006400.KS - Samsung SDI Co., Ltd.

Operator: [Interpreted] Good morning, everyone. Thank you for joining Samsung SDI 2025 Third Quarter Earnings Call. [Operator Instructions] Now we will begin 2025 third quarter earnings results. Yoontae Kim: [Interpreted] Good morning. I'm Yoontae Kim, Executive Vice President of the Business Management Office at Samsung SDI. First, thank you for joining today's earnings call. And joining me are CFO, Jong Sung Kim; EVP Jong Sung Park for Strategic Marketing office; EVP; Yonghui Cho for ESS business team; and VP Ik-Su Kim for Electronic Materials. We'll provide simultaneous interpretation for the earnings presentation and consecutive interpretation for the Q&A session. Now we will begin Samsung SDI's 2025 Third Quarter Earnings Call. I'll start with our 2025 3Q financial results. 3Q revenue was KRW 3.1 trillion, down 4% Q-o-Q and 22.5% Y-o-Y. Operating income recorded a loss of KRW 591 billion. Pretax income recorded a loss of KRW 430 billion, including nonoperating profit and net income posted a profit of KRW 5.7 billion due to gains from the sales of the polarizer film business. Next is our financial status at the end of 3Q. Assets increased to KRW 42.2 trillion, up by KRW 738 billion from the end of 2Q, driven by increased tangible assets and nonoperating profit. Liabilities decreased to KRW 18.7 trillion, down by KRW 56.6 billion Q-o-Q. Equity rose to KRW 23.5 trillion, up by KRW 794 billion Q-o-Q due to an increase in other comprehensive income driven by foreign exchange translation effect. 3Q CapEx was KRW 499 billion, bringing the cumulative total for 2025 to KRW 2.3 trillion. For detailed financial status, please refer to the appendix. Now I will present the 3Q financial results of each business unit. First of 3Q revenue for the battery business was KRW 2.82 trillion, down 5% Q-o-Q and 23% Y-o-Y due to sluggish EV battery sales. Operating profit recorded a loss of KRW 630 billion. For operating profit deficit small -- despite small deficit in the small battery business, deficit widened Q-o-Q as EV battery sales declined with reduced AMPC and tariff impacts on ESS. Revenue for the Electronic Materials business increased to KRW 232 billion, up by 6% Q-o-Q, while operating profit recorded KRW 38.8 billion as sales of OLED materials for major customers' new smartphones and sales of semiconductor materials for AI servers increased. Now I will share our 3Q business highlights. First, we completed the award for server EV and ESS projects. We signed supply agreements with multiple global major OEMs for EV projects totaling over 110 gigawatts per hour based on 465 and Prismatic EV batteries. We also completed the award of the first round bidding for the Korean government-led ESS project. Additionally, we introduced U.S. local next-generation ESS lineup to expand our ESS we introduced NCA-based high-capacity SBB 1.7 and LFP-based SBB 2.0. We also improved safety by adopting enhanced direct injection system and no thermal propagation technology to both products. On top of that, we closed the deal for the Polarizer Film business sales during 3Q. This strengthened financial stability through a cash inflow of KRW 1.1 trillion. Next is the market outlook and our strategies in 4Q. Demand for EV and ESS batteries is expected to grow due to year-end seasonality, while uncertainties such as tariffs still exist. EV demand is expected to grow, particularly in the volume and entry segments in the EU. However, in the U.S. EV demand is likely to slow due to subsidy expiration on September 30 and tariff uncertainties. To actively respond to growing EV demand in the EU by the year-end, we plan to maximize sales from ongoing projects and complete major EV projects awards, including LFP within 4Q. The U.S. ESS market is projected to grow due to rising AI electricity demand and the expansion of renewable energy generation. Furthermore, government-led ESS programs are expected to increase to stabilize the domestic grid. To address this growing demand for utility scale ESS in the U.S. will not only increase sales of Korea-produced products for the U.S. market, but also begin U.S. local line operation. Also, we're continuing our efforts for major project awards, including Korean government-led projects. At the same time, we recently signed an MOU with the Korea Electrical Safety Corporation to promote the domestic ESS industry and improve safety. We also plan to continue our social efforts to establish a safe and reliable domestic ESS industry foundation and promote shared growth. Next is the small battery business. Power tool demand is expected to slow down after a temporary increase driven by early purchases ahead of U.S. tariff impacts. Meanwhile, demand for IT devices and smartphones is expected to stay firm, thanks to flagship smartphone launches. We'll expand sales of new high-power tablets products targeting major customers' launch of new power tools. For IT batteries, we aim to begin the initial supplies through first-in strategy for our major customers' flagship smartphones and expand into various new IT applications, including tablets and laptops scheduled to be launched next year. Last is the electronic materials business. For the semiconductor market, wafer production is projected to grow as DRAM production increases driven by larger investment in AI servers. The OLED panel market is expected to expand, particularly in flagship smartphones, including foldable phones. Steady sales growth is expected, supported by continued demand expansion for semiconductor materials. For OLED materials, we plan to enter new platforms of major customers targeting 2026. Next, we'll go over our core business strategies currently underway. While some uncertainties remain in the market, we plan to strengthen our competitiveness by building a U.S. local manufacturing system and focusing on the fast-growing ESS market in the short term. In the long term, we plan to set the foundation for the future growth through the award expansion of EV volume and entry segments. First is strengthening our ESS competitiveness. StarPlus Energy is converting its existing EV lines into ESS dedicated ones. NCA-based ESS line has already begun operation, while LFP-based ESS line is scheduled to begin operation in 4Q of next year. Through these efforts, we aim to enhance our local market responsiveness by expanding ESS production capacity to around 30 gigawatts per hour annually by around the end of next year. In addition, prismatic cells are much more preferred than cylindrical ones as they offer higher safety, better thermal management and higher energy density. As the only non-Chinese company capable of supplying prismatic products, we'll actively target the fast-growing ESS market in the U.S. through mass production of our SBB 1.7 and SBB 2.0, which feature enhanced safety with new TP and EDI technologies. Next part is the EVs. To enhance our market share, we are actively entering volume and entry segments with prismatic LFP and mid-nickel products. Also, we are expanding sales portfolio by introducing tablet cylindrical batteries for increasingly growing hybrid EV projects. Moreover, we'll continue to win awards for the premium EV segments with high nickel cylindrical 465 and prismatic batteries. Last is our operational efficiency. We will improve productivity across our production lines. And for the LFP line that requires investment due to increasing new orders, we'll modify the existing NCA line to maximize investment efficiency. By aligning our mid- to long-term investment plans in line with demand, we aim to improve our financial stability and cash flow. Now we'll move on to the Q&A session, which will be provided in Korean followed by consecutive interpreting in English. [Operator Instructions] Operator: [Interpreted] [Operator Instructions] The first question will be provided by Won Suk Chung from iM Securities. Won Suk Chung: [Interpreted] I have 2 questions that I would like to ask. The first question is SDI's performance has remained under pressure this year. So could you elaborate on the key factors driving this weakness? And my second question is that please share your outlook for Q4 results and the overall business environment heading into next year. Jong-chun Kim: [Interpreted] So let me -- good morning. My name is Jong Sung Kim, I'm the CFO of Samsung SDI. Let me first provide the answer to the first part of your question. And the first part of the question is related to the business environment. The primary driver of this year's continued weak performance has been the slowdown in demand for SDI EV batteries. Since last year, overall EV demand has moderated with consumers increasingly shifting towards volume and entry-level segment and our entry into the U.S. market has been relatively late, while demand from our JV partner has also declined. In addition, the recovery in small battery demand has taken longer than expected. Although ESS demand continues to grow, particularly in the U.S., profitability has been lower than anticipated due to the impact of tariffs. Despite these business challenges, SDI is strengthening its responsiveness to the U.S. ESS market by converting EV battery capacity at its U.S. joint venture plant for ESS production. In the small battery segment, the company has also introduced new cylindrical tablet products for power tools to drive sales expansion. In EV batteries, SDI continues to secure new orders in the volume and entry segments and expect to see tangible progress in the near future. In Q4, while a short-term rebound in EV battery demand is unlikely, the company expects its operating loss to narrow from Q3, supported by a recovery in sales from other business divisions. However, discussions on compensation related to the volume reduction are still underway, and there is a possibility of one-off costs toward the end of the year. These factors could influence the degree of profit improvement. Let me now answer the second part of your question, which is related to the business environment in 2026. Well, regarding the business environment for next year, in the U.S., EV battery demand growth is expected to remain limited due to the expiration of EV subsidies and fuel efficiency regulations. Europe is projected to see stronger demand supported by the reinstatement of subsidy programs in major countries and the continued enforcement of CO2 regulations. In contrast, ESS demand is expected to continue growing, driven by growth in renewable energy generation and the rapid growth of the AI industry. In particular, with tighter regulations on Chinese products and rising preference for safer prismatic form factors, companies with prismatic capacity in the U.S. are likely to see increased opportunities. For small batteries, a rebound in demand is expected in key applications such as power tools and mobility, supported by the base effect from this year's inventory adjustments. For electronic materials, market demand from DRAM and mobile OLED panels is expected to continue growing, leading to a steady increase in demand for related materials as well. Although challenges in the EV market are expected to persist next year, growth opportunities are anticipated in the ESS, smart battery and electronic materials businesses. We are currently reviewing customer demand and developing our sales plans accordingly, and we plan to share more detailed market response strategies in the next quarter's earnings call. Thank you. Operator: [Interpreted] following question will be presented by Minwoo Ju from NH Investment & Securities. Minwoo Ju: [Interpreted] My name is Minwoo Ju from NH Securities. I have 2 questions. As demand for ESS in the U.S. continues to grow rapidly, what is SDI's outlook for the market? And also, are there any concerns about potential oversupply of ESS batteries in the U.S. market? And also, I'd like to ask you to share SDI's capacity expansion plans for ESS in the region. Yonghui Cho: [Interpreted] Good morning. This is EVP Yonghui Cho, and I will provide the answers to your question. The U.S. ESS market is projected to grow rapidly with battery shipments expected to increase from around 80 gigawatt hour in 2025 to approximately 130 gigawatt hour in 2030, and this growth will be driven by rising power consumption from the expansion of the AI industry and the continued adoption of eco-friendly energy generation. Recently, some battery manufacturers have shifted part of their North American capacity to ESS production, raising some market concerns about potential oversupply. However, domestic production still covers only about 30% of U.S. ESS battery demand with stricter tariffs and PFE compliance requirements, reducing the use of China-made batteries and with local players still building out supply chains for materials and components, the shortage of U.S. production capacity is expected to continue for some time. Accordingly, even if battery manufacturers aggressively expand their ESS capacity, it is expected that supply-demand balance would only be achieved around 2030, considering the pace of demand growth. In SDI's case, the company plans to convert its SPE production line for ESS use, targeting approximately 30 gigawatt hour of U.S. ESS capacity by the end of next year. As opportunities in the U.S. ESS market continue to expand, STI intends to leverage its local capacity to sustain a growth momentum. Jong Sun Park: [Interpreted] This is answered to Mr. Minwoo Ju from NH Securities, a second part of the question, which is related to the development of batteries for volume and entry-level EVs to strengthen SDI's market share and about the update on the current development programs and the recent order trend. And the answer will be provided EVP Jong Sung Park. To capture opportunities in the volume and entry-level EV market, we are developing LFP and mid-nickel prismatic batteries, targeting mass production in 2028. While market entry has been relatively late, we are accelerating our catch-up efforts and leveraging proprietary technologies to establish clear points of differentiation. In the volume and entry segment, cost competitiveness is the most critical factor. To enhance this, we plan to optimize our global supply chain by production base, develop low-cost materials, expand dual sourcing of components and improve manufacturing efficiency through faster stacking and coating processes, all aimed at further strengthening cost competitiveness. In addition, since vehicles in this segment typically have shorter driving ranges, fast charging performance is especially critical and customer safety standards are continuing to rise. By applying our low-resistance technology, we have achieved a superior fast charging performance compared to peers, and we plan to further strengthen our safety differentiation through proprietary thermal propagation prevention technology based on the prismatic form factors. Regarding recent order activity, we are currently in discussions with several global customers on mass production projects scheduled for 2028, and we expect to finalize some of these within the year. We will provide further updates as appropriate within the scope of what can be publicly disclosed. Operator: [Interpreted] The following question will be presented by Kyung Hun from DAOL Investment & Securities, with your question. Kyung Hun Kim: [Interpreted] My name is Kyung Hun from DAOL Securities. I have two questions. The first question is additional question related to ESS. It seems that opportunities for Korean battery manufacturers in the U.S. market are expanding. So what is the current status of SDI's ESS orders in the United States? And the market is also anticipating potential ESS-related collaborations with major U.S. clients. So is there a possibility of securing new orders? And the second question is related to downstream industry. With the rapid advancement of the humanoid industry, it is expected to emerge as a new source of battery demand in the future. So could you share your outlook on the humanoid market and provide an update on SDI's related product development? Yonghui Cho: [Interpreted] This is Yonghui, EVP Yonghui Cho, and I will provide the answer to your question related to ESS. As mentioned earlier, SDI has recently secured local ESS production capacity, converting its SPE line with proprietary technologies such as the highly safe prismatic form factor and an integrated direct injection fire suppression system, the company is in active discussions with multiple ESS clients and is securing orders covering a substantial portion of its capacity through 2027. By production line, the NCA ESS line, which began mass production this year, is preparing to roll out the new SBB 1.7 product, featuring high energy density cells that boost capacity by over 20%. Based on existing partnerships, SBI has already secured a significant portion of '24-'25 volumes from major U.S. customers and is continuing to expand discussions for additional orders. For the LFP line, which is scheduled to begin mass production in Q4 of next year, the company is developing the SBB 2.0 solution featuring large capacity LFP batteries and is likewise engaged in mid- to long-term collaboration discussions with multiple clients. While we can't comment on specific customer, we are actively pursuing opportunities with multiple U.S. clients and expect to see steady growth in ESS orders going forward. Jong Sun Park: [Interpreted] This is EVP, Jong-Sung Park. I will be answering the part of the question related to the humanoid market. The robotics market has been advancing rapidly, driven by more sophisticated movement capabilities, AI-enabled intelligence and declining costs. As a result, applications are expanding beyond industrial uses to commercial and household sectors. With component technologies and supply chains expected to take shape in earnest, the humanoid market is projected to grow quickly from around 20,000 units this year to over 600,000 units by 2030. Because humanoid robots have very limited internal space for battery installation, the batteries must deliver both high power and strong durability to support movement. As a result, high-power, high-capacity cylindrical batteries are currently being used for this application. Several robotics customers have already adopted SBI's cylindrical batteries, which have demonstrated high power and large capacity performance in the power tool market. To further expand business opportunities, SBI is also engaged in additional discussions with multiple robotics manufacturers. Beyond humanoids, advances in AI technology are driving autonomous flight in drones and enhancing immersion in XR or extended reality devices, leading to rapid growth in these emerging markets. These applications require highly customized battery performance, including ultra-compact size, lightweight design and fast charging. To capture opportunities in the expanding AI-related device market, the company plans to leverage cylindrical-based coin cells and pouch-based mini cells. Thank you. Operator: [Interpreted] The last question will be presented by Ji-San Kim from Kiwoom Securities. Ji-san Kim: [Interpreted] This is Ji-San Kim from Kiwoom Securities. I actually have 2 questions. And the first question is related to AI industry. With the rapid growth of the AI industry expected to drive semiconductor super cycle for the foreseeable future, opportunities in the semiconductor materials businesses are expanding. So could you share SBI's strategy to capture this growth and further expand sales in this area? And the second question is related to data centers. BBU sales have continued robust growth throughout this year. So how is this trend affecting the sales this year? And what is the outlook for the market going forward? And I would also like to know if there's a possibility that BBUs could cannibalize the demand of UPS. Ik Soo Kim: [Interpreted] This is EVP Iksoo Kim, and I will be answering your question related to the semiconductor materials. As you have just mentioned, demand for high value-added memory used in AI applications is expected to continue growing with our key customers expanding wafer production for DRAM and HBM. As a result, demand for semiconductor materials is also projected to maintain solid growth momentum. To further drive sales growth, we are pursuing customer diversification while strengthening material competitiveness to meet customer needs for process migration and performance enhancement. In particular, we are expanding our metal slurry portfolio and working to secure new customers for high thermal conductivity EMC materials used in application processors. In addition, we continue to collaborate closely with our major semiconductor manufacturers to jointly develop new products, including organic and inorganic materials, insulating materials and next-generation packaging materials. Jong Sun Park: Again, this is EVP Jong-Sung Park. I will be answering Mr. Ji-San second part of the question related to the BBU market. Major cloud service providers, including Google, Meta and Amazon have been rapidly installing BBUs or battery backup units at the server rack levels within their AI data centers. This trend is driving rapid growth in both the overall BBU market and the demand for BBU sales. Amid the strong market momentum, our BBU cell sales have increased significantly. In the cylindrical battery segment, the revenue contribution from BBUs is expected to surge from just 2% last year to 11% this year. Based on current trends, we estimate our market share in the BBU cell segment will reach around 40% this year. The number of BBU installations is expected to more than double between '24 and '26, a period when data center investments are projected to be highly concentrated. As BBUs are required to deliver high output power rapidly within the limited space of a server rack, demand for high-power cylindrical batteries is expected to increase significantly. Regarding the potential demand overlap between BBUs and the UPS market, while both serve the common purpose of providing backup power beyond outages, their functions and applications are distinct. UPS systems are designed to support power for the entire data center, whereas BBUs are installed to protect specific critical server units. As a result, the 2 products differ in both performance characteristics and use cases. Therefore, we believe the likelihood of market cannibalization between the 2 applications is low. We will continue to capture growing demand by providing products tailored to the specific requirements of each market. Yoontae Kim: [Interpreted] Lastly, we will close the call by answering one of the questions that we collected online in advance. Let me read the questions that we have collected. Given the recent slowdown in earnings and continued capital expenditures, it appears that ongoing funding will be required. So could you elaborate on the company's investment plans and outline your financing strategies, including any potential additional capital increase or utilization of existing assets such as the stake in Samsung Display. And the answer will be provided by EVP Jong Sung Kim. Jong-chun Kim: [Interpreted] As was mentioned before, in terms of capital expenditures, we plan to optimize our investment strategy by adjusting the timing of new projects based on market conditions and prioritizing the conversion and utilization of existing lines rather than adding entirely new capacity. Regarding funding, we recently secured approximately KRW 1.1 trillion in cash through the sales of our polarizer film business. Combined with the gradual improvement in operating performance and continued positive EBITDA, we expect overall funding pressure to ease. Accordingly, we are not considering any additional capital increase at this time. Should further funding needs arise, we will review various options, including borrowings and potential utilization of existing assets, taking into account market conditions and financing requirements Unknown Executive: We appreciate your valuable questions and opinions, and we will refer to them in our management decision making. With this, we will end the earnings conference call for Q3 2025. And should you have further inquiries, please contact the IR team. Thank you. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]

