The Company posted KRW 79.14 trillion in consolidated revenue, an all-time quarterly high, on the back of strong sales of flagship Galaxy S25 smartphones and high-value-added products. Operating profit increased to KRW 6.7 trillion despite headwinds for the DS Division, which experienced a decrease in quarterly revenue.

The Company has allocated its highest-ever annual R&D expenditure for 2024, and in the first quarter of this year, it has also increased its R&D expenditure by 16% compared to the same period last year, amounting to 9 trillion won.

Despite the growing macroeconomic uncertainties due to recent global trade tensions and slowing global economic growth, making it difficult to predict future performance, the Company will continue to make various efforts to secure growth. Additionally, assuming that the uncertainties are diminished, it expects its performance to improve in the second half of the year.

Semiconductors Projected To Continue Growth by Meeting Evolving AI Needs

The DS Division posted KRW 25.1 trillion in consolidated revenue and KRW 1.1 trillion in operating profit for the first quarter.

For the Memory Business, revenue was driven by expanded server DRAM sales and the addressing of additional NAND demand amid a perceived bottoming out of the market price.

However, overall earnings were impacted by the erosion of average selling price (ASP), as well as a decrease in HBM sales due to export controls on AI chips and deferred demand in anticipation of upcoming enhanced HBM3E products.

In Q2 2025, the Memory Business anticipates robust demand for AI servers and will therefore seek to strengthen our position in the high-value-added market via our server-centric portfolio, along with a ramp-up of the enhanced HBM3E 12H to meet initial demand. For NAND, the Memory Business seeks to enhance cost competitiveness by accelerating the transition to 8^th Generation V-NAND for all applications.

In H2 2025, AI-related demand is expected to remain high in conjunction with the launch of new GPUs. Therefore, the Memory Business will expand the sales of high-value-added products, including enhanced HBM3E 12H products and high density DDR5 modules of 128GB or higher.

In the mobile and PC markets, on-device AI is expected to proliferate, so the Memory Business will proactively respond to this shift in the business environment with its industry-leading 10.7Gbps LPDDR5x products.

Earnings at the System LSI Business improved modestly, due to an increased supply of high-resolution sensors and LSI products. This improvement came despite a sluggish smartphone market and the delayed adoption of the Company’s flagship system-on-a-chip (SoC).

In Q2 2025, the System LSI Business will maintain steady revenue by gaining SoC adoption by a major customer for new flagship models and capitalizing on the growing adoption of 200-megapixel sensors.

In H2 2025, the System LSI Business will expand its flagship SoC supply, proactively address demand for high-resolution main and telephoto camera sensors and expand its automotive sensor portfolio.

Earnings for the Foundry Business were muted due to sluggish seasonal mobile demand, inventory adjustments and stagnant fab utilization. However, the Business focused on the 2nm Gate-All-Around (GAA) process, improving yields and stabilizing the line while keeping the program on schedule, while also securing additional sub-5nm orders, specifically the 2nm and 4nm nodes for AI and HPC applications.

In Q2 2025, the Business will stabilize its 2nm process production and drive earnings improvement by actively addressing strong mobile and automotive demand in the United States. Looking ahead to H2 2025, the Foundry Business aims to start 2nm mass production and secure major 2nm orders and strengthen its specialty process portfolio on mature nodes.

SDC Aims To Navigate Challenges and Drive Growth With Differentiated Offerings

Samsung Display Corporation (SDC) posted KRW 5.9 trillion in consolidated revenue and KRW 0.5 trillion in operating profit for the first quarter.

For the mobile display business, SDC reported declining profits QoQ due to seasonality. The results of the large display business have improved via the launch of new QD-OLED monitor products for major clients.

In Q2 2025, the mobile display business maintains a conservative outlook on earnings while pursuing the stable supply of new products such as foldables. For the large display business, demand for gaming monitors is expected to grow due to the upcoming launches of new products.

In H2 2025, SDC aims to grow the mobile display business sales through differentiated technologies and products amid rising market uncertainties. For the large display business, SDC will strengthen its presence in both B2C and B2B monitor markets with diverse product lineups.

MX Achieves Revenue Growth, Continues To Expand AI Capabilities

The MX and Networks businesses posted KRW 37 trillion in consolidated revenue and KRW 4.3 trillion in operating profit for the first quarter.

The MX Business experienced QoQ growth in both revenue and operating profit thanks to the strong sales of its Galaxy S25 series, which features an advanced Galaxy AI experience. Enhanced cost competency and price declines for some components also contributed to solid double-digit profitability.

In Q2 2025, the MX Business plans to sustain flagship-centric sales amid weak seasonality by successfully launching the Galaxy S25 Edge. It will also expand its AI smartphone lineup through the introduction of “Awesome Intelligence” to the Galaxy A series.

In H2 2025, the MX Business will strengthen its foldable lineup by offering a differentiated AI user experience. In addition, the Business will launch new ecosystem products with enhanced AI and health capabilities, and explore new product segments such as XR.

Visual Display Posts Solid Performance, Strengthens Advanced AI Features

The Visual Display and Digital Appliances businesses posted KRW 14.5 trillion in consolidated revenue and KRW 0.3 trillion in operating profit in the first quarter.

The Visual Display Business recorded solid sales of strategic products such as Neo QLEDs, OLEDs, and large models of 75 inches and over, while price increases and material cost reductions resulted in improved QoQ profitability.

In Q2 2025, the Business intends to expand TV sales with its 2025 AI TV lineup and the integration of advanced AI functions.

In H2 2025, the Business will focus on capturing peak season demand by strategic collaboration with distributors, based on an enhanced AI TV lineup.

The Company posted KRW 75.8 trillion in consolidated revenue and KRW 6.5 trillion in operating profit in the quarter ended December 31, 2024. For the full year, it reported KRW 300.9 trillion in annual revenue and KRW 32.7 trillion in operating profit.

Although fourth quarter revenue and operating profit decreased on a quarter-on-quarter (QoQ) basis, annual revenue reached the second-highest on record, surpassed only in 2022. Meanwhile, operating profit was down KRW 2.7 trillion QoQ, due to soft market conditions especially for IT products, and an increase in expenditures including R&D.

In the first quarter of 2025, while overall earnings improvement may be limited due to weakness in the semiconductors business, the Company aims to pursue growth through increased sales of smartphones with differentiated AI experiences, as well as premium products in the Device eXperience (DX) Division.

For 2025 as a whole, the Company plans to enhance technological and product advantages in AI, continue to meet future demand for high-value-added products and drive sales growth in premium segments.

With market conditions expected to remain soft in 1H for the Device Solutions (DS) Division, the Company will focus on securing technology leadership for mid- to long-term growth. Samsung Display Corporation (SDC) will look to strengthen its leading position in high-end products by enhancing product competitiveness, and the DX Division will focus on extending its leadership in delivering AI experiences across a diverse product portfolio.

The Company’s capital expenditures in 2024 reached a total of KRW 53.6 trillion, including KRW 46.3 trillion spent in the DS Division and KRW 4.8 trillion in SDC. In the fourth quarter, the total was KRW 17.8 trillion, with KRW 16 trillion allocated to the DS Division and KRW 1 trillion to SDC.

Semiconductors To Optimize Portfolio Centered on Advanced Nodes

The DS Division posted KRW 30.1 trillion in consolidated revenue and KRW 2.9 trillion in operating profit in the fourth quarter of 2024.

The Memory Business achieved record-high fourth-quarter revenue, backed by a higher blended DRAM average selling price (ASP) due to the increased sales of high-bandwidth memory (HBM) and high-density DDR5 for servers. However, operating profit decreased slightly compared to the previous quarter as a result of increased R&D expenses to secure future technology leadership, as well as the initial ramp-up costs to secure production capacity for cutting-edge nodes.

In the first quarter of 2025, amid ongoing uncertainties in demand, the Memory Business will shift its business portfolio to more high-value-added products by accelerating the migration to cutting-edge nodes to respond to the demand for high-performance and high-density products.

For DRAM, the Memory Business seeks to increase the share of DDR5 and LPPDR5x shipments by accelerating the transition to the 1b nanometer (nm) process. As for NAND, the Business is executing the technology migration from V6 to V8 while increasing sales of V7 QLC-based server SSDs.

In 2025, overall memory market demand is expected to recover from the second quarter. The Memory Business is reducing the portion of legacy DRAM and NAND products to align with market demand and accelerating the migration to cutting-edge nodes. The Business will continue to strengthen its business competitiveness and optimize its portfolio by increasing the portion of high value-added products such as HBM, DDR5, LPDDR5x, GDDR7 and server SSDs based on advanced process nodes.

Earnings at the System LSI Business declined in the quarter due to weak mobile demand and higher R&D expenses to advance cutting-edge product development.

In the first quarter of 2025, earnings are expected to remain weak due to delayed entry into the flagship system-on-a-chip (SoC) market. However, demand for core products such as image sensors and DDI is expected to increase on the back of flagship smartphone launches.

In 2025, the System LSI Business will focus on further enhancing its flagship SoC through product optimization. For image sensors, the Business will proactively respond to high-resolution needs — such as for 200-megapixel (MP) telephoto and main cameras.

The overall profit for the Foundry Business decreased due to lower utilization rates and higher R&D expenses for advanced-node technology. Its 2nm GAA technology is under active development, with the design-kit (DK) already distributed to customers for product design, while the 4nm process is mass producing HPC products based on stable yields.

Looking ahead to the first quarter of 2025, earnings are expected to remain weak due to sluggish mobile demand and fixed-cost burden stemming from lower utilization rates. In this environment, the Foundry Business will concentrate on advancing leading-edge process development and enhancing process maturity to expand opportunities in AI and HPC applications and customer engagement for advanced nodes.

As for 2025, the Business will continue to secure orders from major customers by ramping up and stabilizing the 2nm GAA technology, while simultaneously bolstering the 4nm technology and design infrastructure to meet the growing mobile and HPC needs.

Display To Strengthen Product Competitiveness in 2025

SDC posted KRW 8.1 trillion in consolidated revenue and KRW 0.9 trillion in operating profit for the fourth quarter.

SDC reported declining profits QoQ due to sluggish smartphone demand and rising competition for the mobile display business, and achieved double-digit revenue growth QoQ for the large display business, with an increase in year-end TV sales.

In the first quarter of 2025, the earnings outlook for the mobile display business is conservative, as the overall smartphone market demand is expected to remain weak. For the large display business, TVs with enhanced image quality are scheduled to launch, as well as high-resolution monitors.

In 2025, SDC aims to sustain its leadership in the high-end segment by strengthening product competitiveness. For the large display business, SDC will increase sales of diversified high-performance TVs and monitors.

MX To Drive Flagship-Centric Sales, Reinforce Leadership in Mobile AI

The Mobile eXperience (MX) and Networks businesses posted KRW 25.8 trillion in consolidated revenue and KRW 2.1 trillion in operating profit for the fourth quarter.

The MX Business reported a QoQ decrease in sales and profit, in part due to the fading effects of new flagship model launches. However, on a full-year basis, flagship sales saw robust growth on the back of double-digit growth of the Galaxy S24 series featuring Galaxy AI, with tablets and wearables also increasing in both value and shipments.

In the first quarter of 2025, the MX Business plans to drive sales growth based on its flagship models, particularly the newly launched Galaxy S25 series, and will continue to lead the AI smartphone market through promotion of new AI experiences and product competitiveness.

In 2025, the MX Business will reinforce its mobile AI leadership by providing more personalized, differentiated AI experiences while also strengthening the foldable lineup to generate new customer demand. Additionally, the Business plans to expand sales by providing advanced AI features and rich Galaxy ecosystem experiences for premium tablets, notebooks, wearables and the upcoming XR device.

While prices of major components are expected to increase this year due to advancements in hardware specifications, the MX Business aims to improve profitability by continuing to build out Galaxy AI and expand sales centered on flagship products.

In the fourth quarter, the Networks Business reported significant improvements in revenue and operating profit in key markets. For 2025, performance is set to improve as the Business expects to win new orders and as major operators expand their network and increase adoption of virtualized and open radio access networks (vRAN/ORAN).

Vision AI Expected To Drive Growth for Visual Display

The Visual Display (VD) and Digital Appliances (DA) Businesses posted KRW 14.4 trillion in consolidated revenue and KRW 0.2 trillion in operating profit in the fourth quarter.

The VD Business saw revenue increase in the fourth quarter due to expanded sales and an improved sales mix through peak-season promotion, yet profitability decreased slightly as a result of increased cost from intensified competition amid largely stagnant TV demand.

In the first quarter of 2025, while overall TV demand is expected to decrease YoY due to growing domestic and global economic uncertainties, demand for high-value-added products is projected to remain solid. The Business will try to improve profitability and expand strategic product sales through new model launches based on the Vision AI strategy for Samsung’s AI screens.

In 2025, the overall TV market is expected to grow slightly in major emerging markets. The VD Business plans to lead the AI screen market under Samsung’s “Home AI” vision, integrating AI into all connected device experiences based on the SmartThings platform and expand the adoption of Samsung Knox security solutions.

The Company posted KRW 79.1 trillion in consolidated revenue, an increase of 7% from the previous quarter, on the back of the launch effects of new smartphone models and increased sales of high-end memory products. Operating profit declined to KRW 9.18 trillion, largely due to one-off costs, including the provision of incentives in the Device Solutions (DS) Division.

The strength of the Korean won against the U.S. dollar resulted in a negative impact on company-wide operating profit of about KRW 0.5 trillion compared to the previous quarter.

In the fourth quarter, while memory demand for mobile and PC may encounter softness, growth in AI will keep demand at robust levels. Against this backdrop, the Company will concentrate on driving sales of High Bandwidth Memory (HBM) and high-density products. The Foundry Business aims to increase order volumes by enhancing advanced process technologies. Samsung Display Corporation (SDC) expects the demand of flagship products from major customers to continue, while maintaining a quite conservative outlook on its performance. The Device eXperience (DX) Division will continue to focus on premium products, but sales are expected to decline slightly compared to the previous quarter.

For 2025, the Company will remain focused on enhancing competitiveness in advanced technologies and strengthening leadership in premium products and AI capabilities amid ongoing macroeconomic uncertainties. The DS Division will address demand for differentiated products based on advanced technologies and high value-added products such as HBM and server SSDs. In addition, the Company plans to leverage the mass production on the 2 nanometer (nm) Gate-All-Around (GAA) process to win new clients. SDC will aim to maintain leadership in the high-end product category and broaden its product portfolio. The DX Division will continue to deliver exceptional customer experiences through enhanced AI features and product connectivity.

With over 500 million diverse products being delivered to consumers globally every year, the Company is tailoring its AI technology in each product to help lead the market. By leveraging the SmartThings platform with 360 million users and capabilities in product intelligence, spatial intelligence, and personalization, the Company plans to firmly establish itself in the home of the future, where AI will be widespread. In the AI era for the home, the Company will focus on the security of its products, convenience in device connectivity, intelligent technology to save energy and time, and the health and well-being of users and their families.

Memory Achieves Revenue Growth in Q3

The DS Division posted KRW 29.27 trillion in consolidated revenue and KRW 3.86 trillion in operating profit in the third quarter.

For the Memory Business, demand for AI and conventional servers was strong, as major datacenter and technology companies continued to invest. But mobile demand was relatively soft due to inventory adjustments by some customers, and the supply-demand situation was impacted somewhat by the increasing supply of legacy products in the China market.

The Company focused on actively responding to the demand for AI and server products while depleting aging inventories of legacy products to further improve the inventory level and mix. Therefore, compared to the previous quarter, the Company achieved significant revenue growth in HBM, DDR5 and Server SSD.

However, performance decreased due to a reduced reversal of inventory valuation loss compared to the previous quarter, one-off expenses such as the provision of incentives, and currency effects due to a weak dollar.

For the fourth quarter, the demand trends experienced in the previous quarter are expected to continue. The Company plans to accelerate the conversion of cutting-edge nodes in legacy lines and aims to strengthen its business fundamentals by completing the normalization of the inventory level and mix by the end of the year.

For DRAM, the Company plans to expand sales in line with the increase in HBM capacity, accelerate the transition to 1b nanometer¹ for server DDR5 and actively expand the sales portion of high-density modules based on 32Gb DDR5. For NAND, the Company will expand sales of 8th generation (V8) based PCIe Gen5 and plans to mass-produce the 64TB product for the quad-level cell (QLC) market, which has high growth potential.

Looking ahead to 2025, datacenter and enterprise investments are likely to remain strong in association with AI, and build demand for conventional servers, in addition to AI servers, is expected to be steadily strong.

For DRAM, the Company plans to expand the sales of HBM3E and the portion of high-end products such as DDR5 modules with 128GB density or higher for servers and LPDDR5X for mobile, PC, servers, and so on. For NAND, the Company will proactively respond to the high-density trend based on QLC products — including 64TB and 128TB SSDs — and solidify leadership in the PCIe Gen5 market by accelerating the tech migration from V6 to V8.

The System LSI Business posted modest sales growth, but earnings declined due to increased one-off costs. System-on-chip (SoC) shipments increased as flagship products were adopted for new models by a major customer. Sales of image sensors were affected by H1’s inventory accumulation, resulting in some adjustments, while display driver IC (DDI) sales expanded with new model launches by key customers.

In the fourth quarter, supply of the Exynos 2400 will continue to expand with higher customer adoption, but weak demand for image sensors is expected to continue. For DDIs, the System LSI Business is focusing on growth areas, such as the expansion of IT-oriented OLED products.

Looking ahead to 2025, the momentum of on-device AI is expected to remain strong, and the Company will focus on capturing opportunities in areas such as SoCs and cameras. The System LSI Business plans to concentrate on supplying SoCs for flagship products of a major customer while preparing for next-generation 2nm products. Image sensors will aim to maximize new product supply through HDR, low-power and zoom features, while DDIs will seek to develop low-power products using advanced processes.

The Foundry Business saw its overall earnings decline compared to the previous quarter due to the impact of one-off costs. Still, the Foundry Business successfully met its order targets — particularly in sub-5nm technologies — and released the 2nm GAA process design kit (PDK), enabling customers to proceed with their product designs.

While mobile and PC demand may remain weak in the fourth quarter, high performance computing (HPC) and AI-related demand will continue to be robust. The Foundry Business will strive to acquire customers by improving the process maturity of its 2nm GAA technology, and it will continue to develop competitive technology and design infrastructure to expand additional business opportunities.

For 2025, the overall foundry market is expected to show double-digit growth, driven by HPC and AI applications in advanced technology nodes. The Foundry Business aims to expand revenue through ongoing yield improvements in advanced technology while securing major customers through successful 2nm mass production. In addition, integrating advanced process nodes and packaging solutions to further develop the HBM buffer die is expected to help acquire new customers in the AI and HPC sectors.

Mobile Display Records Solid Results; Will Maintain Leadership in the High-End Market

SDC posted KRW 8.0 trillion in consolidated revenue and KRW 1.51 trillion in operating profit for the third quarter.

For the mobile display business, SDC achieved sequential improvements in both sales and profits thanks to the flagship product launches of major customers. For the large display business, SDC reported a slight weakening in operating profit, but sales volume improved from the previous quarter, driven by the stable demand of TV and monitor products.

In the fourth quarter, SDC expects continued demand for flagship products from major customers, and sales growth of IT and automotive products. However, SDC’s performance outlook is quite conservative compared to the previous quarter, due to headwinds from rising competition among panel makers.

For the large display business, SDC will keep striving to expand sales by meeting the fourth quarter demand of major customers through improved production efficiency, and it aims to respond to the demand for new products in 2025 with timely supply.

In 2025, SDC will continue to maintain its leadership in the foldable and high-end smartphone markets, based on innovative OLED technologies optimized for AI devices and accelerate the expansion of IT and automotive products to further diversify its business portfolio.

For the large display business, SDC will continue to leverage the performance advantage of QD-OLED panels to strengthen its position in the premium TV market. And for monitors, SDC will broaden its lineup by adding high-resolution products and diverse refresh rate options, aiming not only to solidify its competitive edge in the gaming monitor market but also to actively enter the B2C monitor market.

MX Business To Achieve Double-Digit Annual Sales Growth in Flagships

The MX and Networks businesses posted KRW 30.52 trillion in consolidated revenue and KRW 2.82 trillion in operating profit for the third quarter.

Overall market demand for smartphones grew modestly as the residual effects of global inflation slowed the recovery in consumer spending.

The MX Business recorded sequential growth in both revenue and operating profit, bolstered by the launch of new smartphone, tablet and wearable products. Sales increased — with a focus on flagship models — and profitability neared double digits, despite rising material costs as product specifications improved to boost competitiveness.

In the fourth quarter, seasonal factors are expected to lead to sequential growth in the smartphone market. At the same time, competition in the mass market segment is expected to increase as a result of rising demand, particularly in emerging markets.

The MX Business will continue to maintain solid sales of its AI smartphones, such as foldables and the S24 series, with various sales promotions in anticipation of the holiday season, aiming for annual flagship sales growth of double digits. In addition, the MX Business will expand sales linked to year-end seasonality for tablets and wearables, especially on new premium products with significantly enhanced performance, to contribute to the MX Business’ sales and profits.

In 2025, the macroeconomic environment is expected to stabilize to a degree as a result of interest rate cuts, leading to slight growth in the smartphone market. The mass market segment is expected to grow, along with demand for ecosystem products, and the smartwatch and true wireless stereo (TWS) markets will expand with broader applications of AI capabilities.

The MX Business will drive sales growth and improve profitability with a focus on flagship products, including smartphones, foldables, tablets and wearables, based on further advancements of Galaxy AI.

