mobile, along with the high-density trend for memory related to the expansion of 5G, launches of new models from major manufacturers bode well for demand. Furthermore, for servers, we expect enterprise investment sentiment to recover with the expansion of vaccine supply combined with economic stimuli. We expect server demand to be strong with the rising adoption of the new CPU alongside the ongoing trend toward high density. In the PC market, due to prolonged effects of COVID-19, we are witnessing fundamental changes in the way people buy and use their PCs. With the proliferation of a hybrid work model, we expect enterprise demand to be strong while replacement demand should be solid, driven by the release of a new OS. On the other hand, our inventory has fallen to a substantially low level due to the impacts of our higher-than-expected shipments in the last quarter. In this situation, we will maintain our leading position in cost competitiveness while generating bit growth by expanding migration and production of our main nodes such as 15-nano DRAM and 128-layer V-NAND. Moreover, amid such uncertain market conditions, we are working to preemptively identify various issues that can affect customer demand such as issues in the supply chain. Accordingly, we are flexibly managing our product mix to better meet market demand. Also, we are securing additional capabilities to stably supply our products in a timely manner even amid demand fluctuations by extending the range of our demand forecast for each application and by using big data to sharpen our own predictive tools. Furthermore, our 14-nano DRAM is the smallest design rule in the industry's 14-nano class. We will mass produce this product in the second half by applying EUV to 5 layers. In addition, our preparation is going smoothly for mass production of consumer SSD, which adopts double-stack 176-layer 7th generation V-NAND technology, and we expect to start mass production in the second half as planned. We, as the leading company in comprehensive memory solutions, will spearhead the establishment of the next-generation ecosystem of the IT industry. Thank you. Harry Cho: Good morning. This is Harry Cho from System LSI business. In the second quarter, solid demand for 100-mega pixel image sensors, mainly from Chinese customers and the increased supply of DDIs and other products backed by normalization at Austin fab contributed to earnings. However, earnings improvements were limited somewhat by a decline in launch effects of major customers' flagship smartphones and the seasonal decrease in such demand. We released a variety of products in the second quarter with industry-leading technology. In particular, we launched an image sensor that applies 0.6 micrometer ISOCELL, the smallest pixel size in the industry. And we released our first image sensor product for automotive. In addition, we expanded our business areas by releasing 3 types of PMICs for DDR5 DIMM modules. Now let me share our business outlook. In the second half of the year, especially in the third quarter, we expect overall earnings to improve sequentially due to increasing demand for SOCs and OLED DDIs as we enter the peak season for smartphones and also due to growing demand for the past related to rising global IT and TV demand. We will maximize our capability to supply chips by strengthening cooperation with major foundry companies and will flexibly adjust our product mix to prioritize high value-added products. I think so, we aim to achieve double-digit sales growth this year. Thank you. Shawn Han: Good morning. This is Shawn Han from the Foundry business. In the second quarter, we improved our earnings sequentially and set a new high for Q2 sales by maximizing our chip supply capabilities and through the earlier than scheduled normalization at the Austin fab. In addition, as demand for major process products such as CIS, RF, mobile dBi is expected to keep growing. We work to strengthen our competitiveness by improving existing processes and diversifying our portfolio through the development of various new derivative processes. Turning to our outlook. In the second half, we expect overall demand to exceed supply due to rising demand from the accelerating penetration of 5G, the continuation of the work-from-home trend and growing demand for safety stock from customers. As a result, we believe our overall market growth will be higher than our previous estimate. To address increasing demand, accelerate growth and resolve growing industry concerns over supply, we will maximize our capabilities to supply chips by full-fledged operation of Pyeongtaek S5 Line, especially for mass production of second-generation of 5-nano and first-generation 4-nano-based products. We are targeting annual sales growth of well over 20% as well as significantly improved profit. We will work to achieve these goals through pricing strategies to sustain future investments, customer and application diversification and capacity expansions. Thank you. Choi Kwon Young: Good morning. I'm KwonYoung Choi from the business planning department at Samsung Display. In the second quarter, although sales of mobile display business declined quarter-on-quarter affected by weak seasonality, operating margin remained strong as the supply of OLED components has been more stable than that of LCD panels, with set manufacturers continuing to prefer the adoption OLED panels. On a year-on-year basis, both sales and operating profit increased substantially, thanks to growing adoption of OLED panels on the top of lower base. For the large display business, the conversion of manufacturing lines to 2D display weighted on revenue quarter-on-quarter, but a rise in ASP of panels for TVs and monitors have improved profitability. Next, let me share the outlook and our core strategies for the second half of 2021. For the mobile display business, we expect earnings to rise compared to the first half of 2021, spurred by new product launches at major smartphone customers and an increase in supply of high value-added products, including foldables. At the same time, however, you may see a potential drop in shipments for some products due to a supply crunch of certain components such as DDIs. Meanwhile, starting from the second half of 2021, we are preparing full-fledged sales growth of IT and portable gaming products featuring OLED screens, satisfying consumers that are accustomed to the quality of OLED smartphone screens. We at Samsung Display have been satisfying the expectation of consumers and maintaining a substantial gap with our competitors with timely and successful commercialization of new technologies each year, including on-cell touch and whole design and -- et cetera. We will further fortify our innovative leadership by aggressively introducing under panel camera technology and technology related to low power consumption in the near future. For the large display business, we have been strategically preparing QD display to target the high-end market, and we expect manufacturing to start in the second half of this year. We will channel all our efforts to totally prepare its development and mass production so QD display can make a successful debut as planned. Thank you for listening. Sung-Koo Kim: Good morning. This is Sung-Koo Kim from the Mobile Communications business. I would like to discuss the IM division's Q2 results and outlook for the second half of the year. In Q2 2021, market demand is expected to have decreased quarter-on-quarter due to seasonality and a resurgence of COVID-19. For our mobile business, revenue decreased from the previous quarter due to the component supply constraint in the mobile industry and production issues at our factory in Vietnam. Under these circumstances, we strive to minimize the impacts by prioritizing critical products and regions, utilizing our global SCM capabilities to optimally rebalance supply. Meanwhile, products in our Galaxy ecosystem, including tablets, PCs and wearables, contributed substantially to the Q2 performance. In addition, our improved cost structure and efficient resource allocation helped us maintain a solid double-digit operating margin. In the Network business, our performance improved quarter-on-quarter backed by growth in North America and 5G network expansion domestically. Let me move on to the second half outlook. As adoption of 5G and contactless trend continue to drive, we expect the annual mobile market to recover to 2019 level. However, uncertainties regarding the component supply constraint and COVID-19 are likely to linger. In our Mobile business, we will continue to strive to further solidify our leadership in the premium segment by mainstreaming the affordable category and maintaining sales momentum of Galaxy S series throughout the year. In the third quarter, we concentrate on successfully launching new foldable smartphones. We prioritized consumer needs and worked to reflect such needs in our new Z Series models, which offer remarkably enhanced product competitiveness and user experiences. In addition to our own innovations, we have enhanced the open collaboration with our global leading partners to add more meaningful innovations to our customers' daily usage. We expect to provide unique mobile experiences and enrich customer lives. Onto our Galaxy S series. It is our flagship lineup that features premium design and the utmost innovative technologies, including professional-grade cameras and superior display. We continue to generate solid sales of Galaxy S series by emphasizing their optimized user experiences and unique value. Regarding our mass-market smartphones, we provide new innovative technologies and more broadly adopt 5G, including in entry-level models. With these efforts, we will proactively address various regional needs while also broadening our customer choices. In addition, we will work to increase sales of Galaxy ecosystem products, including tablets, PCs and wearables, by promoting easier, more convenient connected experiences throughout our extended Galaxy ecosystem. We will strive to achieve solid sales and profits in the second half by carrying out the strategies that we have outlined. In the meantime, we will continue to strengthen our foundation for future growth by maximizing customer satisfaction and increasing retention based on enhanced user experiences within the Galaxy ecosystem. For the Network business, we aim to promote growth of the business by increasing sales in North America and Japan. And we will continue to seek new business opportunities in Europe and other regions. Thank you. Song Won-Jun: Good morning, everyone. This is Song Won-Jun from the Sales and Marketing team of Visual Display. I'd like to review the market condition and our performance in the second quarter of 2021. First, the TV market in the second quarter contracted quarter-on-quarter because of seasonality but increased compared to last year. Even amid supply issues of some materials, Samsung optimally allocated resources and proactively fulfilled demand for major sports events in the second quarter, such as Euro Cup. Thus, we maintained solid profit by expanding sales with a focus on premium products. In particular, the newly launched Neo QLED includes upgrades in all aspects, offering not only its outstanding picture quality but also sound design and usability, and it garnered positive feedback from numerous consumer reviews and major magazines. Based on the positive responses, Samsung expanded sales of Neo QLED in full swing from second quarter and improved our product mix. Furthermore, Lifestyle TVs, our unique product line, are securing a strong position in the market by actively targeting various consumer passion points such as indoor home cinema and outdoor viewing and by providing experiences the conventional TVs cannot offer. For digital appliances in the second quarter, as people spend more time at home, consumers become more interested in their home surroundings and home decor. Also, pent-up demand continued to affect the market amid government's economic stimulus packages and strong housing markets. Samsung successfully launched the bespoke globally in May and expanded sales based on positive feedback from major markets. In addition, by launching new lifestyle appliances such as a shoe dresser and cordless stick vacuum cleaners, we fulfill the diversifying needs of our consumers and expanded our sales. Now let us look at the outlook for CE in the second half of 2021. As the TV market moves into peak seasonality, we expect market demand to increase half-on-half. However, business uncertainties related to COVID-19, including effects of the surging delta variant, are likely to persist. Samsung will keep monitoring the rapidly changing market conditions and will swiftly respond to changes in demand using our global SCM competitiveness, thereby securing profitability and maintaining our leadership in the market. To do so, based on closing collaboration with channel partners, we'll plan peak season promotion tailored to each region to expand sales and will keep improving our product mix. Also, in order to capitalize on the trend of increasing online purchases during peak seasonality, we'll improve our contactless sales infrastructure by enhancing the online buying experiences for our consumers while also expanding digital content. Moreover, we will strengthen cooperation with online channels to expand the sales opportunities. For digital appliances market in the second half, we also expect uncertainties related to COVID-19 to remain high, and external risks such as increases in low material and logistics costs are likely to