Operator: Good afternoon, everyone. Thank you for joining Samsung SDI 2025 Second Quarter Earnings Call. [Operator Instructions] Now we'll begin 2025 second quarter earnings results. Yoontae Kim: Good afternoon. I'm Yoontae Kim, Executive Vice President of the Business Management Office at Samsung SDI. First, thank you for joining today's earnings call. And joining me are CFO, Jong Sung Kim; VP Soo Han Kim, for Automotive and ESS Battery, EVP Hanjae Cho, for Small Battery; and VP Ik Soo Kim for Electronic Materials. We'll provide simultaneous interpretation for the earnings presentation and consecutive interpretation for the Q&A session. Now we'll begin Samsung SDI's 2025 Second Quarter Earnings Call. First off, please note that starting with the 2024 3Q results, the profit or loss from discontinued operations is separately stated due to the decision to discontinue the Polarizer Film business. Today's presentation will also be based on the same reporting standards. We'll start with our 2025 Q2 financial results. Q2 revenue was KRW 3.2 trillion, up by 0.1% Q-o-Q and down by 22% Y-o-Y. Operating income recorded a loss of KRW 398 billion. Pretax income recorded a loss of KRW 341 billion, and net income posted a loss of KRW 167 billion. Next is our financial status at the end of 2Q. Assets increased to KRW 41.4 trillion, up by KRW 721 billion from the end of 1Q due to capital increase. Equity rose to KRW 22.7 trillion, up by KRW 1.1 trillion Q-o-Q due to capital increase. 2Q CapEx was KRW 1.1 trillion, bringing the cumulative total for the first half to KRW 1.8 trillion. For detailed financial status, please refer to the appendix. Now I will present the 2Q financial results of each business unit. First off, 2Q revenue for the battery business was KRW 2.96 trillion, down 1% Q-o-Q and 24% Y-o-Y. Operating profit recorded a loss of KRW 431 billion. Inventory adjustments by major customers eased and sales of power tools and ESS/BBUs grew on AI growth. However, revenue remained flattish Q-o-Q due to sluggish demand of major EV customers. While fixed cost burden from delayed sales recovery persist, profitability for North Korean ESS declined and volume compensation from a major EV customer was delayed. However, operating deficit in the battery business slightly reduced Q-o-Q as losses in the small battery business decreased quite significantly. For the Electronic Materials business, revenue and profitability improved as sales of OLED materials for major customers' new smartphones as well as semiconductor wafer production increased. Next, CFO, Jong Sung Kim, will share our first half business highlights and market outlook and core strategies for the second half. Jong-chun Kim: Good afternoon. I am CFO, Jong Sung Kim. First, we apologize for our earnings falling short of market expectations. We expected a meaningful recovery in 2Q earnings compared to 1Q. However, due to increased uncertainties such as the IRA revision and tariffs, we were unable to reduce losses as much as originally planned. We expect gradual earnings improvement in the second half alongside sales growth, although macroeconomic uncertainties are likely to persist. To overcome these challenges and solidify our foundation for mid- to long-term growth, we have continued our efforts and achieved the following results. First, we strengthened our battery order efforts to secure future growth in the battery business. For EV batteries, we secured an order for 46-phi cylindrical batteries for a European global EV and its premium EV lineup and are currently in discussions with a U.S. start-up to supply 46-phi batteries for commercial EVs. Discussions with another European global OEM are progressing well for prismatic LFP batteries for volume and entry-level EVs as well as prismatic NCA batteries for commercial EVs. We expect to achieve tangible outcomes in the near future. For the ESS business, we won multiple products by participating in domestic government-led ESS project bidding. We also signed a contract for utility ESS project in the U.S. with local production scheduled to begin in 4Q. Several products, including LFP, are also expected to be finalized in the second half. For small batteries, we'll begin supplying our newly developed tabless ultra-high-power battery to major customers in 3Q. Alongside these efforts, we are continuing to diversify our applications and customer base. For batteries beyond existing applications, we're in discussions to expand applications not only to BBU, which accounts for a meaningful share of sales in the first half, but also to HEVs, humanoids and UAM. For semiconductor materials, we are securing new customers in the U.S., Greater China and Japan and began sales to a new customer in Greater China during the first half. Next is the market outlook and our core business strategies in the second half. For the EV battery market, U.S. demand for EVs is slowing due to relaxed CO2 regulations, reduced subsidy and tariffs. EU demand is concentrated in affordable volume and entry segment as subsidies resume. To cope with this, we are minimizing the impact of market changes by enhancing the operational efficiency of the StarPlus Energy line. Leveraging No-Thermal Propagation technology of prismatic form factors and new chemistries such as LFP, we aim to expand orders in the fast-growing volume in Energy segment. For the ESS market, demand for utility and UPS is steadily growing due to the rising share of renewables and increased power needs from AI data centers. In contrast, pressure on cost and profitability on ESS produced outside the U.S. due to tariffs is mounting. To address this, we'll boost sales in the second half by initiating local mass production in the U.S. and revitalizing domestic electric grid stabilization projects. Also we will secure more orders centering on LFP cells for utility and ultra-high power or UPS. Next is the small battery market. Demand is recovering for high-power products, such as powertools and E2Wheeler. With the expansion of the AI and big data markets, BBU adoption for server is expected to grow. We will increase sales of powertools with new tabless batteries and E2Wheeler and BBU with high-power batteries. Additionally, for IT batteries, we plan to become the first-in to supply batteries for flagship smartphones of major customers in 4Q. Last is the Electronic Materials. OLED panel market is expected to grow around new premium smartphones. With the expansion of AI, the semiconductor market is also expected to gain strong momentum based on rising demand for high value-added DRAM products, including HBM. Accordingly, we'll ensure timely supply of OLED materials to major customers' new platforms while increasing our market share in semiconductor materials by penetrating into customers' new products. With continued market challenges in the second half, significant short-term earnings improvement will be difficult. However, we'll execute the strategies outlined above to gradually recover our performance and achieve mid- to long-term growth. Thank you. Operator: [Foreign Language] Now Q&A session will begin. [Operator Instructions] [Foreign Language] The first question will be provided by William Cho from HSBC Securities. Woo-Hyung Cho: [Foreign Language] This is William Cho from HSBC. I have one question. Samsung SDI recorded a significant loss in the first half of the year. Could you provide a more detailed outlook for the second half and indicate when a turnaround to profit is expected? Jong-chun Kim: [Foreign Language] This is CFO, Jong Sung Kim, and I'll be providing you the answer to your question. In the first half of the year, significant policy changes in major countries such as the revision of the U.S. IRA and the imposition of tariffs led to reduced customer demand and lower utilization rates. This resulted in increased fixed cost pressure and weak performance. However, in the second half, sales are expected to improve, particularly in the smart battery and Electronic Materials businesses, leading to a gradual recovery in performance. We anticipate to turn to profit in Q4. Let me provide additional update by business segment. In the mid- to large-sized battery business, we expect the operating loss to narrow in the second half. This will be driven by increased shipments to major European OEMs, compensation for reduced EV battery orders that was delayed from Q2 and continued strong demand in ESS. However, we do also expect some pressure on profitability from external factors such as the recently imposed U.S. tariffs. For small batteries, solid sales for BBU applications continue while revenues from other applications such as powertools, EVs and micro-mobility are expected to grow significantly compared to the first half. As a result, we anticipate a meaningful improvement in performance with the goal of turning up profit in Q4. In the Electronic Materials business, strong end market demand is driving continued growth in both OLED and semiconductor process materials, and we expect both sales and profits to increase compared to the first half. However, macro level uncertainties are expected to persist in the second half, contributing to continued earnings volatility. We will closely monitor market developments and work in close coordination with our customers to minimize any potential disruptions. In addition, to support mid- to long-term growth, we are working to secure several key orders currently under negotiation. We will continue to drive product differentiation through advanced technologies such as prismatic batteries, utilizing multiple chemistries including LFP and cylindrical batteries featuring tabless technology to further expand our order pipeline. Operator: [Foreign Language] The following question will be presented by Sang Uk Kim from UBS Securities. Sang Uk Kim: [Foreign Language] I actually have two questions. My first question is that you mentioned in your presentation about improving the operational efficiency of the StarPlus Energy lines and setting up a local ESS production system. Does this mean that the StarPlus Energy lines will be converted to ESS production? Please explain the future operational plan for the StarPlus Energy lines in more detail. And my second question is that you've also mentioned that discussions are underway for first LFP project. Does this mean you are now more actively entering the volume entry market? And since the entry is relatively late, what is the catch-up strategy? Soo Han Kim: [Foreign Language] Thank you for your questions. This is VP, Soo Han Kim. I will be providing you the answers to your question. As for your question related to the operational plan for the StarPlus Energy line, well, due to lower-than-expected customer demand, it has become necessary to adjust the operation plan for the StarPlus Energy production line. At present, it is difficult to operate the line solely with EV battery production. So until customer demand recovers, we plan to utilize part of the lines for ESS battery production. After completing the line set up, mass production is expected to begin around October. We have already secured a significant portion of orders for this line throughout next year. To prepare for the possibility of prolonged weakness in customer demand, we are discussing various measures with customers to improve line utilization, such as supplying battery for European EV models in addition to using the lines for ESS production. Starting with mass production of ESS cells, we plan to gradually ramp up line operations. [Foreign Language] Once again, this is VP, Soo Han Kim, and I'll be answering your second question related to the LFP product with which we are going to be entering into the volume entry market. As the EV market grows, the volume and entry-level segments are expanding at a faster pace. To align with this trend, we plan to actively target these segments and expand our business by introducing new products based on multiple chemistries, including LFP. Recent OEM requirements show that as battery energy density and capacity increase, safety standards, including thermal management are becoming significantly more stringent. Additionally, for volume and entry segments, which tend to have shorter driving ranges, fast charging performance is becoming increasingly important. In our case, the proprietary thermal propagation prevention technology, based on prismatic form factors developed through our experience in the high-performance premium market has become a major selling point in recent bidding processes for the volume and entry segment market. We also plan to enhance a fast charging performance by applying lower resistance technology and strengthen cost competitiveness by utilizing low-cost cathode materials. In fact, customer needs are expanding due to the prismatic form factor-based LFP solution, and we are making significant progress in collaboration with multiple customers and projects using multiple chemistry products. By around 2028, when full-scale mass production begins in Europe and the U.S., we aim to be well positioned to compete on equal footing with leading players in the industry. Operator: [Foreign Language] The following question will be presented by Hyun-Soo Kim from Hana Securities. Hyun-So Kim: [Foreign Language] This is Hyun-Soo Kim from Hana Securities. I have two questions related to small batteries. My first question is that you've mentioned that small battery performance improved in Q2 and is expected to improve further in the second half. So could you please provide a bit more detail by application? And my second question is this one. Regarding the new automotive orders for 46-phi cylindrical batteries, could you please provide additional details within the scope of what can be disclosed? Hanjae Cho: [Foreign Language] This is EVP, Hanjae Cho, and I'll be answering your question related to the performance of small battery in Q2. In the case of cylindrical batteries, the market conditions are expected to gradually improve with demand showing signs of recovery, particularly for high-power products across key applications. For powertools, as major customers inventory levels have generally decreased, demand has been gradually recovering since Q1, particularly for ultra high-power battery packs. In the second half of the year, we plan to expand sales by launching 1865 and 2170 tabless products. Given its product characteristics, BBU requires high-speed charging and discharging. We plan to expand supply by further enhancing our high power performance. Sales of E2Wheelers, including off-road e-motorcycles, are also expected to grow, driven by strong consumer demand for high-power and high-capacity products. In line with the market conditions and characteristics of each application, we will actively respond to the recovery in demand by launching new application-specific products based on the competitiveness of our cylindrical batteries. For pouch batteries, we plan to achieve our first-in for all flagship models of major domestic customers in Q4 while also increasing our market share in mass market models to improve both sales and profitability. Through such seamless responses tailored to each application, we will strive to ensure that the small battery business turns profitable as planned in Q4. Soo Han Kim: [Foreign Language] Again, this is VP, Soo Han Kim, and I'll be answering your second question regarding the new automotive orders for 46-phi cylindrical batteries. We ask for your understanding as we are unable to disclose specific details due to contractual obligation. This project is being prepared with a target of mass production in 2028 through investment in a new production line at our manufacturing site in Hungary. Through this order, we expect to strengthen our partnership with the customer and gradually increase our supply share over the mid- to long term. Moreover, this also marks a meaningful expansion of our EV battery product portfolio from prismatic cells to 46-phi cylindrical cells. As the company is planning to locally produce 46-phi cells in the Hungary plant, we will leverage our localization experience and technology competitiveness to ensure smooth execution and further strengthen our presence in the European market. Operator: [Foreign Language] The following question will be presented by Won Suk Chung from iM Securities. Won Suk Chung: [Foreign Language] This is Won Suk Chung from iM Securities, and I have two questions. And my first question is that the U.S. tariff policy is putting pressure on performance. So how significantly is it affecting our profitability? And what measures are you planning to take in response? And my second question is related to Electronic Materials. The Electronic Materials business has been delivering solid performance. So what is the future outlook for the business? And what is the company's strategic direction? Soo Han Kim: [Foreign Language] This is again VP, Soo Han Kim. I'll be answering your question related to the impact of tariff on ESS performance. Currently, more than 70% of our ESS sales are directed to the U.S. and with all shipments exported from Korea and also as the tariff rate is expected to be set at 15% starting in August, it will have a mid-single-digit percentage impact on our operating margin in the second half of the year. To mitigate the impact of tariffs, we plan to begin local production within this year by utilizing the StarPlus Energy lines. Additionally, we aim to start local mass production of LFP ESS by 2026. While some materials will still need to be imported from outside the U.S. and, therefore, remain subject to tariffs, we expect to offset part of the impact through AMPC subsidies. Given that the U.S. ESS market is the fastest growing, we anticipate not only continued sales growth but also a gradual improvement in profit margins. Ik Soo Kim: [Foreign Language] I will be providing the answer to your second question related to Electronic Materials business and I'm VP, Ik Soo Kim. The key products of the Electronic Materials business, semiconductor and OLED materials are expected to continue their steady growth going forward. The semiconductor and OLED material market relevant to our portfolio are expected to grow at average annual rates of 7% and 5%, respectively, through 2030. Aligned with this market growth, our business division aims to achieve sustained sales expansion while maintaining stable profitability. In the short term, we plan to diversify our customer base by increasing the market share of existing products and acquiring new clients. Over the midterm, we are also actively advancing the development of new products to support future growth. If I may elaborate on our new product development, in semiconductor materials, we are focusing on packaging materials, which are expected to demonstrate sustained growth. Leveraging our core technologies, we are developing high thermal conductivity molding compounds for HBM applications as well as copper slurry materials. Additionally, in that process packing materials, we're expanding our product portfolio by developing materials required for next-generation semiconductor processes, including EUV materials. For OLED materials, we are developing a range of new products, including G-Host materials to be applied in major customers' new products as well as RGB materials and low refractive index materials for new applications. We will ensure the timely launch of these new semiconductor and OLED materials to contribute to the future expansion of our Electronic Materials business. Operator: [Foreign Language] Lastly, we will close the call by answering to one of the questions that we collected online in advance. And the question is this. EV sales grew in the first half of the year compared to last year, and other battery companies are also seeing improved performance. However, SDI's recovery appears to be relatively slower. What are the reasons for this? And what measures are being taken in response? And the answer will be provided by VP, Soo Han Kim. Soo Han Kim: [Foreign Language] Our company has focused on the premium market based on high-nickel batteries achieving both strong profitability and top line growth. However, over the past one to two years, due to economic slowdowns in major countries and reductions in EV subsidies, consumer demand has shifted faster than expected towards the volume and entry segments, creating challenges. Additionally, our relatively late entry into the U.S. market limited our ability to secure a diverse range of customers and projects which impacted our sales growth and the expansion of AMPC. To address these challenges, we are actively pursuing orders for volume and entry-level products by leveraging our accumulated expertise in prismatic battery technology. Utilizing a range of battery chemistries, including LFP, we are advancing discussions with multiple customers and expect several projects to be finalized in the second half of the year. In the U.S., we plan to minimize the impact on our performance in the short term through the efficient operation of StarPlus Energy while proceeding as planned with our joint venture with GM. We also intend to expand discussions on project collaborations with other OEMs in the U.S. market. While some of the initiatives that we have outlined are expected to deliver short-term performance improvements, many are geared towards generating results over the mid- to long term. We remain committed to executing these measures diligently to enhance our performance and drive sustainable growth. Unknown Executive: [Foreign Language] We appreciate your valuable questions and opinions and we'll refer to them in our management decision-making. Now we will end the earnings conference call for Q2 2025. Should you have further inquiries, please contact the IR team. Thank you. [Statements in English on this transcript were spoken by an interpreter present on the live call.]