Visual Display To Focus on Premium Models and Service Expansion

The Visual Display and Digital Appliances businesses posted KRW 14.14 trillion in consolidated revenue and KRW 0.53 trillion in operating profit in the third quarter.

The Visual Display Business saw improved profitability both from the previous quarter and a year earlier by prioritizing sales of strategic products such as Neo QLEDs, OLEDs, and big TVs. Additionally, service business sales increased.

In the fourth quarter, overall demand in the TV market is expected to recover due to year-end peak seasonality amid intensifying competition. The Visual Display Business plans to capture peak season demand by enhancing sales programs through strategic collaborations with major retail partners, and will focus on expanding sales and securing profitability by emphasizing the competitiveness of TVs in terms of security, design, and content.

In 2025, the overall TV market is expected to post modest growth, with strategic products like QLEDs, OLEDs, and big TVs continuing to gain market share. To solidify its leading position globally, the Visual Display Business will continue to differentiate AI functionalities and innovate its products centering on premium and Lifestyle screens.

By utilizing AI, the Company aims to enhance core TV features such as picture and sound quality, while also improving the overall user experience within the SmartThings ecosystem. The Company plans to drive sales of premium products centered on Neo QLED, OLED and super big TVs, and it will maintain leadership in the Lifestyle screen category by leveraging well-established competitive advantages.

Furthermore, by capitalizing on the extensive installed base that has been established through hardware leadership, the Visual Display Business will continue to expand the service platform business through advertisement and media such as Samsung TV Plus.

¹ Refers to Samsung’s fifth-generation 10nm class DRAM

The Company posted KRW 74.07 trillion in consolidated revenue and operating profit of KRW 10.44 trillion as favorable memory market conditions drove higher average sales price (ASP), while robust sales of OLED panels also contributed to the results.

Memory Market Continues To Recover; Solid Second Half Outlook Centered on Server Demand

The DS Division posted KRW 28.56 trillion in consolidated revenue and KRW 6.45 trillion in operating profit for the second quarter.

Driven by strong demand for HBM as well as conventional DRAM and server SSDs, the memory market as a whole continued its recovery. This increased demand is a result of the continued AI investments by cloud service providers and growing demand for AI from businesses for their on-premise servers.

PC demand was relatively weak, while demand for mobile products remained solid on the back of increased orders from Chinese original equipment manufacturer (OEM) customers. Demand from server applications continued to be robust, with second quarter results improving significantly from the previous quarter as the Company responded to demand for high-value-added products for generative AI applications.

The Company strengthened its leadership in the DDR5 market through the mass production of a 128GB product based on 1b nanometer(nm)¹ 32Gb DDR5, which was developed for the first time in the industry.

In the second half of 2024, AI servers are expected to take up a larger portion of the market as major cloud service providers and enterprises expand their AI investments. As AI servers equipped with HBM also feature high content-per-box with regards to conventional DRAM and SSDs, demand is expected to remain strong across the board from HBM and DDR5 to server SSDs.

With capacity being concentrated on HBM, server DRAMs and server SSDs for AI applications, conventional bit supply of cutting-edge products for PC and mobile is expected to be constrained.

The Company plans to actively respond to the demand for high-value-added products for AI and will expand capacity to increase the portion of HBM3E sales. The Company will also focus on high-density products, such as server modules based on the 1b-nm 32Gb DDR5 in server DRAM.

For NAND, the Company plans to increase sales by strengthening the supply of triple-level cell (TLC) SSDs, which are still a majority portion of AI demand, and will address customer demand for quad-level cell (QLC) products, which are optimized for all applications, including server PC and mobile.

The System LSI Business posted record-high sales for the first half of the year as it saw earnings improve in the second quarter due to increased supply of key components such as systems on chips (SoCs), image sensors and display driver ICs (DDIs) for major flagship products.

Initial response to the new SoC for wearables, which features the industry’s first 3nm technology, has been favorable and adoption of SoCs featuring this technology by key customers is expected to expand in the second half of the year. The Company also plans to ensure a stable supply of the Exynos 2500 for flagship models.

The System LSI Business will focus on expanding the application of 200-megapixel sensors from main wide camera to tele cameras and plans to expand sales of DDI products with the start of mass production of new models for a customer based in the US.

The Foundry Business saw improved earnings as a result of increased demand across applications. Due to higher orders for sub-5nm technology, the number of AI and high-performance computing (HPC) customers increased twofold from a year earlier. The Foundry Business also distributed the process development kit (PDK) for 2nm Gate-All-Around (GAA) technology to customers ahead of mass production in 2025.

In the second half, the Foundry Business expects a rebound in mobile demand and continued high growth in demand for AI/HPC applications. As a result, the foundry market is expected to experience growth overall, particularly in advanced nodes. For 2024, on the back of full-scale mass production of second-generation 3nm GAA technology, the Company expects growth to outpace the market.

The Foundry Business plans to continue expanding orders for AI/HPC applications and aims to increase the customer number by fourfold and sales by ninefold by 2028 compared to 2023.

SDC Ready To Meet Increased Mobile Demand in H2, Targets Growth in Large Panels

SDC posted KRW 7.65 trillion in consolidated revenue and KRW 1.01 trillion in operating profit for the second quarter.

The mobile display business posted sales growth, driven by solid demand for flagship products, along with effectively supporting new smartphone launches from key customers. Timely response to customer requests with stable supply of IT OLED products also helped higher results.

In the large display business, sales of high-resolution, high-refresh-rate monitor products expanded, mostly in the gaming monitor market, while TVs maintained a stable sales in the high-end segment, driven by increased penetration of OLED panels.

In the second half of the year, the release of new smartphones from major customers and potential replacement demand with the adoption of AI is expected to lead to an increase in mobile display sales. However, competition among panel makers is likely to be more intense than in the first half.

SDC is manufacturing products with improved performance covering power consumption, brightness, slim design and durability, and will continue to expand sales and profitability through continuous quality insurance and enhanced productivity. For the large display business, SDC plans to increase sales and improve profitability by focusing on high-value-added products and introducing new monitors with various refresh rates.

MX Business To Focus on Flagship Smartphones and Ecosystem Products for Revenue Growth

The MX and Networks businesses posted KRW 27.38 trillion in consolidated revenue and KRW 2.23 trillion in operating profit for the second quarter.

Overall market demand for smartphones declined sequentially, particularly in the premium segment, as seasonal trends continued in the smartphone market. While the MX Business recorded a sequential decline in revenue, the Galaxy S24 series achieved double-digit year-on-year growth in both shipments and revenue over its predecessor for both the second quarter and the first half of the year, demonstrating the continued success of the series.

Profitability declined slightly compared to the previous quarter, primarily due to increased costs stemming from the rising prices of essential components. Nevertheless, the MX Business recorded double-digit profitability for the entire first half of the year.

In the second half of 2024, overall demand for smartphones is expected to increase year-on-year, with increased demand for premium products being driven by growing demand for AI and the launch of new products with innovative features. In addition, market demand for ecosystem products such as tablets, smartwatches and smart rings is expected to increase. Accordingly, the MX Business expects smartphone shipments to increase in the third quarter, while tablet shipments are expected to sequentially remain consistent.

The MX Business will seek revenue growth by expanding sales of flagship smartphones and ecosystem products, while also continuing to ensure solid profitability by optimizing product specifications, including component standardization and pursuing operational efficiencies.

Visual Display Business To Lead Growth in TV Market by Promoting Unique Competitiveness

The Visual Display and Digital Appliances businesses posted KRW 14.42 trillion in consolidated revenue and KRW 0.49 trillion in operating profit in the second quarter.

Overall TV market demand saw a year-on-year increase — primarily in advanced countries — as well as a quarter-on-quarter increase mainly due to global sporting events. Backed by differentiated launches of new TV models in 2024, the Visual Display Business solidified its leadership in the premium market by focusing on selling strategic products, such as Neo QLED, OLED and Lifestyle screens. However, profitability decreased year-on-year as costs increased, due to higher panel prices and intensified market competition.

In the second half of 2024, overall market demand is expected to recover further due to growing demand for QLED, OLED and larger screen TVs. The Visual Display Business will capitalize on peak season demand by implementing sales programs centered around premium and large-size TVs. Moreover, it will promote competitive features like AI, security and design along with differentiated customer experiences enabled by Samsung SmartThings.

Additionally, the Visual Display Business will seek to reinforce its growth momentum by strengthening its service businesses.

¹ Refers to Samsung’s fifth-generation 10nm class DRAM

The Company posted KRW 71.92 trillion in consolidated revenue on the back of strong sales of flagship Galaxy S24 smartphones and higher prices for memory semiconductors. Operating profit increased to KRW 6.61 trillion as the Memory Business returned to profit by addressing demand for high value-added products. The Mobile eXperience (MX) Business posted higher earnings and the Visual Display and Digital Appliances businesses also recorded increased profitability.

The weakness of the Korean won against major currencies resulted in a positive impact on company-wide operating profit of about KRW 0.3 trillion compared to the previous quarter.

The Company’s total capital expenditures in the first quarter stood at KRW 11.3 trillion, including KRW 9.7 trillion for the Device Solutions (DS) Division and KRW 1.1 trillion on Samsung Display Corporation (SDC). Spending on memory was focused on facilities and packaging technologies to address demand for High Bandwidth Memory (HBM), DDR5 and other advanced products, while foundry investments were concentrated on establishing infrastructure to meet medium- to long-term demand. Display investments were mainly made in IT OLED products and flexible display technologies.

Memory Business Returns to Profit; Second Quarter Expected to Remain Solid on AI Demand

The DS Division posted KRW 23.14 trillion in consolidated revenue and KRW 1.91 trillion in operating profit for the first quarter.

For servers and storage, demand for generative AI showed solid trends, while demand for DDR5 and high-density SSDs remained strong. For PCs and mobile overall, content-per-box continued to grow for both DRAM and NAND, and demand remained robust on the back of active sell-in driven primarily by Chinese mobile OEM customers.

The Memory Business returned to profit as it achieved qualitative growth by addressing the demand across servers, storage, PC and mobile, focusing on high-value-added products such as HBM, DDR5, server SSDs and UFS 4.0., along with the increase in ASP.

Looking ahead to the second quarter, the industry is expected to remain solid, led mainly by demand for generative AI.

For servers and storage, the continuous increase in the supply of AI servers and subsequent expansion of associated cloud services will increase demand not only for HBM but also for conventional servers and storage solutions. Demand for mobile is expected to be stable in the quarter, while PC customers are predicted to be affected by slow seasonality, making them likely to adjust their inventories ahead of new product launches in the second half of the year.

The Company started mass production of HBM3E 8H this month and plans to mass produce HBM3E 12H products and a 128GB product based on 1b nanometer¹ (nm) 32Gb DDR5 within the second quarter. The Company also started mass production of V9 NAND for the first time in the industry this month.

In the second half of 2024, business conditions are expected to remain positive with demand — mainly around generative AI — holding strong, despite continued volatility relating to macroeconomic trends and geopolitical issues.

For HBM, the Company will continue to increase supply in order to respond to growing demand for generative AI. In DRAM, the Company plans to accelerate 1b nanometer-based 32Gb DDR5 supply with faster ramp-up speeds and further strengthen its competitiveness in the high-density DDR5 module market. For NAND, the Company plans to enhance technology leadership by mass producing quad-level cell (QLC) for V9 in the third quarter.

The System LSI Business increased the supply of systems on chips (SoCs) and sensors for major customers’ new products, but earnings improvements have taken longer than anticipated as Display Driver IC² (DDI) sales were impacted by slowing panel demand.

With smartphone sell-out likely to show signs of recovery after a slow start, the System LSI Business will focus on providing a stable supply of flagship SoCs and sensors and is also preparing to ship products based on advanced technologies for new wearables.

For mobile sensors, the utilization rate is expected to remain high, including the mass production of 50MP products for global customers. For DDIs, sales are expected to continue expanding to meet demand from a major customer for new IT/TV products.

Amid a likely intensified pressure for component pricing, the System LSI Business will proactively adjust its product mix to navigate these challenges effectively.

The Foundry Business saw a delay in sales improvement due to weak market demand and continued inventory adjustments. Still, efficiency efforts in fab operations became more visible, which allowed it to narrow losses slightly.

The development of advanced 3nm and 2nm technologies is progressing smoothly, and 4nm technology yields have stabilized. This improvement in advanced technology competitiveness helped the Foundry Business achieve its highest ever order backlog in the first quarter.

Amid a likely gradual recovery in market conditions, second-quarter revenue is expected to rebound and reach double-digit quarter-on-quarter growth after bottoming in the first quarter.

The Foundry Business plans to complete the development of 2nm design infrastructure and prepare 4nm technology applicable to 3D IC. For mature technologies like 14nm and 8nm, it plans to prepare infrastructure for multiple applications.

In the second half of 2024, the foundry market is expected to see limited growth as uncertainties are likely to persist. However, the Foundry Business expects to outpace the market growth rate in annual sales thanks to increased sales of leading-edge technologies of 5nm and below. It will start mass production of Gate-All-Around (GAA) 3nm second-generation technology and improve the maturity of 2nm technology to focus on high-growth applications like AI and high-performance computing (HPC).

SDC To Focus on Flexible Displays and IT/Automotive, Aims for Sales Growth in Large Panels

SDC posted KRW 5.39 trillion in consolidated revenue and KRW 0.34 trillion in operating profit for the first quarter.

In the mobile display business, while intensifying competition led to a decline in earnings from the previous quarter, SDC ensured the timely supply of flexible displays for a major customer’s high-end smartphones and improved the utilization rate for rigid displays.

For the large display business, SDC narrowed losses on the back of new QD-OLED monitor products and a stronger customer base, despite an ongoing curb in demand.

While SDC expects sales to increase in mobile displays with the launch of new foldable phones from a major customer and stronger demand for IT products in the second quarter, earnings growth is likely to be impacted by intensifying competition.

As for large displays, SDC plans to address demand for TV panels for a major customer and seeks to expand sales of premium monitors.

In the second half of the year, SDC will focus on maintaining competitiveness by expanding the sales of flexible displays with low power consumption and improved durability while also continuing to replace LCD displays in smartphones with rigid display products. Furthermore, SDC plans to boost its IT and automotive businesses in order to diversify its business portfolio.

SDC aims to increase large display sales from the previous year by improving the production efficiency of QD-OLED displays and enhancing the product mix, focusing on high-valued-added offerings.

MX Business Posts Revenue Growth Amid Market Decline, Plans Continued Investment in AI

The MX and Networks businesses posted KRW 33.53 trillion in consolidated revenue and KRW 3.51 trillion in operating profit for the first quarter.

Market demand for premium and mid-range smartphone segments decreased sequentially in volume and value as the smartphone market entered the seasonally slower first quarter.

However, the MX Business achieved revenue and operating profit growth due to strong sales of the Galaxy S24 series and maintained solid double-digit profitability through continued efforts in resource optimization. In particular, Galaxy AI features on the S24, such as Circle to Search, continued to see high usage rates and contributed to sales growth.

In the second quarter, overall demand for smartphones is expected to decline sequentially due to seasonality. Accordingly, the MX Business expects smartphone shipments to decline and tablet shipments to remain consistent sequentially.

The MX Business will maintain its flagship-oriented sales approach in the second quarter by applying the Galaxy S24’s AI experience to other flagship models and maximizing product competitiveness. Additionally, the MX Business will aim to secure solid profitability by continuing to streamline operations in light of continued geopolitical instability and likely increases in the cost of key components. At the same time, the MX Business will remain committed to investing in R&D, including in AI, despite a challenging environment.

In the second half of the year, the smartphone market is expected to rebound due to stabilizing consumer sentiment, the expansion of AI products and services and economic growth in emerging markets.

The MX Business will seek annual growth in smartphone sales and aims to maintain sales momentum through the expansion of Galaxy AI to existing and new flagship products across foldable devices and tablets. For wearables, it will strengthen the Galaxy ecosystem experience through the expansion of new models and form factors like the Galaxy Ring. For smartwatches, the MX Business will strive to meet demand for upgrades through the launch of new premium models.

Additionally, the MX Business will continue to seek operational efficiencies to counter rising component costs to ensure solid annual profitability, and it will continue to invest in research and development to further expand and refine Galaxy AI.

Visual Display and Digital Appliances To Continue Breaking New Ground in the AI Era

The Visual Display and Digital Appliances businesses posted KRW 13.48 trillion in consolidated revenue and KRW 0.53 trillion in operating profit in the first quarter.

The Visual Display Business posted higher quarter-on-quarter profitability even as the overall market demand decreased by concentrating on premium products, such as Neo QLEDs, OLEDs and TVs above 75″. However, profitability declined year-on-year due to stagnant TV market demand and increased costs amid intensifying market competition.

In the second quarter, overall market demand is expected to remain weak due to declining TV demand in emerging markets, but major global sporting events may lead to opportunities to increase sales. The Visual Display Business will focus on securing profitability, enhancing sales of strategic products and strengthening operations management in each business segment.

In the second half of 2024, overall TV demand is expected to recover gradually amid an uncertain macroeconomic and geopolitical environment. The Visual Display Business will address diverse consumer needs while promoting “AI Screen Leadership,” driven by innovative premium TVs and Lifestyle screens. Additionally, it will provide differentiated customer experiences through connected devices and drive market growth by promoting advanced features based on security and sustainability, as well as boosting competitiveness in service businesses such as Samsung TV Plus.

¹ Refers to Samsung’s fifth-generation 10nm class DRAM.
² Integrated circuit.

The Company posted KRW 67.78 trillion in consolidated revenue and KRW 2.82 trillion in operating profit in the quarter ended December 31, 2023. For the full year, it reported KRW 258.94 trillion in annual revenue and KRW 6.57 trillion in operating profit.

Fourth quarter revenue and operating profit increased from the third quarter based on improved performance in Memory due to higher prices, and continued strength in sales of premium display products.

In the first quarter of 2024, the Company will focus on improving profitability by increasing sales of high value-added products. The component businesses aim to meet demand for advanced products and those aimed for generative AI while the Device eXperience (DX) Division will strengthen AI features in smartphones and other consumer products.

The memory market and demand for IT are expected to continue recovering in 2024, though macroeconomic uncertainties remain to be seen. The Company will meet demand for semiconductors for AI applications and expand into AI-enabled consumer product markets. At the same time, the Company will strengthen its leadership in premium products and competitiveness in advanced-node semiconductors.

As ongoing macroeconomic uncertainties are expected to weigh on the business environment in the near-term, the Company expects earnings in the first half of 2024 to show a moderate improvement, with a more significant improvement expected to take place in the second half of the year.

The Company’s capital expenditures in 2023 reached a total of KRW 53.1 trillion, including KRW 48.4 trillion spent in the Device Solutions (DS) Division and KRW 2.4 trillion in Samsung Display Corporation (SDC). In the fourth quarter, the total was KRW 16.4 trillion, with KRW 14.9 trillion allocated to the DS Division and KRW 0.8 trillion to SDC.

Spending on memory was concentrated on building out infrastructure at the facility in Pyeongtaek, Korea and expansion of production capacity of HBM, DDR5 and other advanced nodes. Foundry investments focused on expanding the production capacity of advanced EUV nodes of 5 nanometers (nm) and below, as well as infrastructure at the Company’s factory in Taylor, Texas. Display investments were mainly made in IT OLED products and flexible displays.

Semiconductor Demand To Recover Gradually in 2024

The DS Division posted KRW 21.69 trillion in consolidated revenue and KRW 2.18 trillion in operating losses in the fourth quarter of 2023.

For the Memory Business, the overall market showed a recovery compared to the previous quarter, with content-per-box continuing to increase for PC and mobile. Server demand showed signs of recovery as investments in generative AI expanded across the IT industry.

The Memory Business also focused on expanding sales of high value-added products, leading to significantly higher sales of cutting-edge solutions like HBM, DDR5, LPDDR5x and UFS 4.0, among others. As a result, its bit growth exceeded market growth, and inventory depletion of DRAM and NAND accelerated. The DRAM business posted a profit on the back of higher prices.

Looking to the first quarter of 2024, PC and mobile demand recovery is expected to continue, while server and storage demand will show signs of recovery, though market conditions need close monitoring. In terms of industry supply, bit growth of cutting-edge products is anticipated to face constraints across the market while consumer demand for advanced-node products is predicted to stay strong. The Memory Business will focus on responding to demand for cutting-edge products and intends to improve profitability by actively addressing demand for HBM and generative AI-related server SSDs.

In 2024, the Memory Business expects the market to continue to recover despite various potential obstacles, including interest rate policies and geopolitical issues. For PC and mobile, content-per-box is expected to grow due to the impact from expansion of on-device AI. As far as servers are concerned, server replacements and transitions to new platforms will likely lead to a gradual recovery in demand. Additionally, the Memory Business plans to focus on profitability based on the competitiveness of cutting-edge nodes.

For DRAM, the aim is to enhance leadership in the high-density DDR5 market and solidify competitiveness in HBM by ramping up the volume of next-generation HBM3E in a timely manner. For NAND, the Memory Business will respond to customer demand for high-density storage by being the first in the industry to enter the mobile QLC market, and by leading the Gen5 SSD market for generative AI applications.

Due in large part to inventory adjustments and the selection of Exynos 2400 for a major customer’s flagship model, the System LSI Business saw its earnings improve in the fourth quarter.

In the first quarter of 2024, sales of new SoCs and high-pixel image sensors are expected to remain strong. However, demand for some SoCs is expected to decline, and earnings are likely to worsen — mainly for mobile display driver IC (DDI) — so overall earnings improvement is predicted to be somewhat limited. However, the introduction of on-device AI provides an opportunity to restore the desire of consumers to replace their smartphones.

Although the smartphone market is expected to rebound in 2024, it is believed that the normalization of chip prices and higher financial costs will erode set makers’ promotional capabilities, limiting demand growth.