linger. However, Samsung will strengthen the bespoke lineup with top-notch products and expand its presence by launching in more regions while also carrying out various online and offline marketing activities. By doing so, we will craft our own unique brand image of providing customizable digital appliances, not only the domestic market but also global ones. Moreover, we will enhance our overall operational efficiency and will respond to external risks by optimizing the allocation of global resources by region and by further strengthening supply competitiveness based on product modularization. Through these efforts, we will continue to lead the digital appliances industry. Thank you for listening. Ben Suh: Okay. So that sums up the second quarter results presentations. Before we move on to the Q&A session, I would like to share several data points in key business areas. For DRAM in the second quarter, our bit growth was in the low-teen percentage and ASP increased by a percentage in the high teens. For the third quarter, we expect market bit growth to be in the low single-digit range and our bit growth should be around the market level. For the full year, we expect market bit growth to be in the mid-20% range and our bit growth should be similar. For NAND, in the second quarter, our bit growth was a high single-digit percentage and ASP increased in the mid-single digit range. For the third quarter, market bit growth is likely to be in the low teens, and our bit growth should be around the market level. For the full year, we expect market bit growth to be around 40%, and our bit growth should be similar to the market. In the Display Panel business in the second quarter, the OLED portion of sales was in the mid-90% range and OLED sales volume declined by 1% in the high single digits. In the Mobile business, in the second quarter, sales volume was around 60 million units for handsets and 8 million units for tablets. The blended ASP, including tablets, was approximately USD 233 and the smartphone portion of handset shipments was in the mid-90% range. For the third quarter, on a sequential basis, we expect shipments of handsets to grow but should stay similar for tablets, while blended ASP is likely to increase. We expect the smartphone portion of handsets to be in the mid- to high-90% range. In the TV business, in the second quarter, sales volume declined by a percentage in the high teens, but we expect shipments in the third quarter to grow by a high single-digit percentage. With that, we will now move on to the Q&A session. Operator: [Operator Instructions] Unidentified Company Representative: Starting with this call, we are accepting questions via our web page in advance of an earnings release as part of our efforts to strengthen communication and a variety of questions have been actually submitted. Among all of the questions that were submitted, we would like to first answer the question that -- regarding the company's technology competitiveness, which actually was a topic that we see high interest from the market as well as investors. So the first question that we received goes as follows. I would like to hear the company's thoughts and explanations on the saying that the technology gap between Samsung and other rival companies are narrowing. In particular, I would like to know whether the company has any concerns over its competitiveness after the development of the 176-layer from other companies and whether its cost and price competitiveness will be weakened when it transitions to DDR5 as the High-K Metal Gate technology makes the process more complex. This question will be answered by EVP, Jin-Man Han from the Memory division. Han Jin Man: Yes. That was a very good question. Had I not been told, I would have thought that, that was a question from an analyst. I will answer your question for NAND and DRAM each. First, regarding the competitiveness of the V-NAND side, actually, our key point as we develop our V-NAND is no longer just in the number of layers. We have already secured the industry's top etching technology as we worked on the 128-layer single stack. So as of now, our current focus is how to efficiently increase the stack itself as well as what will be the right time and method of achieving that efficiency. So we believe that the game is no longer just a game of who makes the highest number of stacks or high number of layers, but our key point is currently in terms of the efficiency of the stack height as well as the competitiveness in terms of cost. You've also voiced some concerns about the cost competitiveness of our DRAM, and it is true as the DRAM migration passes from generation to generation and as the nodes become more smaller, the slope of the cost benefit from generation to generation is flattening out and the difficulty of the technology is also increasing. And that is why in order to secure further cost competitiveness, we are exploring various avenues in addition to just process migration. And so the DDR5 that applies the High-K Metal Gate technology is one of our various efforts to secure the key and the core technologies that will give us continuous cost advantages. Also, I would like to say that just because we have applied the technology does not mean that, that technology will be applied in mass production. New technologies will be adopted when they go through a very close and careful consideration in terms of cost and efficiency. For example, currently, our 14-nano-based DDR5 product actually uses EUV on 5 layers. The logic is that by applying EUV on a larger number of layers, the number of total processes decreases, which gives us the cost advantage. And so we believe that the 14-nano will be the start of the DDR5 node that has cost competitiveness. We also think that with the DDR5 ecosystem becoming more active starting from next year, there will be a gradual bit growth. So to sum my answer, I just wanted to reemphasize that we are devoted to various different approaches of R&D that will give us the absolute technology competitive edge in memory going forward for both DRAM and NAND and that we are planning to continue to secure competitiveness in all dimensions, including cost, performance and power. Unidentified Company Representative: Now we will open the conference call for questions. Operator: [Operator Instructions]. The first question will be presented by Nicolas Gaudois from UBS. Nicolas Gaudois: First question is regarding DRAM. Given the solid recovery in server demand in the recent quarter, how is server demand developing in H2 '21? And how much server unit and content growth would you expect to see for the full year of 2021? And secondly, regarding smartphones, could you update us on the situation in Vietnam and India? What has been the impact of possible production disruption due to recent COVID wave? And how are you addressing those challenges? And when would you expect effectively the situation to normalize? Unidentified Company Representative: To answer your first question, yes, as you mentioned, server demand was very strong in second quarter for both DRAM and NAND as many companies started to increase our investments. And also there was the benefit of the impact from the launch of the new CPU. And so we have responded to this by operating our product mix effectively to capture this strong demand. You've asked about the second half, and we think that the demand from servers will maintain solid in the second half. Even though there are many lingering uncertainties, including the possible spread of the variant virus, various geopolitical issues and some uncertainty and volatility around IC supply, we think that, first of all, there is an ongoing trend of higher content on server, especially with the adoption of the new CPU. And also, there is an increase of set build as, for example, the cloud-based overall infrastructure expands within the industry. And so given all of these factors, we think that fundamentally, server demand will remain solid in the remainder of the year. Specifically, regarding the server unit increase, we are expecting that on a year-over-year basis, server unit will grow at high single digit this year. Now to tap that strong demand from the servers, as you know, we are currently in customer sampling for our DRAM 14 -- DRAM that is using the narrow width circuit implementable at 14-nano for DDR5. We're expecting that to go into mass production as scheduled in the second half. Also, for the server SSD, we have a complete supply chain management formed, including in-house fab all the way to the controller. And so we are fully prepared to provide the stable and timely supply as a leading supplier for servers. To take your second question about our mobile production in India and Vietnam, fortunately, in the case of India, we have not gone through any special production issues due to COVID-19, thanks to the various preparation measures that we have made. For example, we instructed employees in the Indian plant to not come to work if they have any symptoms. Also, we had taken the preemptive measure of finding dual supply overseas for the key components. And also, we actually preemptively restructured the production line so that we, if necessary, could close down partially the production line without affecting other parts. But fortunately, our Indian operation has not been affected. In the case of our Vietnam plant, there has been some production impact mainly due to actually our injection molding supplier, for example, going on -- stopping operation due to the nationwide Vietnam lockdown due to COVID-19. However, we have made measures, for example, to find other alternative sources overseas outside Vietnam and also securing additional sources within Vietnam to minimize the impact. We're expecting that Vietnam will be able to normalize within this month. Operator: The next question will be presented by Kim Dongwon by KB Securities. Kim Dongwon: I have one question about memory, specifically memory inventory. I think depending on which server company we are listening to, there are different opinions regarding the current memory inventory level. And so this is driving some concern that if the inventory level continues to go up in the second half, we may actually go through an inventory adjustment in the fourth quarter. Within that context, can you share your views regarding the inventory levels of both the memory suppliers as well as the customer? Unidentified Company Representative: You've asked about also the inventory level of our customer, but I hope you will understand that we are not in a position to give any definitive answers regarding the inventory level at our customers, but we are assuming that there will be a different inventory level from customer to customer given the fact that there was the impact of the part supply issues that hit -- that appeared differently depending on the application and also the recent surge in demand. But overall, we expect that -- considering the overall demand forecast going forward that there will be continued build to inventory demand. You've also asked about the inventory at the memory suppliers. Well, as far as our inventory is concerned, as we mentioned during the presentation, our shipments in the previous quarter significantly increased than what we had expected. And so as a result, both our DRAM and NAND inventory is at considerably low levels. Given the fact that solid demand is expected in the second half across applications, we are expecting that our inventory levels will continue to remain at low levels. Operator: The next question will be presented by Peter Lee from Citigroup. Peter Lee: I have two questions. First question is about DDR5, which is becoming quite a hot topic. There are expectations that the DDR5 would have to use an embedded ECC and this would result in the entire chip size becoming larger. Given all of that, what do you think will be the impact of the increased penetration of DDR5 on the DRAM market in year 2022? Second question is about your Mobile business, especially the smartphone lineup. I think there were media reports that the company will not be launching a new Galaxy Note model in the second half. What is the implication to your then overall flagship lineup and strategy, including the foldable? There's, I think, also a lot of talk that your new foldable that will be launched in the second half will be introduced at a lower price point. Does that imply that the foldable specs would also become lower than before? And how will that impact your profitability? Unidentified Company Representative: To give you an update on our DDR5, we are currently in sampling of our 14-nano DDR5, in line with the schedule for the new CPU launch that supports DDR5 and PC, i.e., Gen 5. The mainstream of the DDR5 is expected to be the 16-gigabit-based high-density product. And so we think that this DDR5 will be the product that significantly gives -- stimulates the trend of high density. Also, in addition to that, in order to meet the demand and request by the cloud companies, we are also developing a maximum 24-gigabit DDR5 product. Now that being said, looking towards the DDR market itself, as you know, the DDR5 does have some cost increase factors versus DDR4, including the die size overhead also. So therefore, this may act as a constraint in terms of bit growth overall. Also, I think another variable that we need to look for in terms of DDR5 market growth is the supply situation of a major chipset that would support DDR5. Unidentified Company Representative: To answer your question about our premium segment lineup, as you know, our flagship strategy has always been to prepare