Operator: Good afternoon, everyone. Thank you for joining Samsung SDI 2025 First Quarter Earnings Call. [Operator Instructions]. Now we will begin 2025 first quarter earnings results. Yoontae Kim: Good afternoon. I am Yoontae Kim, Executive Vice President of the Business Management Office at Samsung SDI. First, thank you for joining today's earnings call. And joining me are CFO, Jong Sung Kim; EVP, Jong-Sung Park for Automotive and ESS Battery; EVP, Hanjae Cho for Small Battery and Ik Soo Kim for Electronic Materials. We will provide simultaneous interpretation for the earnings presentation and consecutive interpretation for the Q&A session. Now we'll begin Samsung SDI's 2025 First Quarter Earnings Call. First off, please note that starting with the 2024 3Q results, the profit or loss from discontinued operations is separately stated due to the decision to discontinue the Polarizer Film business. And today's presentation will also follow suit. I'll start with our 2025 first quarter financial results. The first quarter revenue was KRW 3.2 trillion, down 15% Q-o-Q and 34% Y-o-Y due to slowing market demand. Operating profit recorded a loss of KRW 434 billion, including results from discontinued operations, IQ first quarter revenue was KRW 3.5 trillion and operating profit posted a loss of KRW 426 billion. Pretax profit recorded a loss of KRW 357 billion, including nonoperating profits, net profit posted a loss of KRW 216 billion. Next is our financial status at the end of the first quarter. Assets increased to KRW 40.7 trillion, up by KRW 113 billion from the end of 2024 due to CapEx mainly on EV Batteries. Liabilities rose to KRW 19.2 trillion, up by KRW 143 billion Y-o-Y due to increased debt and accounts payables driven by raw material purchases. CapEx for the first quarter recorded KRW 774 billion. For detailed financial status, please refer to the appendix. Now I will present the first quarter financial results of each business unit. First off, the first quarter revenue for the Battery business was KRW 2.98 trillion, down 16% Q-o-Q and 35% Y-o-Y. Operating profit recorded a loss of KRW 452 billion. The first quarter revenue decreased due to EV and power tool customers destocking and seasonality in ESS, profitability declined due to lower fab utilization rate and higher fixed cost. For the Electronic Materials business, revenue slightly increased and profitability also improved, thanks to enhanced demand centering on OLED materials. Next, the key business highlights of the first quarter. First, we began full-fledged operation at our U.S. fab for prismatic batteries. We initiated early operation of the ramp-up at the Stellantis joint venture first line and now are operating at high yields. Additionally, we broke ground for GM joint venture targeting mass production in 2027. Through this development, we plan to strengthen our prismatic battery supplying capabilities in the U.S. Furthermore, our high-performance prismatic EV battery was recognized for the world's #1 energy density, fast charging and battery safety among mass produced batteries. We won the President's Prize from the IR52 Jang Young-sil Award affirming our technological capabilities in the industry. For Cylindrical Batteries, we initiated mass production of 46-phi batteries and plan to expand our supply to EV projects. There is this endeavor -- endeavor will be securing the market advantage by diversifying the product portfolio and strengthening our product competitiveness. In addition, we expanded applications for cylindrical batteries. We signed an MOU with Hyundai Motor Group and for joint development of specialized robot batteries, while continuing to expand sales of BBU, we're pushing forward with HEV battery projects. We will also enlarge the market and customer base for small batteries to overcome a slowdown in demand. Next is a market forecast and core strategies for the second quarter. Market demand is expected to be gradually recovered, but uncertainty from recent policies is increasing demand volatility. In response, we'll closely monitor internal and external developments actively respond to customer demand changes and increased sales by targeting new customers and applications to improve our performance. For the EV market, demand is recovering centered around Europe as major OEMs reduce inventory levels and as CO2 regulation and EV-friendly policies take effect. However, risk of demand volatility is likely to persist due to uncertain political issues such as tariffs, will actively respond to shifting demand from key European customers while finalizing and securing new high-nickel LFP and 46-phi projects with EU and the U.S. customers as part of our mid- to long-term growth strategy. Additionally, we'll enjoy the HEV market with cylindrical batteries and prepare upgrade also with battery samples to support future growth. The ESS market is expected to grow fast due to expansion of renewable energy and AI data centers, particularly in the utilities and UPS market. The Ministry of Trade, Industry and Energy's recent confirmation of the 11th basic plan for power supply and demand is expected to expand opportunities. We'll expand sales of high safety, high energy density Samsung battery box and strengthen UPS solution offerings in North America and Europe. Also we'll actively participate in domestic electricity grid stabilization products for higher growth. In the small battery market, power tool demand recovery is likely to be delayed due to the sluggish housing market demand -- housing market caused by high interest rates and high inflation. On the other hand, BBU demand is projected to grow with the expansion of AI data centers. We'll focus on expanding sales of high-power batteries produced in non-Chinese fabs to mitigate the tariff impacts targeting power tool and BBU. For IT applications, we aim to maximize sales and profitability through first in strategy for our major customers' flagship smartphones scheduled to be launched in the second half. In the Electronic Materials market, wafer input of major customers will increase, thanks to heightened demand for high-value AI chips. For OLED, material demand will remain strong, supported by increased panel production in preparation for new smartphone launches in the second half. In response, we will expand sales of high-value products such as semiconductor patterning materials, SOH, SOD, slurry and foldable OLED materials. For sustainable growth, we will also enter into new semiconductor material markets and pursue product approvals for next-generation OLED platforms. Although uncertainties in the business environment still remain high in the second quarter, with the first quarter expected to mark the bottom, we see signs of improvement as inventory slowing, utilization rate is recovering and cost saving effects are materializing. Even in challenging conditions, we'll continue pursuing opportunities to expand sales while steadily preparing for future markets. Now we'll move on to the Q&A session, which will be provided in Korean followed by consecutive interpreting in English. [Operator Instructions] Operator: [Interpreted] [Operator Instructions] The first question will be provided by Hyun-Soo Kim from Hana Securities. Hyun-So Kim: [Interpreted] In your presentation, you outlined the market conditions and key strategies for the second quarter. Could you provide a more detailed performance also for each business segment? Jong-chun Kim: [Interpreted] Thank you for your question. This is Jong Sung Kim, the CFO of the company. As previously discussed, due to the increased volatility associated with tariffs, the Q2 performance may not need initial expectations. However, we anticipate a substantial improvement compared to the first quarter by business unit for EV batteries. While demand volatility in North America may be high due to the impact of tariffs, we expect a gradual recovery in demand in Europe, driven by EV-friendly policies, which should lead to an increase in our sales. ESS may also be affected by tariffs. But with the expansion of renewable energy and increase in power demand driven by AI growth, gross sales of SBB and UPS are expected to continue. As a result, we anticipate overall revenue growth for mid- to large-sized batteries compared to the previous quarter, along with a meaningful improvement in profitability. Although the demand for power tools and micromobility batteries is expected to make a further recovery in the second half of the year, we expect significant loss reduction in Q2 compared to the previous quarter, thanks to the reduced customer inventory levels and strengthened promotion along with increased sales from a new application, namely BBU. Following the seasonal slowdown in Q1, sales of semiconductor materials are expected to increase, along with rising sales of OLED materials for new smartphones launching in the second half of the year. As a result, we anticipate revenue growth and improved profit margin in Q2. From a company-wide perspective, we will focus on steadily improving our performance from what we recognize as the bottom point in Q1. Given the ongoing macroeconomic uncertainties, we will closely monitor market development and maintain strong collaboration with our customers to respond effectively. Thank you. Operator: [Interpreted] Following question will be presented by Sang Uk Kim from UBS Securities. Sang Uk Kim: [Interpreted] I have 2 questions. First question is that the uncertainty surrounding the cash policies of the Trump administration continues, what is the impact on the company? And how do you view the outlook moving forward? And the second question is, at the beginning of March, Europe announced an action plan that includes a revision of the CO2 emission regulations for EV and a policy for supporting EV, how will this action plan affect SDI's business? Yoontae Kim: [Interpreted] I will answer the first question. My name is Yoontae Kim. I'm the EVP of the Business Management Office. The unpredictability of U.S. tariff policy makes it challenging to accurately assess their full impact. However, they are expected to place both direct and indirect pressure on the company's performance. Let me delve into details for each product. First, for EV batteries. This production is done locally in the U.S., the direct impact of tariffs is limited. However, this many battery materials and components are imported from overseas, cost burdens are expected to increase. EVs produced in Mexico and Canada by our customers may also be subject to tariffs which could lead to higher vehicle prices and a potential decrease in demand. This a large portion of our ESS batteries are sold in the U.S. have manufactured abroad and exported to the market, they are inevitably subject to tariffs. We will work closely with our customers to respond appropriately to this situation. For small-sized batteries, there is a large proportion of our major customers' production is outside the U.S. A negative impact is anticipated. Furthermore, if the tariff issue becomes prolonged, it could lead to an overall increase in product prices, which may potentially dampen demand across the board, as uncertainties surrounding tariff policies is expected to persist for the time being, we will closely monitor developments and work with our customers to devise appropriate countermeasures aiming to minimize the impact of tariffs. Jong Sun Park: [Interpreted] This is Jong-Sung Park, the EVP for Automotive and ESS Battery business. And I will be answering your second question related to Europe's action plan and its impact on Samsung SDI's business. The European Commission President has made a strengthening the competitiveness of the automotive industry as one of the key objectives of her mandate. And on 5th of March, an action plan was announced, outlining the future direction of policy support. According to the plan, while CO2 emission regulations have been partially relaxed, various measures will be introduced to stimulate the demand for EVs. Similar to AMPC of the U.S., EU is also considering introduction of battery production incentives to protect its domestic industries. In addition, Germany, the largest market in Europe, announced new policies on April 9, to expand tax incentives for EV purchases and to boost infrastructure development. As a result, a similar initiative incurs EV adoption are expected to spread across Europe. Although the growth of EV demand in Europe had previously slowed, recent signs point to a potential rebound. Supportive government policies are expected to accelerate the recovery in EV demand. Given our company's relatively high exposure to the European market, we anticipate a positive impact on our performance. We will actively seek to maximize the benefit of these favorable policies through enhancing the efficiency of production line operations and other measures. Thank you. Operator: [Interpreted] The following question will be presented by Chuljoong Kim from Mirae Asset Securities. Chuljoong Kim: [Interpreted] I also have 2 questions that I would like to ask. The first question is that the sales of Stellantis, new EVs in Q1 were weaker than expected, has there been any change in the sales outlook for Stellantis joint venture? And the second question is this one. While competitors are scaling back CapEx in response to market demand changes, SDI appears to be taking more aggressive approach by continuing to invest and even carrying out a capital increase. Given the historically conservative investments then, must there been a shift in your investment approach? Jong Sun Park: [Interpreted] I will answer your first question. This is Jong-Sung Park, the EVP of the Automotive and ESS Battery business. Amid recent uncertainties related to U.S. tariffs, our customers have temporarily suspended operations at their factories in Mexico and Canada. Consequently, we expect significant demand volatility in the near term. We are working closely with our customers. We reassess this year's sales outlook and explore appropriate countermeasures. In addition to the current models we are supplying, we will work closely with our customers to expand sales to our other model lines and to develop efficient line operation strategies for various scenarios in order to improve utilization rates. Thank you. Yoontae Kim: [Interpreted] This is EVP Yoontae Kim, of the Business Management Office. I will be answering your second question related to CapEx and investment spend. The EV Battery business typically takes 2 to 3 years from the start of investment to mass production. Therefore, investments should be driven by mid- to long-term market and demand forecast rather than short-term market trends. We believe that expanding production basis, diversifying chemistries and form factors and securing future technologies are key factors for sustainable mid- to long-term growth. To this end, we plan to pursue joint ventures with GM and invest in LFP batteries, 46-phi and all solid-state battery technologies. This capital increase is being proactively undertaken to ensure the secure execution of our long-term investment plans. We will move forward without delays, positioning ourselves for a stronger rebound when market demand fully recovers. Thank you. Operator: [Interpreted] The following question will be presented by Minwoo Ju from NH Investment & Securities. Minwoo Ju: [Interpreted] I also have 2 questions. The first question is that the capital increase plan includes investment for expansion in Hungary. So what is the rationale for pursuing further expansion despite the current low utilization rate at the facility? And the second question is that earlier you've mentioned plans to drive a recovery in the Small Battery segment through entry into new applications, could you please elaborate on these plans in more detail? Jong Sun Park: [Interpreted] Thank you for your question. I will be answering your first question related to the investment in Hungary. This is EVP, Jong-Sung Park from Automotive and ESS Battery. The impact of chasm that began in the second half of 2023 persists and the current utilization rate in Hungary remains relatively low. However, as previously mentioned, investments in the Battery business should be approached with a long-term perspective, guided not by present demand, but by projections over a minimum horizon of 2 to 3 years. The investment in the Hungary factory will focus not only on increasing capacity for the current main product, prismatic high-nickel batteries, but also on adding production lines for new products, including LFP and 46-phi batteries. This expansion is designed to position the company to meet market demand starting in 2027, 2028. In parallel, efforts are being made to enhance investment efficiency by renovating and converting existing lines and facilities, which helps to reduce the cost associated with expanding new lines. Hanjae Cho: [Interpreted] This is Hanjae Cho, from Small Battery business. I will be answering your question related to cylindrical battery. As mentioned earlier in the presentation, the key -- the new applications include BBU, hybrid EVs and robots. First, for BBU, which is experiencing rapid demand growth due to the increase in AI data centers, it already accounts for nearly 10% of our cylindrical battery sales. Given the importance of a high power in this segment, we anticipate continued growth in demand for our cylindrical batteries with excellent high-power capability. While pouch batteries have traditionally been used in hybrid EVs, growing interest is now shifting towards cylindrical batteries, thanks to recent advancements in their high power, high capacity performance and enhance the safety features. We are currently in discussion with multiple customers and aim to secure orders within the first half of this year to ensure mid- to long-term demand. We are stepping up our efforts in relation to robots. In February, we signed an MOU with Hyundai Motor Group to jointly develop batteries designed specifically for robots. Moving forward, we plan to build a strong growth foundation by forming additional partnerships. While maintaining our leadership in existing Small Battery applications, we are actively preparing to enter new ones with the goal of quickly restoring our growth potential in the near future. Operator: [Interpreted] The last question will be presented by [indiscernible] from Daol Investment & Securities. Unknown Analyst: [Interpreted] First question is that ESS saw significant growth last year. Do you expect this growth trend to continue this year? And what is the forecast for annual performance this year? And my second question is that in contrast to the underperforming factory business, the Electronic Materials business has maintained a stable performance, what strategies are being pursued to further drive sales growth in this segment? Jong Sun Park: [Interpreted] Thank you for your question. I will be answering your first question related to the sales forecast related to ESS. Once again, this is Jong-Sung Park, EVP from Business Management Office. The ESS market is expected to experience rapid growth through 2025, primarily in the U.S. market driven by the expansion of renewable energy and increasing power demand from AI. This trend is expected to continue for the foreseeable future. In line with these prospects and leveraging the competitive advantages of Samsung Battery Box, which excels in safety and high energy density. We have already secured orders for approximately 90% of our planned ESS battery production capacity for this year. To meet growing demand, we are optimizing production efficiency and converting EV line, which will result in a 20% increase in capacity compared to last year. As a result, we anticipate continuous quarterly revenue growth, an annual revenue growth rate exceeding 20% compared to last year. However, given that helps may create challenges by impacting demand and driving price increases, we are committed to collaborating closely with our customers to minimize any potential impact. In addition, we are exploring various options for securing on ESS battery production base in the U.S. This will enable us to respond more effectively to the rapidly increasing demand in the U.S. market. Ik Soo Kim: [Interpreted] This is Ik Soo Kim, VP responsible for strategy and the electronic materials business. And I will be answering your second question related to strategies to expand sales of Electronic Materials. Since the divestment of polarizer film business, the Electronic Materials business division has been focusing on semiconductor and OLED materials to secure growth engine. In particular, we are solidifying our market share within existing customers based on differentiated technology and product reliability while placing strong emphasis on customer diversification to drive continued sales growth. Let me elaborate on each key material. For semiconductor materials, as AI adoption expands, the increase in advanced fine patterning processes is driving off the usage of materials particularly in patterning and polishing materials, where we are actively pursuing sales growth. To support this, we are responding in a timely manner to next-generation node transition at major semiconductor customers, while also strengthening promotional activities for both domestic and international clients. As OLED technology sees increasing adoption in IT devices like tablets and monitors and with major domestic and global customers investing in 8.6 generation OLED line alongside the growing foldable display market, significant growth is anticipated. In response, we are working to strengthen our product competitiveness by establishing an early presence in our customers' next-generation platform market. To support this, we are broadening our OLED deposition materials portfolio and developing next-generation OLED color conversion materials with a focus on driving growth through high value-added products. Thank you. Operator: [Interpreted] Lastly, we will answer a question that we collected from the online survey in prior, close to the call. The question is about if there is any update on the current development and preparation status of our all solid-state batteries. And if it would be possible to expand this technology to applications beyond EVs? EVP, Jong-Sung Park from Automotive and ESS Battery will answer this question. Jong Sun Park: [Interpreted] As previously shared, we are working on key tasks necessary for mass production, such as expanding cell capacity, stabilizing manufacturing processes and establishing material supply chain in order to meet our target of mass production were all solid-state batteries by 2027. Additionally, some investments in the domestic mother line are planned to take place this year. While our all solid-state batteries are primarily being developed for EVs, we also see potential for their application in emerging markets such as robots and UAM, which increasingly demand not only high volumetric energy density, but also gravimetric volume. We are currently in discussions with potential customers and plan to further expand business opportunities by diversifying applications in the future. Yoontae Kim: [Interpreted] Thank you for the answer. We want to thank all our investors for their questions and valued opinion. We will take them into consideration when making our future business decisions. This is the end of Q1 2025 earnings call. If you have any questions, please contact our IR team. Thank you. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]