The System LSI Business will secure future growth engines by leveraging AI momentum and maximizing SoC, sensor and LSI business competitiveness. It plans to continuously improve on-device functions like NPU performance improvement and model weight reduction. For image sensors, it will expand sales of high-pixel sensors and DDIs and will achieve growth, even in uncertain environments, as IT devices adopt more OLEDs.

The Foundry Business saw its earnings decline in the fourth quarter due to a delay in global economic recovery. Despite these challenges, it is actively developing 3nm and 2nm Gate-All-Around (GAA) technology and plans to expand into newly emerging application segments using advanced process technologies. Furthermore, the Foundry Business achieved its highest annual order backlog in 2023.

In the first quarter of the year, it expects the launch of new products including AI smartphones and AI PCs to drive an improvement in demand. However, the ongoing trend of customers reducing inventory may mean that earnings will not significantly recover. Nevertheless, the Foundry Business is focused on improving yield and optimizing the second-generation 3nm GAA process. It is also securing a 2nm AI accelerator order that includes HBM and advanced packaging.

As demand for smartphones and PCs gradually recovers in 2024, advanced processes are expected to drive an approach to 2022 levels in the foundry market. The Foundry Business will continue stable mass production of the 3nm GAA process, develop the 2nm process and increase orders for fast growing applications such as AI accelerators.

Mobile Display To Focus on Smartphones and IT/Auto; Large Display To Improve Profitability

SDC posted KRW 9.66 trillion in consolidated revenue and KRW 2.01 trillion in operating profit for the fourth quarter.

For the mobile display business, the market demand for smartphones increased slightly year-on-year. Despite facing multiple challenges during the quarter, SDC maintained its performance compared to the previous quarter by ensuring a timely supply for major customers’ new products and focusing on high-end products in its product mix.

For the large display business, although demand remained weak due to unfavorable economic conditions, SDC posted sales growth and reduced losses backed by year-end seasonal TV demand.

In the first quarter of 2024, SDC expects a decline in mobile display business earnings due to intensifying competition among panel manufacturers and muted seasonal demand.

For the large display business, despite challenges posed by weak demand and off-season effects, SDC will continue its efforts to reduce losses by launching new QD-OLED monitors and expanding its customer base.

In 2024, the market demand for smartphones is expected to be sluggish due to the global economic slowdown and prolonged regional conflicts. Nevertheless, SDC aims to focus on sales growth based on differentiated technology and capabilities in the smartphone market, particularly in the highly competitive high-end segment. It also intends to strengthen its future growth engines in the IT and Auto segments.

Although ongoing macroeconomic uncertainties pose challenges to the large display business, SDC expects TV demand to recover moderately, buoyed by upcoming sporting events. It will closely monitor market developments and work towards improving profitability by centering QD-OLED monitors in its product mix, enhancing production efficiency and adding capacity without additional investments.

MX Maintains Double-Digit Profitability, Will Become Global Standard for Mobile AI With Galaxy AI

The MX and Networks Businesses posted KRW 25.04 trillion in consolidated revenue and KRW 2.73 trillion in operating profit for the fourth quarter.

Market demand for smartphones increased slightly quarter-on-quarter, driven by the premium segment, despite continued inflation and geopolitical instability.

The MX Business reported a decline in sales and profit quarter-on-quarter due to lower smartphone sales, including the fading of new-product effects from flagship models launched in the third quarter. However, tablet shipments, led by new product releases, grew significantly and included healthy sales of premium products. Wearable devices also maintained sales momentum during the peak holiday season.

In the first quarter of 2024, smartphone market demand is expected to decline sequentially due to seasonality, but the premium segment is expected to grow year-on-year. Accordingly, the MX Business plans to leverage the newly launched Galaxy S24 series — which brings advanced AI capabilities and enhanced product competitiveness — to expand sales of flagship products. The MX Business will also continue to focus on operational efficiency.

In 2024, smartphone market demand is expected to rebound as consumer sentiment stabilizes in anticipation of a global economic recovery, leading to market growth, especially in the premium segment. Similarly, the tablet market is expected to recover, while the wearables market is forecasted to achieve double-digit value growth for smartwatches and slight value growth for True Wireless Stereo (TWS) devices.

The MX Business aims to lead the AI smartphone market by offering customers a differentiated experience through the integration of Galaxy AI in the S24 series, while also enhancing the user experience and optimizing Galaxy AI for foldable devices. Through these efforts, the MX Business aims to grow its annual flagship shipments at a double-digit rate and solidify its leadership in the foldable category.

In addition, the MX Business will continue to focus on sales of premium devices for tablets. For wearables, it will strive to elevate the Galaxy ecosystem experience, enhance wellness functions in smartwatches and increase the smartphone attach rate by integrating AI technologies.

Through these efforts, the MX Business aims to achieve revenue growth and ensure solid profitability by continuing to optimize resources amid unstable market conditions. Finally, the MX Business will strengthen R&D and investment in future growth areas such as generative AI, digital health and XR.

Visual Display and Digital Appliances To Lead the AI Era

The Visual Display and Digital Appliances Businesses posted KRW 14.26 trillion in consolidated revenue and KRW 0.05 trillion in operating losses in the fourth quarter.

Overall market demand for TVs increased quarter-on-quarter in the fourth quarter, led by seasonality, but declined year-on-year due to reduced consumption sentiments among advanced markets.

The Visual Display Business expanded its leadership in the premium market by focusing on selling high-value-added products — including Neo QLEDs, OLEDs, and Big TVs above 75″ to preemptively respond to high demand during the peak season, including Black Friday.

However, profitability decreased slightly on a quarter-on-quarter and year-on-year basis due to the stagnant TV market demand and increased costs amid intensified competition.

In the first quarter of 2024, overall TV demand is expected to decrease owing to seasonality, apart from the premium market, including Neo QLEDs, OLEDs, and Big TVs above 75″, where solid demand is projected.

The Visual Display Business will amplify the buzz created by launching new premium models announced at CES and its showcase event First Look and, in order to focus on sales of strategic products and securing profitability, take a more proactive approach to promoting differentiated products and service.

In 2024, replacement demand linked to global sporting events is expected to ease the decline in TV market demand gradually. However, uncertainties surrounding various macro factors are anticipated to continue.

The Visual Display Business aims to innovate its premium and Lifestyle products and diversify its lineup to meet various customer needs. Furthermore, it will lead the AI-screen era by continuing to introduce innovations in hyper-connectivity and customized content and services, powered by its next-generation AI processor and Tizen operating system.

Total consolidated revenue was KRW 67.40 trillion, a 12% increase from the previous quarter, mainly due to new smartphone releases and higher sales of premium display products. Operating profit rose sequentially to KRW 2.43 trillion based on strong sales of flagship models in mobile and strong demand for displays, as losses at the Device Solutions (DS) Division narrowed.

The Memory Business reduced losses sequentially as sales of high valued-added products and average selling prices somewhat increased. Earnings in system semiconductors were impacted by a delay in demand recovery for major applications, but the Foundry Business posted a new quarterly high for new backlog from design wins.

The mobile panel business reported a significant increase in earnings on the back of new flagship model releases by major customers, while the large panel business narrowed losses in the quarter.

The Device eXperience (DX) Division achieved solid results due to robust sales of premium smartphones and TVs. Revenue at the Networks Business declined in major overseas markets as mobile operators scaled back investments.

Harman posted a quarterly record in operating profit, led by higher sales of car audio products amid an overall increase in orders from automotive customers and also consumer audio products such as portable speakers.

In the fourth quarter, the DS Division will focus on sales of high value-added products such as High Bandwidth Memory (HBM) while also strengthening its technological leadership. Both the DX Division and Samsung Display Corporation (SDC) will seek to maintain solid profitability by focusing on premium markets.

The Memory Business plans to expand sales of HBM3 products and will address growing demand for new interfaces while increasing the portion of advanced nodes. System semiconductors are expected to post improved results on the back of new products for mobile customers.

SDC expects to maintain strong performance in the mobile panel business, driven by robust demand for premium OLED panels for smartphones. The large panel business will expand QD-OLED sales, led by year-end seasonal demand.

The DX Division will strive to maintain solid profitability by reinforcing strategies for flagship smartphones and expanding sales of premium tablets and wearable products. For TVs, the Company expects solid seasonal demand for high value-added models. The Networks Business will seek to secure new orders in overseas markets, while the Digital Appliances Business will focus on sales of premium products and strengthening the product mix.

Harman will seek to post another robust quarter by expanding sales of audio products during end-year seasonality as well as addressing the continuing demand for automotive products.

In 2024, while macroeconomic uncertainties are likely to persist, memory market conditions are expected to recover. The DS Division will seek to expand sales of advanced node products and plans to meet demand for high-performance, high-bandwidth products by increasing sales of HBM3 and HBM3E with the industry-leading HBM production capacity in the industry. For the Foundry Business, the second generation 3-nanometer (nm) Gate-All-Around (GAA) process will start mass production and operations will begin at its new factory in Taylor, Texas. Furthermore, in the Advanced Package business, production will begin, based on the multiple orders it has received from domestic and overseas HPC customers, including orders for the Company’s turnkey service that combines logic, HBM and 2.5D advanced packaging technologies.

For SDC, the mobile panel business plans to meet increasing demand for new applications, while the large panel business will improve profitability by adding new products and enhancing yields.

The DX Division will focus on the premium market by increasing sales of flagship smartphone models and innovative TV products. The Company plans to expand the application of AI, provide tailored hyper-connected experiences via SmartThings and secure technologies in new areas such as XR. The Networks Business will aim to increase revenue by seeking business opportunities overseas and reinforcing technology leadership in core 5G chips and virtualized Radio Access Network (vRAN) solutions.

The Digital Appliances Business plans to strengthen the leadership in premium segments with global launches of appliances featuring AI technology. The Company plans to continue advancing the connectivity experience between SmartThings-based digital appliances and other devices.

Harman is expected to secure orders in new areas including automotive displays and will address demand for high-growth products such as home audio equipment.

In the third quarter, Samsung Electronics’ capital expenditure reached KRW 11.4 trillion, including KRW 10.2 trillion spent in the Device Solutions (DS) Division and KRW 0.7 trillion in Samsung Display Corporation (SDC). The cumulative total for the January-September period is KRW 36.7 trillion, with KRW 33.4 trillion allocated to the DS Division and KRW 1.6 trillion to SDC.

The full-year capital expenditure for 2023 is expected at approximately KRW 53.7 trillion, including KRW 47.5 trillion allocated to the DS Division and KRW 3.1 trillion to SDC.

Spending on memory is expected to be concentrated in Pyeongtaek, which includes completing the P3 infrastructure and progressing the P4 framework for mid- to long-term supply. The Company remains committed to investing in new technologies, such as securing industry-leading HBM production capacity. Foundry investments are expected to increase from last year, centering on production capacity expansion in Pyeongtaek for the EUV process as well as for infrastructure investment in Taylor. For SDC, investments will mainly focus on expanding capacity for flexible displays and OLED products for IT applications.

Foundry Achieves Record Backlog From Design Wins; Memory Demand To Recover in 2024

The DS Division posted KRW 16.44 trillion in consolidated revenue and KRW 3.75 trillion in operating losses in the third quarter.

For the Memory Business, the PC and mobile demand improved by increasing adoption of high-density products in both DRAM and NAND and the completion of customers’ inventory adjustments. The server demand for generative AI-oriented, high-density and high-end products remained strong in comparison to the sluggish demand for conventional servers.

With a focus on improving profitability, the Memory Business continued to expand sales of advanced-node products such as HBM, DDR5, LPDDR5x and UFS 4.0, and it also strived to reduce inventory levels by production adjustment rather than by aggressive sales expansion.

Overall, bit growth came in under guidance but the average selling price (ASP) of both DRAM and NAND saw some decent increases when compared to the previous quarter.

Looking to the fourth quarter, thanks to effects of peak seasonality including year-end promotions and launches of new smartphones by major mobile customers, the demand for PCs and mobile is likely to improve. Additionally, the trend of high-density penetration for both PCs and mobile devices has been accelerating more than forecasted. Cloud service providers’ capital expenditure is concentrated on generative AI, so the associated server demand is expected to remain strong.

The Memory Business will expand the sales portion of highly profitable automotive products and HBM3 mass-volume business for major customers, in line with growing demand for generative AI. Through the ramp-up of Pyeongtaek Line 3, Samsung will proactively address the rising demand for new interfaces such as DDR5, LPDDR5x, PCIe Gen5 and UFS 4.0.

Looking ahead to 2024, PC and mobile demand is likely to benefit from the arrival of some replacement cycles for products sold during the initial phase of the pandemic. For DRAM, due to the spread of On-Device AI, the high-density trend in the flagship and high-end segments is expected to continue.

Overall memory demand is expected to recover gradually thanks to increasing demand for AI and normalizing inventory levels at customers, but various factors that can affect the server market — such as geopolitical issues and IT spending trends that are related to macroeconomic conditions and centered on generative AI — need to be continuously monitored.

In the third quarter, the System LSI Business posted a slower than expected improvement in earnings due to a delayed recovery in semiconductor demand and the impact from inventory adjustments.

During the quarter, the development of E2400 was completed, which has significantly improved performance for the CPU, GPU and NPU when compared to its predecessor. In addition, the Mobile Display Driver IC (DDI) achieved the highest quarterly sales this year on the back of a new product launched by customers, while the 200-megapixel image sensor has expanded the application from wide-angle cameras to telephoto cameras.

In the fourth quarter, the System LSI Business expects earnings to improve significantly, as supply to mobile customer’s new products is predicted to increase. The mobile SoC is in the final stages of development for next year’s flagship smartphones and is poised to expand the business portfolio by targeting global customers for the modem business, while also enhancing the solution capabilities for On-Device AI.

In 2024, as the mobile market is expected to pursue sales growth by increasing the portion of premium models, the System LSI Business will also seek growth by increasing sales of flagship products and expanding the business area beyond the mobile market.

Earnings at the Foundry Business remained weak as a slow recovery in major applications including mobile led to a delay in fab utilization rate improvement. However, the Foundry Business did achieve a quarterly record backlog for new design wins, centering on HPC applications.

In the fourth quarter, earnings are expected to improve as demand for semiconductors will likely increase with the launch of new products by major customers. The Foundry Business is stabilizing the GAA processes by continuously improving the yield of the second-generation 3nm process, and it also plans to secure a design infrastructure that reflects the Silicon results for 2nm.

Looking ahead to 2024, the foundry market is expected to return to a state of growth with the recovery in mobile demand and continuing increase in HPC demand. The Foundry Business plans to mass produce the second-generation 3nm process and the fourth-generation 4nm process for HPC applications. It will also strengthen the overall product portfolio by focusing on the development of specialty processes such as RF and eMRAM to expand into various applications such as HPC, automotive and consumer applications.

Mobile Display Posts Solid Results, Will Continue Focus on High-End Market

SDC posted KRW 8.22 trillion in consolidated revenue and KRW 1.94 trillion in operating profit for the third quarter.

For the mobile display business, SDC saw a slight increase quarter-on-quarter in market demand on the back of seasonal demand and launches of new products by major smartphone makers. SDC achieved solid results by focusing on premium OLED, with the polarizing trend intensifying between high-end and mid-range-and-below markets.

For the large display business, SDC saw earnings improve from the previous quarter as it concentrated on high-end products while strengthening operational fundamentals resulted in enhanced yields and reduced losses.

In the fourth quarter, SDC expects sales in the mobile display business to remain relatively strong thanks to seasonal effects in the smartphone and IT markets. However, growth may be limited as lingering inflation and rising interest rates impact consumer sentiment. SDC will strive to generate similar results quarter-on-quarter by leveraging competitiveness in the high-end market and featuring launches of new foldable products.

For the large display business, despite concerns over prolonged tepid demand due to the economic downturn, SDC will continue its efforts to reduce losses with an enhanced product mix including an increased share of monitors.

In 2024, in spite of persistent and adverse macro factors, SDC will seek to secure robust results by utilizing its wide capabilities, including preemptive investments, development of differentiated technologies and effective management to ensure stable quality and yield.

Furthermore, as its strategic customers are releasing new products featuring OLED in the foldable smartphone, IT OLED, automotive and gaming segments, SDC will actively promote OLED’s unique selling points and create a turning point in the market.

In particular, SDC will maintain its industry leadership by developing not only technology that caters to customer needs, but also a complete supply chain — both upstream and downstream — in the high-potential AR/VR markets.

Mobile Achieves Double-Digit Profit, Will Leverage Holiday Season in Q4

The MX and Networks businesses posted KRW 30.00 trillion in consolidated revenue and KRW 3.30 trillion in operating profit for the third quarter.

Overall market demand increased from the previous quarter, driven by a recovery in the global smartphone market. The sales and profitability of the MX Business increased quarter-on-quarter, driven by the successful launch of new flagship models. New foldable devices, tablets and wearables recorded strong sales, supported by a stable supply, and the Galaxy S23 series, launched in the first half of 2023, also maintained solid sales momentum.

In the fourth quarter, due to seasonality, the smartphone market is expected to grow and experience intensified competition, especially in the premium segment. Competition is also expected to increase in the mass-market segment, while market uncertainties are expected to remain due to ongoing geopolitical instability.

The MX Business will continue to maintain steady sales of its new foldable products and the Galaxy S23 series with various sales promotions in anticipation of the year-end holiday season. For tablets and wearables, the MX Business will expand sales with a focus on new premium products, leveraging seasonality and strengthening marketing campaigns in close collaboration with partners.

In 2024, smartphone market demand is expected to rebound as consumer sentiment stabilizes in anticipation of a global economic recovery, and growth in the premium segment is expected to continue. The premium segment of the tablet market is also expected to grow, while the smartwatch market is forecasted to achieve double-digit growth, with the True Wireless Stereo market set to grow modestly.

The MX Business will focus on further enhancing the smartphone experience for customers, seeking double-digit growth in annual flagship shipments and above-market smartphone revenue growth. For tablets, an emphasis will be placed on strengthening the premium product lineup, while for wearables, priority will be on expanding sales of new models and enhancing wellness features.

Moreover, the MX Business will advance generative AI technology in core features to deliver hyper-personalized experiences, as well as acquire technologies in future growth areas such as XR, Digital Health and Digital Wallet.

Through these efforts, the MX Business aims to achieve annual growth in revenue and profit in 2024 while optimizing resources to adapt to unstable market changes and improve profitability.

Visual Display and Digital Appliances To Focus on Securing Profitability

The Visual Display and Digital Appliances businesses posted KRW 13.71 trillion in consolidated revenue and KRW 0.38 trillion in operating profit in the third quarter.

Overall market demand for TVs increased quarter-on-quarter in the third quarter, led by seasonality, but declined year-on-year due to various macroeconomic factors affecting consumer demand.

The Visual Display Business improved year-on-year profitability as it expanded its leadership in the premium market to focus on selling high-value-added products — including Neo QLEDs, OLEDs and Super Big TVs — while reducing overall costs, especially material costs.

In the fourth quarter, demand uncertainty is expected to remain unresolved due to various risks in the business environment, apart from the premium market, where solid demand is projected.

The Visual Display Business will ensure the capture of peak-season demand by enhancing its competitiveness in both online and offline channels. In addition, it aims to secure profitability by improving its high-value-added product mix with Neo QLEDs, Lifestyle Screens and Super Big TVs.

In 2024, the TV market may fluctuate due to the external risks that were also present in 2023. However, consumer sentiment is expected to turn around from this year and slightly improve to alleviate the decline in market demand.

The Visual Display Business will continue to innovate TV products, focusing on premium and lifestyle screens, to lead the ultra-high-definition and ultra-large size TV market — especially targeting demand associated with major sports events scheduled in 2024.

The Visual Display Business will continue to center on the fundamentals of TV, including picture and sound quality, as well as other features that are highly valued in the market, to allow customers to enjoy differentiated screen experiences.

The Company posted KRW 60.01 trillion in consolidated revenue, a 6% decline from the previous quarter, mainly due to a decline in smartphone shipments despite a slight recovery in revenue of the DS (Device Solutions) Division. Operating profit rose sequentially to KRW 0.67 trillion as the DS Division posted a narrower loss, while Samsung Display Corporation (SDC) and the Digital Appliances Business saw improved profitability.

The Memory Business saw results improve from the previous quarter as its focus on High Bandwidth Memory (HBM) and DDR5 products in anticipation of robust demand for AI applications led to higher-than-guided DRAM shipments. System semiconductors posted a decline in profit due to lower utilization rates on weak demand from major applications.

In the mobile panel business, earnings were similar to the previous quarter on the back of solid sales of premium panels, while the large panel business continued to focus on QD-OLEDs in the premium market.

The Device eXperience (DX) Division achieved strong profitability due to higher sales of premium TVs and digital appliances, an improved cost structure and increased operational efficiency. The Networks Business’s revenue declined in major overseas markets including North America and Japan.

Harman posted revenue and profit growth, led by demand for consumer audio such as portable and True Wireless Stereo products. Harman also won the largest automotive order in its history in the quarter.

The weakness of the Korean won against the US dollar, euro and major emerging currencies resulted in a positive impact on company-wide operating profit.

Global demand is expected to gradually recover in the second half of the year which should lead to an improvement in earnings driven by the component business. However, continued macroeconomic risks could prove to be a challenge in such recovery in demand.

The DS Division will focus on sales of high-value-added products such as DDR5, LPDDR5x and HBM amid expectations of a recovery in demand. It will continue to strengthen mid- to long-term competitiveness by increasing investments in infrastructure, R&D and packaging technology, while also enhancing the completeness of the Gate-All-Around (GAA) process.