a lineup that meets the customers' needs and to respond to market change. Our key top priority for the second half in terms of our flagship is to focus on mainstreaming the foldable form factor and to drive sales volume growth of the foldable by doing this. And so the new foldable model that we are preparing will be delivering even a higher level of product completeness and innovation. And on top of that, we are preparing an optimized and differentiated user experience that takes advantage of the foldable form factor. And so on top of this extremely competitive product, we are going to promote this with a full-scale flagship marketing, including far more visibility and exposure in offline displays to raise the awareness of the new foldable products that we will be launching. By increasing the overall sales volume of the foldable, we are planning to achieve economies of scale. And with optimized product design, we expect to achieve solid profitability for the foldable. Please stay tuned for the Unpacked event that is coming soon for the details of our new foldable models. So in addition to the foldable, the second piece of our flagship strategy is to maintain the sales momentum behind the S series. As you know, the S series has always been satisfying the needs of various premium customers. So we will increase and maximize the sales of our S series throughout the second half of this year by appealing to not only customers that want the most innovative technology experience but also those that are looking for a greater performance for price and also by upselling to users of S series or A series that have a very strong royalty towards the S series. Operator: The next question will be presented by Claire Kyung from Hana Financial Investment. Claire Kyung: My question is about your NAND technology. Can you share with us or give us update of your NAND technology road map? Unidentified Company Representative: About our NAND road map, the focus of the NAND road map is 6th generation and 7th generation up to around year '22. And then even after that, we have a road map defined for 10 years to follow. And for the subsequent 5 generations, we have already prepared a very detailed technology road map regarding the key element technologies. To give you some update, the industry's only single stack-based 128-layer 6th generation V-NAND has already grown to take up a significant part of our overall production volume during the first half. Also, our 112-gigabit share is expected to continue to grow. This is the technology that has significant cost competitiveness and will benefit from the increased demand for server high-density SSD. Also, as we mentioned during the presentation, we are preparing to launch a consumer SSD that is based on the 176-layer 7th generation V-NAND, which is optimized for high-density and multitasking environment. To give you some update on the yield ramp-up for the double-stack 176-layer, because we have already secured the etching technology by working on the 120-layer single stack, we were confident that we will be able to ramp up much faster compared to the previous generations. And as we expected, currently, we are achieving ramp-up at around twice the speed that we did in previous generations. Also, the 200-layer plus 8th generation V-NAND product, which would give us the absolute cost competitiveness in double stack, in that case, we have already secured a working chip and preparing to expand the lineup. Operator: The next question will be presented by Kim Sung Kyu from Daiwa Capital Markets. Kim Sung Kyu: My first question is about the use of EUV on your DRAM operation. I think many investors are wondering what impact the adoption of EUV in DRAM would have in terms of DRAM supply. During the presentation, you mentioned you've emphasized 14-nano nodes, but also your competitors are announcing plans of adopting EUV technology. So given all of that, can you tell us what is the competitive differentiating factor that you have in EUV that sets you apart from your competitors? And also, if possible, can you share with us your road map for EUV on DRAM? Second question is about the CE, the Consumer Electronics business. You've mentioned during the presentation, but I think there are some concerns that especially the CE division will have to bear additional cost burden as raw material prices increase and logistic prices are also on an upward trend. In that context, can you share with us the details of how you plan to maintain your profitability or reduce your costs? Unidentified Company Representative: To answer your first question, yes, many memory companies have recently started to announce EUV-related plans. It seems that finally, EUV is becoming a mainstream trend in the industry. But as you will recall, we have been talking about EUV several times through earnings conference calls and media reports from 2018. Now having already done EUV, I think one thing that we have learned is that EUV is much more than just simply purchasing the equipment and also applying this production, that what is much more critical is to maximize the synergy on the technology side and also to build the know-how and to internalize the know-how of the entire ecosystem such as masks and inspections. And so as you know, within the memory industry, we were early to realize the importance of EUV technology. We preemptively invested in EUV technology. And so we had a head start in, first of all, building a very stable ecosystem through close collaboration with the key EUV-related suppliers around the world, starting from the mid-2000s. Also, we have already accumulated a significant EUV-related technology knowledge as well as know-how based on various research through application of EUV in the DRAM process. And as a result of that, we were able to apply EUV in 5 layers in 14-nano DRAM, which naturally would give us a cost competitiveness. And so the -- you've asked about the strategic or the competitive differentiation that we have against other companies, and I think that this specialty that we have already built up using EUV technology is a key technology strength that is unique to Samsung. And so the preemptive adoption of EUV on our memory process was not just another step in our process and node migration. Actually, it was done in the context of giving us a long-term absolute technology competitiveness. And so in addition to -- as we did with the preemptive adoption of EUV, if we find that there are leading technologies that will give us that breakthrough in memory process migration, we will continue to make these preemptive investments. Your second question was how the CE division plans to deal with the expected cost increase. As we mentioned during the presentation, we are also expecting there to be increase in raw material prices and logistics costs in the second half, but we are prepared to respond to this actively and to defend our profitability at a solid level on various fronts, including product, distribution and operations. First, in terms of products, we will focus on further improving our product mix by increasing the sales of, for example, the bespoke lineup that we have already launched globally in the first half and also increase the sales of the high and premium products such as the new lifestyle consumer electronics products that caters to the various needs of consumers. In terms of distribution, in addition, while maintaining the competitiveness of our existing off-line channels, we will continue to also strengthen, for example, B2B and online bespoke channels to further gain sales opportunities. Also, we will further build in our cost competitiveness by newly launching more modularized products and, at the same time, make sure that we are prepared to cope with any risks posed by COVID-19 by analyzing the competitiveness of our different manufacturing sites and also readjusting our overall volume to enhance our operational efficiency. Operator: The next question will be presented by Lee Soonhak from Hanwha Investment & Securities. Lee Soonhak: I have two questions. The first question is about your IM division. You have emphasized the Galaxy ecosystem products, for example, the tablets, the wearable and PCs. Can you share with us the amount of appeal this Galaxy ecosystem is having on the consumers' demand? Do you have a sense of how strong the lock-in effect is from the Galaxy ecosystem? And how much contribution are you expecting on your revenue as well as profits from these ecosystem products? Second question is about the QD display. It appears that the mass production of the QD display is imminent. If you say that it will go into mass production as scheduled, that will probably, we're assuming, be in the fourth quarter. At this point, can you share with us the preparation status as well as an update, if there is, on the mass production timing? Also, it seems that the initial mass production capacity for the QD display would be limited to around 30,000. Do you think that there is additional room on that capacity? Unidentified Company Representative: On your first question about our Galaxy ecosystem products, by providing a differentiated Galaxy ecosystem experience, the sales of our tablets, wearables and PCs are expanding. Even though we do not disclose the revenue or profit per product, we are expecting that in 2021 within our Mobile -- or IM business division, the Galaxy ecosystem products' overall performance will increase considerably versus what they did in 2020. Also, the wearable market itself is continuing to grow at a high pace, but especially since we are planning to launch new models of our wearables in the second half, we're expecting that our wearables will be growing -- will be outgrowing the overall market. And our strategic approach to the Galaxy ecosystem product is not to just gain the direct contributions to our business performance but also to even further develop the connective experience across our devices. So that is a major driver to increasing our customer retention, also to raise the customers' trust in the Galaxy products and also to make Galaxy itself a stronger premium brand with higher level of aspiration by customers. To answer your question about QD display, actually, as you know, we announced our plans to invest in QD display in October of 2019. Since then, we have been developing the technology and acquiring the equipment. We completed the equipment and so we brought in the equipment in the first quarter. We are currently, to give you a status update, going through the ramp-up and test product -- after we've completed the test -- product testing. As you mentioned, yes, we are planning to go into mass production in the fourth quarter. Currently, actually, we're preparing the QD display for both TVs as well as monitor products. This is per the request of our customers. We are currently still discussing about specific timing as well as prices, and we'll not be able to share details today. You've also asked about whether we have plans of additional capacity investments. As you know, our basic approach to additional investment is to closely listen to the customers' demand and also sense the market movement. So according -- our current capacity is, as you mentioned, 30,000 per month. And we -- additional investments will depend on customer demand as well as market movement. The QD display is actually a product that can satisfy the consumer needs that -- the needs of the consumers that are actually wanting a premium display that can deliver the high-quality OTT or game content. And so based on our past experience of how we led the mid-sized and small-sized OLED as the display of smartphones, we think that the QD display will provide that next engine of growth for the large-sized display market that has actually been a stagnant since the transition from CRT to LCD. Operator: The next question will be presented by an [indiscernible]. Unidentified Analyst: I'll ask two questions. First question is about your SoC business. I think there is a concern in the market that your SoC business is losing its competitiveness. How does the company plan to recover the competitiveness of its SoC business, especially regarding the APs? My second question is about the DP business. It's great to see how we OLED is now moving beyond smartphones and being adopted in new applications such as tablets, PCs and foldables. In that context, can you give us the update on the benefit of your OLED business? How your OLED business is expected to benefit from the newly created demand across these new applications and whether you have plans for additional investments? Unidentified Company Representative: To answer your question about our SoC, we are aware of the concern in the market regarding the SoC business's competitiveness. We are currently looking towards various approaches to enhance our competitiveness and expecting to see some visible results during the second half. For example, in terms of the products, we have adopted a new GPU IP, which will give us improvements in terms of performance as well as GPU power. Also, by applying the functions that are specialized to consumer game devices onto mobile, we will be able to offer a competitive edge for game-related features. Our strategy specific to the mid- to low-end SoCs for the volume market is, first of all, to gain long-term contracts in order to drive our long-term revenue and also to gain on new customers for the volume market. Also, given the fact that the mobile market is a saturated market, we are looking into leveraging the advantage that we have accumulated on the mobile SoC business to apply that to new applications