Operator: [Interpreted] Good morning. Thank you for joining today's earnings call. [Operator Instructions] Now we will begin Samsung SDI's 2024 4Q Earnings Call. Yoontae Kim: [Interpreted] Good morning. I'm Yoontae Kim, Executive Vice President of the Business Management Office of Samsung SDI. First, thank you for joining today's earnings call. And joining me are CFO, Jong Sung Kim; EVP, Jong-Sung Park for Automotive and ESS Battery; EVP, Hanjae Cho for Small Battery; and VP [indiscernible] Kim for Electronic Materials. We will provide simultaneous interpretation for the earnings presentation and consecutive interpretation for the Q&A session. Now I will begin Samsung SDI's 2024 Q4 Earnings Call. First of all, please note that starting with the Q3 results, the profit or loss from discontinued operations is separately stated due to the decision to discontinue the polarizer film business, and today's presentation will also follow suit. I'll start with our Q4 and annual results for 2024. The Q4 revenue was KRW 3.8 trillion, down 5% Q-o-Q and 29% Y-o-Y due to slowing market demand. The operating profit recorded a deficit of KRW 257 billion. Including results from discontinued operations, Q4 revenue was KRW 4.5 trillion, and operating profit posted a deficit of [ KRW 243 billion ]. Including profit under the equity method and impairment losses on tangible assets, pretax profit recorded a deficit of KRW 347 billion. Annual revenue decreased by 23% Y-o-Y to KRW 16.6 trillion, and operating profit fell by 77% Y-o-Y to KRW 363 billion. Including results from discontinued operations, annual revenue was KRW 17.9 trillion with operating profit at KRW 446 billion. Next is our 2024 4Q financial status. Assets increased by KRW 6.5 trillion to KRW 40.6 trillion due to CapEx and EV batteries. Liabilities rose by KRW 4.9 trillion to KRW 19.2 trillion, driven by increased debt. R&D expenditure in 2024 was KRW 1.3 trillion, up roughly KRW 200 billion Y-o-Y. CapEx totaled KRW 6.6 trillion. For key ratios of our financial status, please refer to our earnings presentation slides. Now each business unit will present Q4 and annual results for 2024. First off, Q4 revenue for the battery business was KRW 3.6 trillion, down 3% Q-o-Q and 29% Y-o-Y. For EV batteries, demand has slowed due to high interest rates and the reduction of EV subsidies in major countries, leading to inventory adjustments by major customers and a decrease in revenue. For power tool and micromobility batteries, revenue also declined, impacted by the sluggish housing market and weakened consumer purchasing power. On the other hand, revenue of ESS battery reached a record high due to increased sales of ESS and UPS backed by growing power demand for data centers due to strong AI adoption in the U.S. Operating profit for the battery business in Q4 recorded a deficit of KRW 268 billion, a significant drop Q-o-Q due to lower utilization across all business, except ESS batteries, increased fixed costs from new fab operation and onetime costs such as inventory valuation losses. Q4 revenue for the Electronic Materials was KRW 190 billion, down 28% Q-o-Q and 31% Y-o-Y. Demand for semiconductor manufacturing materials grew with the increased input of memory semiconductor wafers. However, sales of display manufacturing materials decreased significantly due to seasonality. Operating profit for the Electronic Materials was KRW 11.6 billion, down 82% Q-o-Q and 83% Y-o-Y. Taken together for the fiscal year of 2024, annual revenue for the battery was KRW 15.7 trillion with operating profit at KRW 218 billion. Annual revenue for the Electronic Materials was KRW 901 billion with operating profit of KRW 145 billion. Now let me enumerate our 2024 business highlights. We successfully initiated early operation at the Stellantis joint venture StarPlus Energy in the U.S. and quickly secured high yield. We also finalized a joint venture agreement with GM laying the foundation for expanding EV business in the U.S. Furthermore, we secured approval for the U.S. Department of Energy, which helped alleviate financial burdens associated with large-scale investments. We also strengthened partnerships with key customers. We have successfully secured orders for premium prismatic batteries from major OEMs in Europe and Asia. Additionally, we are enhancing cooperation with multiple OEMs for 46-phi battery projects. Some of these products are already in the final stages of securing orders. We expanded partnerships with three major independent power producers, ESS, IPP companies in the U.S. We were the first in entering into all flagship models for our major smartphone customer. In 2024, we saw a significant advancement in technology. We advanced all solid battery sample stage and expanded the number of customers to five while internalizing key materials. We started mass production of P6, #1 energy dense premium prismatic battery in the industry and also enhanced the safety and energy density of our new turnkey ESS solution, the new SBB 1.5, which has now entered mass production and supply. We also built a pilot line for LFP large cell. For major ESG achievements, we received CO2 Footprint verification from Carbon Trust for our two additional products, cylindrical and prismatic cell. We also received platinum validation for Zero Waste to Landfill at all domestic and overseas sites. Furthermore, our rating improved from A to A+ and 2024 ESG evaluation and ratings conducted by KCGS and we were also listed on Dow Jones Sustainability World Index for the 20th time. Next, the CFO will share 2025 forecast and business strategies. Jong-chun Kim: [Interpreted] Good morning. This is Jong Sung Kim, Head of Business Management Office. Let's begin with the market forecast by business and strategies for 2025. First is the EV market forecast. 2025, the global EV market is expected to grow 21% Y-o-Y led by the U.S. and Europe overtaking the Chinese market in 2024. However, macro uncertainty is remain high. In terms of policies, U.S. stronger against China, and stricter EU carbon regulation present opportunities. However, the potential reduction of EV-related subsidies and tax credit in the U.S., declining consumer purchasing power in the EU may delay the market recovery. Meanwhile, tighter global cost competition is expected as sales of volume and entry segment EVs and Chinese battery export expand. New battery cell manufacturing companies are likely to suffer due to stressed financial situation caused by delays in mass production. Next is the ESS market forecast. The U.S. will lead 14% of market growth due to growing demand for utilities and UPS driven by the expansion of AI data centers. Especially demand for Korean ESS batteries will increase due to China and U.S. geopolitical tension. As for the small battery market excluding EVs, e2-wheeler such as e-scooter is expected to grow around the India market. However demand recovery on power tool in e-bikes batteries will be delayed due to housing market slum and weakened consumer purchasing power leading to destocking. In the Electronic Materials market, stable growth is expected for semiconductors, driven by increased demand for high-value AI products. However, modest growth is expected for display materials, mainly led by Chinese panel manufacturers. Now let's move on to the 2025 business strategies. As mentioned earlier, we expect a very challenging business environment this year. Under the core principle of select and focus, we aim to set the ground for sustainable growth through three key strategies: expanding sales and awards, heightening technical edge, and reforming fundamentals. First and foremost, to expand sales and awards will promote optimized and personalized response for each business customers. For EVs, we'll supply for more diverse EV trims and expand U.S. sales around StarPlus Energy. Also, we'll focus on winning LFP projects for the mid- to long-term growth of volume and entry segment EV market. For ESS, we'll secure ESS production capacity to the fullest to meet growing demand and maximize sales through the SBB 1.5 and high-value UPS products tailored for AI data centers. For small batteries, we'll expand sales with high-power new products, including power tool and battery backup units and strengthen micromobility competitiveness with differentiated products such as those with extended lifespan. For Electronic Materials, we will diversify our customer base by promoting our products to new semiconductor and display customers in China. Second, highlight -- heightening technological edge. For ASB, we will achieve the targeted energy density and complete mass production technology. We'll complete the development of next-generation premium prismatic battery P7 and thrust commercialization based on LFP platform for volumes on EVs by elevating technological readiness. In small batteries, we'll launch ultra-high power small batteries to secure orders for hybrid EVs and expand sales for outdoor power tool preparing for long-term growth. Lastly, reforming fundamentals. To reform the fundamentals, we are implementing various initiatives to make profit amid challenging market circumstances. We are improving productivity of key products in Hungary and stabilizing StarPlus Energy through timely setup and ramp up. We're also enhancing investment efficiency by utilizing old lines and equipment. Furthermore we'll reduce cost by optimizing utilization related resources, diversifying key materials, and simplifying the manufacturing process. The business environment of 2025 is expected to become more challenging. In times like this we must return to our core values and continuously innovate and challenge ourself. By doing so we'll fortify our management foundation to gear up for the upcoming [indiscernible]. Thank you. Unknown Executive: [Interpreted] To conclude the presentation, I'll discuss 2024 dividend and our shareholder return policy covering 2025 to 2027. We plan to pay out base dividend of KRW 1,000 for common dividend and KRW 1,050 for preferred dividend per share due to a loss in free cash flow in 2024. With the expiration of the existing shareholder return policy, we have reviewed the policy covering 2025 to 2027. No dividend will be paid for the next 3 years as free cash flow, the resource of dividend is projected to remain negative due to continuous sizable CapEx for mid- to long-term growth. In light of this, we'll focus our resources on strengthening our growth engine. Improving business performance and securing future competitiveness, we'll strive to resume dividend payout when we establish the next shareholder return policy. Next shareholder return policy will be reestablished in 2028 by comprehensively considering business results, free cash flow, and investment plans and et cetera. Unknown Executive: [Interpreted] Now we'll move on to the Q&A session which will be provided in Korean followed by consecutive interpreting in English. If you have any questions, please follow the operator's guidance. Operator: [Interpreted] [Operator Instructions] The first question will be provided by Hyung Cho from HSBC Securities. Woo-Hyung Cho: [Interpreted] I have one question regarding your fourth quarter results. You mentioned during the presentation that there were some one-offs reflected in Q4. The size appears to be a bit large. Can you give us some details about the one-off? And also, what would the profitability be without the one-off? Yoontae Kim: [Interpreted] This is EVP, Yoontae Kim, of Business Support, and I will answer your question about one-off expenses in Q4. The Q4 one-off expense includes some inventory asset valuation impairment and also some quality-related provisioning. Even though it's difficult for us to go into the details, without the one-off expense, the EV battery business will be recording a low single-digit percentage profit and company level profit would also be slightly above breakeven. Operator: [Interpreted] The following question will be presented by Jay Hyun Kwon from JPMorgan Securities. H. Kwon: [Interpreted] I have two questions. The first question is about first quarter and full year 2025 guidance. During the presentation, you gave us the market outlook and the company's strategy direction. Can you give us a bit more detail about what you expect in terms of company performance? Second question, the last year, the downstream demand continued to be sluggish. You mentioned that you are expecting continued uncertainty downstream this year, and we are seeing automotive OEMs as well as battery companies adjust their investment plans. Is SDI also planning any changes to its CapEx plan this year? Jong-chun Kim: [Interpreted] This is CFO, Jong Sung Kim, and I answer your first question. As mentioned as part of the market outlook this year, the EV market is expected to grow, but policy uncertainty is rather high and demand in power tools and micromobility markets continue to remain muted. Under such circumstances, major customers are focusing on inventory adjustments, and therefore, near-term recovery of business performance remains challenging. However, from the second half of this year, as policy uncertainty is somewhat resolved and inventory adjustments come to an end, we expect to see improvements. For the ESS and Electronic Materials business, demand is relatively more stable, and we expect growth to continue quarter after quarter except for the seasonally weak Q1. So overall, we expect company level performance to gradually improve from Q2 after bottoming out in Q1. The business environment once again this year is not easy, but we will focus on minimizing the impact of market slowdown on our performance and patiently laying the foundation for future growth by expanding sales and project awards through close cowork with customers, heightened technology edge and also reformed business fundamentals. Heonjoon Kim: [Interpreted] This is EVP, Heonjoon Kim, and I'll answer your second question, which was about our investment plans this year. SDI is also revisiting its investment plan, taking into account the market situation and is in the process of adjusting its investment plans with an overall conservative stance. The focus is on improving our investment efficiency, including using existing lines to reduce cost of new line expansions or adjusting the timing of some investments depending on the project and the site. Accordingly, we expect this year's CapEx to decrease than last year. That said, we plan to execute investments necessary for future growth, including the U.S. JV with GM, all solid batteries, LFP and the 46-phi according to original schedules. Operator: [Interpreted] The following question will be presented by Jin-Myung Lee from Shinhan Securities. Jin-Myung Lee: [Interpreted] I have two questions. With the start of inauguration of the Trump government, there is continued policy uncertainty in the U.S. And I'm wondering what are your plans? Can you give us some updates on the Stellantis joint venture operation this year? And how much AMPC do you expect? Second question is related with ESS. The U.S. ESS market is expected to show another year of strong growth driven by increase in power demand, such as AI-related data centers. Does SDI have plans of increasing its ESS capacity? Also, is it looking into securing local ESS capacity in the U.S. Unknown Executive: [Interpreted] This is EVP [indiscernible] Kim of large batteries. I'll answer both of your questions. The first question regarding the Stellantis joint venture. As mentioned earlier, the Stellantis joint venture actually started operation of its first line last December, which is 2 months ahead of its original schedule. It successfully executed the quickest ramp-up period in the industry and is in full operation at a quality equal to existing mass production lines. Additional lines will be coming online in steps this year, and we will be focusing on on-time setup and ramp-up to stabilize the plant early on. Regarding the AMPC, given the various market changes and uncertainties, we are in discussions still with the customer over full year volume. And therefore, it's difficult for us to disclose the specific size at this point. We will communicate with the market at a later time once customer discussions are completed and specific projections are available. Regarding your second question about our ESS capacity expansion plans and whether we're looking into local U.S. capacity, leveraging our outstanding safety and differentiated performance, our ESS order book is already corresponding to around 90% of our capacity. And U.S. ESS demand is expected to remain strong, driven by expansion of the AI industry and also renewable energy. We are working on increasing our capacity by at least 20% by enhancing the efficiency of our production lines and also converting EV battery lines for ESS. In addition to more capacity, we will focus on promotion of our SBB 1.5 with greater safety and energy density and the launch of the new SBB 2.0, which features large capacity LFP cells and major performance upgrades to drive new orders. On the UPS side, we will focus on further increasing our market share in the high power output market, where we already have more than 80% market share by offering stronger high-end solutions based on our unparalleled high-power output and long cycle life technology specialized for AI data centers. We're currently studying local production options to meet mid- to long-term demand, and we will share details with the market when they become available. Operator: [Interpreted] We'll take one last question. The last question will be presented by Hyung Wou Park from SK Securities. Hyung Wou Park: [Interpreted] I have two questions. First of all, with the weak demand coming from power tools and micromobility, it appears that the cylindrical battery business performance would also be negatively affected. I would like to hear some details about your strategy for the cylindrical battery business this year. Second question is about your Electronic Materials business. Can you give us a bit more detail for full year market outlook and your strategy for the Electronic Materials business by product? Hanjae Cho: [Interpreted] This is Hanjae Cho of the Small Battery business unit. I'll answer your first question. With the delay in the recovery of the U.S. housing market and also European e-bike-related budget cuts, the demand for power tools and micromobility has remained sluggish and customers are continuing their inventory adjustments. Therefore, the situation is not easy, but we will launch new high-power batteries to expand sales in power tools and actively take on the battery backup unit, the BBU market, where demand is growing with the increase of data centers. We will also increase our presence in the recently growing e2-wheeler market with differentiating products featuring longer cycle life. For mid- to long-term growth, we plan to launch the new ultra-high power products to supply to outdoor power equipment projects and hybrid EV projects. The 46-phi, which starts mass production in Q1 will offer better quick charging and cycle life performance and will be used to win new EV projects to build mid- to long-term growth momentum. Ik-Su Kim: [Interpreted] This is Ik-Su Kim, VP of the Electronic Materials business, and I will answer your second question. The semiconductor materials market is expected to see steady growth as strong AI demand drives memory bit shipments this year, leading to increased wafer input. That said, concerns still remain about a potential scenario where Chinese chip makers increase their legacy chip production, leading to oversupply and inventory buildup of mobile and PC semiconductors and eventually production adjustments by major chip makers. We plan to strengthen our DRAM and NAND metal slurry lineup to increase sales to key Korean customers and to increase high heat conductive EMC using our core ingredient technology, including filler and catalysts necessary for achieving high thermal conductivity. For SOD and [ CI-SCR ], we're looking to increase sales to new customers, including Chinese customers. The display materials market is expected to grow slightly Y-o-Y, mainly around the OLED panel makers. The QD display market is expected to maintain growth momentum, mainly around gaming monitors. We plan to use our new G or green-host product, which improves panel life and efficiency to get designed in on new platforms of major Korean and overseas customers and also increase sales by expanding sales to Chinese IT and automotive applications. This year, the Electronic Materials business expects to achieve quality growth despite high uncertainty, and we will focus on maximizing our business performance by getting our new products designed in on time and following through with solid quality. Unknown Executive: [Interpreted] Before we end the call, we will take one question that we have collected online prior to this conference call. The question that we will address will be about LFP battery. The question is that there's continuing growth of LFP battery demand coming from both EV and ESS markets. Can we hear some updates on SDI's LFP preparation? This question will be answered by EVP Jong-Sung Park of the Large battery business. Jong Sun Park: [Interpreted] SDI is a latecomer to LFP batteries, but we have already completed a platform that differentiates us from competitors. We are currently in commercialization of LFP with offerings specific to EV and ESS markets, respectively. For EV batteries, our LFP battery is differentiated from existing products in terms of higher energy density and cycle life by leveraging our prismatic form factor, material and electrode technology. We are discussing 2027 mass production projects with key customers, and we are also preparing a system for local supply to meet needs of key customers. For ESS, we're developed -- we have already developed one of the industry's largest capacity LFP cell in the second half of last year, and we plan to complete proofing of production process and mass production feasibility this year with the aim of starting mass production of the LFP-based SBB 2.0 with better cost competitiveness and capacity from the first half of next year for global supply. Our proprietary technology and global production operation know-how will be actively leveraged to quickly expand our position in the market. Unknown Executive: [Interpreted] Thank you for all of the opinions that have been submitted, and we always value and reference the opinions of our investors in our business decisions. That completes our earnings conference call. If you have any additional questions, please forward them to our IR team. Thank you very much. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]