SDC’s mobile panel business is expected to post improved earnings as major customers launch new smartphone models, while the large panel business will address year-end seasonal demand with a supply of ultra-large panels.

The DX Division plans to sustain solid profitability with new foldable smartphone and wearable launches and by increasing sales of premium TVs and digital appliances. The Networks Business aims to win new projects to grow revenue and reinforce technology leadership in 5G core chips and software-based virtualized Radio Access Networks (vRAN).

The Digital Appliances Business plans to expand the Bespoke lineup globally and increase sales of energy-efficient products featuring the Energy Savings Mode on SmartThings, while Harman is expected to improve profitability with higher sales of consumer audio products.

The Company’s total capital expenditures in the second quarter stood at KRW 14.5 trillion, including KRW 13.5 trillion for semiconductors and KRW 0.6 trillion for displays. Spending on memory was concentrated on completing the P3 infrastructure and the P4 framework for mid- to long-term supply. Foundry investments continued to focus on fabs in Taylor, Texas and Pyeongtaek, Korea to address the demand for advanced nodes, while investments in displays focused on infrastructure and module production enhancements.

Memory Business To See Improved Growth amid Stabilizing Market

The DS Division posted KRW 14.73 trillion in consolidated revenue and KRW 4.36 trillion in operating losses for the second quarter.

The Memory Business achieved its bit growth guidance even as it saw more limited price drops for both DRAM and NAND, which ultimately contributed to a quarter-on-quarter improvement in performance. As server customers continued inventory adjustment, overall purchase demand had not yet recovered. Due to the strong demand for generative AI, however, investment from the data center sector was concentrated on AI servers.

For DRAM, the Memory Business exceeded bit growth guidance by expanding sales on applications of consumer, graphics and automotive in addition to expanding sales focusing on servers, especially by actively responding to rising demand for DDR5 and HBM for generative AI applications.

As for NAND, the Memory Business actively responded to the demand for flagship smartphones with competitiveness in UFS 4.0 and also achieved bit growth guidance by increasing sales of gaming devices, branded products for retail and so on. Meanwhile, the price decline was considerably less than the previous quarter.

Looking to the second half of the year, the market is expected to gradually move toward stability considering increasing production cuts in the industry, while inventory adjustments by customers are likely to wind down.

In mobile and PC applications, with the normalization of major customers’ set inventory levels, Set-Build demand is expected to improve due to the launch of new smartphones and PC promotion in the second half of the year.

The server demand is expected to recover gradually and, in terms of products, demand for DDR4 and DDR5 is also expected to improve.

Based on supply flexibility linked to market conditions, the Memory Business will optimize its portfolio by focusing on high value-added and high-density products. In DRAM, to strengthen leadership in high-performance servers and mobile high-end segments, the Memory Business will rapidly increase the share of leading-edge products such as DDR5, LPDDR5x and HBM.

In the second quarter, the System LSI Business posted a lower-than-expected improvement in its earnings due to the delayed recovery of demand for semiconductors and customers’ continued inventory adjustments.

However, the System LSI Business won a design award for automotive SoCs with a domestic OEM for their 2025 premium model, and it also continued efforts to expand SoC applications including actively discussing mid- to long-term cooperation with European customers.

The System LSI Business expanded its applications to fingerprint authentication cards in the security business as well as Battery Management Systems (BMS) in the power management IC business.

In the second half of 2023, the recovery of demand for major applications such as mobile is likely to be delayed due to depressed consumer sentiment and lower-than-expected reopening efforts in China.

The System LSI Business is also seeking to resume supplying major customers by securing product performance for the flagship model and new business solutions aside from smartphones. For automotive SoC, it will continue focusing on winning orders from European OEMs in 2026.

The Foundry Business saw its revenue increase quarter-on-quarter in the second quarter thanks to increased sales to some US customers, but operating profit declined significantly as utilization decreased due to fab expansion and uncertainties in short-term demand.

The Foundry Business is smoothly mass producing its third product using GAA technology thanks to the stabilization of the 3-nanometer (nm) process, and the development of both the second generation of 3nm GAA technology and the 2nm GAA technology is on track and progressing well.

The Foundry Business successfully held the SFF/SAFE 2023 event in the US and Korea, introducing its process roadmap and various technological innovations. It launched the Multi-Die Integration Alliance with ecosystem partners.

In the second half of the year, although there are still considerable uncertainties, it expects demand to improve gradually.

The Foundry Business will lay the foundation for growth by advancing the development completeness of the 3nm GAA process with improved Power, Performance and Area (PPA) and by expanding orders from large customers.

It will keep striving to grow its product portfolio by continually developing mature processes, such as 8nm eMRAM, as well as 8-inch technologies for use in automotive applications.

SDC To Leverage New Technology To Build on Earnings

SDC posted KRW 6.48 trillion in consolidated revenue and KRW 0.84 trillion in operating profit for the second quarter.

For mobile panels, SDC achieved results similar to the previous quarter’s and thus maintained its market share by supplying OLED panels equipped with outstanding performance and technology.

For the large panel business, SDC has been improving its business fundamentals with enhanced yield and productivity, and it is also strengthening the premium position of its QD-OLED products with the product mix upgrade centered on ultra-large 77-inch TVs.

In the second half of the year, since SDC has several of its mobile panel customers due to release new products, it expects to see earnings improve. In particular, using its accumulated technological prowess in new areas such as HIAA and HOP, SDC aims to stay ahead of its competitors and seamlessly accommodate the mass production of new products from the customers.

For large panels, uncertainty over demand is likely to persist in the second half. SDC will collaborate with its customers to boost sales of ultra-large TVs, which are performing well. In addition, SDC acquired eMagin, a microdisplay manufacturer, in May. SDC will actively develop technology to lead the Extended Reality (XR) display market, which is expected to grow rapidly.

Mobile To Focus on New Foldable and Galaxy Ecosystem Devices in 2H

The Mobile eXperience (MX) and Networks businesses posted KRW 25.55 trillion in consolidated revenue and KRW 3.04 trillion in operating profit for the second quarter.

Overall market demand declined from the previous quarter due to continued macroeconomic factors, including high interest rates and inflation.

Sales decreased sequentially for the MX Business as the effect of the Galaxy S23 launch from Q1 faded. Mass market recovery was also delayed due to the continued economic downturn, affecting Q2 sales.

Nevertheless, the Galaxy S23 series was able to achieve higher results than its predecessor in the first half, in terms of both volume and value.

The MX Business’s efforts to optimize operational efficiencies throughout R&D, manufacturing, and logistics, underpinned by stabilized prices of major raw materials, led it to maintain a double-digit margin.

For the second half of 2023, the overall smartphone market is expected to return to year-on-year growth, especially in the premium market.

However, external forecasts for market growth have also been lowered, amid risks of a prolonged global economic downturn.

Regarding tablets, the overall market is expected to stay mostly flat, but the high-end segment is projected to increase.

The MX Business will focus on the newly launched Galaxy Z Flip 5 and Galaxy Z Fold 5 series — which feature refined and differentiated user experiences – further fortifying its leadership in the global foldable smartphone market.

For the Galaxy S23 and Galaxy A series, the MX Business plans to enhance sales through close collaboration with its partners and sales programs tailored by region.

The MX Business will also focus on boosting sales of its tablets and wearables, with a strong focus on its new high-end models, which were announced this week at the Galaxy Unpacked event.

Through such activities and initiatives, the MX Business intends to grow its annual revenue in 2023, while securing sold double-digit profitability through enhanced operational efficiency.

Visual Display and Digital Appliances To Maintain Robust Performance in 2H

The Visual Display and Digital Appliances businesses recorded KRW 14.39 trillion in consolidated revenue and KRW 0.74 trillion in operating profit for the second quarter.

Demand for TVs declined quarter-on-quarter due to seasonal spending trends, but the decrease in demand started to ease in comparison to the previous year. The Visual Display Business posted higher results year-on-year by focusing on sales of high-value-added products, such as Neo QLED/OLED/ultra-large TVs, and reducing overall costs.

In the second half of 2023, the Visual Display Business expects seasonal strength to ease the decline in overall TV demand amid continued uncertainties in the business environment, while the premium market is projected to remain robust.

The Visual Display Business will continue leading the industry through innovative products including 98-inch ultra-large screens, Micro LED lineups and the world’s first large-sized OLED gaming monitor and also through differentiated marketing related to areas highly valued by its consumers, such as the environment, security and content. Furthermore, it will leverage seasonal sales opportunities through compelling sales promotion strategies focusing on key products, including Neo QLED, OLED and Lifestyle.

The Company posted KRW 63.75 trillion in consolidated revenue, a 10% decline from the previous quarter, as overall consumer spending slowed amid the uncertain global macroeconomic environment. Operating profit was KRW 0.64 trillion as the DS (Device Solutions) Division faced decreased demand, while profit in the DX (Device eXperience) Division increased.

The DS Division’s profit declined from the previous quarter due to weak demand in the Memory Business, a decline in utilization rates in the Foundry Business and continued weak demand and inventory adjustments from customers.

Samsung Display Corporation (SDC) saw earnings in the mobile panel business decline quarter-on-quarter amid a market contraction, while the large panel business slightly narrowed its losses.

The DX Division’s results improved on the back of strong sales of the premium Galaxy S23 series as well as an enhanced sales mix focusing on premium TVs.

The strength in the Korean won against the US dollar, euro and most major emerging currencies resulted in a negative impact of approximately KRW 0.7 trillion on company-wide operating profit, mostly in the component business.

In the second quarter, while current market conditions are expected to remain, the DS Division will focus on boosting technological competitiveness, including the gate-all-around (GAA) based 2-nanometer (nm) process, while meeting demand for DDR5, LPDDR5x and other high-end products.

SDC’s mobile panel business will focus on meeting demand projections for the second half of the year, while the large panel business is expected to see an increase in quarterly sales.

The DX Division aims to maintain solid profitability by expanding sales of the Galaxy A series smartphones and new TV models while also improving cost efficiency.

In the second half of the year, based on expectations of a gradual market recovery and a rebound in global demand, the DS Division will focus on high-capacity server and mobile products. The DS Division will continue to strengthen its technology leadership by expanding customers for leading-edge products based on the GAA process.

SDC’s mobile panel business is expected to continue leading the high-end market, while its large panel business will further expand in the premium market and improve profitability.

The DX Division plans to solidify its leadership in the premium segment, including foldable smartphones and Neo QLED screens. The DX Division also aims to increase market share by expanding collaboration with partners and will enhance profitability by continuing to improve operational efficiency.

The Company’s total capital expenditures in the first quarter stood at KRW 10.7 trillion, including KRW 9.8 trillion for semiconductors and KRW 0.3 trillion for displays. Spending on memory was concentrated on completing the P3 infrastructure and on the P4 framework in preparation for mid- to long-term supply. Foundry investments focused on fabs in Taylor, Texas and Pyeongtaek, Korea to address demand for advanced nodes, while investments in displays focused on infrastructure and module production enhancements.

Semiconductor Demand Expected to Gradually Recover in 2H

The DS Division posted KRW 13.73 trillion in consolidated revenue and KRW 4.58 trillion in operating losses for the first quarter.

The Memory Business’s performance fell significantly compared to the previous quarter, with ongoing inventory adjustments leading to a decrease in overall demand amid an economic slowdown and weakened customer spending.

For DRAM, demand was sluggish due to inventory adjustments by server customers, mainly hyperscalers, and purchasing delays and Set-Build reductions, with consumer demand for mobile and PC applications having not yet recovered. The Memory Business focused on selling high value-added products such as high-density mobile products and meeting server-use DDR5 demand in line with the adoption of new CPUs. While prices fell less than the market forecast, bit growth could not meet the previous guidance.

As for NAND, despite weak demand, the Memory Business actively responded to trends shifting toward high-density across overall applications, such as eStorage of 512GB and above for major mobile customers and client SSDs of 1TB and above for PC OEMs. As a result, our bit growth exceeded the previous guidance.

Looking ahead to the second quarter, as major hyperscalers invest more conservatively in servers and customers continue to adjust their inventories, limited demand recovery is expected.

For DRAM, the Memory Business will respond to increasing demand for DDR5 and high-density modules led by the launch of new CPUs for servers and increased demand for AI and will also actively respond to LPDDR5x demand for mobile high-end products such as new form factor smartphones.

For NAND, based on cost competitiveness, the Memory Business plans to actively address demand for high-density products across all applications while responding to customer needs for high-density storage by creating mobile quad-level cells (QLC) markets and diversifying product portfolios.

In the second half, demand is expected to gradually recover as customer inventory levels will have declined due to inventory adjustments occurring since the second half of last year. Set-Build demand is expected to improve with the launch of new smartphones and PC promotion. In addition, the portion of DDR5 for servers is expected to increase due to the expansion of new CPU adoption, and content-per-box will continue to grow as the transition to high-core CPUs accelerates.

For DRAM, the Memory Business plans to accelerate the conversion of cutting-edge nodes for DDR5 and LPDDR5x and actively respond to the strong market demand for HBM3 8H and 12H.

For NAND, the Memory Business will strengthen supply operations for products that customers need by creating a mobile QLC market and expanding the supply of cutting-edge nodes such as V7 and V8.

The System LSI Business’s earnings fell sharply in the first quarter due to a drop in demand for major products such as SOCs, sensors and DDIs. Nevertheless, System LSI achieved sales growth for mobile SOCs and launched an ultra-wide band-based short-range wireless communication semiconductor.

In the second quarter, the System LSI Business expects overall demand to remain at a similar level, but there is some visibility regarding declines in customer inventories for products such as sensors and panel DDIs. Demand for inventory accumulation ahead of the third quarter peak seasonality should also contribute to a slight earnings recovery.

In the second half, the System LSI Business expects customer inventories to normalize for system IC components, and overall mobile demand is likely to recover, starting with a recovery in the Chinese market. System LSI will try to re-enter flagship segment to strengthen the business competitiveness of the mobile SoC business and also expect to expand business areas as a customer is planning to commercialize fingerprint authentication-based credit cards with more enhanced security.

The Foundry Business saw demand contract in the first quarter. This resulted in high inventory levels and a subsequent decline in orders that led earnings to fall significantly.

The Foundry Business is mass producing the 1st generation 3nm process by applying GAA technology, with yields remaining stable into and throughout the quarter. It is also developing the second-generation process and is focused on securing new orders from key customers who need high-performance, low-power characteristics in mobile and HPC applications, aiming for mass production in 2024.

In the second quarter, the Foundry Business expects earnings to improve slightly quarter-on-quarter thanks to a rebound in demand. In addition, the basic infrastructure of 2nm designs has recently shown meaningful silicon results, and development progress is on track. The Foundry Business also secured the foundation to support future products for generative AI by completing the development of a high-density memory integration technology.

In the second half, the market is expected to recover around HPC/Auto and earnings are projected to rebound accordingly. Based on the stable development of second generation 3nm GAA, the Foundry Business will expand new customer orders and strengthen its technical leadership by smoothly advancing the development of 2nm, the next-generation technology.

Display To Solidify Leadership in Premium Market throughout 2023

SDC posted KRW 6.61 trillion in consolidated revenue and KRW 0.78 trillion in operating profit for the first quarter.

For mobile panels, although market demand continued to contract, SDC fortified its market leadership due to the expansion of foldable phone models, strong sales of flagship products and dominance in the premium segment.

For the large panel business, SDC solidified its position in the premium market on the back of a full-fledged launch of new QD-OLED products by its major customer and a diversification of product sizes and other specifications.

In the second quarter, SDC expects to see results decline year-on-year due to the global economic slowdown increasing seasonal effects.

SDC plans to maintain its dominance in the high-end market and maximize sales by promoting the adoption of OLED panels throughout its main customer’s entire lineup and by accommodating their mass production of new products in the second half. For large panels, while demand is likely to remain weak, sales should grow as new products for 2023 roll out in earnest.

In the second half, while concerns over market uncertainties and the economic downturn remain, there are hopes for a potential demand recovery due to improving market conditions in China.

SDC aims to keep its leadership in high-end smartphones by leveraging its differentiated technology in new offerings and expanding sales by enhancing the performance of foldable products.

Demand for large panels is expected to be sluggish due to prolonged economic uncertainties. However, SDC will focus on strengthening its presence in the premium market by offering a wider range of sizes to more countries and diversifying its customer base.

Despite market conditions, SDC has decided to invest in an 8.6-generation OLED production line. Starting this year, SDC will strive to scale up the OLED market and increase adoption of OLED panels in the laptop, tablet and automotive markets.

Mobile Posted Solid Earnings Led by Successful Launch of Galaxy S23

The MX and Networks businesses posted KRW 31.82 trillion in consolidated revenue and KRW 3.94 trillion in operating profit for the first quarter.

While demand across the overall smartphone market decreased, the premium market grew from the previous year in both volume and value. The MX Business recorded higher sales compared to the previous quarter and saw profitability recover to double digits. The positive first quarter performance was led by strong sales of the newly launched Galaxy S23 series, specifically its most premium model, the Galaxy S23 Ultra. In addition, efforts to enhance operational efficiency throughout the business contributed to a significant boost in operating profit.

The Networks Business posted a revenue decline, due to weakness from overseas markets such as North America and Southwest Asia.

In the second quarter, market demand is expected to recover in the low-to-mid segment, leading to a slight quarterly increase in market volume and a decline in value.

The MX Business will focus on supporting steady sales of the Galaxy S23 series while increasing marketing for its foldable phone category. This will boost sales of existing models and drive awareness for the upcoming launch of new models in the second half. The MX Business will also focus on addressing recovering mass-market demand via the new Galaxy A54 and Galaxy A34 series, which deliver a stronger premium experience through key product upgrades and a new design.

The Networks Business will seek new business opportunities while continuing to focus on the Korean and North American markets.

In the second half, the smartphone market is expected to increase in both volume and value amid signs of a global economic recovery. As a result, the MX Business expects especially strong demand in the premium segment.

The MX Business will unveil its new foldable phones with enhanced user experiences, further cementing Samsung’s leadership in the category. For the Galaxy S23 and Galaxy A series, MX will collaborate closely with partners and implement customer sales programs tailored by region. In addition, the MX Business will strengthen the competitiveness of its tablets and wearables and highlight the premium ecosystem experience amid an expected flat market that follows significant growth during the pandemic.

The Networks Business will seek revenue growth by winning new orders and expanding in overseas markets while also strengthening its leadership in 5G core chips and virtualized Radio Access Networks.

Visual Display and Digital Appliances To Continue Focus on Premium and Lifestyle Products

The Visual Display and Digital Appliances businesses recorded KRW 14.08 trillion in consolidated revenue and KRW 0.19 trillion in operating profit for the first quarter.

While demand for TVs declined due to the ongoing impact of the global economic downturn, the Visual Display Business posted higher results both quarter-on-quarter and year-on-year by focusing on sales of high-value-added products and reducing overall costs.

The Digital Appliances Business posted earnings similar to the previous quarter amid slower demand and ongoing burden of cost.

In the second quarter, market demand as a whole is expected to contract at a slower pace compared to last year.

Nevertheless, the Visual Display Business will focus on meeting demand for premium products including the 2023 Neo QLED and its offerings and also aim to secure profitability by optimizing operations and managing costs.

The Digital Appliances Business will focus on securing profitability by globally expanding the Bespoke lineup and improving cost efficiency.

In the second half, market demand is expected to gradually recover due to seasonal spending trends, though continued external uncertainties are likely to intensify competition within the industry.

The Visual Display Business will continue leading the industry by monitoring the rapidly changing market conditions and leveraging seasonal sales opportunities through differentiated promotion strategies, focusing on key products including Neo QLED, OLED, Lifestyle Screens and expanding the 98″ Super large screen and Micro LED lineups.

The Digital Appliances Business plans to boost competitiveness through SmartThings and growth of increasing sales of premium products.

The Company posted KRW 70.46 trillion in consolidated revenue and KRW 4.31 trillion in operating profit in the quarter ended December 31, 2022. For the full year, it reported 302.23 trillion in annual revenue, a record high and KRW 43.38 trillion in operating profit.

The business environment deteriorated significantly in the fourth quarter due to weak demand amid a global economic slowdown. Earnings at the Memory Business decreased sharply as prices fell and customers continued to adjust inventory. The System LSI Business also saw a decline in earnings as sales of key products were weighed down by inventory adjustments in the industry. The Foundry Business posted a new record for quarterly revenue while profit increased year-on-year on the back of advanced node capacity expansion as well as customer base and application area diversification.

Samsung Display Corporation (SDC) saw earnings in the mobile panel business decline as smartphone demand fell while the large panel business narrowed its losses as sales of QD-OLED for TVs increased and as the business’s LCD inventory was fully depleted.

Revenue and profit at the Mobile eXperience (MX) Business declined amid weak demand in the mid- to low-end segments while the Networks Business posted an increase in revenue led by domestic demand for 5G installations and expansion in overseas businesses.

The Visual Display Business posted higher revenue and operating profit as sales of premium products, including Neo QLED and Super Big TVs, increased, while the Digital Appliances Business saw a profit decline because of cost increase due to deteriorated market conditions and as competition intensified.

The strength in the US dollar against the Korean won resulted in a positive impact of approximately KRW 0.5 trillion company-wide on operating profit compared to the previous quarter.

The recent change in Korean tax law which revised taxation on dividends received from subsidiaries led to a decline in the Company’s corporate tax in the fourth quarter.

The one-time item due to the tax law change was reflected in the quarter’s financial statements and does not mean the Company received a corporate tax refund, nor is it related to the Company’s actual tax payment.

In the first quarter, the semiconductor business will focus on actively addressing the demand for high-end products, such as DDR5, LPDDR5x and 200 megapixel (MP) image sensors, amid a weak memory market and soft global IT demand. SDC plans to meet the demand for major customers’ new products.