and also to develop a customer SoC business to further drive our business growth. To answer your question about the display side, as you mentioned, since we succeeded in the mass production of OLED displays for smartphones first in the world in 2009, we have been the leader driving the growth of premium smartphones. We have followed with introduction of innovative technologies, such as flexible form factors, on-cell touch as well as whole display to meet the higher demand of the customers. And that has played a key role in making OLED the mainstream technology for smartphone displays. Leveraging this success experience in smartphones, we have been focusing on further expanding our display OLEDs to other applications, including tablets, laptop, PCs and automotive and have started to see visible results. To introduce some of the key new applications that we have been focusing on, one would be the high-end laptop market. As you know, the laptop market itself has benefited, and it's growing quite rapidly with the untapped or non-face-to-face demand. And the high-end laptop is a market where you have not only content creators that need productivity but also consumers that actually want to enjoy videos and games. And we expect that this high-end laptop market will continue to enjoy growth in the future. In addition to that, the portable game device is another application that we have been focusing on. Also, we are quite interested in the EV display market. I think with the launch of new electric vehicles, consumers are naturally expecting to see a higher end, more sophisticated interior. And I think our curved or freeform factor, flexible OLED products will be a great offering for the EV interior displays, and we're currently discussing supplying the flexible OLEDs to EV markets with customers. We believe that these new applications will provide an additional driver, a new driver of growth for the midsized OLED products. And as we did in the smartphone market, we will continue to lead the market by offering a differentiated technology innovations. A key differentiating factor for us is that we are able to offer not only the low-end or low-priced rigid OLEDs but also the high-end flexible OLEDs. We have the product lineup which we will actively leverage to further develop business. Regarding additional investments, we will respond depending on the market situation and also our discussion with customers. Unidentified Company Representative: Due to the limited time, we will take two more questions. Operator: The next question will be presented by Doh Hyunwoo from NH Investments & Securities. Doh Hyunwoo: I have a question about the 14-nano process. First of all, can you give us when you expect to ramp up the 14-nano? And also, what would be the contribution within your overall production as of end of year '22? You have applied EUV on your 14-nano quite actively, but I think there's conflicting views of whether this is a benefit or not. Even though, yes, by using EUV, you are able to implement smaller pitch sizes, on the other hand, that involves more expensive equipment as well as other cost-increasing factors considering that other parts of the supply chain, such as the [indiscernible] or the inspection machines probably aren't as tested and proven as non-EUV processes. So I'm assuming that the company has compared the cost of using EUV on your 14-nano versus not. Can you share with us your cost comparison results? Unidentified Company Representative: To answer your question, yes, our 14-nano is a process that has implemented the smallest possible circuit size or pitch that's possible at 14-nano range. And it will be using EUV on 5 layers for our DDR5 product, which is currently in customer sampling with plans of going into mass production in the second half. Regarding the share that this 14-nano EUV will take up in our process, that will be actually tied to the formation of the DDR5 ecosystem. You've asked about a cost comparison. Actually, in terms of cost, we already passed the cost point with 14-nano when we were using EUV only on one layer. So naturally, by using EUV on 5 layers with 14-nano, there will be cost benefit. Operator: The last question will be presented by Kim Young-gun from Mirae Asset Securities. Kim Young-gun: First question is about your technology road map for the GAA process. Can you give us an update of where your GAA process development currently stands and what kind of competitiveness you are expecting? Also, can you introduce to us the new packaging solution that is receiving some attention as well as the competitiveness of that packaging solution? My second question is for the Network business. Recently, you've announced plan -- you've announced that you won a contract with Vodafone to follow the contract from Verizon. Do you have any additional contract plans or orders with global operators in the second half and onward? Also, can you give us some details of the competitiveness of the vRAN solution that you recently announced? Unidentified Company Representative: To answer your first question about our GAA, our target for GAA is to go into mass production with first-generation process on 3-nano by year '22 and then to start mass production of second-generation process on 3-nano by year '23, and we are on track with this road map. The 3-nano first-generation process is currently in design -- product design phase by a key customer. Also, looking forward to the 3-nano second generation GAA process, we think that this will further expand the leadership that Samsung has in GAA process technology by innovating our process development, manufacturing and infrastructure capabilities and also further enhancing our PPA. Regarding the cutting-edge package technology, we have been internally developing differentiated technologies for packaging, including the 2.5D and 3D ICs, which will give us additional competitiveness in, for example, areas such as HPC. In addition to developing the technology internally, we are also focusing on building an open ecosystem by cooperating in various ways with global OSAT as well as PCB companies and also having joint development projects. Unidentified Company Representative: To answer your question about our Network business, based on our 5G technology, we are currently in 5G trials with a large number of carriers within Europe. And we are actively promoting our 5G equipment to various operators in the European market in addition to Vodafone. You've also asked about our vRAN, which is a technology that is capable of delivering RAN -- a performance that is similar to the existing RAN technology but by using commercial off-the-shelf servers. We were able to secure the large-scale commercial level 5G vRAN solutions first in the industry, which offers advantages in terms of network deployment, management, efficiency as well as scalability and flexibility. We've already proven that we are the leader in these virtual base station area by supplying our vRAN solution to a Tier 1 operator in the U.S. We will continue to further expand our technology leadership and preemptively respond to market changes, including the adoption of vRAN by global operators to expand our customer base and also to build our business. Unidentified Company Representative: As we mentioned, we had actually received questions in advance, and I think most of the submitted questions were sufficiently answered during the Q&A session that we just had over the conference call. But I would like to suggest that we take one more question on a topic that received a high level of interest before ending today's call. That question is about our cash and M&A plans. The question was that even though our cash is continuing to accumulate, there has not been a significant sized M&A to follow the Harman acquisition, and the person wanted to know our plans to execute M&A to drive our future growth. Unidentified Company Representative: I would like to answer that question. In times when business paradigms change rapidly and competition becomes increasingly fierce, I believe strategic M&A is necessary to make a breakthrough by acquiring companies that possess the core capabilities. We have been undertaking preparations for M&A in various fields. And although it is difficult to specify a timing due to the domestic and global uncertainties, we remain positive on the prospects of carrying out an M&A of a meaningful size within 3 years, as we mentioned in January. We are open to considering businesses in various areas and of various sizes. When we push ahead with an M&A as long as the deal will contribute to the sustainable growth of our company. And so we are actively reviewing numerous fields that are deemed to be new growth engines, including AI, 5G and automotive. However, it is difficult to specify a particular field over concerns of revealing our business plan. Unidentified Company Representative: Due to the limited time, we were unfortunately unable to answer all of the questions that were submitted in advance. However, I would like to thank everyone who shared their opinions and providing us with valuable information that we will reference in our decision-making process. And that completes our conference call for this quarter. We wish all of you and those close to you, stay strong and in good health. Thank you.

Ben Suh: Good morning. This is Ben Suh from Investor Relations. Thank you for joining our Earnings Call for the First Quarter of 2021. With me representing each of the business units are Mr. Han JinMan, Executive Vice President of the Memory Global Sales and Marketing Office; Mr. Shin Dong Ho, Vice President of the System LSI Marketing Team, Mr. Han JinMan, Senior Vice President of Foundry Marketing Team; Mr. Choi KwonYoung, Senior Vice President of Samsung Display; Mr. Kim Sunggu, Vice President of the IT and Mobile Business; and Mr. Song WoonJun, Vice President of the Visual Display Business. In addition, Mr. Kang TaeGyu from Investor Relations is present on this call as well. I would like to remind you that some of the statements we will be making today are forward-looking based on the environment as we currently see it. And all such statements are subject to certain risks and uncertainties that may cause our actual results to be materially different from those expressed in today's discussion. Before we start the review of our quarterly results, I would like to address the first quarter dividend. Today, the Board of Directors approved a quarterly dividend of KRW361 per share for both common and preferred stock. As part of the shareholder return policy covering the three year term from 2021 to 2023 announced in January, the regular dividend will be KRW9.8 trillion for each of the next three years. Accordingly, the total payout for the first quarter to be paid in May is KRW2.45 trillion or one fourth of the 2021 annual total. With that I would like to present the results for the first quarter. Despite many ongoing challenges, including the effects of COVID-19, we once again achieved solid results. Thanks to the dedication of our employees and support of our customers and partners. Total revenue in the first quarter increased 6.2% quarter-on-quarter to KRW65.4 trillion, a new all-time high for a first quarter. Despite weak seasonality for the display business, strong smartphone sales and PC and mobile LED memory demand drove such results. Compared to the same period last year, revenue increased by 18.2% mainly due to solid sales of finished products, including smartphones, TVs, and digital appliances. Gross profit grew slightly on a sequential basis to KRW23.9 trillion is a significant increase in contributions from the IM division more than offset declines from the other businesses. Gross margin was 36.5%. SG&A expenses decreased slightly quarter-on-quarter to KRW14.5 trillion with reduced advertising and promotional costs. As a percentage of sales, they declined by around 2 percentage points. Operating profit increased quarter-on-quarter to KRW9.4 trillion, a solid sales of smartphones and improved profitability in the CE division outweighed weak seasonality in display and a decline in semiconductor profitability. On a year-on-year basis both operating profit and operating margins increased backed by strong sales of finished products and an increased utilization rate for mobile OLEDs. I will now briefly review the results of each business unit. For the semiconductor business, despite solid memory shipments mainly for PC and mobile, profits edge down primarily due to the production disruption at our Austin fab, which was caused by a major power in water outage. NAND price declines and initial costs associated with ramping up new memory fabs also weighed on the results. In display, earnings fell sequentially due to weak seasonality for mobile products. On a year-on-year basis, however, earnings improved significantly led by a higher OLED utilization rates. In the Mobile business, earnings improved significantly both quarter-on-quarter and year-on-year as sales of flagship and mass market smartphone models grew considerably and its contributions of products in the Device Ecosystem lineup such as tablets, PCs and wearables also grew. The network business maintained its solid performance as 5G continues to expand globally. For the CE Division, profits grew both quarter-on-quarter and year-on-year due to continued pent-up demand for digital appliances alongside expanding sales of premium TV products. Regarding currency effects, there was weakness in the U.S. dollar and strengths in the Euro and major emerging currencies against the Korean won. This was positive for our finished product