Operator: Good morning, everyone. Thank you for joining Samsung SDI 2024 Third Quarter Earnings Call. After today's presentation, we will move on to the Q&A session. [Operator Instructions] Now we will begin 2024 third quarter earnings results. Yoontae Kim: [Interpreted] Good morning. I am Yoontae Kim, VP of the Business Management Office of Samsung SDI. Thank you for joining the earnings call for the third quarter of 2024. First, I would like to introduce the management team joining today's call. We are joined by CFO, Jong Sung Kim; EVP Michael Son for Automotive and ESS Battery; EVP Hanjae Cho, representing Small Battery; and EVP Sang-Kyun Kim for Electronic Materials. Before we begin, I would like to mention that Samsung SDI decided discontinue the polarizer film business on September 10 as disclosed on DART. Please note that from Q3 results, the profit and loss from discontinued operations is separately stated, and we also separately categorize it as assets held for sale and liabilities held for sale in the financial statements. Let me enumerate our Q3 results and financial highlights. Under the effect of slowed market demand, Q3 revenue was KRW 3.9 trillion, down 4% Q-on-Q and 30% Y-o-Y. Operating profit went down 46% on quarter and 72% in year to KRW 129 billion. For reference, including the results of the polarizer film business, Q3 revenue was KRW 4.2 trillion, down 5% Q-o-Q and 29% Y-o-Y. Operating profit went down 50% on quarter and 72% on year to KRW 141 billion. Speaking of performance by segment, the battery business posted KRW 3.6 trillion in revenue, down 5% Q-o-Q and 31% Y-o-Y, impacted by slowing market demand for small batteries and the base effect from one-off profit in the previous quarter. Its operating profit declined 69% versus last quarter and 85% versus last year to KRW 63.5 billion. The Electronic Materials revenue was KRW 263 billion, which increased 24% quarterly and slightly increased yearly centering on OLED materials. The operating profit rose to KRW 66.4 billion, up 102% Q-on-Q and 24% Y-o-Y with profitability improving as well. Pretax profit was KRW 266 billion with KRW 136 billion of nonprofiting -- nonoperating profit, such as profit and loss under the equity method. Profit from continuing operations before corporate tax was KRW 226 billion, and the net profit was KRW 230 billion, including profit from discontinued operations of KRW 3.6 billion from the polarizer film business as previously mentioned. Quarter end total assets increased 3.62 -- KRW 362 billion to KRW 38.1 trillion sequentially as the tangible assets grew on CapEx. The liabilities were KRW 17.9 trillion (sic) [ KRW 17.009 trillion ], up by KRW 416 billion Q-o-Q. The equity increased (sic) [ decreased ] KRW 54.4 billion on quarter to 21% -- KRW 21 trillion while the debt-to-equity ratio rose slightly to 80%. Next, I would like to share our ESG performance. We are conducting the 8 environmental management strategic tasks under the guiding principle of ESG management lies at the core of our business strategy and offers a differentiating competitive edge. In July, we have started recycling the lithium retracted and recovered from cathode washing wastewater and established a local recycling system at the StarPlus Energy plant-Stellantis joint venture in the U.S. In August, we also received carbon footprint certification for 2 battery products from Carbon Trust in the U.K., bringing the total number of certificated products to 4. Along with that, our efforts to manage ESG throughout the entire supply chain continues as we work with partners to monitor ESG risks and help them improve their ESG capabilities. In recognition of our efforts, we received the highest rating of A+ by KCGS, Korea's leading ESG rating agency. We will continue to make every efforts in ESG management. Now each business unit will present the details of the Q3 results and the Q4 outlook. Michael SON: [Interpreted] Good morning. This is Michael Son, Head of the Automotive and ESS Battery Strategic Marketing team. For EV battery in Q3, the revenue grew as P6 sales new EVs in the U.S. increased, but profitability weakened due to slower EU demand and FX effect. Although the EV battery was affected by the short-term sluggish demand, we solidified our foundation for medium- to long-term growth by finalizing the joint venture contract with GM based on premium prismatic batteries and winning new orders for European and Asian major OEMs. Meanwhile, in terms of ESS, ESS revenue and profit improved as utility sales increased amid launch of the SBB 1.5, backed by growing power demand for AI as well as renewable power generation products in the U.S. For mid- to large-sized battery in Q4, earnings is expected to improve around ESS. For EV battery, we see limited sales improvement due to sluggish growth in demand and customers' inventory destocking despite StarPlus Energy start-up production in the U.S. and larger sales of high-value products for EU customer. As for ESS, as sales of utility SBB in the U.S. continue to grow, we will drive earnings growth by expanding EU sales of utility in UPS in Q4 as we did in Q3. Thank you. Hanjae Cho: [Interpreted] Good morning. I'm Hanjae Cho, Head of the Small Battery Strategic Marketing team. For cylindrical battery in Q3, despite power tools and m-mobility applications showing a slight uptick in their sales Q-o-Q, mainly to major customers, slow market recovery and inventory adjustment continued. The results weakened due to the base effect caused by the one-off profit realized in the previous quarter, low utilization led by declined cylindrical sales for EVs. For pouch battery, the revenue increased with major customers' launch of new smartphones. As for cylindrical battery in Q4, challenging circumstances such as the slow recovery in demand are expected to continue. However, we will expand sales of power tools to major customers in order to minimize the impact of weak demand in the short term. Also for mid- to long-term growth, we will develop new affordable products to address the mid- to low-end market and innovative products to the premium market. And for our market expansion, in addition to pioneering a new market in Southeast and West Asia, where demand for E 2 wheeler is growing. We will also push forward for our entry into the E 4-wheeler market, which represents special-purpose 4-wheel vehicles. The 46-phi battery is on track for mass production early next year with significant demand growth expected in the coming years. We're currently in discussions with major OEMs to secure EV orders and expect to see tangible results before year-end. For pouch battery, we will maintain our momentum for earnings growth while duly preparing for upcoming flagship models planned in the fourth quarter. Thank you. Sang-Kyun Kim: [Interpreted] Good morning. I am Sang-Kyun Kim, Head of the Electronic Materials business. In Q3, OLED materials results improved significantly Q-o-Q and Y-o-Y due to increased demand driven by the launch of mobile flagships and increased sales from customers' inventory restocking. Semiconductor materials results remained on par with the previous quarter. In Q4, customers' inventory destocking and low utilization rate is expected due to slow market demand. For semiconductor materials, we will sustain our market share with major customers and enter new orders for SOD and EMC to new customer. For OLED materials, we will enter new platforms for materials such as G-Host in a timely manner in line with the launch of new products by key local and Chinese customers. Thank you. Unknown Executive: [Interpreted] We will move on to the Q&A session, which will be provided in Korean followed by consecutive interpreting in English. If you have any questions, please follow the operator's guidance. Operator: [Foreign Language] The first question will be presented by Won Suk Chung from iM Securities. Won Suk Chung: [Interpreted] My name is Won Suk Chung from iM Securities. Can you shed some light on the joint venture agreement with GM that was announced at the end of August? In particular, how did GM, which had traditionally used pouches, decide to adopt the prismatic batteries? And are there any plans to expand into additional U.S. locations? And do you also have any plans for capacity expansions as well? Jong-chun Kim: [Interpreted] Thank you. My name is Jong Sung Kim. I'm the CFO of the Business Management Office, and I'll be providing the answer for the first question. As for further clarification to the disclosure made on 28th August, the JV with GM will be located in New Carlisle, Indiana adjacent to the city of Kokomo, Indiana, where our Stellantis JV, StarPlus Energy, or SPE, is located and will produce and supply our prismatic premium product, P6, to GM for an 8-year period from 2027 to 2034. The production capacity will be 27 gigawatt hour per year with the possibility of expansion to 36 gigawatt hour through [ consultation ] between the parties. Regarding GM's decision to adopt the prismatic cells, we believe that our high energy density P6 prismatic battery was able to meet the particularly high demand for longer driving range in America where there is a growing focus on EV safety recently. Both companies plan to operate the joint venture by leveraging our manufacturing technology together with GM's strength in local operations, supported by JD's advantages of stable supply and financing. We also believe that both sides through the JV will enjoy various benefits of manufacturing locally in the U.S. Regarding further expansion within the U.S., we are exploring various options, including JVs with other OEMs or stand-alone plants. This will be pursued in line with the company's mid- to long-term growth strategy, which takes into account not only automotive batteries, but also ESS and other businesses. Thank you. Operator: [Foreign Language] The next question will be presented by Woo-Hyung Cho from HSBC. Woo-Hyung Cho: [Interpreted] My name is Cho Woo-Hyung from HSBC Securities. I actually have 2 questions. One question is related to the EV batteries for the North American market and the other for the European market. With the U.S. potential election just around the corner, it seems that there is increased uncertainty related to EV policies. So I'm wondering, as you've mentioned, that SPE will be operational ahead of schedule in Q4. This was mentioned during the presentation. So what are the projected time lines for each production line going forward? Or so what are the estimated AMPC figures for Q4 this year and for 2025 after operations begin? And as for the European market, it seems that there's going to be accelerated electrification taking place on the European continent. So with the European EV demand, which accounts for a large proportion of SDI's automotive battery sales slowing down this year, what is SDI's outlook for European market demand and sales next year? Michael SON: [Interpreted] I am EVP Michael Son of the Automotive and ESS Battery business, and I'll be providing you the answers to your 2 questions. And your first question is related to the early operation of SPE and as well as the schedules for the lines as well as estimated AMPC figure for the year 2025. Well, SPE will be our first U.S. battery cell production site with the first line coming online ahead of schedule in December this year, supplying P6-based cells and modules. The remaining 3 lines are planned to start up sequentially every quarter starting in Q1 of next year, with a combined capacity of 33 gigawatt hour per year. We plan to apply the know-hows we have accumulated from operating the Hungarian plant to SPE to shorten the ramp-up period to 1 to 2 months to ensure optimal yields in a short period of time and respond to customer demand in a timely manner. Regarding the AMPC amount outlook for SPE, although we expect only marginal benefit in Q4 this year as it will be the early stage of production, next year, we expect to be able to run SPE's lines at full capacity based on customers' aggressive EV strategies, including the launch of various new vehicles from Stellantis, which will result in a meaningful AMPC. And the resulting AMPC will be used to fund the joint venture's operations and future facility investments. Let me continue to provide you with the answer to your second question. And your second question was related to the anticipated EV demand in Europe as well as SDI's sales outlook. The European EV market is currently down around 2% year-to-date in August with the economic recession and the removal of subsidies in key countries contributing to sluggish demand compared to the rest of the world. However, thanks to a number of changing factors, European demand is expected to improve next year, and we expect our sales to increase as well. First, starting next year, OEMs will need to produce more EVs than they did this year to meet tighter regulations that will require a 15% reduction in average CO2 emissions from vehicles sold in Europe compared to 2021, and many market research firms expect European EV demand to grow by at least 25% in 2025 compared to this year. In light of reinforced regulations, European countries are demonstrating a renewed commitment to providing policy support for EVs. In particular, Germany, the largest market in Europe, is working to expand tax incentives and corporate vehicle tax discounts for EVs in corporate fleets, which make up nearly 60% of vehicle sales in Germany. It is worth noting that the upper price limit for electric vehicles eligible for corporate vehicle tax discount is expected to increase from EUR 70,000 to EUR 95,000. This is anticipated to have a positive impact on sales of premium electric vehicles equipped with our batteries. In addition, with the recent confirmation of the EU's imposition of additional tariffs on Chinese EVs, the proportion of sales by local OEMs in Europe is expected to increase in the future, and demand for our products is expected to increase accordingly. While we are currently working on our business plan for next year and it is too early to comment specifically on our sales outlook, we expect our battery sales to begin to improve from this year as key policy changes mentioned above drive demand for EVs in Europe. Operator: [Foreign Language] The next question will be presented by Jay Hyun Kwon from JPMorgan. H. Kwon: [Interpreted] I actually have 2 questions. And the first question is related to the ESS market, and the second question is related to the Electronic Materials business. And my first question is that the ESS business performance, particularly in the U.S. market, has recently shown a significant improvement. So what are the main drivers behind the recent demand increase and outlook? And also what is the projected profitability for the ESS business as a result? And my second question is related to the polarizer film business. So what is your strategy for the Electronic Materials business now that you have decided for the sale of the polarizer film business? Michael SON: [Interpreted] Once again, this is EVP Michael Son of the Automotive and ESS Battery business. I'll be providing the answer to the first question that you have asked. And those are questions related to the main drivers behind the recent demand increase and outlook and also about the projected profitability for the ESS business. The increase in demand for ESS is set to become a long-term trend as electricity demand rises in line with the growth of the AI industry and the expansion of renewable power generation particularly in the U.S. market. The demand for electricity for AI in the U.S. market is forecast to grow by approximately 6 folds from 16 terawatt hour in 2024 to 97 terawatt hour in 2030. This growth is expected to be driven by the increasing promotion of climate commitments such as carbon neutrality by major tech companies. As a result, the demand for ESS in the U.S. is anticipated to expand considerably from 41 gigawatt hour in 2024 to 90 gigawatt hour in 2030, representing a notable increase from last year's forecast. In this context, we have launched SBB or Samsung Battery Box, a solution for power with increased energy density and safety, which has increased product competitiveness and is rapidly improving sales and profitability. Following sales growth of more than 20% Q-o-Q in Q3, we expect further sales growth in Q4 and continued improvement in profitability. On the other hand, ESS customer demand has historically been dominated by short-term projects with short lead times from order to mass production but in recent years, the size of individual projects has increased and long-term supply projects are on the rise. In the midst of this, we have secured stable orders for next year's deliveries based on our long-term partnerships with 3 major U.S. utilities, and we expect our earnings to continue to grow in the future. Thank you. Sang-Kyun Kim: [Interpreted] This is EVP Sang-Kyun Kim of the Electronic Materials business, and I'll be providing the answer to the second question. And your second question was related to our strategy for the Electronic Materials business after the sale of the polarizer film business. Well, going forward, the Electronic Materials business plans to secure future growth engines by developing new materials through active R&D investments mainly in semiconductor materials, OLED materials and battery materials. In terms of major materials, semiconductor market is expected to grow at a CAGR of 8%, mainly in patterning materials. As fine patterning process increases with the expansion of AI-based technologies. We plan to secure patterning materials for new nano process, including SOH, slurry, EUV, inorganic PR, et cetera, to achieve a first in position with major clients' next-generation tech nodes. Based on this foundation, we will also work to expand entry into other external customers. The OLED or O-L-E-D market is expanding into IT devices such as tablets and monitors. With the growth of foldable display market, the material demand is expected to see a steady annual growth rate of around 6%. In addition to our existing green host, we plan to secure new deposition materials like blue host and next-generation color conversion materials for OLED, thereby increasing our share with major customers. We plan to increase sales of FOCA or F-O-C-A for foldables through expansion of our customer base. In addition to Battery Materials business will be fostered in line with the battery business road map by promoting the black boxing of core technologies such as additives for electrode and materials for all solid-state batteries in addition to existing separator materials. While the divestment of the polarizer film business will reduce sales volume in the short term, we plan to use this as an opportunity to realign our portfolio around high-value materials business and continue our profitable qualitative growth. Thank you very much. Operator: [Foreign Language] The last question will be presented by Sang Uk Kim from UBS. Sang Uk Kim: [Interpreted] My name is Sang Uk Kim from UBS, and I have 2 questions. And my first question is related to ESS. The first question is that the introduction of LFP batteries seem to be necessary to further enhance ESS competitiveness in the United States, where demand is growing rapidly. So what is the current progress on LFP? And what are your plans for capacity expansion and overseas locations? And as for my second question, with the ongoing slowdown in business results, as sluggish demand for cylindrical batteries continues, so when do you expect demand to recover for SDI? And what is your medium and -- to long-term strategy? Michael SON: [Interpreted] This is Michael Son, the EVP for the Automotive and ESS Battery business, and I'll be providing you the answer about the LFP batteries for ESS. As you have mentioned, we are -- or have been preparing for the introduction of LFP batteries to expand the growth of the ESS business and have recently completed the verification of large-sized LFP cells, confirmed the product and plant concept, and last month started the construction of a mother line at the Ulsan plant with the aim of mass production and supply to global projects in 2026. Our LFP batteries will leverage the benefits of the prismatic form factor to enable the industry's largest cell size for cost competitiveness while applying differentiated manufacturing technologies and cell design to achieve the highest energy density and longest life characteristics. And regarding capacity plans, we are responding to the recent increase in demand by producing NCA chemistry-based SBB products in Ulsan, Korea and Xi'an, China and are planning to expand LFP capacity in the mid- to long term and are also considering setting up overseas LFP production bases. For our overseas LFP production base, we plan to complete validation and initial mass production first at the domestic mother line. Given the continuously expanding market size and the active support policies for local production, we are prioritizing the United States as the initial location. Moving forward, we will proceed to enter the market at the appropriate time considering the future market demand and policy changes. Hanjae Cho: [Interpreted] My name is Hanjae Cho. I'm responsible for the Small Battery business, and I will be providing the answer related to the cylindrical batteries. So with the ongoing slowdown, as you said, for the demand for the cylindrical batteries, my answer -- you had some questions related to that. So our cylindrical battery business is slowing down, as you said -- as demand for power tools and e-bikes has slowed -- been slow to recover after a sharp decline due to post-pandemic recession and high interest rates and also sales for EV applications, which have been growing as strongly in recent years, have also declined significantly. Despite a rate cut in September, real mortgage rates remain high and U.S. housing market indicators remain weak. Many research firms forecast a full recovery in demand for housing-sensitive power tools only in the second half of 2025. Additionally, e-bikes are expected to be affected by the off season in the second half of the year, and EV demand will take some time to recover. In the short term, we will strive to minimize the impact of the slowdown in demand by strengthening cooperation with major customers in power tools and entering into new micro-mobility markets while thoroughly preparing to respond to demand recovery for cylindrical batteries in the medium to long term. Our first objective is to maintain our technology leadership in cylindrical batteries. To this end, we will launch cost competitive products for mid- to low-end markets for power tools and micro mobility as well as innovative products for the premium market. We will also look for new markets for E 2 wheelers like India and enter into E 4-wheeler market, which is a market for specialized 4-wheeled vehicles used in construction, agricultural sectors and so on. Regarding the new 46-phi form factor, we anticipate commencing mass production in the first quarter of next year and actively pursuing orders for EV application within the year to secure new mid- to long-term growth engines. Thank you. Unknown Executive: [Interpreted] So now we would like to answer a question that we have received online in advance. Since our last earnings call, investors have been able to submit questions in advance via our website. And this quarter, we received a variety of questions, many of which were not addressed during the Q&A session, so we'll close today's earnings call with an additional response to one issue of particular interest to our shareholders. Michael SON: [Interpreted] This is Michael Son of the Automotive and ESS business -- Battery business, and I will be providing the answer to our retail investor. EV demand growth has slowed over the past year or so, impacting the performance of the rechargeable battery industry. However, we believe that the medium- to long-term growth of the EV market will remain unchanged, driven by continued agreement policies in major countries, introduction of a range of EVs with improved performance and competitive pricing and the impact of expanding charging infrastructure. Most market research firms maintain a 15% CAGR growth forecast through 2030 and most of the major OEMs that we work with are launching new EV projects in various segments to increase electrification rates from 10% this year to 30% to 40% in the next 3 years. In response, we are actively developing technologies and winning orders in line with these market needs. In terms of new orders, our business opportunities are expanding as OEMs are actively considering the adoption of prismatic batteries for safety, energy density and fast charging capabilities. In addition to the JV with GM, the largest automotive company in the U.S., which you may already know, we have recently reached some tangible results on new orders for European and Asian customers. We are also in discussion with a number of customers for ultra-premium all solid-state batteries, volume segment focused NMX and LFP, and a new form factor, 46-phi batteries. We will strive for mid- to long-term growth and profitability by securing continuous high-quality orders, leveraging industry-leading technology for competitiveness and the highest quality standards. Thank you. Unknown Executive: [Interpreted] thank you very much for your response. We appreciate our investors' feedback, and we will take the feedback into account when we make key management decisions. So this concludes our Q3 2024 earnings call. If you have any further questions, please contact our IR team. Thank you very much. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]