The Company plans to expand its leadership in the premium smartphone segment with the launch of Galaxy S23 while the Networks Business will focus on the domestic and overseas businesses, including North America. The Digital Appliances Business will aim to boost sales in the premium segment through new models, such as the BESPOKE Infinite Line.

For 2023, while the macroeconomic uncertainties are expected to persist, the Company anticipates demand to begin recovering in the second half. The semiconductor business will continue to reinforce market and technology leadership and expand the proportion of advanced nodes and products, such as DDR5, LPDDR5x and Gate-All-Around (GAA) processes.

Earnings at SDC’s mobile panel business is expected to be robust, and the large panel business will focus on growing the QD-OLED business and improving profitability.

The Device eXperience (DX) Division plans to improve competitiveness by strengthening the premium product line-up, based on the Company’s technology leadership. The Division also plans to expand the SmartThings ecosystem through differentiated technologies and partnerships to provide customized, hyper-connected user experiences.

The Networks Business is expected to maintain revenue growth by actively responding to new market opportunities, particularly in overseas businesses, and by reinforcing technology leadership in 5G core chips and virtualized Radio Access Network (vRAN).

For the Digital Appliances Business, the Company will continue to provide hyper-connected user experiences based on SmartThings and enhance the competitiveness of premium products centered on BESPOKE models.

The Company’s capital expenditures in 2022 reached a total of KRW 53.1 trillion, including KRW 47.9 trillion for semiconductors and KRW 2.5 trillion for displays. In the fourth quarter, capital expenditures were KRW 20.2 trillion, with KRW 18.8 trillion in semiconductors and KRW 0.4 trillion in displays. Spending on memory was concentrated on investing in P3 and P4 infrastructure, in preparation for mid- to long-term bit supply and in EUV to enhance competitiveness. Foundry investments focused on expanding the production capacity of advanced nodes at Pyeongtaek as well as on the initial capacity for 3 nanometer (nm) and the infrastructure for the Taylor site.

Memory Earnings Declined in Q4; Semiconductor To Focus on High-end Product Demand in Q1

The semiconductor businesses posted KRW 20.07 trillion in consolidated revenue and KRW 0.27 trillion in operating profit in the fourth quarter.

Overall memory demand weakened as customers continued to adjust their inventories amid deepening uncertainties in the external environment. In addition to the base effect that Bit growth was below the market level last quarter, Samsung achieved Bit growth that exceeded the market by expanding sales, focusing on server applications. But, due to worsened consumer sentiment caused by deepening macro issues, the price fell further and with the effect of a meaningful amount of inventory valuation loss, the result decreased significantly compared to the previous quarter.

For DRAM, demand for server was limited as Set build declined because of economic uncertainty and customers’ stance on inventory reduction remained. Mobile and PC demand was weak because of major customers’ continued inventory adjustments and Set build reduction. But the Company expanded the portion of cutting-edge nodes by optimizing its product portfolio and actively responded to the demand for high-density products focusing on major data centers and server OEM customers. For NAND, demand for server SSD was somewhat stagnant because of customers’ inventory adjustments.

Looking to the first quarter, customers’ inventory adjustment stance has remained unchanged as economic uncertainties continue. Although demand recovery momentum in the short-term is concerned, Samsung will continue to minimize any adverse impacts by actively addressing the demand for high-end products such as LPDDR5x, with timely preparation for fast-growing DDR5 demand for server and PC.

In 2023, based on cost competitiveness, the Memory Business plans to expand the proportion of high-value-added products by addressing the demand for high-density server SSDs, responds to the high-density trend of smartphones and PC and strengthens its market leadership.

The System LSI Business saw its earnings decline in the fourth quarter due to sluggish sales caused by inventory adjustments and a decrease in sales for major components.

However, the mobile SoC business achieved its highest-ever full-year revenue and the Automotive SoC business has solidified its mid- to long-term growth base by supplying an initial sample on schedule for a European premium OEM and by signing an MOU for product development with an autonomous driving solution company in the US.

In the first quarter, impacts of sluggish demand and inventory adjustments are expected to continue for the time being. Samsung will strive to expand sales of low- to mid-priced volume zone SoCs and 200MP image sensors. And for automotive SoCs, the Company will try to sustain growth momentum through additional orders from European premium OEMs and for self-driving products.

For 2023, Samsung expects the impacts of the economic downturn to continue for the time being. However, analysis of smartphone purchase patterns suggests that demand will continue to polarize between premium and low-priced phones.

In order to respond to this divided market, for SoCs, the Company will expand sales in the volume zone while reinforcing the position of its products for flagship devices. Samsung will also ensure its major smartphone OEM customers successfully launch flagship models by smoothly supplying and expanding the line-up of its differentiated 200MP image sensors.

The Foundry Business once again set a new record in the fourth quarter for quarterly revenue thanks to increased contributions from advanced nodes for customers, an increased portion from HPC and the continuous evolution of mature processes; and its full-year sales also reached an all-time high. However, its utilization rate started to decline due to inventory adjustments.

Regarding next-generation GAA processes, the 3nm first-generation process is currently being mass-produced with a stable yield and based on the first-gen mass-production experience, the development of the 3nm second-generation process is progressing rapidly. In addition, for the process for automotive and following the mass production of 5nm, the Company started developing 4nm.

In the first quarter, Samsung expects the utilization rate to fall and earnings to decline accordingly due to weak demand.

In 2023, demand may fall temporarily in the first half of the year due to the economic slowdown and inventory adjustments. However, the Company expects market demand to recover in the second half, centering on HPC and Auto sectors.

Samsung will strive to win new customers for the 3nm second-generation process, to focus on the development of the first-generation 2nm process and continue to develop specialty and mature processes to diversify within applications such as Automotive/IoT.

Finally, given the rising importance of next-generation package technology in the HPC and mobile market, the Company has established an AdVanced Package (AVP) business team within the Device Solution Division to expand the advanced package business and bolster synergies between business units.

Mobile Display Saw Solid Earnings; To Focus on OLED and QD-OLED in 2023

SDC posted KRW 9.31 trillion in consolidated revenue and KRW 1.82 trillion in operating profit for the fourth quarter.

The mobile display business achieved solid results by focusing on high-end smartphone products despite market demand continuing to contract. For the large display business, its losses lessened in the fourth quarter thanks to increased sales of TVs during the end-year peak season. In addition, the Company exhausted its LCD inventory, completing the switch to a full-fledged QD-OLED centered business.

Looking ahead to the first quarter, Samsung expects smartphone demand to decline year-on-year due to the economic slowdown in major regions. The Company will strive to maintain its solid earnings for the mobile display business by actively responding to launches of flagship products by major customers.

In the large display business, Samsung will secure additional demand and promote an early ramp-up with the introduction of a new lineup of ultra-large TVs and large-size monitors.

In 2023, the business environment is expected to remain challenging due to unstable market conditions and intensifying competition. For the mobile display business, the Company plans to strengthen its market dominance with technological superiority in the relatively solid high-end smartphone market. In addition, Samsung will capitalize on the accelerated transition to OLED by leveraging its cost competitiveness, which is the result of its preemptive investments.

In the large display business, the Company will continue to improve profitability by solidifying its sales base in the premium market, backed by stable yields.

MX To Expand Flagship Product Sales Amid Persistent Macro Uncertainties

The MX and Networks businesses posted KRW 26.90 trillion in consolidated revenue and KRW 1.70 trillion in operating profit for the fourth quarter.

Market demand for smartphones remained weak in the fourth quarter, with the mass market contracting sharply due to continued inflation and geopolitical instability. The MX Business reported a decline in both sales and profit quarter-on-quarter, due to fading new-product effects of flagship models and a drop in smartphone sales on weak demand from the economic slowdown. The impact of the decline in sales of mass-market smartphones was greater than previously expected while flagship sales held up well relative to market projections.

In the first quarter, a sequential decrease in market demand is expected across all smartphone segments, amid continuous macroeconomic uncertainties. The Company plans to expand flagship product sales with the successful launch of its new Galaxy S23 series, equipped with an enhanced camera and gaming functionalities, among others. Samsung will also continue to enhance its Galaxy ecosystem products, consisting of PCs, tablets and wearables, while maintaining its focus on effective resource management for solid profitability.

In 2023, the Company expects smartphone market demand to contract due to persistent macroeconomic conditions. Mass-market models are expected to be impacted the most while consumer demand for premium smartphones and tablets is projected to stay relatively solid.

The MX Business plans to achieve strong sales and solid profitability by strengthening the competitiveness of its premium flagship products. For the mass-market segment, the Company plans to collaborate with mobile carriers on various sales programs, including those aimed at expanding the 5G smartphone user base. It also plans to improve the premium product experience for its tablets and wearables, through upgraded product features and multi-device experiences.

Visual Display To Continue Focus on Premium and Lifestyle Products

The Visual Display and Digital Appliances businesses recorded KRW 15.58 trillion in consolidated revenue and KRW 0.06 trillion in operating loss for the fourth quarter.

Market demand for TVs increased quarter-on-quarter on the back of year-end seasonality but contracted year-on-year due to the global economic slowdown. The Visual Display Business posted higher results than the previous quarter by meeting regional, peak-season demand and expanding sales of high-value-added products, including Neo QLED and Lifestyle models. However, results declined from a year earlier due to weaker consumer sentiment from rising interest rates and inflation.

Looking ahead to the first quarter, market demand is expected to decline both quarter-on-quarter and year-on-year because of seasonality and the ongoing impact of the global economic downturn. Samsung will focus on capturing demand for premium products, including our 2023 Neo QLED, and strengthen partnerships with major channel partners. The Company will also aim to secure profitability by optimizing operations and manage costs.

In 2023, overall TV demand is expected to remain stagnant as market uncertainties are projected to persist. Based on the demand for premium products, Samsung will focus on the ultra-large-screen market with 98″ Neo QLED and continue innovations in premium products by releasing MicroLED models in various sizes as well as providing more options for OLED TVs and gaming monitors.

Total consolidated revenue was a record for the third-quarter at KRW 76.78 trillion despite a challenging business environment, while operating profit declined 23% from the previous quarter to KRW 10.85 trillion. With record revenue in each of the respective quarters so far this year, the Company expects annual revenue to surpass the historical high set in 2021.

Earnings in the Memory Business declined as inventory adjustments of customers exceeded market expectations and demand for consumer products remained weak. The System LSI Business saw lower profits due to weak demand for mobile phones and TVs, while the Foundry Business posted a record quarterly revenue on improving yields in advanced nodes.

SDC (Samsung Display Corporation) saw record revenue for the mobile panel business as demand increased following the release of new flagship smartphones, including foldables, while the large panel business continued to post losses amid weak TV and monitor markets.

The MX (Mobile eXperience) Business posted solid profitability, driven by sales of flagship products, including foldables, as well as new wearables. The Networks Business saw an improvement in earnings, led by overseas businesses, including securing a deal with Comcast.

The Visual Display Business expanded sales of premium products, but earnings declined due to weak demand and increased costs. The Digital Appliances Business, despite enhanced product mix, saw continued challenges due to higher materials and logistics costs amid sluggish demand.

The strength in the U.S. dollar against the Korean won benefited the Company’s component businesses, resulting in an approximately 1.0 trillion won company-wide gain in operating profit compared to the previous quarter.

In the fourth quarter, while the Memory Business expects there to be fundamental server demand based on core infrastructure investments, inventory adjustments are likely to continue. The Company plans to actively address demand for high-density products and maintain priority on DRAM profitability. For the System LSI Business, new products from mobile customers are expected to drive growth in SoC revenue while in the Foundry Business, earnings momentum is expected to continue on solid demand from global customers and additional yield improvements.

SDC expects to maintain earnings growth in the mobile panel business, driven by strong demand for premium OLED panels for smartphones. The large panel business will expand the quantum-dot (QD)-OLED presence, increasing its customer base.

The MX Business will continue to sustain strong sales of premium smartphones and expand sales of tablets and wearables. The Company plans to focus on profitability amid ongoing macroeconomic uncertainties. For the Networks Business, the Company plans to expand overseas businesses, including in North America and Japan.

In the Visual Display Business, the Company will prioritize capturing demand in the premium segment and enhancing profitability through cost efficiency. The Digital Appliances Business will aim to increase revenue with higher sales in the premium segment and online channels during the year-end seasonality.

In 2023, demand is expected to recover to some extent, but macroeconomic uncertainties are likely to persist. The DS (Device Solutions) Division plans to actively address demand for high-density products and expand contributions from advanced nodes and adoption of new applications. The DX (Device eXperience) Division will continue to strengthen the leadership in premium segments and enhance the multi-device connectivity experience across mobile, TVs and home appliances.

In the Memory Business, after a dampened first half, demand is expected to rebound centering on servers as data center installations resume. The Company plans to align its supply strategy with the mid-term market outlook, taking into account the limited overall production in the industry. With the reorganization of the SoC business, the System LSI Business will further enhance competitiveness, and the Foundry Business is expected to reinforce advanced node technology leadership and win new orders in HPC and automotive segments.

For SDC, the Company plans to continue focusing on premium smartphones and boost sales to new applications, such as IT and gaming. The large panel business will seek to increase sales of QD-OLED by expanding the product lineup and enhancing the performance.

The MX Business will aim to boost revenue by increasing sales of flagship products centering on foldable devices and the S series. The Company also plans to secure solid profitability by strengthening large-screen premium tablets and maintaining high growth of wearables. The Networks Business will sustain revenue growth by expanding overseas businesses and reinforcing technology leadership in core 5G chips and vRAN (virtualized Radio Access Network) solutions.

In the Visual Display Business, the Company will maintain leadership in ultra large screen and premium market segments. The Digital Appliances Business will continue to make product innovations in energy-efficient and eco-conscious home appliances and aims to achieve revenue growth, mainly from the premium segment.

In the third quarter, Samsung Electronics’ capital expenditure reached KRW 12.7 trillion, including KRW 11.5 trillion spent in the DS Division and KRW 0.5 trillion in SDC. The cumulative total for the January-September period is KRW 33 trillion, with KRW 29.1 trillion allocated to the DS Division and KRW 2.1 trillion to SDC.

The full-year capital expenditure for 2022 is expected at approximately KRW 54 trillion, including KRW 47.7 trillion allocated to the DS Division and KRW 3.0 trillion to SDC.

This year’s capital expenditures in the Memory Business will focus on P3 and P4 infrastructure, as well as on advanced technologies, such as EUV, to enhance the Company’s market competitiveness. Investments in the Foundry Business will center on expanding the production capability at the Company’s sites in Taylor and Pyeongtaek to address demand for advanced processes using EUV, in line with our Shell-First strategy. For SDC, investments will focus on expanding the capacity of flexible displays for mobile products and improving the efficiency of large QD-OLED panel production.

Foundry Delivers Record Earnings; Memory To Aim for Higher-Than-Market Bit Growth in Q4

The Semiconductor businesses posted KRW 23.02 trillion in consolidated revenue and KRW 5.12 trillion in operating profit in the third quarter.

For the Memory Business, as customers’ inventory adjustments exceeded market expectations and the demand for consumer products continued to weaken, both DRAM and NAND bit growth were below guidance and its earnings declined compared to the previous quarter.

For DRAM, in the face of a worsening slowdown in demand across the industry, the Company maintained a disciplined sales strategy focused on profitability, and its inventory levels increased somewhat. For NAND, Samsung strengthened its product portfolio by consistently increasing the high-density portion in mobile and server OEM applications, but its overall bit growth was below guidance.

Looking to the fourth quarter, the Company aims to deliver bit growth that exceeds the market for both DRAM and NAND by actively addressing demand, focusing on high-density and high-performance products, in line with the needs of its customers.

For DRAM, Samsung will continue to strengthen its cost competitiveness and secure profitability by expanding cutting-edge node migration for server products and also prepare 16Gb-based products to cope with demand for high-density products of 64GB and higher. Moreover, the Company will focus on solidifying its market leadership by responding to LPDDR5x demand for new flagship mobile models. As for NAND, the Company will actively respond to the demand for high-performance and high-density products while also capitalizing on NAND’s high price elasticity to steadily unlock new demand.

Moving on to 2023, although geopolitical uncertainties are likely to dampen demand to some degree in the first half, demand may recover later next year, driven by resumed installations of data centers and the adoption of DDR5 for new CPUs. Regarding production, Samsung will align its supply strategy with mid-term outlook considering limited overall production in the industry. In particular, it will reinforce market leadership by actively meeting the rising demand for new interfaces, including DDR5 and LPDDR5/x, and for high-density products.

The System LSI Business saw its earnings decline in the third quarter due to a decrease in demand for major components. However, SoC revenue grew thanks to an increased portion of 5G, and the Company reinforced the foundation for mid- to long-term growth by winning OEM orders for automotive SoCs.

In the fourth quarter, Samsung expects sales in the SoC business to increase on the effects of a new product launch by major mobile customers, while its new low- to mid-priced SoCs are scheduled to start mass production.

In 2023, the Company will expand sales in volume-zone SoCs while also strengthening the competitiveness and status of flagship products. In addition, it will work closely with foundries in order to smoothly supply various 200-megapixel image sensors.

The Foundry Business achieved its highest ever quarterly revenue and operating profit in the third quarter thanks to steady improvements in advanced process yield and increased revenue contributions.

Following the shipment of the world’s first mass-produced 3-nanometer GAA, Samsung further strengthened its technology leadership by presenting next-generation 2-nanometer and 1.4-nanometer roadmaps.

In the fourth quarter, revenue is expected to see double-digit growth sequentially on solid demand from all applications, maximum production of an optimized product mix and an increased advanced-node portion of production. The Company also expects to deliver record sales and operating profit on an annual basis for 2022.

Looking ahead to 2023, demand in the first half is expected to slow temporarily due to macroeconomic uncertainties, an economic slowdown and inventory adjustments at customers. However, Samsung still expects to deliver annual growth on the back of second half contributions from mass production for new customer orders and continued strength in HPC, datacenter and Auto demand.

Mobile Display Earnings Improve; Large Display To Continue QD-OLED Expansion

SDC posted KRW 9.39 trillion in consolidated revenue and KRW 1.98 trillion in operating profit for the third quarter.

Mobile display earnings improved both year-on-year and quarter-on-quarter thanks to growth in demand attributable to launches of new models by major smartphone brands. The Company’s business strategy, which concentrates on premium OLED products led to the record-high quarterly earnings.

For large displays, although sales of QD-OLED products continued to rise, initial investment costs of QD-OLED caused continued loss.

Looking ahead to the fourth quarter, Samsung expects market growth to be weaker-than-normal due to sluggish consumer spending, despite strong seasonal effects for the smartphone and IT markets. The Company will try to maintain its earnings quarter-on-quarter by utilizing competitiveness in the high-end market and by capitalizing on favorable exchange rates, in spite of an otherwise unfriendly business environment.

In 2023, while macroeconomic challenges may persist, Samsung will focus on solid earnings through pre-emptive investments, development of differentiated technologies and effective management to ensure stable quality and yield. Also, the Company will collaborate more closely with customers to increase its OLED market share, promoting the advantages of OLED in new application areas such as IT, Automotive and Gaming.

In particular, in the AR/VR market, which is projected to enjoy full-fledged growth starting 2023, Samsung will develop the technologies that customers need and complete SCM in order to solidify its leadership in the display industry.

Flagship Sales Drive Mobile Profit; To Seek Revenue Growth and Solid Profitability in 2023

The MX and Networks businesses posted KRW 32.21 trillion in consolidated revenue and KRW 3.24 trillion in operating profit for the third quarter.

The MX Business posted higher revenue and operating profit from the previous quarter driven by new smartphone and wearable launches. Sales of the Galaxy Z Fold4 and Z Flip4 showed strong growth compared with the previous models, despite a challenging market environment. The Galaxy S22 series, launched in the first half, also maintained solid sales momentum, posting significant revenue growth from a year earlier.

Looking ahead to the fourth quarter, market demand for smartphones and wearables is forecast to increase from previous quarter due to year-end seasonality despite ongoing geopolitical issues and macroeconomic instability. Samsung aims to sustain strong sales of flagship products, including foldable devices and S22 series, and expand sales of Galaxy Ecosystem devices such as tablets and wearables. In addition, new mass market smartphone model launches is expected to help drive sales volume.

In 2023, smartphone and wearable markets are expected to grow amid continuing global economic instability. For tablets, while the low- to mid-end market is expected to contract slightly, demand for premium products is likely to remain solid. The Company will seek to maintain the high growth of foldables and expand sales of the S series, thus improving the product mix and extending revenue growth. In tablets, Samsung aims to increase revenue by reinforcing the premium product lineup and by enhancing the tablet experience through features such as S-Pen.

Moreover, the Company plans to provide a convenient multi-device experience based on SmartThings, while also boosting profitability through sales growth of Galaxy Ecosystem devices. With these efforts, it aims to achieve revenue growth in 2023 and secure solid profitability.

Visual Display Business To Focus on Premium Segment Leadership

The Visual Display and Digital Appliances businesses posted KRW 14.75 trillion in consolidated revenue and KRW 0.25 trillion in operating profit in the third quarter.

Overall market demand for TVs increased quarter-on-quarter in the third quarter led by improved seasonality, but contracted year-on-year, due to macroeconomic factors negatively affecting consumer demand. The Visual Display Business posted a decline in earnings, as a result of weaker demand, higher costs and unfavorable currency effects in some regions. Nevertheless, the Company solidified its leadership in the premium segment.