businesses, but the weak dollar was negative for the component business resulting in a net neutral position for the company as a whole. Next, I would like to share our business outlook. In the second quarter, we expect earnings to grow in the semiconductor business mainly due to improving memory market conditions, but to decline in the IM Division as the new product effects weaken. For memory, strong server demand should lead to improved earnings. In system semiconductor, foundry is already seeing full resumption of manufacturing at the Austin fab, while System LSI is likely to continue to feel some effects of last quarter's disruption in foundry production. For display, we expect mobile panel sales to decline due to weak seasonality for smartphones and the effects of some component shortages. In Mobile business, revenue and profitability are likely to decrease as flagship new product effects decline. And some components experienced supply issues, but we will work to minimize the impacts of the component issues by actively managing our local SCM capabilities. In the CE Division for TVs, we will focus on bolstering sales of new products such as Neo QLED models and actively capturing demand from sporting events. The digital plans business will strive to grow by expanding Bespoke product sales globally. Now let's move on to outlook for the second half of the year. For our component businesses, we expect market conditions to improve and we will continue to extend our product and technology leadership. For our finished products businesses, we will focus on strengthening our premium segment leadership in our product lineups. However, global macro risks, including demand uncertainties related to COVID-19, are likely to persist. For memory, we expect the business environment to remain favorable, including positives such as solid demand for server and mobile products. We will enhance our market leadership by accelerating migration to 15-nanometer DRAM and 6th-generation V-NAND while also expanding application of EUV process in our products. System LSI will work to maximize its supply capabilities by cooperating this foundries at home and abroad and Foundry will expand its supply with full-fledged mass production at Pyeongtaek Line 2. For display, we will continue our efforts to increase adoption of OLED panels while also establishing a foundation for QD display in the large panel business. The mobile business will strive to secure a solid profitability by further popularizing foldable models, expanding our lineup of mass market 5G models and bolstering growth of tablets, PCs, and wearables. The network business will continue to address demand from growing domestic and global 5G commercialization as it also continues to explore new business opportunities globally. Amid demand uncertainties related to COVID-19, the CE division will work to secure profitability by further expanding sales of premium products, including Neo QLED and ultra-large screen TVs as well as new life digital appliances. Now, I will address capital expenditures. CapEx in the first quarter was KRW9.7 trillion with KRW8.5 trillion allocated to semiconductor and KRW0.7 trillion to display. Memory investments concentrated on capacity expansions and advanced process migrations in Pyeongtaek and Xian to address growing demand. Foundry investments focused on capacity expansions for advanced processes, including for 5-nanometer EUV. Finally, I would like to share some of our activities aimed at enhancing governance for sustainability management, as well as our key achievements in this area. We continue to strengthen our sustainability management. Our efforts to protect the environment are enabled by a range of activities, which include reducing our environmental footprint and increasing our role in the circular economy. We also strive to create a better society as we engage in activities related to human rights, diversity, digital responsibility, and the education of the future generations. We achieved our goal of meeting 100% of the energy needs at our operations in the U.S., Europe and China from renewable sources by 2020, a goal we announced in 2018 as part of an effort to increase use of renewable energy. In addition, our commitment to developing energy-efficient products and reducing energy use in our operations was recognized at the U.S. Environmental Protection Agency 2021 ENERGY STAR awards. Samsung became the first company in nine years to receive the Corporate Commitment Award. We also received our eight Sustained Excellence award, which is the highest honor among the annual awards. In particular, the rare and prestigious Corporate Commitment Award, which was created in 1993 is only given when there is a company without standing leadership in product efficiency and energy management, and Samsung became the first non-U.S. company to receive the award. The Sustained Excellence award is granted to companies that receive ENERGY STAR certification on a high majority of products released in the U.S., which enhances ENERGY STAR’s brand awareness among consumers. Meanwhile, we are now including sustainability management as part of the evaluation criteria for all business units and executives to better reflect sustainability achievements in performance evaluations and compensation. We believe this will help further our achievements in sustainability management throughout the company. We’ll keep bolstering our sustainability management through continued efforts to strengthen our response on EST issues, while also enhancing our financial performance. I will now turn the conference call over to the gentleman from each business unit to present first quarter performances and outlooks for their corresponding business segments. Han JinMan: Good morning. This is Han JinMan from the Memory Global Sales and Marketing Office. Overall demand was decent in the first quarter, backed by strong demand from mobile, and mainly from laptops, from PCs. However, profit slightly decreased due to the initial cost of new line ramp up that is associated with advanced node migration and the downward trend in NAND prices. DRAM, demand for mobile stay solid, despite weak seasonality. Due to releases of new models by major customers and increased penetration of 5G smartphones, centering on the Chinese market. Demand for PC was partially affected by a shortage of some components, but it remains strong as online-based activities became routine for global consumers, amid continuing effects of COVID-19, followed by an expansion of the one PC per person trend. Global demand in the first quarter increased moderately quarter-on-quarter and significantly year-on-year as content-per-box rose due to increasing adoption of a new server CPU and demand was solid, mainly from data centers. Demand for consumer products was also strong despite weak seasonality. Due to an increase in 4K high-definition content and growth in TV and set-top box memory content to use streaming services. Our results beat our big growth guidance. Thanks to our active response to growing mobile demand in the burgeoning 5G market, a rising server demand for data centers, while also benefiting from sales of PC and TV products related to the rise of home entertainment culture. Now let's talk about the NAND market. Demand for mobile was robust in accordance with strong smartphone sales and along with rising demand in content-per-box, mainly from Chinese customers. Server SSD saw growth in demand compared to the previous quarter, thanks to the base effect of weak demand in the previous quarter as major datacenter companies resumed storage investments. Demand for client SSD, especially for laptops, also stayed strong as contactless activities such as telecommuting and online education continued. Amid full-fledged migration to 128-layer, sixth generation V-NAND, we exceeded our bid growth guidance by actively addressing the recovery of demand for server SSD and solid demand for mobile and client SSD. Now moving to the outlook for the second quarter. In the second quarter, we expect our profits to improve significantly backed by strong demand, centering on DRAM across all applications. For DRAM, there is some set build risk for mobile products due to supply issues with some components, but demand is likely to stay robust. Thanks to the expanding 5G market and related growth in content-per-box. For server, we expect to set build the major OEMs to pick up with the release of a new CPU. And demand from data center companies will continue to be strong, backed by solid demand for cloud. For PCs, centering on laptops demand from PC should stay solid as educational laptops enter peak seasonality and build demand for addressing Back to School is strong. Amid growing demand for overall applications, we will continue to strengthen our cost competitiveness and market leadership by ramp ups and tiny sales of cutting-edge products, such as 15-nano DRAM. Demand in the second quarter in mobile, similar to DRAM, we should keep an eye on the possibility of disruptions and set builds due to component supply issues. But we expect demand to pick up because of growing content-per-box from expanding 5G lineups at major customers. Demand for server SSD is likely to stay strong due to increase storage demand from customers and a high-capacity trend with the release of a new CPU. We also expect demand to stay solid for client SSD while demand for low-to-mid priced laptops continues to rise, thanks to the influence of back-to-school effects along with the rising penetration of high-capacity products. We will actively address the increase in demand for high-capacity SSD with 8 terabyte or more, which focuses on us, while accelerating migration to the industry's only single-stack based 128-layer sixth generation 512 gigabit V-NAND strengthening technological leadership and cost competitiveness. Let me present our outlook for the second half of this year. Amid rapidly changing landscape of the memory industry, our R&D and investing constantly aims to meet needs for fast and higher energy efficient products to increase our performance. At the same time, we are enhancing our core capabilities with the responsibility of leading memory company. In the second half of this year, amid accelerating economic recovery due to persisting stimulus programs in numerous countries, we think demand for servers and storage will keep growing because of expanding investment in data centers and high-capacity trend with the release of a new CPU. With a launch of new models for major customers and the broad penetration of 5G, which are likely to positively affect both set shipments and content-per-box of smartphones, we think mobile demand will keep rising. Furthermore, we expect demand from PC to remain strong in the second half, backed by continuing demand for upgrades and additional units in households around the world, with a steady increase in PC product content-per-box. However, we need to stay abreast demands uncertainties is caused by global macro issues, such as geopolitical risk and supply risk for some components. Based on strong, across-the-board demand within DRAM prices will continue their first half trend and keep rising through the second half. For NAND in the second half, due to a controller supply-demand imbalance for solution products. We expect demand for certain applications to exceed supply. So we will focus on staying on in front of changes in the market demand via big data analysis, and by responding actively to IT into infrastructure for data centers and customer demand in areas such as mobile products. In addition, as mainstream technology, 15-nanometer DRAM, and 128-layer 6th-generation V-NAND will drive our bit growth and cost competitiveness in the second half. And we will continue to strengthen our technology competitiveness by applying EUV on multiple layers of the 14-nanometer DRAM based on our industry-leading technology and by ramping-up the solution products in the second half, adopting double-stack based 176-layer 7th generation V-NAND. In closing, we recognized and presented importance and responsibilities that are now in the semiconductor industry. Memory in particular has progressively become the most relevant and vital element of our daily lives, as well as in the workplaces. We are now living in a generation that is increasingly emphasizing social and environmental values rather than simply a product features. With our most advanced technology and extraordinary talents, we will proactively contribute to the standardization of next-generation memory and continue to solidify our leading position as a trusted partner in the IT industry. Thank you. Shin Dong Ho: Good morning. This is Shin Dong Ho from the System LSI Business. In the first quarter, we increased supply of mobile SOCs and image sensors backed by launches of flagship and high-end smartphones by major customers. But earnings remained mostly flat quarter-on-quarter due to impacts of mobile DDI supply issues caused by disrupted foundry production. However, we reinforced our technological leadership by releasing Exynos 2100, our first product to integrate a 5G modem into a premium mobile SoC, as well as a 50-megapixel ISOCELL image sensor with advanced Dual Pixel Pro technology. Now, let me talk about the outlook of the second quarter. In the second quarter, we expect overall demand for mobile components to weaken due to a seasonal decline in smartphone demand and continuing effects of the disruption of foundry production in the previous quarter. We will focus on achieving targeted results through a flexible product mix adjustment and pricing policies considering