Operator: Thank you all for joining the conference call for the earnings results of Samsung SDI. This conference will start with a presentation followed by a Q&A session. [Operator Instructions] Now we will begin the presentation on Samsung SDI's second quarter 2024 earnings. Yoontae Kim: [Interpreted] Welcome, everyone. Thank you for joining us today. I'm VP Yoontae Kim of Samsung SDI's Business Management Office. First, we are joined by CFO, Jong Sung Kim; EVP Michael Son for Automotive and ESS Battery; EVP Hanjae Cho representing Small Battery; and VP Kyongho Yoon for Electronic Materials. We will now begin the earnings call for the second quarter of 2024. First, let me enumerate our Q2 results and financial highlights. Under the effect of slowed market demand incited by the EV adoption curve entering the chasm, Q2 revenue was KRW 4.5 trillion, down 13% quarter-over-quarter and 24% year-over-year. Operating profit went up 5% on quarter to KRW 280 billion but did 38% on year. Speaking of performance by segment, the Battery business posted KRW 3.9 trillion in revenue, down 15% Q-o-Q and 27% Y-o-Y, impacted by slowing market demand and falling metal prices. The operating profit declined 3% versus last quarter and 46% versus last year to KRW 208 billion. The Electronic Materials revenue was KRW 577 billion, which increased 5% quarterly and 1% yearly, centering on polarizer film earnings. The operating profit rose to KRW 72 billion, up 36% Q-o-Q and 16% Y-o-Y with profitability improving as well. Pretax profit was KRW 377 billion with KRW 97 billion of nonoperating profit such as profit and loss under the equity method. The net profit was KRW 301 billion. Quarter end total assets were KRW 37.8 trillion, up by KRW 2.3 trillion sequentially as the tangible assets grew on CapEx. The liabilities were KRW 16.6 trillion, up by KRW 1.8 trillion Q-o-Q. The equity also rose KRW 585 billion on quarter to be KRW 21.2 trillion with the debt-to-equity ratio at 78%. Next, our ESG performance during the period. On June 28, we released a Sustainability Report 2024 that details our ESG activities and outcomes. For the environmental factor, our commitment and aim for environment-friendly management with tasks like transitioning to renewable energy, cutting greenhouse gas emissions and building battery circular economy. For the social factor, our effort in reinforcing supply chain sustainability, employee safety and health, product safety as well as ensuring diverse and inclusive global talent acquisition and work culture. For the governance factor, the Board of Directors' activities such as introduction of a senior independent director system along with ethics and compliance commitments and performance. Also outlined in this report are Samsung SDI's efforts to secure super-gap technological competitiveness, which is the key element in our mid- to long-term growth and vision such as R&D, patenting and smart factory operations. This report is available on our official website and DART corporate filing system. We'd like to ask for your continuous interest in this. Before moving on to business details, CFO Jong Sung Kim, will share the company's first half highlights and second half outlook of 2024. Jong-chun Kim: [Interpreted] Good morning. I'm CFO Jong Sung Kim. Let me start with our first half highlights. Samsung SDI's earnings fell short of the market expectations, mainly in EV battery due to continued market demand slowdown, which derailed more than anticipated. Nonetheless, we maintained solid results by putting profitability as our priority in such challenging environment while preparing to accelerate growth once the market turns around. First, our preparation for commercializing also the state battery is well on course. We began simple supply late last year, which this year expanded to 5 customers at their request. The preparation to launch mass production of LFP battery in 2026 is also going strong as we set up a dedicated pilot line. This is to capture expanding demand in volume and entry-level EV markets, which are slated to grow at a high rate. We also further solidified our foothold in pouch battery market by bolstering development capability, which resulted in increasing our market share in key customers' flagship model. As recently reported in media, we have been awarded a large-scale ESS project from one of the leading clean energy companies in the U.S. This reflects market recognition of our Samsung Battery Box competitiveness. We are also engaging in additional talks on long-term supply of Samsung Battery Box, our total solution for utility application with key customers. Now turning to the upcoming half outlook. The second half will likely see the repeat of the first half situation where the demand meets the initial forecast. We also expect the lagging demand to recover later than anticipated. That being said, this is a temporary situation caused by a variety of factors such as EV market chasm, inventory adjustments at customers and macro uncertainties. We maintain our forecast that the EV industry's high growth will remain unaffected in the longer term. Pressing through the difficulties in the second half, Samsung SDI will steadfastly pave the way for sustained future growth while improving business results. First, we'll maximize revenue to overcome demand slowing down. For EV battery, we'll expand P6 sales in the U.S. market and secure new projects. StarPlus Energy, our first joint venture in the United States, will push to start mass production ahead of schedule. For a small battery, we will expand sales of differentiated products such as high-power cylindrical battery and increase long-term agreements with key customers to ensure stable demand. Second is driving cost innovation for higher profitability. Not only will we focus on improving manufacturing cost by maximizing productivity, but we'll also innovate our materials cost by optimizing product designs and execute efficiency investments by developing new tools. Through such a holistic approach to cost innovation, we will continue improving our profitability. Lastly, we will secure market-leading future technologies. In addition to our preparation for next-gen products like all solid state battery and 46-phi battery, we will develop affordable solutions such as NMX and LFP chemistries, building a pilot line for dry electrode processing, adding another global R&D base and securing top talent worldwide. Samsung SDI will further strengthen our fundamentals for qualitative and profitable growth so we can overcome this challenging business environment and leap one step further. We ask for your continued support in our journey. Thank you. Yoontae Kim: [Interpreted] Now each business unit will present the details of the second quarter results and the second half outlook. Michael SON: Good morning. This is Michael Son, Head of the Automotive and ESS Battery Strategic Marketing Office. For EV battery, the earnings fell short of the market expectations due to sluggish demand, which led to a decline in sales and utilization rate. However, our efforts in preparing for sustained growth continued as we won new projects from key customers and engaged in detailed discussions with customers regarding our all solid state batteries supply. As for ESS, both revenue and profit increased, thanks to robust sales of high-power UPS solution and Samsung Battery Box, which feature our trademark high energy and safety with data center boom propelled by the rise of AI on top of renewable energy boom. In the upcoming half, while remaining sluggish in the third quarter, EV batteries market demand will gradually recover in the fourth quarter. We will expand P6 supply for the U.S. market while pushing forward mass production at StarPlus Energy as early as this year in order to improve results across the board in the second half. ESS battery is anticipated to maintain an upward trend in both demand and sales in the next half as well with utility and UPS solutions playing the key roles. We will continue our external growth and improved profitability by securing new projects currently in talks with key customers in North America. This is the end of automotive and ESS batteries presentation. Thank you. Hanjae Cho: Good morning. I am Hanjae Cho, Head of the Small Battery Strategic Marketing team. The Q2 revenue decreased overall as the market demand slowed down for cylindrical battery despite revenue declining due to inventory adjustments at customers in power tool and mobility sectors. Profit went up, thanks to one-off compensation from long-term agreements. For 46-phi battery, we secured a new customer for micro-mobility application with mass production planned to begin about a year earlier than scheduled around early 2025. Under the contracted market demand, pouch battery revenues decreased in the second half. We expect the earnings to downward adjust to an extent, albeit briefly since Q2 earnings reflected one-off profit. We will focus on achieving stronger results than the first half by pursuing new business opportunities. On cylindrical battery part, we'll push to expand sales in power tool and OPE market by preemptively developing high-power products. Leveraging differentiated products with long life and quick charging, we're looking to expand our business to commercial and special vehicle sectors. With 46-phi battery, our focus will be on preparing mass production and acquiring projects that we are engaged to win within the year. For pouch battery, we'll expand sales towards new flagship models while duly preparing for timely supply for upcoming models planned early next year. Thank you. Kyongho Yoon: Good morning. I'm Kyongho Yoon, Head of Electronic Materials Strategic Marketing team. The Q2 revenue and profit improved mainly on polarizer film and semiconductor materials. Both revenue and profit of polarizer film went up with solid sales of high-value large panel products, while our share increased at Taiwanese customers. Semiconductor materials had better earnings with stronger sales at a major customer, along with our slurry product being adopted for our customers' new line. We minimized the revenue drop in OLED materials despite headwinds of flagship application absence supply for new IT application and maintaining our share in Chinese customers. In the coming half, amid the forecast of demand fluctuations, we expect semiconductor and OLED materials to perform better than the last half. With memory market, we expect it to ease. We'll work for better results in semiconductor materials through new supply of EUV materials and slurry while expanding sales at a key customer. Regarding OLED materials, we are looking to increase supply volume through adoption at key customers' new platform as well as Chinese customers' new products. Polarizer film will be affected by a slowing demand due to customers' inventory buildup. This said, we expect the demand to take an upturn in Q4, where high season events await like Black Friday and China Double 11. We'll continue our focus on increasing sales by expanding new business opportunities in high-functional products and water adhesive coated materials. Thank you. Yoontae Kim: [Interpreted] Now we will move on to the Q&A session, which will be provided in Korean followed by consecutive interpreting in English. If you have any questions, please follow the operator's guidance. Operator: [Foreign Language] [Operator Instructions] [Foreign Language] The first question will be provided by Hyun-Soo Kim from Hana Securities. Hyun-So Kim: [Foreign Language] [Interpreted] I have 2 questions. The first question is about your competitive situation. During the past several years, many new battery companies have entered the market in Europe and China. But it seems recently these companies are experiencing somewhat of difficulties. For example, Northvolt had its BMW contract canceled. Do you think that the difficulty being faced by these newer entrants can provide benefits to SDI in, for example, larger opportunities to win new projects? That's the first question. Second question is about your CapEx plan. There is definitely a decrease in demand for EV, both in U.S. and European markets. This has caused not only auto OEMs but also battery companies to scale down their CapEx plans. What about SDI's? Does SDI have plans of adjusting its CapEx plans this year and going forward? Michael SON: [Foreign Language] [Interpreted] This is Michael Son, Head of Strategic Marketing of the Auto and ESS BU from the competitive situation. According to recent media reports, it does seem that some new battery manufacturers are struggling with various issues as they enter mass production. In terms of providing us with additional business opportunities, this has brought some positive effects on SDI. As you would know, production of automotive batteries requires not only sufficient financial resources necessary for the large-scale upfront CapEx investments but also the ability to produce tens of millions of batteries with consistent quality, which requires know-how and technology built over time. Also, global SCM capabilities are critical, especially in order to navigate the various policy changes we see today. Today, also form factor and chemistry needs have become more diverse and specific to each customer or vehicle model, requiring battery manufacturers to further accelerate the pace of their technology development. These are all challenges for a latecomer that does not have what it takes to deliver high-quality, safe batteries that OEMs want at mass production scale. And in light of this, the impact of new entrants is expected to remain limited even in the mid- to long term, and the existing top-tier players are likely to remain dominant in the battery market. Yoontae Kim: [Foreign Language] [Interpreted] This is Yoontae Kim of the Business Management Office. And I'll answer your second question about our CapEx plans. As we mentioned during the last quarter's call, our investments are carried out with a long-term perspective, consistent with the inherent characteristics of the rechargeable battery business. And as the CFO mentioned during the presentation, we remain consistent about the growth potential of the business in the mid- to long term. This year, key aspects of our investment program include, on one hand, investments to respond to already booked demand such as the expansion of our Hungary facility and the construction of the Stellantis joint venture plant 1 in the U.S. as well as, on the other hand, investments that are essential for the mid- to long-term growth such as the all -- solid batteries and the 46-phi. There are no major changes to our investment plan, and investments executed in the first half have already more than doubled on a Y-o-Y basis. That said, near-term EV demand continues to remain weak, and changes have been detected in OEMs' electrification strategy. And so we are also actively monitoring such market changes to make optimum investment decisions that are consistent with the market situation. Operator: [Foreign Language] The following question will be presented by Woo-Hyung Cho from HSBC Securities. Woo-Hyung Cho: [Foreign Language] [Interpreted] I have 2 questions regarding your battery development. First question is about the battery development, an update of your battery development to address the mass and entry vehicle segment and also the plug-in hybrid. I'm asking because in order to overcome the current chasm, many of the auto OEMs are putting more emphasis on the volume and entry segment vehicles and also plug-in hybrid vehicles, and that's why I would like to know a bit more about your development to address the segments. Second question is about your 46-phi development. During the presentation, you mentioned that you would be bringing forward mass production to early 2025 next year. So in that context, can you give us some updates on the current development situation, your preparations for mass production and also the orders and contracts you are currently winning? Michael SON: [Foreign Language] [Interpreted] This is Michael Son of the Auto and ESS BU. And I'll answer your first question about our preparations to capture the volume, entry segment and the PHEV. Even though the recent chasm effect appears to highlight the growth of the volume and entry EV segments even more, actually, the demand for volume and entry segment EVs has always been expected to increase naturally as part of the wider penetration of EV overall, and that is why SDI has already been developing low-cost battery platforms using either NMX or LFP cathode material to capture this demand. Our current plan is to complete platform development, which is the stage for technology verification, during the second half of this year. And currently, we are discussing concrete projects with customers and pursuing contract opportunities with the mass production target of 2026. Going forward, our focus will be on developing larger form factors, material optimization and developing differentiated manufacturing processes for better cost competitiveness, which will give us greater edge even in the volume and entry segment. Now regarding the plug-in hybrid PHEV demand. In fact, we have been getting increasing requests from customers recently for new PHEV projects. SDI has an excellent track record of supplying prismatic batteries with the high-power output needed for PHEVs, and we will focus on capturing market demand using our product competitiveness. Hanjae Cho: [Foreign Language] [Interpreted] This is Hanjae Cho of the Small Battery BU, and I'll answer your second question, which was about the 46-phi development update. Our 46-phi battery development and mass production preparations are underway smoothly. And recently, we secured the first 46-phi project, which is an m-mobility project, and mass production is scheduled to start from early next year. Even though this is not an EV project built, it is significant in that our 46-phi mass production will be accelerated by more than 1 year versus our original plan and that SDI will be able to demonstrate even faster to the market our mass production ability and the product competitiveness of the 46-phi. Meanwhile, we are currently engaged in an active discussion with major OEMs about projects and look forward to announcing tangible results in the near future even in the EV application, leveraging our edge in technology gained over time, including excellent energy density and fast charging. Operator: [Foreign Language] The following question will be presented by Minwoo Ju from NH Investment & Securities. Minwoo Ju: [Foreign Language] [Interpreted] I have 2 questions. My first question is about the recent news that you've announced that you've won an ESS supply contract to a North American customer. Do you think that going forward, there will be even more market share for you in the utility ESS segment? Can we look forward to that? Second question is about the prismatic battery. Many OEMs have started to adopt more prismatic batteries on their vehicles, and some battery companies and cell companies are set to be considering the production of prismatic. What do you think is the advantages of prismatic? And do you think this trend will have a positive impact on SDI? Michael SON: [Foreign Language] [Interpreted] This is Michael Son, and I'll be answering the 2 questions that you gave us, the first question being whether we can look forward to increased market share for SDI in the utility ESS market. Recently, SDI has been winning ESS supply projects from various many major customers in the North American market. In the past, cheaper Chinese ESS had been increasing market share in the North American market. But customers, we believe, have growing concerns about geopolitical risk, including large increase in U.S. tariffs against Chinese batteries and about the overall product competitiveness itself. Meanwhile, SDI's utility ESS solution, which is the SBB has become more competitive with higher energy density, better safety and longer product life, which has increased business opportunities for us in the North American market. Going forward, we will continue to focus on increasing market share by introducing higher-capacity SBB for utility applications using large-capacity modules and maximizing space utilization and also preparing high-quality LFP products, leveraging SDI's unique product competitiveness and aiming for mass production in 2026. At the same time, we're looking into various ways of expanding our global footprint, including the addition of new global production sites in order to expand our local supply capabilities. I'll continue to answer your second question, which was about the advantages of the prismatic form factor and whether the current trend is likely to benefit -- is likely to have a positive effect on SDI's business. Well, regarding the advantages of the prismatic form factor, in addition to the well-known advantage, which is the ease of standardization, other advantages include safety and also pack design. And these advantages have been attracting more attention recently. In terms of the safety advantage, EVs have been increasing battery content in order to cover longer ranges, which further raises the importance of battery safety. Because prismatic batteries structurally have a large bottom surface area, a larger area would come into contact with the underlying cooling plate, which is optimal for preventing thermal propagation, which is the phenomenon when abnormal heating in one cell spread to adjacent cells. In terms of pack design, prismatic batteries can be used efficiently in the new pack design concepts such as cell-to-pack or cell-to-chassis, which are being studied to improve energy density and cost because in prismatic battery, cells can be loaded directly without additional safety devices. Given these advantages, we expect the share of prismatic batteries to continue to increase within the EV market. And in fact, we have been receiving increasing requests from OEMs recently to work together on prismatic projects. Prismatic form factors have been a key focus of SDI for a long time from the early days of our automotive battery business. SDI has, therefore, the extensive know-how in developing and mass-producing prismatic batteries and also has built a component SCM optimized for the prismatic form factor based on our close collaboration with various partners. This is SDI's differentiating edge that new entrants cannot easily emulate, and we will leverage this unique competitive edge to actively capture market demand. Operator: [Foreign Language] The last question will be presented by Sang Uk Kim from UBS Securities. Sang Uk Kim: [Foreign Language] [Interpreted] I have 2 questions, and the 2 questions are about the implications of the recent surge in AI industry on SDI's businesses from 2 aspects. The first question is about the impact on your semiconductor material business. Recently, there's been an increase in demand for HBM tied with the AI industry. Would this have -- do you think have some positive impact on your semiconductor material business? Second question is the implications on your ESS business. There is expectations that power consumption and demand for data centers would also quite significantly increase tied to the growth of the AI industry. In that context, are you seeing an increase in the sales or contracts of your ESS business? Kyongho Yoon: [Foreign Language] [Interpreted] This is Kyongho Yoon of the Electronic Materials BU, and I'll answer your first question about our semiconductor material business. First of all, key customers increasing HBM production would lead to more advanced node production, which would increase wafer input and also material consumption. Accordingly, demand for SDI's major products such as SOH and SOD is expected to increase, bringing positive impact on sales as well as profitability. Furthermore, growth of the market size for high-end AI semiconductors such as HBM is expected to lead to greater demand for related materials and new materials. In terms of the process material, we are planning to complete qualification during Q4 of new EUV materials and slurry whose usage has been increasing with the increased advanced node production. For packaging material, we are currently developing high heat dissipation EMC products for graphic chips and preparing for customer qualification during Q3 to capture AI semiconductor-related material demand in the future. Regarding the semiconductor material outlook for the second half of this year, even though some demand volatility may occur versus our original forecast in areas such as foundry, we will focus on maintaining the growth momentum overall in the second half with more customer diversification and also volume increases. Michael SON: [Foreign Language] [Interpreted] To answer your second question, which was about the impact, the implications to our ESS business from the expected increase in power demand from -- driven by AI industry growth, according to market research firms, with the growth of the AI industry, total data center power consumption is expected to more than triple by 2030. And this is already a 51% upward adjusted figure than levels that were projected at the start of the year in order to account for the rapid increase in power used for AI. In particular, the increased share of renewable power within the incremental power supply mix is expected to drive rapid increase in the demand for ESS, which is necessary to ensure stable power supply. Also, demand for UPS, which is an essential infrastructure for data centers, is also expected to surge. Greater market demand has rapidly increased business opportunities for SDI, and we are using the SBB, which is our ESS solution for utilities, as well as our ultra-high-power UPS products to closely collaborate with the large-scale power companies that have the capabilities to take on large-scale projects targeting data centers. Currently, we have already booked orders to cover next year and a large part of the year after. Yoontae Kim: [Foreign Language] [Interpreted] Lastly, we will answer questions that we have received in advance via online. Starting from this quarter, in order to strengthen communication with retail investors and also to promote better understanding of the company, we have been receiving questions through our website in advance. And many people have left a wide variety of questions. It seems most of them have been sufficiently covered during the Q&A session we just had. And so we will answer one more question that addressed the topic that many other investors have also been interested in. The question is the following. There have been media reports saying that SDI is leading the pack in all solid battery development, raising investors' expectations level. And is the development moving ahead as planned? Have investment size and mass production timing been decided yet? And this question will be answered by Michael Son, the Head of Strategic Marketing of our Auto and ESS Battery division. Michael SON: [Foreign Language] [Interpreted] SDI built a pilot line for the all solid batteries last year and have been producing samples. Customers have been showing growing interest. And in Q2, we supplied samples to new global premium OEMs in addition to our existing customers at these new customers' request, and performance evaluation is currently underway. The current samples have been delivered -- have delivered performance in line with our development road map, and also customer feedback overall has been positive regarding the product characteristics and the performance of the sample supplied. We are currently also finalizing our production process, which is one of the most critical aspects in mass production, and we're also finalizing our line investment plan. In the second half of this year, we plan to, therefore, finalize the production process and carry out some initial facility investments while also supplying the next stage samples with larger sizes and capacity. This will provide an important basis for carrying out more detailed project discussions with customers such as specifications in the context of mass production. Yoontae Kim: [Foreign Language] [Interpreted] Thank you, VP Son, for that answer. And also thank you, everyone, who shared their valuable opinions with us. We will be sure to refer them -- refer to them in our decision-making process. This completes our earnings call for second quarter 2024. If you have any additional questions, please forward them to the IR team. 