In the fourth quarter, Samsung expects market demand to improve quarter-on-quarter due to year-end seasonality, but macroeconomic uncertainties are expected to persist. The Company plans to utilize sales opportunities such as Black Friday and global sporting events, focusing on its Neo QLED, Lifestyle and super-big TVs. It will also focus on securing profitability through optimized operations and efficient cost management.

Looking ahead to 2023, overall TV demand is expected to remain stagnant, while demand for premium products including super-big TVs will continue to grow. Samsung will continue product innovation centered on premium products and strengthen its focus on sustainable, eco-conscious management.

The Company posted consolidated revenue of KRW 77.2 trillion, a record for the second-quarter, and operating profit of KRW 14.1 trillion, a 12% increase from a year earlier. The DS (Device Solutions) Division reported a historical high in quarterly revenue for the second consecutive quarter while the DX (Device eXperience) Division posted a significant year-on-year revenue growth.

Earnings in the Memory Business improved both year-on-year and quarter-on-quarter as the Company focused on meeting solid demand for servers under the disciplined sales strategy to meet market demand, helping to maintain average selling prices. The system semiconductor businesses (System LSI and Foundry Businesses combined) achieved a record high quarterly profit as System LSI expanded its product lineup while Foundry hit the Company’s targeted yield trajectory for advanced nodes as it increased supply to global customers.

SDC (Samsung Display Corporation) saw record second-quarter revenue and operating profit for mobile displays driven by solid demand from major customers. Performance in the large panel business was weaker due to initial ramp-up costs of quantum-dot (QD) displays and a decline in LCD prices.

The MX (Mobile eXperience) Business posted a sequential decline in earnings as material and logistics costs rose, but revenue increased from a year earlier driven by sales of premium models. The Networks Business saw an increase in revenue from the previous quarter and added DISH Network as a customer.

Earnings in the Visual Display Business declined due to weak global TV demand while the Digital Appliances Business posted a record high quarterly revenue for the second straight quarter as sales of Bespoke products expanded globally.

The strength in the US dollar against the Korean won benefited the Company’s component businesses, resulting in an approximately 1.3 trillion won company-wide gain in operating profit compared to the previous quarter.

In the second half, with macroeconomic uncertainties expected to persist, the DS Division will focus on managing a portfolio of high-value-added products and expanding advanced nodes and new applications. The DX Division will continue to reinforce leadership and product lineup in the premium segment.

In the Memory Business, server demand is expected to remain solid while PC and mobile demand is likely to see continued weakness. The Company will closely monitor the demand impact from various factors, such as new mobile product launches and focus on high-value-added and high-density product portfolio management.

The System LSI Business plans to expand the SoC business and strengthen the leadership position in image sensors. For the Foundry Business, the Company aims to exceed market growth by adding new global clients while continuing to reinforce technological competitiveness through the development of the 2nd generation GAA process.

For SDC, earnings in the mobile panel business is expected to increase, driven by new smartphone launches and expansion into new application areas such as automotive and gaming. Earnings in the large display business is expected to improve as demand increases for QD displays.

The MX Business expects to post solid profitability with foldable products becoming mainstream as the Company targets foldable sales to surpass that of the Galaxy Note series. For the Networks Business, the Company plans to maintain momentum in revenue growth by expanding overseas businesses.

In the Visual Display Business, the Company will capture demand in the premium segment by boosting sales of strategic products, such as Neo QLED, Super Big and Lifestyle TVs. The Digital Appliances Business will focus on improving profitability by increasing sales of premium products.

The Company’s capital expenditures in the second quarter was KRW 12.3 trillion, including KRW 10.9 trillion spent in the DS Division and KRW 0.8 trillion in SDC. Similar to the first quarter, spending on memory was concentrated on infrastructure at P3 and on process migrations at fabs in Hwaseong, Pyeongtaek and Xi’an. Investments in the Foundry Business focused on increasing production capacity of under 5-nanometer advanced processes.

Semiconductor Quarterly Revenue All-time High

The DS Division posted KRW 28.5 trillion in consolidated revenue and KRW 9.98 trillion in operating profit in the second quarter.

The Memory Business’s performance improved both year-on-year and quarter-on-quarter as ASP stayed at a better-than-expected level thanks to the disciplined sales strategy to meet market demand and the benefits of a strong dollar. Although server demand remained solid, demand for consumer products such as mobile weakened due to widening impacts of macro issues, resulting in DRAM and NAND shipments to come in below bit growth guidance.

For DRAM, the Company achieved the highest sales of server products in the industry for any quarter by optimizing its portfolio and actively responding to solid demand centering on servers but missed guidance for total bit growth due to weak demand for consumer products such as PCs and mobile devices.

As for NAND, Samsung continued to expand the proportion of high-density products of 512Gb and higher for server SSD and actively responded to the high-density trend in client SSD and mobile to maintain a favorable ASP. But the overall bit growth came in below guidance as mobile demand was much weaker than expected.

Looking to the second half of the year, fundamental demand for server will stay solid as the investments in core infrastructure and new growth areas such as AI and 5G are expected to keep expanding, centering on major datacenter companies. Customers may possibly adjust inventory level temporarily amid some IC components supply problems as well as a concern over widespread economic recession and geopolitical issues.

Demand for consumer products like PC and mobile is likely to stay weak. For PC, there is a possibility that the slump in demand may expand to enterprise segments. Nevertheless, there are also chances of consumer demand getting stimulated during the year-end promotional season.

Amid the highly volatile market situation, the Company plans to maintain its stance of operating an optimized portfolio that centers on high-density and high-value-added solutions, based on supply flexibility in accordance with market conditions and customer needs.

For DRAM, Samsung will keep staying disciplined against excessive sales expansion and flexibly managing supply in line with demand.

For NAND, the Company will focus on creating demand mainly for high-density products while considering characteristics of high price elasticity and will continue to strengthen its market leadership by actively responding to demand based on its excellent cost competitiveness.

The System LSI Business saw its earnings improve quarter-on-quarter due to a growing supply of DDIs, volume-zone SoCs and positive effects of foreign exchange movements. Samsung further solidified its leadership in image sensor through the world’s first supply of 200-Mega pixel sensors and secured US customers in addition to Europe in automotive SoC business.

In the second half, the Company aims to exceed revenue and profitability growth by expanding its lineup of 5G SoCs and expand its customer base to maximize supply of its 200M pixel image sensors.

The Foundry Business achieved its highest ever second quarter revenue thanks to yield improvement, solid demand for advanced processes centering on HPC and stable demand in matured processes from various applications. It also achieved its highest second quarter profit. In addition, it has strengthened technological competitiveness through the world’s first mass production of the 3-nanometer GAA process, accomplished in June.

In the second half, the Company maintains its view that HPC and 5G-related demand will remain solid despite uncertainties related to geopolitical issues and inflation. Through close cooperation with customers, Samsung aims to exceed market growth through yield improvement of advanced processes alongside a proper pricing strategy.

In addition, the Company plans to advance the completion of second-gen GAA process development and expand customer base for large-scale orders. In October, offline forums will take place in US, Europe, Japan and Korea to further strengthen customer networking.

SDC Earnings To Improve With New Product Launches in 2H

SDC posted KRW 7.71 trillion in consolidated revenue and KRW 1.06 trillion in operating profit for the second quarter.

Mobile display earnings improved from a year earlier despite a slowdown in smartphone demand, led by strong sales for flagship smartphone models and positive effects of foreign exchange movements. Growing adoption of OLED displays in laptops and gaming devices also contributed to the results.

For large displays, a decline in LCD ASP and initial costs of QD display development caused continued loss. However, Samsung expects sales and profit margin to increase in earnest from the second half of 2022, driven by rapid improvements in the QD display yield and a rising number of brands adopting QD display products.

Looking ahead to the second half of this year, for the smartphone market, the Company forecasts earnings to grow compared to 1H as new products are due to be released by major customers. However, earnings are likely to be more volatile than last year due to a number of difficult-to-predict external factors. Samsung expects sales of its OLED panels to continue to expand, given the high proportion of premium lineup, which is relatively unaffected by economic fluctuations.

For laptops, although the market is expected to shrink, the Company forecasts sales volume of its OLED displays to keep growing, led by strong consumer preference for displays featuring high resolution and a fast response time.

For large displays, new TVs and monitors equipped with QD display are scheduled to roll out globally. Samsung will actively promote the excellence of QD displays to consumers through joint promotions with its customers, aiming to lead the premium market.

Mobile Business To Focus on Flagship Sales and Multi-Device Experiences in 2H

The MX and Networks businesses posted KRW 29.34 trillion in consolidated revenue and KRW 2.62 trillion in operating profit for the second quarter.

Overall market demand declined from the previous quarter amid geopolitical issues and concerns over inflation on top of continued weak seasonality. Profitability decreased from the previous quarter at some degree due to rising costs of components and logistics as well as negative effects of foreign exchange movements.

However, supply disruptions in the first quarter were mostly resolved in the second quarter and Samsung secured its revenue growth year-on-year with solid sales of flagship models such as Galaxy S22 series and Galaxy Tab S8 series.

For the second half, smartphone market demand is forecast to stay similar year-on-year or show single-digit growth with prolonged geopolitical issues and economic uncertainties. However, the Company aims to expand flagship sales by successfully launching new foldable models, driving the mainstreaming of the foldable products as a key category in the premium segment with better customer experiences through collaboration with global partners.

While the global smartwatch market is likely affected by economic uncertainties in the short term, Samsung will continue to maintain high growth momentum with the release of new watch models, expanding Galaxy Ecosystem devices.

Moreover, the Company plans to provide a richer, multi-device experience based on SmartThings by introducing various everyday scenarios customized to individual life patterns. Although market uncertainties are forecast to persist for some time, the Company will strive to maintain double-digit profitability by improving its product mix centered on flagship products through mainstreaming foldable lineup and by continually enhancing operational efficiency.

Strong Focus on Premium Products Amid Continued Macro Uncertainties

The Visual Display and Digital Appliances businesses posted KRW 14.83 trillion in consolidated revenue and KRW 0.36 trillion in operating profit in the second quarter.

In the second quarter, market demand for TVs decreased both quarter-on-quarter and year-on-year, the former due to weak seasonality and the latter due to the previous year’s high baseline buoyed by pent-up demand. Consumer demand was also affected by macroeconomic factors such as inflation and high interest rates, resulting in lower quarterly revenue and profit for the Company.

However, Samsung was able to maintain its premium leadership in the market with expanded sales of strategic products, including Neo QLED and Lifestyle TVs.

In the second half, while opportunities such as peak seasonality and global sporting events are expected, macro risks are also expected to continue, casting uncertainties on overall market demand.

Samsung will closely monitor rapidly changing market conditions and achieve solid profitability by further expanding strategic product sales. It will also work with its channel partners through strategic partnerships and actively target the Signage market where B2B demand has been recently revived. The Company will also focus on solidifying its market leadership with innovative products such as Micro LED and Odyssey Ark.

The Company posted a record consolidated revenue for the third straight quarter of KRW 77.78 trillion and operating profit of KRW 14.12 trillion, a 51% increase from a year earlier. The DX (Device eXperience) Division posted the highest revenue since 2013 while the DS (Device Solutions) Division reported a historical high for quarterly revenue.

The Memory Business achieved a record-high in quarterly sales for servers amid solid demand and results at the System LSI Business improved sequentially as prices increased. For the Foundry Business, demand was solid across all applications and the Company increased the portion of advanced processes.

SDC (Samsung Display Corporation) saw record first quarter results for mobile displays driven by strong sales at major smartphone customers, while for large displays the improvement of production yield of quantum-dot (QD) displays exceeded expectations.

The MX (Mobile eXperience) Business posted sequential increases in revenue and profitability thanks to strong sales of Galaxy S22 Ultra, positive responses to new, mass market 5G models and solid sales of Device Ecosystem products including tablets and watches. The Networks Business continued to expand overseas and met domestic 5G expansion needs.

Revenue at the Visual Display Business increased year-over-year with higher sales of premium, high-value products such as Neo QLED and Super Big TVs. The Digital Appliances Business posted a record high quarterly revenue driven by growth of premium products, centering on BESPOKE.

The strength in the US dollar against the Korean won outweighed the weakness in some emerging currencies, leading to a positive impact of approximately KRW 300 billion on operating profit compared to the previous quarter.

In the second quarter, while macroeconomic uncertainties and logistics issues are expected to persist, the DS Division will work to meet solid demand and the DX Division will focus on securing profitability with higher sales of new smartphone and TV products.

The Memory Business will work to meet the expected solid demand centering on server and expand the sales of high-value-added products. The System LSI Business will focus on maximizing supply of key components, such as SoCs and image sensors. For Foundry, the Company will solidify its technology leadership with the world’s first mass production of the 3-nanometer GAA process and continue to win new customers.

As for SDC, mobile displays is expected to maintain solid results year-on-year, driven by continued solid demand from major smartphone customers. In large displays, revenue is expected to increase with the release of TVs featuring QD displays. In the second quarter, LCD production will continue to ramp down as originally planned.

In the MX Business, revenue is expected to grow significantly year-on-year due to solid sales of Galaxy S22 series and higher sales of new mass market 5G models. The Company expects to achieve solid profitability by utilizing global SCM capabilities, despite macroeconomic uncertainties. For the Networks Business, the Company aims to win new business opportunities.

The Visual Display Business will focus on selling new models, including Neo QLED and The Freestyle, while the Digital Appliances Business will aim higher revenue and profitability by improving product mix with increased availability of BESPOKE products in the global market.

In the second half, while uncertainties related to the macroeconomic environment and geopolitical issues are likely to persist, the Company will prioritize increasing the portion of advanced processes for components and strengthen the premium lineup and leadership position in the DX Division.

In the Memory Business, server demand is expected to remain solid and the Company plans to increase sales of next-generation interfaces, such as DDR5 and LPDDR5. The System LSI Business will focus on expansion of its SoC lineup and the Foundry Business will seek to achieve meaningful profit by improving advanced node yields and increasing its portion of sales.

For SDC, sales is expected to increase in mobile displays driven by expansion of foldable products and accelerated adoption of OLED in new applications, such as IT, gaming, and automotive. The large display business will try to establish a leadership position in the premium segment and narrow losses with QD displays.

The MX Business expects to maintain a solid level of profitability with the expansion of the premium user base and by maximizing sales of new foldable products and increasing sales of new Device Ecosystem products. For the Networks Business, the Company will maintain growth by meeting domestic 5G needs and actively expanding in overseas markets as well as continuing to reinforce leadership in vRAN (virtualized Radio Access Network) technology.

In the Visual Display Business, the Company will strengthen its premium market position by expanding sales of differentiated strategic products, such as Neo QLED 8K and Lifestyle products. The Digital Appliances Business will continue to focus on increasing sales of premium products amid ongoing material cost and logistics issues.

The Company’s capital expenditures in the first quarter stood at KRW 7.9 trillion, including KRW 6.7 trillion spent on semiconductors and KRW 0.7 trillion on displays. Spending on memory was concentrated on infrastructure at P3 and on process migrations at fabs in Hwaseong, Pyeongtaek and Xi’an. Foundry investments were focused on developing and establishing the production capacity of under 5-nanometer advanced processes.

Memory Exceeded Guidance With Record-High Quarterly Sales for Server

The DS Division posted KRW 26.87 trillion in consolidated revenue and KRW 8.45 trillion in operating profit in the first quarter.

The Memory Business’s performance exceeded market forecasts as the memory price declined less than market expectations thanks to solid demand mainly from server and PC. However, the Company saw a slight profit decline due to a one-off special incentive and mild seasonality in some applications.

For DRAM, overall server demand stayed solid because of the increased DRAM content led by rising adoption of high-core CPUs and strong demand for datacenters. By preemptively assessing demand with the help of an advanced and proprietary machine-learning-based market sensing system, and by actively responding to demand for servers, Samsung exceeded its bit growth guidance and achieved record high quarterly sales for server.

As for NAND, server SSD demand for datacenters remained solid, driven by pent-up demand. In mobile, memory demand slowed slightly due to weak seasonality and inventory adjustment by some customers. Given the limited inventory level and future market conditions, the Company maintained its status quo, which is to refrain from excessive expansion of sales, and continued to increase the portion of high-density and high-value-added products.

Looking to the second quarter, Samsung expects server demand to remain relatively solid.

For DRAM, while uncertainties including component shortages need comprehensive monitoring, server demand is expected to stay relatively solid aided by growing adoption of DDR4 8CH CPU. The Company will continue to pursue the highest-quality portfolio by expanding sales of high-value-added and high-density products while actively responding to demand for applications that show the most growth potential.

For NAND, server SSD demand is expected to grow, driven by expanded investment mainly for datacenters amid shortage issues in chip production and in active and passive components. For Client SSD, enterprise PC demand is likely to be solid while consumer PC demand is expected to shrink. Samsung will maintain efforts to actively address SSD demand for enterprise sector with its business competitiveness.

In the second half, server demand is expected to be relatively solid resulting from increased demand for DDR5 and high-density trend, but the pace at which component shortages are resolved needs constant monitoring.

For mobile, demand can potentially recover sooner than expected as macro issues are expected to be cleared. In particular, as major manufacturers are scheduled to release new products in the second half of the year, the Company expects Set Build to recover. In addition, demand for high-density products and LPDDR5x is forecast to increase as manufacturers strengthen flagship lineups.

While maintaining a product mix focused on server and high-end PCs, Samsung will respond to new demand in a timely manner by expanding supply of cutting-edge interfaces such as DDR5 and LPDDR5x. In addition, the Company will center its portfolios on high-value-added and high-density solutions and steadily realize cost reductions, thus strengthening its market leadership.

The System LSI Business saw its earnings improve quarter-on-quarter due to foreign exchange gains and increases in sales price despite the weak seasonality of the mobile industry and inventory adjustments. DDI sales increased year-on-year by more than 30% in both large panel and mobile display. In first quarter, the Company began shipping SoCs for volume zone and started the mass production of new 5G FR2 RFICs and 0.64-micrometer 108-megapixel image sensors.

In the second quarter, the SoC supply is expected to grow thanks to production yield improvement for flagship SoCs and adding mid-range line-up.

In the second half, the System LSI Business plans to further expand the 5G SoC lineup, and supply its technology leading 108- and 200-megapixel sensors and meet the customers’ requests. The Company expects the growth rate to be higher than the previous year, improving both profitability and sales.

The Foundry Business achieved its highest ever first quarter sales, thanks to solid demand from all applications and improvements in the yields of the advanced process.

Through close collaboration between the R&D center and the Foundry Business, the Company has entered the stabilizing yield trajectory of the advanced process, while continuously improving production capability. In addition, the Company added new orders for applications such as HPC/Automotive to prepare for future growth engines and improved its ability to respond to future demands through new investments in Taylor in the US and domestic facilities.

In the second quarter, the Company will continue to improve the yield of the advanced nodes and plans to secure a technological edge through first-generation GAA process (3GAE) quality verification and mass production for the first time in the industry. Furthermore, the Company will also continue to develop the 3-nanometer second-generation GAA process (3GAP) according to the planned schedule.

In the second half, the Company expects the foundry supply shortage to continue and will continue its technology leadership through the yield improvement of the GAA process and aim to exceed market growth by improving the yield and adopting pricing strategies to ensure future investments.

Display Earnings Improve Year-on-Year; To Focus on Premium OLED and QD Displays in 2H

SDC posted KRW 7.97 trillion in consolidated revenue and KRW 1.09 trillion in operating profit for the first quarter.

Mobile display earnings improved from a year earlier, driven by solid demand for premium products and positive effects of foreign exchange movements. Growing adoption of OLED displays in laptops and gaming devices also contributed to the results.

For large displays, Samsung rolled out QD monitors in the first quarter, which were well received in the market and thus raised expectations for QD TVs scheduled to be released in the third quarter. Additionally, the Company is quickly stabilizing yield of QD displays.

Looking ahead to the second quarter, Samsung expects to see a decline in mobile displays earnings compared to the previous quarter because of prolonged geopolitical conflicts and lockdowns in some regions. Large display earnings is likely to enhance in the second quarter as the Company is due to ramp down LCD production as scheduled and expand shipments of QD products in earnest.

In the second half, despite lingering uncertainties surrounding the business environment, the smartphone market size is forecast to remain at last year’s level, led by the economic recovery of advanced countries.

Samsung will further reinforce its leadership in the premium OLED display market, with stable SCM capabilities and foldable lineup expansion. The Company also aims for sustainable growth based on diverse product segments, ranging from smartphones to IT, automotive, gaming, and wearables, by capitalizing on its competitive edges in SCM capabilities and new technology development. In particular, in order to secure a solid OLED position in the fast-growing EV market, Samsung will focus on offering a full lineup of solutions spanning from rigid to foldable displays.

For large displays, the Company is committed to stabilizing production of QD displays while actively promoting the product, in the hope of diversifying its customer base and positioning QD displays in the premium display segment.

Mobile Earnings Remain Solid Despite Supply Shortage; To Focus Flagship Sales in Q2

The MX and Networks businesses posted KRW 32.37 trillion in consolidated revenue and KRW 3.82 trillion in operating profit for the first quarter.

Overall market demand declined both quarter-on-quarter and year-on-year due to a weak seasonality and geopolitical uncertainties. However, MX business saw growth in both revenue and profitability from the previous quarter despite supply shortage. Strong sales of the Galaxy S22 series since its launch in Q1 helped drive the revenue growth, on the back of Galaxy S22 Ultra with S-Pen garnering positive feedback from the existing Galaxy Note customers. Mass-market 5G smartphones including new A-series as well as Device Ecosystem products such as tablets including the Galaxy Tab S8 and wearables have also contributed to the profit growth.