the tight global supply of semiconductors. In the second half of this year, we believe it'll be prudent to prepare for the possibility that the current shortages situation will persist, due to geopolitical factors, such as escalation of US-China tension as well as environmental factors that may affect semiconductor production. With System LSI, we will maximize our capability to supply chips by strengthening cooperation with the in-house foundry and expanding the use of outsourced foundries. And by implementing flexible pricing policies, we will strive to keep going. Thank you. Seung Hoon Han: Good morning. This is Seung Han from the Foundry business. In the first quarter, earnings declined due to a disruption of production at Austin fab in the U.S. due to major power and water outage. Positively, we continue our effort to strengthen our technological leadership by starting the development of the second generation three-nano process and completing the development of the 14 and 8-nano RF processes to actively lead the 5G market. Turning to our outlook. In the second quarter, we fully normalized the production line in Austin, and we will try to improve profitability and sales by flexibly managing our product mix and using pricing strategies to secure future investment resources. In addition, we will prepare to expand supply in the second half of the year through the start of mass production at Pyeongtaek Line 2 and we will reinforce our differentiated high performance heterogeneous integration technology package solutions by completing the development of the 2.5D interposer package and starting development of 5-nano based 3D IC packaging. In the second half, we expect growth in the foundry market to exceed previous projections due to rising demand from accelerating 5G penetration, a continuation of the work from home trend, resumption of corporate IT investments, and growing demand from customers securing safety stock. We plan to respond to increasing customer demand through active supply expansions centering on advanced processes by a full operation of Pyeongtaek Line 2, but we will strive to secure the basis for future growth by expanding our global customer bases and by diversifying within the applications such as HPC network, automotive and others. The explosive increase in digital transformation demand is accelerating the rapid growth of the foundry industry to see greater opportunities. We are striving to provide the best service to our customers with advanced technologies, differentiated solutions and strong ecosystems. Furthermore, we will lead semiconductor industry through cooperation with all customers and partners so that the semiconductor industry can grow and develop. Thank you. Choi KwonYoung: Good morning. I'm KwonYoung Choi from the Business Planning department at Samsung Display. In the first quarter, although the mobile display business posted a declining earnings, quarter-on-quarter due to shortages for some smartphone components and weak seasonality, growing adoption of OLED displays by flagship right to entry-level models is driving growth year-on-year. For the large display business, a rise in demand triggered by the expansion of contactless services and increasing VOD viewing hours led to positive changes in market factors, such as increase in ASP. However, earnings declined quarter-on-quarter as we continue to convert our manufacturing lines to in preparation for the next-generation TV market. Next, let me share the outlook for the second quarter, the mobile display business, it'll likely to see a slow down in quarter-on-quarter growth affected by the prolonged impact of the weak seasonality and component shortage in the first quarter. And latent demand for the new smartphone model is scheduled for release in the third quarter. However, we are determined to raise our utilization rate and secure profitability to securing key display components and further collaborating with our customers. Our large display will continue to pave the way for a smooth transition to new business model based on 2D display technology. Next, let me turn to our outlook for the display market and our core strategies for the second half of 2021. We expect the smartphones market to continue to recover in the second half thanks to rising 5G smartphone demand and economic recoveries. We at Samsung Display will strive to secure panel components and fulfill all orders for customers’ new product launches scheduled in the second half of this year. We'll also work to ensure a stable supply of products via timely development of new technologies. In particular, we'll strive to increase OLED market share in the mobile display market by diversifying within new application areas that are expected to grow post-COVID, including IT devices, such as tablets, laptops and foldable phones, as well as automotives. We’ll work to ensure OLED becomes the standard in the premium displays. For the large display business, we’ll channel our efforts through – toward preparing for the successful mass production of 2D display our next generation panel technology so that it can set a new standard in the premium TV and monitor markets. Thank you for listening. Kim Sunggu: Good morning. This is Sunggu Kim from the Mobile Communications business. I like to discuss IM division’s Q1 results and outlook. In Q1 2021, market demand is expected to have decreased on quarter-on-quarter basis due to seasonality, but have recovered on year-on-year basis from Q1 2020 when the market was significantly impacted by COVID-19. As for our mobile business, flagship smartphone sales increased QoQ as the Galaxy S21, which we launched in January has been well received by the customers. Meanwhile, the Galaxy A series equipped with innovations and price competitiveness continued its solid sales performance. In addition, we have long been striving to enhance connected, convenient and rich experiences across our device ecosystem. And such efforts are leading to material growth in contribution from our tablet, PC and wearable businesses. Thanks to the above mentioned factors, our revenue and profits saw anterior growth QoQ. For our network business, search increased compared to the previous quarter, led mainly by those in North America and Japan and we maintained robust profitability. Now let me move on to Q2 outlook. Market is expected to decrease QoQ due to component supply shortage issue amid continuing seasonally weak demand. As for our mobile business, we expect sales to ramp up for A72 and A52, which we unpacked our first four A series models and also our new notebook PC Galaxy Book, which we unpacked just yesterday. In addition, we expect robust sales of tablets and wearables to continue. On the other hand, we expect partial decrease in new flagship launching effect and component supply shortage, which are likely to lead revenue to decrease QoQ. However, we are trying to minimize the impact of supply shortage and secure robust profitability by rebalancing supply via our global SCM capabilities. For the network business, we will continue responding to 5G equipment expansion in Korea and network rollouts in global markets, including North America and Southwest Asia. Now, let me move on to the second half and annual outlook. We expect market demand to recover to a pre-COVID level on annual basis or meet a gradual economic recovery and full-fledged expansion of 5G market. As for our mobile business, we will strengthen our leadership in the premium segment by continuing sales momentum of Galaxy S series and by popularizing the affordable category, which includes Z Fold and Z Flip. At the same time, we will strive to maximize sales of the new competitive mass market 5G models and to further grow our tablet, PC and wearable businesses. Through these efforts, we will try to achieve solid profits. In addition, we will continue our efforts to further strengthen the Galaxy ecosystem to provide more valuable and richer experiences to our customers by not only enhancing our own services, but also by collaborating more closely with the global leading partners. For the network business, we will remain active in 5G commercialization globally and continue to seek new business opportunities. Thank you. Song WoonJun: Good morning. I'm Song WoonJun from sales and marketing team of Visual Display. First, I'd like to review the market conditions and our performance in the first quarter in 2021. The TV market in first quarter contract here to quarter-on-quarter after a year-on-year in peak season, but expanded year-on-year due to a strong demand in advanced markets. Samsung proactively address strong demand using our global SCM capabilities and we expanded sales and improved our profits year-on-year by prioritizing high value added products such as QLED, super large screen TV and lifestyle TVs. In particular, newly launched Neo QLED have garnered positive feedback from both consumers and our channel partners in every aspect, such as picture quality, sound and usability. And it has been showing strong sales at early stage. Our digital appliances in first quarter amid on continuing release of pent up demand, consumer needs for home appliances are becoming more diversified as the people spent more time at home and become more interested in home decor. We achieved revenue growth, not only in advanced markets, but also in emerging markets, such as Southwest Asia and Latin America. By expanding sales of premium products, including customizable bespoke products that can meet the diverse needs of consumers. Also profitability improved as we focused on our operational efficiency based on modular concept. Now let's look – let's us look at our outlook for second quarter in the second half of 2021. We expect TV demand in second quarter to increase year-on-year due to major sporting events, such as a Europe Cup and Olympics that were postponed last year. However, there are still market uncertainties as a several countries have a resume lockdown policies following additional waves of COVID-19. As I mentioned before, we will expand the sales of new models, which are receiving positive review in the market and implement promotions of our high picture quality products and super larger TV – super larger screen TVs to proactively target the ongoing rise in demand for home cinema and home entertainment, as well as demand inducing by sports events. Along with Neo QLED, which deliver the best viewing experience offering ultra slim design and AI based the sound with the industry’s highest contrast and black detail. We will further strengthen our leadership with successful launch of Micro LED for home. For digital appliances in second quarter, although market demand is expected to increase year-on-year, business condition may face risks such as a rising material and logistics costs. We will provide a new experience in home appliances and expand the ecosystem through Bespoke Home, which was introduced in the Korean market in first quarter. For the global market with client expand the launch of Bespoke to new region in phases, which will consolidate our unique identity. For air conditioners, as six years and begins, we’ll lead the market by popularizing our differentiated Windfree feature. And we’ll continue to grow throughout all our old products. And second half of the year, as demand moves from home entertainment to outdoor activities and travel amid an increase in vaccinations, we expect TV demand to decrease compared to the second half of last year, when impacts of pent-up demand were strong. So we will keep monitoring market demand and preventively address shifts in a dynamic market. We will strengthen our premium leadership and continue sustainable growth by expanding high value-added products such as Neo QLED, Micro LED and lifestyle TV like the frame, which is designed to satisfy diverse needs of our customer. Our digital appliances, market uncertainties have a potential to keep rising, but we will spread the successful Bespoke DNA globally and keep gaining growth momentum with innovative products, as well as new life products to meet consumer needs, while fostering growing channels such as a B2B and online. Thank you very much. Ben Suh: Thank you for the presentations. That sums up the first quarter results presentations. Before we move on to the Q&A session, I would like to share several data points in key business areas. For DRAM in the first quarter, our bit gross was in the mid-single digit percentage and ASP increased in the mid-single digit range as well. For the second quarter of the year, we expect market bit gross to be in the low-single digit range and our bit gross should be around the market level. For the full year, we expect market bit gross to be around 20% and our bit gross to be similar. For NAND in the first quarter, our bit gross was in the low-double digits while ASP declined in the mid-single digit range. For the second quarter, we expect market bit gross to be in the low-single digit range and our bit gross should be similar. For the year, market bit gross is likely to be in the mid-30% range, and we expect to perform better than the market. In the Display Panel Business, in the first quarter, the OLED portion of sales was in the high 80% range and OLED sales volume declined by 1% in the late teens. The Mobile business in the first quarter sales volume was around 81 million units for handsets and 8 million units for tablets. The blended ASP, including tablets was US$243. And the smartphone portion of handset sales volume was in the mid-90% range. For the second quarter, we expect quarter-on-quarter shipments to decline for handsets, but rise for tablets. And