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 the conference call of the earnings results of Samsung SDI. [Operator Instructions] Now we will begin the presentation on Samsung SDI's first quarter 2024 earnings results. Yoontae Kim: [Interpreted] Good morning and good evening. Thanks for joining us today. I'm Yoontae Kim, Vice President of Business Management Office at Samsung SDI. First, on the call with me is CFO, Jongsung Kim; EVP, Michael Son, for Automotive and ESS Battery; EVP, Hanjae Cho, representing Small Battery; and VP, Kyongho Yoon for Electronic Materials. We will now begin the earnings call for the first quarter of 2024. Let me start with our quarterly results and financial highlights. In Q1, under the effect of a slowed market demand incited by prolonged global recession as well as low seasonality, the revenue generated was KRW 5.1 trillion, down 8% Q-o-Q and 4% Y-o-Y. The operating profit was KRW 267 billion, which decreased 14% Q-o-Q and 29% Y-o-Y. The operating margin came in at 5.2%, a modest decline Q-o-Q. In terms of performance by each business, the battery business reported KRW 4.6 trillion in revenue, which went down 8% Q-o-Q and 5% Y-o-Y, while the operating profit stood at KRW 215 billion, falling 5% Q-o-Q and 32% from a year ago. That said, prismatic batteries for EV have increased on year revenue and higher operating profit both quarterly and yearly thanks to expanded sales of high-value products such as P6 that began supply in the United States. The Electronic Materials business saw revenue decline to KRW 549 billion, 3% Q-o-Q and 1% Y-o-Y, with KRW 53 billion of the operating profit, which is down 38% Q-o-Q and 10% Y-o-Y. The pretax profit was KRW 293 billion, including KRW 26 billion nonoperating profit, such as profit and loss using the equity method. The net profit was KRW 287 billion. The core and total assets grew by JPY 1.4 trillion to record KRW 35.5 trillion due to expenditures capitalized to raise tangible assets mainly for the EV battery business. The liabilities rose KRW 714 billion sequentially to KRW 14.8 trillion, with the equity at KRW 20.6 trillion, which went up by KRW 698 billion. The debt-to-equity ratio was 72%. Lastly, I would like to go over Samsung SDI's commitment to ESG principles. While seamlessly executing a strategic task for environment management, we are in the process of establishing processes and systems for disclosure of data management that will enable us to comply with requirements for sustainability disclosures, such as European Sustainability Reporting Standards and IFRS Climate-related Disclosures. To enhance our supply chain sustainability, we are currently working with RBA to assess ESG aspects of our global supply chains in Europe, China and the U.S. We are also making sure that we provide due assistance where needed in order to boost ESG capabilities of our supply chain members. Now I'd like to hand over the call to the representatives of each business unit for details of Q1 results and Q2 outlook. Michael SON: [Interpreted] Hello. I'm Michael Son, Head of Automotive and ESS Battery Business Strategy Marketing Office. In Q1, as the market demand slowdown extended, EV battery revenue declined Q-o-Q. However, it went up Y-o-Y backed by sales expansion of high-value products as P5 showed solid sales and P6 began supply for a premium model in the U.S. on top of AMPC profit recognition. The profit grew over quarter as well as over year. The ESS Battery saw both revenue and profit fall due to the off-season effects and delays in some projects. In the second quarter, we anticipate the results to improve gradually with EV batteries. Though the demand may not recover in earnest soon, we will strive to secure solid profitability with stable sales volume raised from our current ongoing products while we press ahead with P6 battery sales expansion. For ESS Battery business, we expect both revenue and profit rebound as Samsung Battery Box sales expand in utility sector and also demand for the data center UPS grows. Thank you. Hanjae Cho: [Interpreted] Good morning. I am Hanjae Cho, Head of Small Battery Strategy Marketing team. The Q1 revenue was adversely affected by seasonality trends, whereas profitability improved anchored by pouch battery cells. For cylindrical cells, the revenue fell, which is attributable to inventory buildups at our customers mainly in mobility sector, while power tool batteries sustained similar results Q-o-Q thanks to long-term agreements. We had big revenue growth for pouch batteries versus last quarter pushed by major customers' launch of new flagship smartphones and robust sales. For yearly figures, both revenue and profit went up hoisting the small battery results overall. In Q2, we will continue leveraging ongoing long-term agreements to ensure our profitability while seeking [ CLCA ] renewals to secure stable volume supply for the longer term. Also, we will preemptively penetrate new fast-growing markets of outdoor power equipment in the U.S. as well as electric 2-wheelers in India and Southeast Asia. For 46phi project, our plan is to acquire new customers while keeping our mass production preparation on track. For pouch cells, we will try to ensure the first in supply for our major customers' upcoming models in the second half. Thank you. Kyongho Yoon: [Interpreted] Good morning. I'm Kyongho Yoon, Head of Electronic Materials Strategy Marketing team. The Q1 revenue and profit went down on quarter as we hit low season for LED materials market along with temporary inventory adjustments at our semiconductor materials customers. However, polarizer film saw revenue growth in magnitude as well as profitability improving as sales expanded centering on large panels of our 75-inch. In Q2, we expect the revenue to expand with the market recovery. The polarizer film sales will increase as we actively engage with peak season demand for TV products coming up in the third quarter. We anticipate that the semiconductor materials will have better performance, capitalizing on the recovery in the memory chip market. However, on OLED materials side, the revenue is likely to decline due to sluggish demand under the off-season effect. Thank you. Yoontae Kim: [Interpreted] Now we will move on to the Q&A session, which will be provided in Korean first followed by consecutive interpreted in English. If you have any questions, please follow the operator's guidance. Operator: [Foreign Language] [Operator Instructions] [Foreign Language] The first question will be provided by Woo-Hyung Cho from HSBC Securities. Woo-Hyung Cho: [Foreign Language] [Interpreted] I have 2 questions. The first question is about your CapEx plans this year. When we look at your major competitors, they're either maintaining their CapEx similar to last year or actually reducing their CapEx spending versus their plan. On the other hand, SDI has planned to significantly increase its CapEx this year. Can the market expect SDI to change its stance in CapEx to a more aggressive stance? Also, can you give us a detailed breakdown of where you're planning to make your investments this year? Second question is about the cathode materials. Last year, you made the investment in STM. Can we expect the company to continue to increase the share of its internalized cathode materials? And if so, how much does it plan to expand? Jong-chun Kim: [Foreign Language] [Interpreted] This is CFO, Jongsung Kim, and I'll take your first question. You've asked about CapEx. And this year, automotive batteries will be the key focus of investment, and our investments are based on market and already secured customer demand with a long-term point of view to reflect the characteristics of the automotive battery business. The recent high interest rates and delays in global economic recovery has dampened EV market growth rates in the near term. However, growth rates are still expected to be high in the mid to long term, and our investments are being carried out as originally planned based on this long-term approach. Key investment projects currently underway this year include the expansion of our Hungary and Malaysia plants to supply demand that's already secured as well as the construction of a new JV plant in the U.S. We are also actively planning new product-related investments such as the 46phi, all-solid-state battery and LFP to secure the mid to long-term growth momentum. So overall, our investments this year were significantly increased versus last year. This year and going forward, we will continue to thoroughly execute our investment plans to ensure the timely response to customer demand and also the continued growth in the mid to long term. Yoontae Kim: [Foreign Language] [Interpreted] This is Yoontae Kim of the Business Management Office, and I answered your second question about our investments into STM and cathode material. The company does see the need to internalize a certain portion of its total cathode material needs for the sake of ensuring stable supply and also for gaining cost competitiveness. This has been the rationale behind our investment in cathode material. So going forward, the company plans to maintain a certain level of internalized ratio on a mid to long-term basis through STM as a way of optimizing our sourcing structure. Operator: [Foreign Language] The following question will be presented by Won Suk Chung from HI Investment & Securities. Won Suk Chung: [Foreign Language] [Interpreted] I have 2 questions regarding next-generation batteries. First of all, this is the all-solid-state battery. The company has announced, it's planning to mass-produce it from year 2027. But when we calculate back, it appears that at least by this year, you need to make some detailed decisions, including winning orders or planning out new production line buildout. Can you give us some update and outlook about your solid-state battery development? And also, can you compare what kind of pricing you're expecting on the all-solid-state battery versus the existing lithium-ion batteries? Second question is about the 46phi development. 46 is a form factor that the market is very interested in. Can you give us some updates on your mass production preparations and what kind of schedules and time line you're expecting? Also, have you been able to win any new customers other than the existing GM order? Michael SON: [Foreign Language] [Interpreted] This is Michael Son of our Automotive and ESS Battery division, and I'll take your first question about the all-solid-state battery development update. SDI set up the all-solid-state battery pilot line last year in June, and since then, samples have been supplied to several auto OEMs as evaluation is currently undergoing. With the all-solid-state battery attracting growing interest in the market, we have been actually receiving sample requests from additional companies other than those that we are already working with. But we are currently examining details to finalize the production method and production line investment plans this year. We will also conduct technology verification and lay out SCM securement plans in order to secure mass production capabilities of the key materials to prepare for mass production targeted in 2027. Now regarding the pricing and future market growth, all-solid-state batteries would initially be used mainly in the super premium vehicle segment, but over time and as overall demand increases, cost would come down, which would help expand the addressable market. Hanjae Cho: [Foreign Language] [Interpreted] This is Hanjae Cho of the Small Battery division, and I'll answer your second question about the 46phi batteries. During the first half of last year, SDI set up production lines capable of producing 46phi batteries of various heights and is currently supplying samples to various customers. Based on our edge in cylindrical battery technology that we have accumulated over a long time, SDI is currently developing 46phi products that are differentiated in terms of high power outage, long cycle life and fast charging in addition to the highest energy density in the industry. We plan to complete preparations for mass production within this year. Regarding the customer contracts, we're talking not only with OEMs but also with customers in other applications, such as mobility that are currently using the 21700 existing standard-sized cylindrical batteries. We're talking with them about mass production projects to start from 2025. Operator: [Foreign Language] The following question will be presented by Hyun-Soo Kim from Hana Securities. Hyun-So Kim: [Foreign Language] [Interpreted] The question was that this was the first time the AMPC was reflected in SDI's operating profit. There was a question asking for a detailed breakdown of what was reflected and whether the company is expecting to recognize a similar size going forward? And how much of AMPC can we expect once the Stellantis joint venture goes into mass production next year? Yoontae Kim: [Foreign Language] [Interpreted] This is Yoontae Kim of the Business Support Office. I'll answer that question about the AMPC. As you know, on December 14 of last year, the U.S. Treasury Department announced the proposed regulations on the products that will be eligible for the AMPC application. With the help of outside experts, we confirmed that the products we currently produce in the U.S. are eligible for AMPC application. That is why KRW 46.7 billion was recognized this time in a lump sum for the products that had been produced from last year, that's 2023, until first quarter of this year. Going forward from second quarter, the amount accrued will be recognized on a quarterly basis. And once the Stellantis joint venture line operation ramps up next year, the AMPC benefit is expected to significantly increase. Operator: [Foreign Language] The following question will be presented by Minwoo Ju from NH Investment & Securities. Minwoo Ju: [Foreign Language] [Interpreted] My first question is about the development of low-cost batteries. In addition to the premium NCA-based products, you're also or said should be preparing low-cost products. Can you give us an update on that development? And also, you see sales of these low-cost products increase. Wouldn't that relatively negatively affect your profitability? Second question is about the decrease in growth rate of European EV sales and the impact that would have on your business. The decrease in the growth rate of EV sales appears to be more notable in the European side. You have a higher dependence on European sales. What kind of impact are you feeling? And do you think that that would have any implications for the operation of your Hungary plant? Michael SON: [Foreign Language] [Interpreted] This is EVP, Son Michael, and I'll take your first question, which was about the development of low-cost platforms and the impact that may have on our profitability. The company strategy of pursuing profitable and qualitative growth remains unchanged. That said, for the sake of increasing our mid to long-term growth potential, we are currently developing the NMX or LFP plus platforms, which target the volume and entry segment EVs where demand has been recently growing. Our mass production target of these platforms is 2026. Even though the volume and entry segments are more price-sensitive than the premium segment, we are planning to secure an appropriate level of margin through differentiation in various aspects. For example, in terms of performance, we aim to have a competitive edge within the same segments in key metrics, such as energy density, charging speed and product life. In terms of cost competitiveness, we are focusing on optimizing material and form factor and also gaining differentiation in technology and manufacturing process. Therefore, while maintaining our leadership in the premium segment of the existing high nickel batteries, we will also focus on developing and winning contracts for NMX and LFP plus for stable growth in order to achieve both profitability and quantitative growth. This is EVP, Michael Son, continuing to answer your second question about the European impact on our battery operation. The EV market demand continues to remain dampened due to delays in global economic recovery. And as you mentioned, Europe is showing a relatively weaker growth rate. However, global demand, including in Europe, is expected to gradually improve starting from the second half. Now when we look at a mid to long-term perspective, the EV market is expected to continue a fast pace of growth supported by various factors, including environment policies. SDI does have a high share of European customers, but the vehicles that use our batteries are sold evenly across global markets, including Europe and the U.S. So in terms of battery capacity, Europe does not account for an absolutely high share as our end market. This is why a slowdown in European demand has not particularly affected our Hungary plant more. And we will try to minimize the impact of the near-term EV growth rate slowdown by increasing supply of the existing P5 and newly launched P6 into U.S. market. Operator: [Foreign Language] The last question will be presented by Chuljoong Kim from Mirae Asset Securities. Chuljoong Kim: [Foreign Language] [Interpreted] I have 2 questions regarding the electronic materials, especially the semiconductor materials. First question is related with AI. A lot of attention is building up in the market regarding AI. What kind of implications do you think that would have in your semiconductor material business? Second question is, aside from AI, the overall industry situation of the semiconductor industry is improving quarter-over-quarter. Given that, what kind of business outlook or guidance can you give us for the business performance of your battery material -- excuse me, the semiconductor material business? Michael SON: [Foreign Language] [Interpreted] This is Michael Son, and I'll answer your first question because even though you've asked about the implications of AI for the semiconductor material business, actually, from SDI's perspective, it would have positive impact on our other businesses as well. The growth of the AI market is expected to bring positive effects to many aspects of SDI's business, including ESS Battery, Electronic Material, Semiconductor Material business and also the small-size pouch battery business. First of all, the AI market growth leads to increase in data center power demand, which is expected to more than double from the current levels by 2030. Increased demand for power is expected to drive significant demand increase for not only utility ESS but also UPS, which is used as data center backup power. Increase in data centers and AI-enabled devices will drive rapid increase in high-end semiconductors for AI applications, which would be positive to the business performance of our semiconductor material business. Also, the demand for on-device AI-enabled mobile IT devices requiring high-density batteries is expected to increase. And given that our key customers are leading the market, this would be another tailwind for our business. Kyongho Yoon: [Foreign Language] [Interpreted] This is VP Kyongho Yoon of the Electronic Materials business, and I'll answer your second question, which was asking about the impact from the improving semiconductor industry situation. This year, the semiconductor market is expected to report significant growth versus last year as the semiconductor market situation starts to meaningfully improve following the semiconductor production cuts last year and also the positive impact from the increase in AI-related demand. This year, our semiconductor materials business is expected to record more than 20% year-over-year revenue growth and meaningful profitability improvement, particularly around key products such as the SOH, premium EMC and EUV material. We also expect additional growth opportunities from the rapid increase in demand for high-end semiconductors. Yoontae Kim: [Foreign Language] That completes our conference call for the first quarter 2024 earnings results. If you have any further questions, please forward them to the IR team. 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 very much for joining this earnings conference call. We will now start the Fiscal Year 2023 Fourth Quarter Earnings Conference Call of Samsung SDI. The conference call will start with a presentation by the company, followed by a Q&A session with the attending analysts. [Operator Instructions] We will now start the presentation of Samsung SDI. Yoontae Kim: Good morning and thank you for joining us today. I am Yoontae Kim, Vice President of Business Management Office at Samsung SDI. First joining us are CFO, Jongsung Kim; EVP, Jongsun Park representing Automotive and ESS Battery; EVP, Hanjae Cho for Small Battery; and VP, Kyongho Yoon for Electronic Materials. We will now begin the earnings call for the fourth quarter of 2023. First off, our Q4 results and financial highlights. Q4 revenue was KRW5.6 trillion, down 6% quarter-over-quarter and 7% year-over-year. The operating profit stood at KRW312 billion, down 37% sequentially, with 5.6% operating margin. Comparing on year-to-year basis, the total operating profit declined 37% due to decreased sales volume in smaller batteries and ESS batteries. Meanwhile, hoisted by a high value P5 product, the EV battery portion of sales went up 20% year-over-year, yielding operating profit growth. Looking at each business segment, the battery business posted KRW5.0 trillion in revenue, down 6% both quarterly and yearly. The operating profit was KRW226 billion, declining 45% QoQ and 37% YoY. The revenue for the electronic materials business fell 7% QoQ, 9% YoY to KRW567 billion impacted by the slowing polarizer film demand. The operating profit was KRW86 billion, 2% QoQ increase, thanks to robust sales of high value products or 35% decrease year-over-year. The pre-tax profit was reported at KRW581 billion, with KRW269 billion non-operating profit, such as profit and loss using the equity method. The net profit was KRW493 billion. The quarter-end total assets rose KRW492 billion from the preceding quarter to KRW34.4 trillion. The liabilities decreased KRW191 billion sequentially to KRW14.1 trillion, while the equity increased KRW683 billion to KRW19.9 trillion, with a debt to equity ratio at 71%. Next, CFO, Jongsung Kim will share the company’s business highlights in 2023 and business outlooks of 2024. Jongsung Kim: Hello. This is Jongsung Kim, the CFO of Samsung SDI. Although 2023 was marred by market demand slowdown induced by high interest rates and inflations along with geopolitical risks instigating global economic recession. For Samsung SDI, it was the year of strong execution for the goal of becoming a global top tier company by 2030. Results wise, our revenue grew 13% YoY, but the overall results fell short of the mark with the operating profit decreasing YoY due to the weak performances of Small Battery and Electronic Material divisions. With the EV battery business, our key focus area, however, we managed to continue growth in revenue and improvement in profitability as we ramped up new Hungary lines ahead of schedule and expanded sales of P5 cells and small batteries for EVs. There is such the business recorded YoY growth of 38% in revenue and 93% in operating profit, contributing to its continuous growth. Besides our preparations for the future went on as planned, we solidified our presence in the U.S. market with the new JV MoU with GM and second plant JV with Stellantis. Our supply agreement with Hyundai Motors and its commitment to expand collaboration with Volvo were results of our drive to secure the ground for sustained growth. As for all solid-state battery with the aim of commercialization in 2027, we began producing demo cells after completing the S line and formed an ASB Commercialization Team, with the Electronic Materials division getting into ASB material business in earnest. Samsung SDI’s global R&D network continued to build on with the new R&D center in Shanghai, following