In the second quarter, smartphone market demand is forecast to slightly decline quarter-on-quarter amid continued seasonal effect with uncertainties over Covid-19 and geopolitical issues. The MX Business aims to secure revenue growth year-on-year and double-digit profitability by leveraging its global supply chain management (SCM) capabilities. With the component shortage for Galaxy S22 series expected to improve, the Company will strive to maintain the strong sales of flagship smartphones while also actively responding to increased market demand for the mass-market 5G models.

For the second half, uncertainties over prolonged COVID-19 and component shortage are likely to persist. However, the smartphone market is projected to continue to grow and the wearable market is likely to see a double-digit growth.

The MX Business will solidify its leadership in the flagship market by accelerating innovation while maximizing sales of the new foldable models and Device Ecosystem products ensuring supply of key parts and better customer experiences through collaboration with partners. The Company will also closely cooperate with the VD and DA businesses under DX division to further strengthen seamless and connected experiences across Samsung products. With these efforts, the Company will strive to achieve sales growth in 2022 and maintain solid profitability with an improved product mix and operational efficiency.

Strong Focus on Premium Products Amid Continued Market Uncertainties

The Visual Display and Digital Appliances businesses posted KRW 15.47 trillion in consolidated revenue and KRW 0.8 trillion in operating profit in the first quarter.

First quarter demand for TVs contracted quarter-on-quarter following the end of year peak in Q4 and along with geopolitical issues stemming from Russia. It also declined year-over-year, following the previous year’s high baseline attributed to pent-up demand. The Company expanded revenue and profit year-over-year by working closely with channel partners, and actively targeting high value product demand. Its new Neo QLED line-up, upgraded with a new level of picture quality and sound, has garnered a positive response from the market.

In the second quarter, the Company expects TV demand to decline both quarter-on-quarter and year-over-year due to increased outdoor activities and continued market uncertainties. Samsung plans to achieve growth by continuing its focus on premium products. In response to persistent issues with raw materials and logistics, the Company plans to further optimize operations by establishing sales and supply plans further down in advance.

In the second half, while macroeconomic risks are expected to persist, the Company will capture demand from sporting events during the peak season, and solidify its premium leadership with sales of its Neo QLED 8K and Lifestyle Screens as well as innovative products like Micro LED and Odyssey Ark.

The Company posted KRW 76.57 trillion in consolidated revenue, a quarterly record and KRW 13.87 trillion in operating profit in the quarter ended December 31, 2021. For the full year, it reported KRW 279.6 trillion in revenue, a new historic high and KRW 51.63 trillion in operating profit.

The fourth quarter revenue growth was driven mainly by the finished product businesses, with expanded sales of premium smartphones, including foldable phones, as well as TVs and home appliances. Operating profit declined from the previous quarter due to a special bonus payment to employees, but rose from a year earlier, driven by the semiconductor businesses.

Earnings at the Memory Business decreased from the prior quarter as prices fell to a certain extent and bit growth came in below the Company’s guidance. The Foundry Business posted a new record for quarterly revenue, while profitability decreased slightly from the previous quarter due to a rise in costs related to ramping up advanced process nodes.

The Display Panel Business saw earnings continue to improve for mobile panels, while losses in large panels widened due to price declines in LCDs and costs related to QD displays.

Revenue of the Mobile eXperience (MX) Business increased slightly led by sales of premium products such as foldable phones and Device Ecosystem products, while profit declined quarter-on-quarter as marketing expenses increased. The Networks Business results improved from the prior quarter as revenue grew for both domestic and global businesses.

The CE businesses posted record quarterly revenue due to robust sales of premium products, but profit declined slightly quarter-on-quarter amid rising costs.

The strength in the US dollar against the Korean won offset the weakness in major emerging currencies, leading to a positive impact of approximately KRW 300 billion on operating profit compared to the previous quarter.

In the first quarter, the Memory Business will focus on maximizing the quality of the business portfolio via higher sales of advanced node products to support the server and PC demand recovery, although lingering uncertainties are likely to persist. The System LSI Business will look to supply essential SoCs and CISs for key customers’ flagship products, while the Foundry Business will seek to expand supply by improving production and yield at advanced processes.

In the Display Panel Business, mobile displays is expected to deliver improved results year-on-year, driven by new smartphone releases and an expansion of the foldable display customer base. In large panels, losses are likely to be partially mitigated with the mass production of QD displays.

The MX Business is expected to deliver revenue and profit growth despite supply constraints, led by new flagship model releases and higher sales of mass market 5G smartphones as well as tablets and wearables. For the Networks Business, the Company aims to win new opportunities from European and other global customers.

The Visual Display and Digital Appliances businesses will seek to improve profitability by focusing on sales of premium products and expansion of new-category products and the portion of online sales.

In 2022, amid expectations of a recovery in global IT demand, the Company’s component businesses will increase production of advanced processes and enhance leadership in next-generation products and technology. In the finished product businesses, the Company will strengthen the premium segment lineup and create new user experiences by enhancing connectivity and synergies between devices. However, challenges associated with supply issues and COVID-19 are likely to persist.

In the Memory Business, demand is expected to grow as enterprises ramp up IT investments while the Company will expand supply of high-performance products and increase application of industry-leading EUV technology to solidify the cost competiveness and market leadership. The System LSI Business will reinforce the lineup of SoCs and the Foundry Business aims to outpace market growth by extending technology leadership with mass production of the 1st generation GAA process.

For the Display Panel Business, demand for OLED is expected to increase with the higher penetration of 5G and growth of the foldable market. For large panels, the Company will work to secure technology leadership in the premium segment with QD displays while closing the LCD production line as planned.

The MX Business aims to increase market share by focusing on innovations in flagship products and providing a differentiated user experience. The Company will also expand sales of Device Ecosystem products by enhancing the value delivered to customers. For the Networks Business, the Company will focus on capturing demand for 5G networks and winning new global customers.

For Visual Display and Digital Appliances, the Company will further solidify market leadership and seek growth by continuing to expand sales of premium products, such as Neo QLED and Bespoke, and also by strengthening sales of Lifestyle TVs and new home appliance products.

The Company’s capital expenditures in 2021 reached a total of KRW 48.2 trillion, including KRW 43.6 trillion for semiconductors and KRW 2.6 trillion for displays. Spending on memory was concentrated on capacity expansions and process migrations at fabs in Pyeongtaek and Xi’an to address the demand for advanced nodes, including EUV-based 15-nanometer DRAM and 6th generation V-NAND. Foundry expenditures were focused on capacity expansions for 5-nanometer EUV nodes. For displays, investments were centered on mobile modules and QD displays.

Semiconductor Led by Server Sales; Foundry Posted Highest-Ever Revenue

The semiconductor businesses posted KRW 26.01 trillion in consolidated revenue and KRW 8.84 trillion in operating profit in the fourth quarter.

Overall demand in the Memory Business, centered on server, was solid but earnings declined quarter-on-quarter due to a continuation of global supply chain issues and a slight drop in ASP. Considering the inventory levels and the market outlook, Samsung refrained from pushing aggressively to expand sales and, as a result, came in below initial bit growth guidance. However, the Company continued to strengthen competitiveness by increasing its cutting-edge portion of processes.

For DRAM, impacts on set production from global supply chain issues were felt throughout all applications, while server demand remained strong thanks to an increase in DRAM content-per-box on increased adoption of high-core CPUs. Graphics cards shortage in supply remained due to the strong demand for gaming PCs, along with rising demand for crypto mining. Based on preemptive product-mix adjustments, Samsung actively addressed an increase in server and graphic demand.

For NAND, demand for server SSD from major data center customers was robust, but there were some market effects related to disruptions in the IC component supply chain. Demand for client SSD was somewhat stagnant because of inventory adjustment by some customers and manufacturing disruptions caused by component shortage. Samsung focused on optimizing sales considering various factors including its inventory situation, while identifying impacts on production caused by changes in line operation due to the lockdown in Xi’an.

Looking to the first quarter, while risks, such as the spread of a COVID variant, need to be monitored, the Memory Business will concentrate on enhancing the balance of its portfolio, including through increased sales of cutting-edge, high-value products to support the server/PC demand and also by actively addressing demand from all applications.

For DRAM, server demand remains strong thanks to the high-density trend alongside increased investments centering on data centers, while the high-core CPU portion continues to increase. Mobile demand is solid as major manufacturers launch products based on new form factors and increase the portion of LPDDR5.

For NAND, server SSD demand is expected to be robust thanks to continuing investments, mainly in data centers. PC demand will recover, mainly for laptops, along with gradual improvements in component shortage. And for mobile, despite being amid slow seasonality, Samsung expects the high-density trend for storage to persist as manufacturers launch new 5G models.

In 2022, the Memory Business expects server demand to grow, attributed to increase in IT investments and new high-core CPUs, while 5G lineup expansion is likely to increase content-per-box for mobile, although challenges related to supply issues and COVID-19 are likely to persist. Therefore, the Company will continue to reinforce its leadership by expanding supply of high-performance products and increasing application of its industry-leading EUV technology.

The System LSI Business reached the highest-ever quarterly sales thanks to increased demand for SoCs, DDIs and PMICs, but profit fell slightly due to the influence of special bonuses. In the fourth quarter, the Company began supplying the 4-nanometer AMD GPU-powered SoC and expanded adoption for the 108-megapixel image sensors from customers.

In the first quarter, demand is expected to stay strong for OLED DDI, NFC/eSE and PMIC products. Samsung plans to expand supply of GPU and NPU improved SoCs and ultra-high resolution image sensors.

In 2022, the System LSI Business hopes to see its performance grow further by maximizing supply of 5G SoCs for the volume zone and 108- and 200-megapixel sensors.

The Foundry Business set a new revenue high for the fourth quarter as it increased sales for large-scale HPC customers and secured new orders in HPC application. In addition, the Company confirmed US Taylor and domestic new fab investment amidst global semiconductor supply chain stabilization efforts. However, profitability fell slightly due to the increase in cost caused by the delay of the advanced node ramp-up.

In the first quarter, Samsung will focus on improving its advanced process yield to improve its supply stability. Also, the Company will continue technical leadership through mass production of the 1st generation GAA process in the first half of 2022.

For this year, Samsung expects supply to remain tight due to rising penetration of 5G, solid HPC demand, growing out-sourcing from IDM players and continued needs for securing safety inventory. The Company aims to exceed market growth by expanding capacity at advanced nodes, adjusting prices and adding new customers.

Mobile Panel Earnings Improved; To Focus on OLED and QD Displays in 2022

The Display Panel Business posted KRW 9.06 trillion in consolidated revenue and KRW 1.32 trillion in operating profit for the fourth quarter.

The mobile panel business saw its earnings continue to improve, primarily driven by solid demand for newly launched smartphones from its key customers. In addition, increased sales of products for new applications including laptops and gaming consoles contributed to the mobile panel earnings.

For the large panel business, however, its losses widen in the fourth quarter due to declines in LCD ASP and initial costs related to QD displays.

Looking ahead to the first quarter, Samsung forecasts improved results year-on-year for the mobile panel business, thanks to a release of new smartphones by its major customers and a growing customer base in the foldable display.

In the large panel business, losses are expected to be partially mitigated on the mass production of QD displays as TVs and monitors adopting QD displays are to make debut in the markets.

In 2022, solid demand for OLED is likely to continue despite macro environment-related risks, based on the rising penetration of 5G and growth of the foldable market. Samsung will pursue a balanced business structure for stable growth by expanding Flexible OLED to mid-range devices as well as diversifying applications for Rigid OLED including IT, gaming and automotive.

For the large panel business, the Company will strive to secure technology leadership in the ever-growing premium segment with QD displays while winding down its LCD line as planned.

Mobile To Focus on Flagship, Strengthening Mass Market 5G Lineup

The MX and Networks businesses posted KRW 28.95 trillion in consolidated revenue and KRW 2.66 trillion in operating profit for the fourth quarter.

Overall market demand increased from the third quarter due to strong year-end seasonality. Despite the component supply shortage, the MX Business saw a slight revenue growth quarter-on-quarter driven by sales increase in premium smartphones including foldable lineup and Galaxy S series. Device Ecosystem products such as PCs, tablets and wearables have also contributed to the revenue growth. Meanwhile, increased marketing expenses to boost foldable category sales and prepare for the launch of new models in Q1 2022 had impact on profitability to some degree.

Looking ahead to the first quarter, demand for smartphones and tablets is forecast to decline quarter-on-quarter amid weak seasonality as well as uncertainties over component supply. However, the MX Business aims to secure solid profitability by expanding flagship sales such as Galaxy S21 FE and upcoming release of a new Galaxy S series. Also, Samsung will proactively target replacement demand with competitive mass-market 5G lineup and growth opportunities in the market while continuing to increase sales of Device Ecosystem products such as PCs, tablets and wearables.

In 2022, uncertainties related to prolonged pandemic and component shortage are likely to persist. Yet, the smartphone market is expected to continue to grow and the wearable market is likely to see a double-digit growth. The MX Business will solidify its leadership in the flagship market by accelerating innovations and differentiated experiences such as Galaxy S and foldable series, while strengthening the competitiveness of mass-market 5G lineup and Device Ecosystem products. With these efforts, the Company will strive to achieve material growth in 2022 and continue its efforts to enhance profitability with an improved product mix and operational efficiency.

As for the Networks Business, the fourth quarter performance improved quarter-on-quarter thanks to growth both in domestic and overseas markets. Samsung will actively explore new business opportunities overseas including Europe, while also responding to its 5G networks expansion in South Korea. At the same time, the Company will further improve its in-house 5G chip and solidify foundations for growth.

Visual Display and Digital Appliances To Continue Focus on Premium and Lifestyle Products

The CE businesses recorded KRW 15.35 trillion in consolidated revenue and KRW 0.7 trillion in operating profit for the fourth quarter of 2021.

The overall TV market grew quarter-on-quarter due to year-end seasonality, but decreased year-on-year due to fading effects of pent-up demand. The Visual Display Business saw strong sales of its premium and lifestyle products, but recorded slightly lower operating profit quarter-on-quarter due to rising costs, including for logistics. The Digital Appliances Business saw slow market growth in 4Q due to fading pent-up demand, in addition to a continued rise in material and logistics costs. However, Samsung achieved better profits compared to the previous quarter, thanks to an improved product mix and operational efficiency.

In the first quarter, market demand is expected to decrease year-on-year for both TVs and home appliances and high material and logistics costs are expected to persist for home appliances. The Company will continue its focus on premium and lifestyle product sales and improved operational efficiency. The Visual Display Business plans to expand premium product sales with promotional activities such as those associated with regional sporting events. It will also focus on sales of its Lifestyle category, including The Freestyle, a new product announced at CES 2022. The Digital Appliances Business aims to further expand its Bespoke lineup in global markets and enhance online sales.

In 2022, while market uncertainties are projected to remain, Samsung expects stronger demand for premium and super large TVs. In addition to its continued focus on premium and lifestyle TVs, it plans to offer an improved home entertainment experience, with various services and the Smart Hub, optimized for in-home activities. The Company expects a sluggish market for home appliances, but expects demand to edge up for new-category lifestyle products. Samsung plans to further expand its Bespoke lineup and continue to launch new-category products that reflect changing consumer needs.

Total consolidated revenue was a quarterly record of KRW 73.98 trillion, a 10% increase from a year earlier, which was the previous high. Operating profit increased 26% from the previous quarter to KRW 15.82 trillion, the second-highest ever, as favorable market conditions continued in the memory market while the foundry and display businesses achieved robust sales. The finished product businesses also posted solid performances.

The Memory Business saw a significant improvement in earnings with record quarterly bit shipment, as well as the second-highest revenue for DRAM, and the Foundry Business’s results improved due to strong sales to global customers. For the Display Panel Business, earnings rose as major smartphone customers launched new products.

The Mobile Communications Business saw a sequential improvement in earnings on the back of strong demand for new foldable models and low- to mid-range smartphones as well as growth from tablets and wearables. The Networks Business expanded its global business, including in North America and Japan, and continued to grow 5G network installations in the domestic market.

The Consumer Electronics Division saw strong expansion of the premium TV and Bespoke product lineup, but profitability declined due to rising raw materials and logistics costs.

The strength in most currencies against the Korean won, with the US dollar, in particular, had a positive impact of approximately KRW 800 billion on operating profit compared to the previous quarter.

For the fourth quarter, the Company will focus on meeting demand for memory and system semiconductor products even as component shortages at some customers may affect demand. The Company will also maintain solid profitability in the finished products businesses by strengthening our leadership and lineups in the premium segment.

For the Memory Business, a longer-than-expected component supply issue may need to be monitored due to potential impacts on set builds, but the Company will actively address strong fundamental demand for servers from increased investments from technology companies. For the System LSI Business, supply of SoCs and related products for mobiles phones planned for 2022 is expected to increase, while earnings at the Foundry Business is expected to improve significantly by aggressively addressing the demand for advanced processes.

In the Display Panel Business, the mobile panel segment is expected to achieve solid results on steady demand for smartphones and growing sales for new applications. The Company is on track to begin mass production of quantum-dot (QD) displays as planned.

The Mobile Communications Business expects to post robust profitability by expanding sales of premium products such as foldable phones, meeting replacement demand with low- to mid-range 5G smartphones and increasing sales of tablets and wearables.

The Consumer Electronics Division will focus on growing sales of premium products during the year-end holiday season.

In 2022, amid expectations of a recovery in global IT demand, the Company’s component business will focus on expanding advanced processes and enhancing product and technology leadership. In smartphones and consumer electronics, the Company will prioritize solid profitability by strengthening the premium category leadership. However, uncertainties related to component supply disruptions and COVID-19 are likely to remain.

In the Memory Business, the Company plans to boost cost competitiveness with the mass production of 14-nm DRAM and 7th generation V-NAND as well as next-generation products based on industry-leading extreme ultraviolet (EUV) technology. The System LSI Business will expand its business by reinforcing the SoC lineup, while the Foundry Business is expected to continue to deliver strong improvements in results by securing technology leadership through 3-nm Gate-All-Around (GAA) process and by meeting demand through active investments.

For the Display Panel Business, the portion of OLED panels in the market is expected to increase with higher penetration of 5G smartphones as the Company closely monitors supply of components such as DDIs. For the large panel business, Samsung will strive to secure leadership in the premium TV segment with QD displays.

In the Mobile Communications Business, the Company will strive to improve sales and profitability by strengthening its position in the premium market with expanding sales of flagship products including foldable phones as well as offering a stronger lineup of 5G smartphones for the mass market. The Company will also continue to bolster the tablet and wearables business and develop industry-leading technology. The Networks Business will continue to enhance hardware with custom 5G chips and strengthen software-based virtualization solutions for future growth as the Company pursues continued expansion overseas.

The Consumer Electronics Division expects overall demand to weaken, but will focus on proactively capturing growing demand for premium TVs and increasing global sales of Bespoke products.

The Company’s capital expenditures in the third quarter reached KRW 10.2 trillion, including KRW 9.1 trillion spent on semiconductors and KRW 0.7 trillion on displays. Total capital expenditures so far in 2021 were KRW 33.5 trillion, including KRW 30 trillion for semiconductors and KRW 2.1 trillion for displays.

Semiconductor Led by Server DRAM Sales; Foundry To Continue Record Quarterly Revenue  

The Semiconductor businesses posted KRW 26.41 trillion in consolidated revenue and KRW 10.06 trillion in operating profit in the third quarter.

For the Memory Business, the overall price situation remained favorable and the Company set a new record for quarterly bit shipment and the second-highest revenue for DRAM, backed in particular by significant growth in server sales.

For DRAM, server demand continued to grow as the adoption of a new, high-core CPU was released in the first half of the year. PC demand from end-users has also been robust due to changes such as workplaces opting for hybrid work patterns, and mobile demand recovery has become more visible thanks to releases of new products by major manufacturers and the base effect of the previous quarter.

Despite a resurgence of COVID-19 in major production countries and component supply issues that led to disruptions in set builds, Samsung actively responded to DRAM demand by flexibly operating its product mix.

For NAND, server SSDs demand recovered along with increased investments by major server customers, and demand from data centers for high-capacity products was strong based on the high-capacity trend spurred by new CPU adoptions. Mobile demand has been solid due to the launch of new models.

Looking to the fourth quarter for DRAM, the fundamental demand for server is expected to stay strong thanks to the new CPU adoption and expansion of datacenter investments. However, Samsung will keep monitoring the impacts of the component supply issues on set builds.

For Mobile, manufacturers are likely to continue to launch new 5G models but there are chances that growth of purchasing demand could be limited due to inventory adjustments at some customers along with impacts of supply chain issues. For PC, set build growth to stay similar compared to the last quarter.

As for NAND, server SSD demand is expected to be robust as business activities normalize and continued growth in enterprise IT budgets and the high-capacity trend for server SSD.

For the outlook next year, while macro uncertainties, such as the timing of mitigating component supply issues, influences of “Living with COVID-19” policies amid increasing vaccination rates and raw material pricing issues, make it difficult to provide specific guidance, server and PC demand is expected to be robust with the trend toward high-capacity following the expanding new CPU adoption and continued growth of enterprise IT investments. For Mobile, the Company expects shipment growth and the high capacity trend to continue with the increase in low-end to mid-range 5G models, and also as manufacturers launch products with new form factors.

Samsung will continue to expand the portion of 15-nm DRAM and 128-layer V-NAND, proactively address the server market where demand is likely to grow thanks to new adoptions of DDR5 with rising penetration of a high core CPU, and also preemptively secure demand for NAND solution products.

Moreover, while expanding mass production of 14-nm DRAM and 176-layer V-NAND, the Company will continue to strengthen its market competitiveness via cost reductions through next-generation processes and products.

The System LSI Business saw its earnings improve in the third quarter thanks to increased demand for SoCs/DDIs as major mobile customers launched new products. In the third quarter, the Company launched the industry’s first 200-megapixel image sensor for mobile phones and the industry’s smallest dual pixel image sensor.