the blended ASP is likely to decline quarter-on-quarter. We expect the smartphone portion of handsets to be in the low-to-mid 90% range. In the TV business, in the first quarter, sales volume declined by mid-20% range, and we expect shipments in the second quarter to decline by a mid teen percentage. With that, let’s now move on to the Q&A session. Operator: [Foreign Language] The first question will be presented by Nicolas Gaudois from UBS. Please go ahead with your question. Nicolas Gaudois: Good morning, and thanks for taking my questions. First question is regarding overall Samsung, could you explain our semiconductor competence shortage is influencing your overall business for sets and how you manage that issue going forward? And certainly regarding memory, despite the fact that bit shipments were somewhat better than expected in Q1 and pricing trends has started to improve. We’ve seen lag in of an improvement versus market expectations. Some of that could probably relate to some delay in technology migration as well as we initial ramp up costs of new fabs. For me on, could you share if you on the transition process to 1z nanometer DRAM and then one alpha and 128-layer NAND followed by next technology migration starting in Q2 and what is the timeline back of this for significant cost reduction. Thank you. Song WoonJun: [Foreign Language] So take your first question due to the global semiconductor shortage, we are also experiencing some effects, especially around certain set products and the display production, but we are approaching this from multiple angles to minimize the impact. [Foreign Language] So for example, at the set level, such as smartphones, TVs and consumer electronics products, we are, first of all, talking closely with major component suppliers in order to gain the necessary component inventory. At the same time, we are also discussing with retailers and meter channels about supply plans, so that we are able to allocate the components to the products that have more urgent need or higher priority in terms of supply. So reflecting that feedback, we are currently rebalancing our overall production. At the same time, we’re also trying to optimize our supply lead time that’s required from receiving the parts, producing the product, and then delivering the finished products to the channels. This is in order to minimize any loss sales opportunities that maybe caused due to the component shortage. [Foreign Language] In that context, we are actually preparing to implement our next generation ERP system and ERP. This has capabilities in terms of large scale data processing, and also can support AI-based decision making. The plan is to start this implementation and roll this out to all of our local subsidiaries globally until January of next year. We think that with this next generation ERP system, we will be able to better respond more efficiently and more quickly to such macro issues going forward. [Foreign Language] On the display side, actually the DDI shortage has started from the second half of last year. So we were able to actually preemptively secure the necessary inventory. And so our impact during the first quarter was minimized. Currently for the display, we are focusing on securing the necessary part inventory by closely cooperating with the suppliers, and also we’re giving updates frequently to the customers regarding the situation in order to discuss supply plans. [Foreign Language] Also to switch hats, we’re also a semiconductor supplier. And so to respond to this current situation, we’re focusing on maximizing the efficiency of our current capacity in foundries. And also we’ll be actively responding to customer demand by – especially, by expanding our capacity around the cutting edge processes once Pyeongtaek Line 2 comes into full-scale operation in the second half. [Foreign Language] So I think your second question about the memory business, the reason why the operating profit decreased slightly in first quarter, despite the strong shipments and also positive DRAM ASP is mainly because of the initial cost necessary for the new fab for the migration and also the decrease in NAND ASP. However, looking towards the second quarter, we expect to see strong demand across all applications. And so we’re expecting in the second quarter, our results to significantly improve. [Foreign Language]About the 1G DRAM migration, that would be our 15-nano DRAM. And so we will be scaling up this migration towards the 50-nano DRAM and also this sixth-generation 128-layer NAND as we go forward. And so as we pass through the second half of this year, we expect the magnitude of cost improvement to continue to increase. [Foreign Language] Operator: [Foreign Language] The next question will be presented by Soon-hak Lee from Hanwha Investment & Securities. Please go ahead with your question. Soon-hak Lee: [Foreign Language] About the Austin fab power shortage, can you share with us, specifically the magnitude – the size of the damage that the company incurred and how much of that has been reflected in your first quarter results? Can you also give us an update on the restoration of the Austin operation? Second question is about the large raise displays, we do know that the LCD production has been continuing given the positive market situation. I’m wondering if there’s a possibility that you would decide to further extend your LCD production. Also can you share with us your business strategy for the QD display? Han JinMan: [Foreign Language] To your answer first question, as you know, there was a major snow storm and a cold wave in Texas on February 6, which caused power and water outage. And this caused us to stop the operation of our Austin fab. After the power and water supply was returned to normal, we started on restoring the operation. And as of March 31, we were able to achieve 90% level of production moving. And currently, the Austin fab is fully normalized. There was wafer production disruptions due to the stopping and the recovery of the fab about 71,000 wafers were affected and this corresponds to around KRW300 billion to KRW400 billion of damage. The power outage and the water outage was actually preannounced. So we did have time to prepare for shutting down the plant. And we also had time to prepare for how we will be recovering the operation. Also from the very start of the event, we carefully shared our information closely with our customers. Also, we were able to, I think, bring back the operation, back to normal earlier than most expected because all of our employees were able to focus on this effort, according to the plan. Also going forward in order to prevent this from being repeated, we're currently talking with the state as well as the municipal government and also talking with the local utility companies about to find solutions. [Foreign Language] To answer your second question about the displays, as you know, QD-display is a major project that we have developed in order to enhance the long-term competitiveness of our large size display business. Currently, we're focusing on raising the level of completeness of the QD-display. And we'll try to launch the product as originally planned during the second half of this year. We're currently continuing to work with our customers to do this. Regarding your first part of the question, which was about the LCD products, as you know, we are continuing to produce LCD products, certain volumes based on market situation and customer requests. Currently, we have not reached any firm decisions regarding going forward, how long, whether is the production will be extended in terms of timing or scale. The LCD market we think is currently under very unprecedented volatility due to unexpected and unexperienced economic situation, as well as the components shortage situations. So we think that given that nature it's best for us to continue to respond to flexibly, based on market demand or market movements and customer demand, rather than taking any mid to long-term approach to LCD production. [Foreign Language] Operator: [Foreign Language] The next question will be presented by Peter Lee from Citigroup. Please go ahead with your question. Peter Lee: [Foreign Language] My first question is about the second half memory demand and supply outlook that the company has. I think the market is very interested in how the memory market will unfold. Can you share your views regarding this, especially some more details about the memory side on the second half? The second question is about the IM side, first quarter of performance has been strong. You've mentioned that second quarter may be a bit softer, but I'm wondering what you see in the rest of the year and the second half. Do you think that this trend will continue? And can you share with us some of your strategies in terms of profitability? Han JinMan: [Foreign Language] To answer your first question about our memory outlook, in terms of SET bills, we think that the impact of the chip shortage would be focused mainly on PC and mobiles. And if the component supply situation improves there are factors that will drive further demand growth. For example, for PC, there is this trend of one PC per person also for mobile we – there it seems to be an additional penetration of 5G and also many countries are continuing to implement economic stimulus policies. So these would actually be able to drive further demand growth in PC and mobile. And so, given that I think this is a market situation that calls for constant monitoring. [Foreign Language] About prices, as you know, DRAM prices turned around in the first quarter. We think that this trend will continue in the second quarter, assuming that there will be a strong demand growth. Going forward, we think that the magnitude of price increase could actually become larger as time passes throughout this year. Also given the fact that additional upside on supply is limited. We think that this trend can continue until the second half. [Foreign Language] On the NAND side mobile content-per-box is continuing to accelerate. Also, there is definite increase in storage demand from the server side. And so we think that from the second quarter actually demand exceed supply in certain solution products, such as SSD, which is an area where we have strengths. [Foreign Language] Your second question about the mobile business, second quarter is a slow season and so we do think that demand for mobile will decrease versus the first quarter looking towards the second half there are some growth factors such as a gradual economic recovery being expected, and also the further rollout of 5G, which may drive demand growth. But on the other hand, there are still uncertainties, including the components shortage and the impact of COVID-19 still lingering. Also, there are some cost increases that we’re anticipating in the second half such as preemptive marketing that we’re planning to drive up sales of our flagship in the second half, as well as to raise the awareness of our foldable and the component shortage may have impact on ourselves as well. But despite these challenges, we will be focusing on maintaining a robust profit margin by maintaining a strong flagship sales, also increasing and expanding the user base of our foldable products as well as continuing to introduce a very innovative and powerful A-Series, as well as embodied by the A52 and A72, which were unpacked last March also by expanding the device ecosystem. That includes tablets, PCs, and wearables. [Foreign Language] Operator: [Foreign Language] The next question will be presented by Claire Kim from Hana Financial Investment. Please go ahead with your question. Claire Kim: [Foreign Language] I have two questions. So the first question is about the technology migration. I think there was a recent media report that your competitor is actually going or leading or taking ahead in terms of DRAM and NAND migration. So in that context, in the case of DRAM, the early adoption of EUV and for the NAND, the maintenance of the single step technology can end up being a bottleneck in terms of your technology migration. So in that context, can you share with us your assessment of the technology competitiveness levels from a mid to long-term perspective? Second question is about the V-NAND V8. Can you share with us an update on your plans of adopting V8 our development plans that would follow the 7th generation V-NAND? Song WoonJun: [Foreign Language] To answer your question for DRAM first, and then to answer the part about NAND. In the case of DRAM, our most cutting edge node that is in a full scale mass production is 15-nano and currently in the industry, we have the largest share of 50-nano process in our overall node. [Foreign Language] Looking forward what we are planning in terms of mass production. And the second half is the 14-nano DRAM, which has already come successfully completed evaluation by the major chip set companies. Whereas the 50-nano process used EUV on a single layer, the 14-nano will be using EUV on multiple layers. And this demonstrates the fact that we have technology leadership in terms of utilizing EUV ecosystem in a differentiated manner. [Foreign Language] The reason why this EUV technology leadership is important is, because when EUV is applied and the new, how necessary in using EUV will be critical in further DRAM process migration, as well as the changing technology paradigm. And so we think that the early introduction of EUV will actually serve us very well going forward in terms of providing us the technology and cost competitiveness on a mid to long-term perspective. [Foreign Language] On