those in Europe and the U.S. Raising the appeal to top talent around the world we also boosted patenting to enhance our R&D competence. Key ESG activities include joining Global Battery Alliance in March for establishing a sustainable battery value chain and receiving the best rating in supply chain co-prosperity assessment by Korea’s commission for corporate partnership, the first time in 12 years of being assessed. Although we managed to come out of difficult situations in 2023 with meaningful results, we faced yet another challenging year. We expect demand recovery timing to be later than initial expectations in the markets of power tools, semiconductors and display. The EV market, which has been pacing at a high growth rate so far is said to undergo a temporary stagnated state while crossing the chasm under the shadows of prolonged global economic recession. However dire the situation maybe in 2024, Samsung SDI stands steadfast in preparing for a quantum leap in the regrowth phase to come after crossing that market stagnation by materializing Super-Gap Technology costing evasion and customer base enlargement. For Super-Gap Technology core competitiveness, we plan to accelerate commercialization and mass production of all solid-state battery, a game changer for our future EV market. We leverage this to bring us leaderships in next generation products and technologies. We also continue enhancing our edge and battery materials technology by setting up mass production system of such, including ASB materials. Also to strengthen competitiveness in IT use pouch battery where we lagged behind recently, we plan to increase investment in it, such as expansion of dedicated development line. To drive cost innovation in the face of growing price competition in the EV market and increasing share of low cost batteries in the ESS market, we will work to ensure that Samsung SDI has the world’s best cost competence in those markets. Most of all, the focus will be on improving profit via cost innovation in upcoming battery and material products, while expanding clientele and entering new markets. Last but not least, we will continue expanding new customer base as well as strengthening strategic partnerships with our own existing customers to be well prepared for the future. The Electronic Materials business will expand its product portfolio by commercializing new products such as EV semiconductor materials and OLED polarizer film. To that end, in 2024, we strive to rise above in terms of both revenue and profitability in all divisions through unified efforts on the three core strategies of Super-Gap Technology core competitiveness, cost innovation and customer base enlargement. Lastly, in a bid to form up our footing for sustainable growth, we will boost our ESG management by executing the eight strategic tasks for environment management, aligning our business with EU’s battery regulations, calculating Scope 3 emissions and setting a reduction target and expanding the supply chain engagement in the ESG practice for our sustainable growth, to be insured. Thank you. Now, each business unit will present the details of 2023 Q4 results and 2024 Q1 and annual outlook. Jongsun Park: Good morning. This is Jongsun Park, Head of the Automotive and ESS Battery strategy marketing team. In Q4, the overall revenue remained on par with the last quarter. EV battery portion reported revenue uptake with expanded sales of P5 for premium EVs, whereas ESS battery revenue fell due to softer sales and utility solutions. Profitability went down due to decreased raw materials prices, causing short-term effect on profit and loss. In Q1, EV battery business plans to begin full fledged production of high capacity P6 product for a major customer and expand sales and enhance profitability while actively seeking new order wins. With ESS batteries, we will focus on sales of Samsung Battery Box, a total ESS battery solution built with enhanced energy density and safety. As for the market outlook for 2024, the EV battery market is projected to reach $185 billion in value, 18% growth year-over-year. Amid the forecast of being muted due to persisting high interest rates and global recession, the market growth will gradually recover from the second half with low interest rate effect kicking in. We anticipate that green policies such as the U.S. IRA and ESS strength in the CO2 regulation in 2025 will propel demand to continue meaningful mid to long-term growth in the regions. Drawing on this prospect, we will enhance revenue and profit by increasing sales of high value products, P5 and P6, with next generation platform projects and prepare for the start of production in the U.S. with no delay. Next, the ESS battery market is anticipated to reach $26 billion, up 18% year-over-year. Along with continued growth of North America, Europe and China markets, we expect new booming demand in Korea and South America, with strong policy push for ESS industry. We will expand order wins with Samsung Battery Box’s new product appeal and prepare an LSP product that can accommodate the market demand for affordable batteries. This is the end of automotive and ESS Battery division presentation. Thank you. Hanjae Cho: Good morning. I am Hanjae Cho, Head of the Small Battery Strategy marketing team. Q4 revenue and profitability went down due to delayed recovery of power tool, micromobility and IT product demand on top of increased market inventory level. With Q1 being a seasonally weak period, we expect sales to decrease. To tackle this, we will secure new applications and customers such as the e-scooter demand in Southeast and West Asia regions, where electrification is pushing the demand. With 46-Pi project, we are committed to meeting customer milestones and pursuing new project wins. We expect pouch sales to increase with the launch of new flagship smartphone models of our major customer. Next, the market outlook for 2024. This year, the small battery market is expected to grow 3% YoY to $44 billion in size. By application, we forecast power tool demand to stagnate overall, while demand for professional use grows with increased product variation and rising electrification fostered by strengthened environmental regulations. We expect mobility market to meet tailwinds with increasing cylindrical adoption to EVs and widening e-scooter demand in Southeast and West Asia. Under the base effect, key IT product demand is likely to increase year-over-year with widening demand for smartphone batteries mainly on flagship models. We will make efforts to discover new business opportunities in growing sectors of new applications and micromobility and gain the edge in the market by timely developing new cylindrical and pouch battery products. This is the end of Small Battery division’s presentation. Thank you. Kyongho Yoon: Good morning. I am Kyongho Yoon, Head of Electronic Materials Strategy Marketing team. We closed Q4 with lower revenue versus the prior quarter, but with profit slightly barred by the increased sales of a high value OLED and semiconductor materials. OLED material sales expanded with the mass production of new platforms for Chinese customers and semiconductor materials reported better revenue and profit, thanks to recovering demand and new product application. Polarizer film revenue, however, declined due to panel production cuts under sluggish demand. In Q1, weak seasonality is set to negatively affect sales of OLED materials and polarizer films, whereas the semiconductor materials will likely see sales growth, thanks to recovering market demand and expanding product sales. Now, let me go over 2024 market outlook. We expect to see optimistic demand mainly from high value materials such as big screen LCD TV panels, mobile OLED panels and semiconductor materials. In display market, we expect LCD TV panel demand to be similar to the last year’s level, while over 65-inch big panels enjoy surging demand. Mobile panel demand is forecast to keep growing centering on OLED. In semiconductor market, DRAM market is normalizing and foundry demand is increasing due to AI demand growth, raising wafer inputs of our customer. We will stay committed to improving both revenue and profit by expanding supply of high value products like big size polarizer film and G-host diversifying customer portfolio and timely putting forward materials for new products with high functionality such as UV inorganic photoresist. Thank you. Yoontae Kim: Before going into the Q&A session, I would like to address our shareholder return policy. In January 2022, Samsung SDI disclosed the shareholder return policy for the 3-year term that pays out base dividend of KRW1,000, with additional 5% to 10% of the annual free cash flows. In 2023, we posted a loss in free cash flows due to large scale CapEx. In light of this, our 2023 annual payout consists only of base dividend. Total payouts will be KRW56.9 billion, with KRW1,000 common dividend and KRW1,051 preferred dividend per share. The payout will be made upon final approval of the shareholders meeting. Now, we will move on to the Q&A session which will be provided in Korean followed by consecutive interpreting in English. If you have any questions, please follow the operator’s guidance. Operator: Now Q&A session will begin [Operator Instructions]. The first question will be provided by Woo-Hyung Cho from HSBC Securities. Please go ahead with your question. Woo-Hyung Cho: I have two questions regarding your EV battery business. Number one is as you would know there is increasing concern in the market about the slowdown of EV demand. In that context, can you give us your outlook for EV demand this year in 2024 and your strategy in response? Second question is about your new order, new contract plans this year, last year you had some significant wins such as orders from GM and the Hyundai Motor Group. What kind of order plans do you have this year and what kind of size do you expect? Unidentified Company Representative: We are aware of recent concerns in the market over the leveling off of the EV growth rate driven by global economic slowdown and the so-called Chasm phenomenon. Now according to the Chasm phenomenon after reaching a certain level of market penetration, EV growth rate is expected to temporarily decrease at least until the market enters the next mainstream growth phase. Now despite this theory, demand growth is unlikely to slow down across all global markets. According to third-party market research firms North America, which has a relatively low EV penetration rate is expected to show an annual growth rate of over 50%, which is much higher than that of last year, thanks to the benefit of IRA. In Europe, where EV penetration is relatively higher, growth rates may decrease near-term, but then stricter CO2 regulations are scheduled to be introduced from 2025 and OEMs have accelerated their electrification strategies in preparation of these new regulations, which is expected to turn around growth rates from at least second half of this year. In the mid to long-term, the EV market is expected to continue strong growth supported by environment-friendly policies maintained by key countries in both North America and Europe. Despite the near-term demand slowdown this year, we are aiming to increase revenue and improve profitability by focusing on batteries for the premium EV models, where demand is expected to be relatively more solid. Specifically for their premium EV models, in addition to the existing P5 we will start supply of P6 to increase the share of the high value products. This year, we will also focus on preparing for the operation of our new U.S. production site in time to capture the demand growth expected from 2025 and after. At the same time, we will also focus on winning new orders in the low cost platform products that can meet market needs to drive our continuous growth. Your second question was about our outlook for new orders this year, looking back in 2023 by acquiring new customers, including GM and Hyundai and diversifying our customer base, which had been more European focused, Samsung SDI was last year able to create a foundation for stable growth over the mid to long-term. Now this year in 2024, we are planning to add on of course new customers and also win orders across various segments and form factors. We will focus on winning new contracts not only with our premium products, which has been our traditional strength, but also for the volume and entry segment vehicles through cost innovation and enhanced cost competitiveness. In terms of form factor, we are currently pursuing contract opportunities in both the prismatic P6 and cylindrical 46-Pi. While it is difficult to disclose specific size of opportunities at this point, we will communicate with the market once details have been worked out with our customers. Operator: The following question will be presented by [indiscernible] from Macquarie Securities. Please go ahead with your question. Unidentified Analyst: I have two questions. The first question is about your all-solid-state battery business. I’ve heard that you have newly established the all-solid-state battery commercialization team. First of all, in order to successfully achieve commercialization of all-solid-state on time, what are some of the key tasks that you need to work on and succeed this year? Also, what kind of market size do you expect to see from all-solid-state batteries and what kind of revenue are you expecting to record? Second question is about your Electronic Materials business, I know that the Electronic Materials division is also developing battery related materials. What kind of development is it engaged in? Can you give us some updates and also what kind of revenue we can expect from your battery materials development? Jongsun Park: This is Jongsun Park of the Automotive and ESS Battery Marketing. If I answer your first question, now in order to achieve mass production capabilities of all-solid-state batteries on time the most critical tasks for us this year will be number one to secure the mass production performance for key materials and number two to develop the electrode technology for higher battery capacity. Also samples that were produced at our S line during the fourth quarter of last year have already been delivered to our customers. Customers will be coming back to us with results of the basic performance and lifecycle tests they are currently running in a sequential manner. And through this process, we will be able to upgrade the performance of our all-solid-state batteries at an earlier stage. While it is difficult to exactly focus the size of the all-solid-state battery market until for example 2030, we will focus on using our unique technology leadership to create and lead the market. Kyongho Yoon: This is Kyongho Yoon of the Electronics Material Marketing. And I’ll take the second question you had about our development of battery materials. In addition to the separator which is already in mass production, SDI has been developing a high conductivity C and T dispersion liquid for cathode that can increase battery capacity and also power performance. Our target is to build the M line during the first half of this year. We are also working on black boxing and stabilizing the STM of the all-solid-state batteries core technologies scheduled to be mass produced in 2027. Now for this purpose, we have already completed deployment of the pilot line for the key materials in the second half of last year and we are currently preparing for mass production. So the development of the battery materials will diversify our product portfolio and also creates new synergies with the battery division. Operator: The following question will be presented by [indiscernible] from Shannon Securities. Please go ahead with your question. Unidentified Analyst: I have two questions. The first question is about your mid to large size battery, the new product P6 that you’ve mentioned. This year, what kind of contribution do you think the P6 will have on your top and bottom line? I am asking this question because I recall when your P5 was launched that had actually a very positive impact on the profitability of your auto and mid to large size battery business. Can we expect something similar from the P6 launch this year? Second question is about the small size cylindrical, during the presentation you mentioned you are expecting that market to somewhat improve this year. But because of the declining market situation, the performance of the small size cylindrical has continued to decline. So what kind of market do you expect? When do you think the market will improve and what do you think will be the trigger for that improvement? Jongsun Park: This is Jongsun Park of the Automotive and ESS Battery Marketing. I will take your first question which was about the P6. P6 has an energy density that is about 10% higher compared to the P5 and is scheduled to start mass production from January for supply to U.S. and European customers. P6 revenue is not expected to be large in Q1 this year, but from Q2 onwards P6 is expected to make meaningful contribution to revenue, reaching double digit share within our prismatic batteries revenue on a full year basis. In terms of profitability once P6 starts meaningful mass production of scale from second quarter, it is expected to deliver similar profitability as P5 and positively contribute to the overall EV battery profitability. Hanjae Cho: This is Hanjae Cho of the Small Battery Marketing and I will take your second question which was about our cylindrical batteries. Power tools were the main driver for the high profitability of the cylindrical batteries. As power tool sales jumps during the pandemic, power tool companies were eager to secure battery inventory, leading to a boom in batteries for power tool applications. The pandemic was followed by high interest rates and weak housing market, which has delayed recovery of power tools demand and has increased inventory levels at key power tool customers. This is posing a challenge in achieving profitability as high as before. Now, while the market environment remains challenging, we will focus on cost innovation activities for 16 products and also acquired new business opportunities for new applications including e-scooters. We will also launch new cylindrical battery products targeting power tools and EV applications that meet market needs to become a dominant player in these new markets. Also going forward we will focus on winning new orders for the 46-Pi battery, the demand of which is expected to increase sharply and this will also contribute to revenue growth and profitability. Operator: The following question will be presented by Hyun-Soo Kim from Hana Securities. Please go ahead with your question. Hyun-Soo Kim: I have two questions. The first question is about the IRA. Last December the FEOC guidelines were announced as part of the IRA. Does this have any impact on the supply chain management, the SEM strategy of SDI, do you need to change SEM strategy, would there be any challenges in making these changes if necessary? Second question is about the overall EV demand growth leveling off, slowing down. There is concern that this may lead to an oversupply of battery. In that context, can you share with us your line utilization levels last year and whether you have additional capacity expansion plans this year? Yoontae Kim: This is Yoontae Kim of the finance and accounting team. I will take your first question about the IRA. As you mentioned last December, the U.S. Department of Energy announced the detailed guidance on the IRA FEOC to present comprehensive standards for determining an FEOC. It also announced so called transition rules under which certain low-value add critical minerals that are difficult to trace would qualify for a 2-year grace period. That said, even with the newly announced standard, some areas of FEOC determination still remains unclear and the critical minerals that will qualify for the transition rule are not yet finalized. Therefore additional information needs to be verified before we are able to conclude whether major changes are necessary to our SEM strategy. Working closely with the Korean Ministry of Trade, Industry and Energy, we have already submitted our opinion and inquiries to U.S. authorities including a request for FEOC grace period for graphite. It appears that major auto OEMs have also submitted relevant request letters. So, regarding all these specific strategies direction, we hope to communicate that to the market after the relevant facts have been determined. Jongsun Park: This is Jongsun Park again, Automotive and ESS Battery Marketing. I will take your second question about our EV battery line utilization last year and capacity plans this year. Given that many battery makers are currently in the process of adding new lines in anticipation of near to long-term EV demand growth forecasts. A near-term demand weakness if it happens may lead to oversupply. However, SDI has always maintained a policy of profitable and qualitative growth and has insisted on timely capacity increase backed by firm customer demand, speedy ramp up and optimized line operation resulting in high utilization rates. For example, Hungary, our main plant has been maintaining utilization at around low to mid-90s. This year, the focus will be on the on track preparation of the new plants capacity increase for the full scale EV growth expected from 2025 and after as well as maximizing the production efficiency of existing lines and maintaining high utilization rates, including the new lines in Hungary that started operations in the second half of last year in order to maximize revenue growth and profitability. Operator: The last question will be presented by [indiscernible] Mirae Asset Securities. Please go ahead with your question. Unidentified Analyst: I have two questions. First question is about your small size battery. You have mentioned that your – in terms of EV batteries, your Hungary lines are maintaining a high level of utilization, but your small size batteries are facing difficulties and challenges. I recall that during the last conference call you mentioned that the company will be focusing on opportunities in M or micromobility. Can you give us some updates of what kind of business opportunities you are seeing this year and what kind of demand you are expecting from M-mobility in the mid to short, near to mid-term? Second question is about the electronic materials business. Up till now, traditionally the polarizer film has been the main contributor to your revenue, that product has been facing challenges recently. So, in that context, what kind of new business opportunities are in the works in OLED or semiconductor materials? What kind of new products are you trying out this year? And when do you expect to put them into mass production? Hanjae Cho: This is Hanjae Cho of the Small Battery Marketing. I will take your first question about our M, the micromobility business. As of 2024, the micromobility market is expected to be around $3.2 billion, which is similar to the size it had last year in ‘23. However, within the micromobility, the e-scooter market is expected to grow by around 17% YoY. Thanks to the green subsidy policy in India and Indonesia. So, in the mid to long-term e-scooter demand is expected to overtake e-bikes by 2026 and grow into a market roughly 4x the current size by 2030. So, we will focus on capturing the new business opportunities for e-scooter and increase our market share by operating sales hubs in India and Southeast Asia and expanding our long life product lineup to contribute to revenue growth and profitability increase. Kyongho Yoon: This is Kyongho Yoon of the Electronic Materials Marketing and I will take your second question which was about some new products we have in store this year. First, looking back last year in 2023, we completed development of the green, red photoresist for image sensors and successfully launched mass production of it. Also the OLED polarizer film completed customer certification in late 2023 and is scheduled to start mass production this year. In 2024, we are preparing to start mass production of products that were delayed due to customer schedule changes such as the tungsten slurry and the EUV photoresist as well as a new item which is a premium EMC for our graphic DRAMs during the first half of this year. Also, in order to win opportunities in products newly adopting OLED, we are developing the g-host and p-dopants in line with customer schedules. So, these new materials may not deliver a notable contribution to this year’s revenue, but they are expected to be growth engines for future of the electronics materials business. Yoontae Kim: And that completes our earnings conference call for the fourth quarter 2023. If you have any additional questions, please forward them to our IR team. Thank you.