the NAND side as you know, we have been significantly increasing the scale and the share of the 6th-generation V-NAND with 128 layers on a single stack those share all of that within our overall production has increased quite significantly during the first quarter. Going forward, we are planning to continue to increase the share of the high capacity, for example, 512 gigabit, which has the industry’s best cost competitiveness, and also actively respond to the demand of the high capacity SSDs of eight terabyte and above, which is an area where we are getting quite intensive demand from by flexibly operating our product mix. [Foreign Language] I think going forward in terms of the NAND technology paradigm not only the number of layers, but also the efficiency of the stacking technology will become a very critical factor. As you know, we have the strength of having the lowest height – stack height in the industry based on a single stack technology. This will give us the positive feedback structure in terms of development difficulty going forward. And we are planning to maintain outstanding cost competitiveness by using double stack technology to achieve stacks of up to – layers of up to the high 200 layer ranges on a cell layer basis. [Foreign Language] Your second question was about our V-NAND, seventh generation V-NAND to give you an update. We're planning to go into a full scale mass production of solution products starting from the second half, and we will be announcing them as each application or product is prepared. [Foreign Language] For the V eight or X eighth generation V-NAND, actually our lab has already secured the working guy. Our milestones going forward is to pass the cost – crossover point by second half of next year and then to carry on to mass production. And this will also be part of our efforts to maintain product competitiveness. Operator: [Foreign Language] The next question will be presented by Seung-Gun Kang from KB Securities. Please go ahead with your question. Seung-Gun Kang: [Foreign Language] I have two questions. First question is that there was a media report recently of an M&A of Kioxia being evaluated at around $30 billion. This has triggered some expectations of NAND industry going through a consolidation phase. In that context, can you share with us what implications do you think there will be on the company by NAND industry consolidation process? Also, what is your strategy in trying to maintain your market share in the NAND business going forward? Second question is about the small and midsize displays. As you know in the small and mid-sized OLED market Samsung display has had a dominant position, but recently there's been new entry by Korean and Chinese competitors. So, first question is how does the company plan to respond to this additional competition going forward? Unidentified Company Representative: [Foreign Language] To answer your first question, as we've emphasized several times before, we have no plans of driving an artificial consolidation in the NAND industry, the focus of our NAND strategy still remains on gaining a cost competitiveness through technology leadership, and actively responding to customer demand based on our mass production capabilities. [Foreign Language] Now, that's to just share some perspective regarding that topic. We do think that NAND market does have a larger number of players versus the DRAM market. So it seems that supply will be leading the market for some time, even this market situation. It appears that the economies of scale is critical because that will enable a supplier to supply products that are cost competitive and at the right time. And so whether a company has the economies of scale or not will determine whether that supplier can succeed going forward, inevitably companies that do not have that capability will not be able to meet the market demands and will be losing its position in the market. [Foreign Language] But once again, an industry transformation and consolidation is an area that we're not interested in directly getting involved in. And so we will continue to maintain the focus of our NAND strategy in increasing our cost competitiveness and technology leadership. [Foreign Language] Because in fact from our perspective, currently in the NAND market, there is very strong demand for example, high capacity solution products, SaaS or NVMe, which is an area where we offer quite a lot of strength. Also the market response to our products is very positive. And so from our perspective, the strategy for us in NAND is to continue to provide high value added, high-capacity products that satisfies the customer's needs in order to maintain our position as a trusted supplier within the NAND market. [Foreign Language] I'll touch on our second question about the small size displays. We are aware that the market is a bit concerned about the increased level of competition in the small size OLED market as new competitors enter the small and medium-sized OLED market, where we had traditionally been a dominant player. However, we had actually foreseen this possibility from several years before, and we have been implementing various strategies in order to further strengthen our market leadership and continuously maintain our market share. [Foreign Language] One of the key strategies in responding to the additional competition has been technology innovation. As you know, we have been the player that introduces many new technologies, display technologies first in the industry, including the camera whole low frequency operation and foldable displays. Also, we have continuously work with various suppliers in order to raise the level of technology completeness. As you know, it takes up it is – it has been this ability to introduce new technologies on a pre emptive basis and also the high level of SCM capabilities we have does give us a definite advantage versus any new competition. [Foreign Language] On top of this technology advantage, we also have a cost advantage given the fact that we have made major investments at least two to three years ahead of the new competitors. So that will give us quite a lot of cost advantages. So based on this technology and cost advantage, our focus will be to continue to maintain a strong relationship with our customers by supplying the products necessary for the flagship smartphones on a stable basis, and also to actively utilize our proprietary intellectual property in order to effectively maintain the first mover advantage in the OLED market. [Foreign Language] Operator: [Foreign Language] The next question will be presented by [indiscernible] from ‎Korea Investment & Securities. Please go ahead with your question. Unidentified Analyst: [Foreign Language] I have two questions. The first question is about DRAM and DRAM. DDR5 five is a major topic. So in that context, can you share with us your plans for example of how Samsung is planning to enter the DDR5 related market? Second question is about the, the foldable smartphones. I think there is building interest in the company's foldable strategy in that context, can you share with us your second half foldable lineup and how you plan to differentiate the foldable? Han JinMan: [Foreign Language] DDR5 can actually be used in a wide range of applications including supercomputers, high performance servers, cloud data center network as well as edge computing and so we're currently working very closely with a major CPU companies as well as data center companies in terms of technology and marketing. [Foreign Language] Our offering to DDR5 is 512 gigabyte DDR5 memory module, which is the largest capacity in the industry. It also was the first general purpose DRAM product to adopt an eight layer TSP technology and high K metal gate technology. Also therefore, we expect that our DDR five memory module will be able to deliver high capacity, high performance, low power consumption at the top industry levels and will play a key solution role in the cutting edge industries such as next generation computing, high capacity data centers and artificial intelligence. [Foreign Language] On the research side, main focus of our memory research currently is to on developing a memory that support CXL which is one of the next generation high capacity memory solutions. Also we will continue to achieve technology innovation to maintain the technology leadership in DDR as well Unidentified Analyst: [Foreign Language] To answer your second question about the foldable, the focus of our foldable strategy this year would be to popularize or expand the user base of our foldable phones. So the focus of Z fold this year would be to emphasize its large screen and the differentiated experience and entertainment and productivity to position the Z folds at a premium of positioning before the Z flip. We are going to emphasize the stylish design as well as improve the usability to appeal to millennials as well as the female user base. Even though I'm not at liberty to talk about the details of our second have foldable lineup today, what I can say is that we are focusing on improving the functionality and form factors compared to the previous models based on customer feedback. Also, we are emphasizing a stronger foldable ecosystem by closely working strategically with the partners so that customers will be able to experience an improvement in not only the level of product completeness but also in terms of customer experience. [Foreign Language] Operator: The last question will be presented by Sung kyu Kim from Daiwa Capital Markets. Please go ahead with your question. Sung kyu Kim: [Foreign Language] Well, my first question is to the memory division about their outlook or their view about the mobile market going forward. On one hand there is been very positive expectations, such as the pent up demand coming online from second half of last year for mobile demand, also the expectations that with the 5G models being introduced this year, there will be an increase in not only handset volume, but also content per set. But on the other hand, there is been some negative issues such as the shortage of certain components including APs, and also some views that in certain areas due to the weak or underdeveloped 5G network infrastructure, mobile demand may actually be softer than expected. So given this different, a mix of factors, I'm wondering how the memory division looks upon the mobile market, also I do – I am aware that mobile takes on a larger share within the memory business. Can you share with us what competitive advantages or competitiveness you think the mobile business has in terms of mobile supply? Second question is about the VD business, with the supply of LCD panels continuing to remain short, LCD panel prices have increased quite significantly. This may have a negative impact on your TV business. So in that context we – I would like to hear how you plan to respond and what you expect going forward? Han JinMan: [Foreign Language] Well, to answer your question about the mobile market outlook. In the second quarter, we are expecting that there will be some issues in the short-term due to the supply issues of other semiconductor components, but looking towards the second half of this year, we're expecting that there will be an increase in both handset sales, as well as content per box as major OEMs are expected to launch new products, and also we're expecting that there will be a wider adoption of 5G. [Foreign Language] To answer the – to continue to answer your question, we think that in the mobile segments, the demand for LPDDR5 products will grow especially for the 5G flagships on the high-end models. And therefore, we're continuing to collaborate with the AP chipset companies using our product competitiveness. And the chipset companies are also expanding their AP production in line with the production of our LPDDR5 uMCP. So major companies are planning to apply in their mass production, the LPDDR5, our LPDDR5 and the UFS 3.1 base uMCP, we think that with our active efforts and technology, we will be able to accelerate the creation of a 5G ecosystem. [Foreign Language] You've also asked about our competitiveness in mobile, and actually our supply is increasing not only to flagship, but also to the high end model using the 256 gigabyte and also in mid range models with a 128 gigabyte, also leveraging our excellent cost competitiveness, we are planning to increase the competitiveness in the high and mid-end markets based on the 512 gigabit, 6th-generation V-NAND product. [Foreign Language] To answer your second question about the TV business, as you mentioned, due to the very strong TV demand that's been continuing from the second half of last year, there are some impact to the supply of key components including LCD panels and semiconductors. We think that this trend will remain for some time going forward. In response, one approach that we have is to leverage our global SCM capabilities to avoid any production disruptions during the second half. At the same time, we're focusing on securing profitability, especially around the high end products by – for example, planning preemptively promotions with key retailers and distributors in time for the peak season for each country this year, so that we will be able to expand especially our premium new model offering Neo QLED ultra-large size TVs, as well as the lifestyle TV, which is a product group that we have differentiation. Ben Suh: Okay. So that concludes our conference call. Once again, thank you for joining us, and we wish all of you and those close to you to stay strong and in good health. Thank you. [Foreign Language]