In the fourth quarter, the Company expects earnings to continue to increase due to expanded supply of SoCs and related products for launches of new 5G smartphones in 2022.

The System LSI Business will improve its performance next year by expanding supply of 5G SoC products for the volume zone as well as for new flagship products that feature enhanced GPU performance.

The Foundry Business saw its earnings improve sequentially, posting record revenue for the quarter as supply of key advanced process products increased. The Company also secured a stable revenue base by winning new orders for advanced processes from global customers.

In the fourth quarter, demand for advanced and mature processes looks to remain strong, and the Company expects to post a new quarterly record for revenue, increasing more than 10% from the third quarter. The Company plans to continue its technological leadership by completing the design of first-generation 3-nm products based on GAA and developing second-generation 3-nm GAA process.

In 2022, the foundry market is expected to remain tight due to high silicon consumption for 5G in mobile and strong GPU-led demand for HPCs. The Company plans to improve earnings significantly by expanding supply of advanced processes of sub 5-nm process as well as increasing sales to global customers and normalizing prices for sustainable future investment.

Display Earnings Improve; Strong Demand for OLED To Persist 

The Display Panel Business posted KRW 8.86 trillion in consolidated revenue and KRW 1.49 trillion in operating profit for the third quarter. Overall display earnings improved compared to the previous quarter primarily due to the strong sales of small to mid-sized OLED panels despite weak performance in the large display business.

Mobile display earnings rose amid favorable seasonal effects, driven by demand for newly launched products from major smartphone customers. Especially, sales expansion for high-end products including foldable phones contributed to the highest-ever third quarter profit. However, the large display business continued to post losses mainly due to price declines in LCD panels.

Looking ahead to the fourth quarter, for mobile displays, Samsung forecasts strong demand for new smartphones to continue and sales for laptops and gaming devices to grow during the holiday season. Thus, it expects the earnings to remain solid for the fourth quarter. In the large display business, as the Company is all set to begin mass production of QD displays, it will focus on the successful introduction of its first QD products to the market.

In 2022, a favorable environment for the OLED business is expected to continue, thanks to the recovery of smartphone market demand and the higher adoption of 5G phones. Moreover, sales of applications such as laptops and tablets are forecast to grow in earnest. Samsung will strive to turn such momentum into a new growth engine for the Company. Also, amid concerns over supply of some components such as DDIs, the Company will closely monitor its supply chain and take preemptive actions to potential risks to ensure uninterrupted product delivery.

For the large displays, Samsung will complete the business reorganization from LCD to QD displays as planned and focus on securing leadership in the premium TV segment with QD displays.

Mobile Earnings Improve on Premium and Mass-Market Lineup Sales

The IT & Mobile Communications Division posted KRW 28.42 trillion in consolidated revenue and KRW 3.36 trillion in operating profit for the third quarter.

Overall market demand increased from the previous quarter due to alleviating influences of COVID-19. Despite component supply constraints across the industry, the Mobile Communications Business saw revenue increase from the second quarter. Smartphone sales increased compared to the previous quarter thanks to strong sales of flagship models including Galaxy Z Fold3 and Galaxy Z Flip3, as well as enhanced mass-market lineup. Device Ecosystem products such as wearables have also continued material growth. While increased marketing investments for the foldable category had some effect on profitability, the Company secured solid double-digit operating profit margin.

Looking ahead to the fourth quarter, market demand is forecast to increase quarter-on-quarter due to strong year-end seasonality, however, uncertainties over component supply are likely to persist. The Company will strive to maintain a double-digit operating profit margin by further expanding premium smartphone sales with the Galaxy Z Flip3 Bespoke Edition while also continuing sales momentum of the Galaxy S series. At the same time, the Company will proactively target replacement demand with competitive mass-market 5G lineup, and increase sales of Device Ecosystem products such as wearables, PCs and tablets.

In 2022, amid uncertainties over COVID-19, the smartphone and wearable markets are expected to continue growing. The Mobile Communications Business aims to reinforce its leadership in the premium segment by driving the mainstreaming of the foldable category providing innovative technology and differentiated experience such as Galaxy Z Flip3 Bespoke Edition. With these efforts, the Company will strive to achieve solid performance by strengthening mass-market 5G lineup and Device Ecosystem business.

For the mid-to-long term future growth, the Company will continue its efforts to develop advanced technologies and collaborate with leading global companies.

As for the Networks Business, the Company expanded its business overseas including North America and Japan, and actively responded to 5G expansion in South Korea. The Company will continue with its network rollouts in Korea while exploring new business opportunities overseas including North America, Japan, South West Asia and Europe. By improving the in-house 5G chip and advancing 5G virtualization solutions, the Company will strive to strengthen its product competitiveness and solidify foundations for growth.

CE Profits Decrease Due to Higher Costs, Despite Solid Sales of Premium Products

The Consumer Electronics Division, comprised of the Visual Display and Digital Appliances businesses, recorded KRW 14.10 trillion in consolidated revenue and KRW 0.76 trillion in operating profit in the third quarter.

Despite strong sales of its premium TVs and Bespoke home appliance products, the Company recorded lower profits both quarter-on-quarter and year-on-year, due to a significant rise in material and logistics costs.

Looking ahead to the fourth quarter, the Company expects higher demand for TVs quarter-on-quarter due to year-end seasonality. However, year-on-year demand is expected to decrease as more regions adopt “Living with COVID-19” policies and pent-up demand effects continue to fade. Samsung plans to respond by focusing on premium product sales, with optimized year-end promotions for both its offline and online channels.

In 2022, the Company expects the growth trend to continue to slow, as consumers increasingly spend less time at home. However, a heightened interest in customized, premium lifestyle products is expected to remain, which the Company plans to actively address. Further product mix enhancement, global market expansion, retail and marketing optimization and strengthened SCM capabilities are key elements of Samsung’s plan.

Total consolidated revenue was KRW 63.67 trillion, a 20% increase from the previous year and a record for the second quarter. Operating profit increased 34% from the previous quarter to KRW 12.57 trillion as market conditions improved in the memory market, operations normalized at the Austin foundry fab, and as effective global supply chain management (SCM) helped maintain solid profitability for the finished product businesses.

The Semiconductor business saw a significant improvement in earnings as memory shipments exceeded previous guidance and price increases were higher than expected, while the Company strengthened its cost competitiveness. For the Display Panel Business, a one-off gain and an increase in overall prices boosted profits.

Earnings at the Mobile Communications Business declined from the previous quarter due to component supply shortages and COVID-19 related production disruptions. But the business posted solid profitability as the Company leveraged its global SCM capabilities, improved the cost structure and as contributions from tablets and wearables continued.

The Consumer Electronics Division posted strong results driven by increased sales of premium products as demand remained strong.

For the second half, market conditions are expected to be favorable for the component business and the Company will focus on enhancing product and technology leadership. In smartphones and consumer electronics, the Company aims to maintain solid profitability by strengthening the premium category leadership. However, risks of continued disruptions in component supply and uncertainties related to COVID-19 are likely to persist.

The Memory Business is expected to see continued demand growth for server and mobile products and the Company will accelerate migration to 15-nm DRAM and 6th-generation V-NAND as well as expand the application of extreme ultraviolet (EUV) lithography process in DRAM production. Demand for key System LSI products is expected to increase as new smartphones are introduced, while the Foundry Business will accelerate growth by expanding the Pyeongtaek S5 Line capacity and by adjusting pricing to enable future investment cycles.

For the Display Panel Business, the mobile panel segment is expected to improve as major customers launch new flagship models and the Company will focus on finalizing the mass production process for quantum-dot (QD) displays for shipment to begin within the year.

The Mobile Communications Business plans to achieve solid revenue and profit by boosting the competitiveness of the product lineup with the launch of new foldable models and the expansion of mass market 5G phones. The Company will also continue to increase sales of the Galaxy Ecosystem products. The Networks Business will drive revenue growth in key markets, including North America, and continue to explore new opportunities in Europe and other regions.

The Consumer Electronics Division will solidify leadership in the premium TV market and increase digital appliances revenue by bolstering global sales of the Bespoke product line.

The Company’s capital expenditures in the second quarter reached KRW 13.6 trillion, including KRW 12.5 trillion spent on semiconductors and KRW 0.6 trillion on displays. Total capital expenditures in the first half were KRW 23.3 trillion, including KRW 20.9 trillion for semiconductors and KRW 1.4 trillion for displays. Investment in the Memory Business was spent mainly on addressing future demand through capacity expansion and process migrations to advanced nodes. Investment in the Foundry Business focused on expansion for advanced processes such as 5-nm EUV lithography.

Semiconductor Earnings Rise; Strong Demand To Continue in 2H

The semiconductor business posted KRW 22.74 trillion in consolidated revenue and KRW 6.93 trillion in operating profit in the second quarter.

The Memory Business reported a significant increase in earnings from the previous quarter, led by strong demand for server and PC memory, as well as stronger-than-expected increases in average sales prices for both DRAM and NAND chips. Cost reduction from the ongoing adoption of latest manufacturing process also helped.

For DRAM, demand from datacenter companies was strong thanks to solid growth in Cloud service while continued trends for remote work and education lifted demand for PCs.

Demand for mobile memory, however, saw a limited impact in the short term due to recurring waves of COVID-19 outbreaks at locations of global smartphone production bases and tight supplies of key components.

The graphics market also grew in the second quarter on healthy demand for cryptocurrency and graphic cards for gaming PCs. Memory demand for game consoles also grew on new game launches, against the backdrop of rising need for home entertainment.

Samsung was able to respond promptly to the strong server and PC demand, reporting a higher bit growth than the previous guidance, thanks to a preemptive adjustment to the Company’s production mix.

As for NAND, demand was solid over sustained growth in content-per-box, particularly from major customers, even as tight supplies of components limited overall mobile phone production in the second quarter. Solid state drives (SSDs) reported growth due to increased investment in servers from datacenter companies and solid demand for laptops.

NAND shipments in the quarter also exceeded the previous bit growth guidance while the portion of 128-layer 6th-generation V-NAND continued to increase.

Looking to the second half of the year, the market is expected to see supply problems for components persist, as well as risks from the variant COVID-19 viruses and geopolitical tensions. However, the memory market’s fundamentals remain strong on the back of increasing 5G adoption and sustained demand for servers and PCs.

Memory demand will likely be buoyed by new smartphone model launches, with the wider 5G availability driving growth in content-per-box. Increasing adoption of the latest CPU, along with growing enterprise PC demand to support the new remote work dynamics, is expected to support memory demand for servers and PCs. At the same time, Samsung’s chip inventory level has fallen to a substantially low level due to the stronger shipment last quarter than the previous guidance.

Samsung will continue to manage production mix in a flexible manner and enhance capabilities to meet fluctuating market demand. The Company will further cement its leadership in cutting-edge chip technology and is set to begin mass production of 14-nm DRAM using the EUV-based process, based on the industry’s smallest design rule in the 14-nm class, in the second half. Samsung will also start mass production of consumer SSD adopting the double-stack based 176-layer 7th-generation V-NAND, using the finest etching technology, during the second half.

The System LSI Business saw its earnings improve in the second quarter with a solid demand for 100Mp image sensors from Chinese customers and as production normalized at the Austin fab. However, improvement was somewhat limited due to a decrease in flagship smartphone launches and SoC demand amid weak seasonality.

The Company also released an image sensor that applies 0.64μm ISOCELL, which is the smallest pixel size in the industry, and also the Company’s first product of the image sensor for automotive and expanded its business areas by releasing 3 types of PMICs for DDR5 DRAM modules.

In the second half of the year, especially third quarter, the overall earnings are expected to improve amid rising demand for SoC and OLED DDI as we enter strong seasonality for smartphones and TVs.

The Foundry Business saw its earnings improve thanks to early normalization of the Austin fab and maximized chip supply capabilities.

In the second half of this year, the Company expects to see a continued 5G penetration, work-from-home trend, and customers securing safety stock resulting in higher market growth than before.

To meet this rising demand, the Company will maximize its capabilities to supply chips via full-fledged operation of Pyeongtaek S5 Line, and target annual sales growth of well over 20% through pricing strategies to sustain future investment as well as customer and application diversification.

Display Earnings Improve on One-off Gain and ASP Rise

The Display Panel Business posted KRW 6.87 trillion in consolidated revenue and KRW 1.28 trillion in operating profit for the second quarter. Its earnings improved from the previous quarter despite weak seasonality for mobile products, primarily due to a one-time gain as well as an increase in overall ASP.

Mobile display saw its earnings grow as the continued adoption of OLED panels by customers helped its profit margin remain strong. Compared to a year earlier, both sales and operating profit increased substantially because of the wider adoption of OLED displays as well as the base effect. For large displays, while the conversion of manufacturing lines to QD displays affected revenues, profitability improved thanks to the increased ASP of panels for TVs and monitors.

Looking ahead to the second half, Samsung expects demand to recover for mobile displays as major customers are planning to launch new flagship models, including high-value products such as foldable phones. However, there are concerns that a supply crunch of certain components such as DDIs may affect shipments for some customers. Meanwhile, the Company forecasts the sales of IT devices and portable gaming products featuring OLED screens to grow in earnest.

Samsung will continue to strengthen its market leadership by introducing new technologies such as Under Panel Camera (UPC) and low-power consumption related ones. For large displays, the Company will focus on finalizing the mass production process for QD display to allow product shipments to start within the year.

Mobile Profitability Remains Solid in Q2; To Strengthen Leadership in Premium Segment in 2H

The IT & Mobile Communications Division posted KRW 22.67 trillion in consolidated revenue and KRW 3.24 trillion in operating profit for the second quarter.

Overall market demand decreased from the previous quarter due to the impact of weak seasonality and prolonging COVID-19. The Mobile Communications Business saw a revenue decrease compared to the previous quarter, influenced by a component supply shortage in the industry as well as production disruptions in its Vietnam factory. However, the Company secured solid double-digit operating profit margin by minimizing impact through rebalancing supply with its global SCM capabilities and improving cost structure. Device Ecosystem products such as tablets, wearables also contributed to the second quarter profit.

Looking ahead to the second half, mobile market is forecast to recover to the pre-COVID level on an annual basis as 5G adoption and contactless trend continue to thrive. However, uncertainties over component supply and COVID-19 will continue to persist. The Company will strive to achieve solid revenue and profits by enhancing the competitiveness of its smartphone lineup with the launch of new foldable models and expansion of mass-market 5G models. Also, it will further increase sales of the Galaxy Ecosystem products.

With successful launch of the new foldable smartphones with further enhanced user experience, the Company will solidify its leadership in the premium segment by mainstreaming the foldable category while continuing the sales momentum of Galaxy S series throughout the year.

As for the Networks Business, the Company improved performance compared to the previous quarter backed by growth of its North America business and 5G networks expansion in South Korea. The Company will strive to drive sales growth in North America and Japan while exploring new business opportunities in Europe and other markets.

Solid Earnings for Both TV and Appliances; To Continue Focus on Premium Product Sales

The Consumer Electronics Division, comprised of the Visual Display and Digital Appliances businesses, recorded KRW 13.4 trillion in consolidated revenue and KRW 1.06 trillion in operating profit in the second quarter.

Overall market demand for TVs decreased from the previous quarter due to low seasonality, but was higher compared to a year earlier. Expanded sales of premium products including the newly launched Neo QLED, and a timely response, based on operational efficiency, to demand generated by global sporting events allowed the Company to post solid profits in the second quarter.

The Digital Appliances Business also posted steady results, buoyed by sustained pent-up demand in the quarter. The Company launched its Bespoke lineup in global markets in May, garnering positive initial feedback from the market. New lifestyle products including the Shoe Dresser and cordless Stick Vacuum Cleaner also led to expanded sales.

Looking ahead to the second half, COVID-19 related uncertainties continue to pose a risk for both TV and Digital Appliances businesses. However, the Company looks forward to improved demand for TVs compared to the first half of the year, due to stronger seasonality.

The Company will closely monitor rapidly changing market conditions, and swiftly respond to changes in demand with its advanced SCM capabilities. Expanded sales of premium products via peak-season promotions tailored by region, enhanced online and offline buying experiences, and improved operational efficiency are part of the plan to secure profitability.

Total consolidated revenue was KRW 65.39 trillion, a 6% increase from the previous quarter and a record for the first quarter. Operating profit increased 4% from the previous three-month period to KRW 9.38 trillion as solid sales of smartphones and consumer electronics outweighed lower earnings from semiconductors and displays.

The semiconductor business saw an earnings decline quarter-on-quarter (QoQ) despite solid memory shipments, mainly due to the production disruption at the Austin fab, and a downward trend in NAND prices, while initial costs of new line ramp-up associated with advanced node migration also weighed on the results. Profit from the Display Panel Business fell quarter-on-quarter because of weak seasonality of mobile products.

Earnings at the Mobile Communications Business rose significantly as sales of flagship and mass-market smartphones increased and contributions of products in the Device Ecosystem such as tablets, PCs and wearables grew. The Networks Business maintained solid performance on the back of continued expansion of 5G globally.

The Consumer Electronics Division reported higher profit both quarter-on-quarter and year-on-year as demand remained strong for digital appliances and premium TVs.

In the second quarter, earnings at the semiconductor business is expected to increase as memory market conditions improve on the back of strong server demand. The Foundry Business has seen a full resumption of production at the Austin fab, while the System LSI Business is expected to continue to be impacted from the previous quarter’s foundry disruption. For displays, mobile panel sales are likely to decline due to weak seasonality for mobile phones and the effects of some component shortages.

The Mobile Communications Business is set to see revenue and profit decrease as flagship smartphone sales fall and some components experience supply issues. The Company plans to minimize the impact from components by leveraging its global supply chain management (SCM) capabilities. The Consumer Electronics Division will focus on bolstering sales of new products such as Neo QLED models and expanding sales of the Bespoke lineup.

For the second half, market conditions are expected to improve for the component business with the Company continuing to extend product and technology leadership. In smartphones and consumer electronics, the Company will focus on strengthening the premium category leadership. However, global macroeconomic risks, including uncertainties over demand related to COVID-19, are likely to persist.

The Memory Business is expected to see solid demand for server and mobile products and the Company will accelerate migration to 15-nano DRAM and 128-layer 6th-generation V-NAND as well as expand application of extreme ultraviolet (EUV) lithography processes. The System LSI Business will maximize supply capabilities by cooperating with foundries at home and abroad, while the Foundry Business will expand supply with mass production at the Pyeongtaek Line 2.

The Display Panel Business will continue to increase adoption of OLED panels and establish a foundation for quantum-dot (QD) displays in large-sized panels.

The Mobile Communications Business plans to post solid profitability by popularizing foldable models, expanding the lineup of mass-market 5G phones and increasing sales of tablets, PCs and wearables. The Networks Business will continue to address demand from growing 5G commercialization globally while the Consumer Electronics Division will seek to secure profitability by expanding sales of premium products.

The Company’s capital expenditures in the first quarter stood at KRW 9.7 trillion, including KRW 8.5 trillion spent on semiconductors and KRW 0.7 trillion on displays.

Semiconductor Earnings Decline, to Improve Significantly in Second Quarter

The semiconductor business posted KRW 19.01 trillion in consolidated revenue and KRW 3.37 trillion in operating profit in the first quarter.

The Memory Business saw a slight profit decline due to a downward trend in NAND prices and initial costs associated with ramping up new lines, despite overall decent demand backed by server and mobile products.

For DRAM, demand for mobile stayed solid despite the weak seasonality due to releases of new models by major customers and increased penetration of 5G smartphones. Demand from PC remained strong as online-based activities became routine for global consumers.

Server demand increased significantly year-on-year, as content-per-box rose due to increasing adoption of a new server CPU and as demand was solid mainly from datacenters. Demand for consumer products was also strong, due to an increase in 4K high-definition content and growth in TV and set-top box memory content to use streaming services.

As for NAND, demand from mobile was robustly supported by strong smartphone sales along with rising demand and content-per-box. Server SSD saw growth in demand compared to the previous quarter thanks to the base effect of weak demand in the previous quarter as major data center companies resumed storage investments.

Looking to the second quarter, the Company expects to improve earnings significantly amid favorable business conditions, which include strong demand across all applications.

DRAM demand is likely to stay robust thanks to the expanding 5G market and related growth in content-per-box and sever demand will continue to be strong backed by solid demand for cloud applications. PC demand will stay solid as educational laptops enter peak seasonality.

For NAND, demand is expected to pick up because of growing content-per-box from expanding 5G line-ups at major customers. Demand for Server SSD is likely to stay strong due to increased storage demand from customers and a high capacity trend with the release of a new CPU. The Company will actively address the increase in demand for high-capacity SSD with 8TB or more, while accelerating migration to the industry’s only single-stack based 128-layer 6th generation 512Gb V-NAND to strengthen technological leadership and cost competitiveness.

For the second half, amid the accelerating economic recovery from persisting stimulus programs in numerous countries, demand for servers and storage will keep growing because of expanding investment in data centers and the high capacity trend with the release of a new CPU. Mobile demand will keep rising with the launch of new models from major customers and the broad penetration of 5G and PC demand will remain strong backed by continuing demand for upgrades and additional units in households.

Based on strong, across-the-board demand, DRAM prices are expected to continue the upward trend through the second half of the year. For NAND in the second half, demand for certain applications is expected to exceed supply due to a controller supply-demand imbalance for solution products.

In addition, 15-nm DRAM and 128-layer 6th Generation V-NAND will drive bit growth and cost competitiveness in the second half, and the Company will continue to strengthen technology competitiveness by applying EUV on multiple layers of the 14-nm DRAM based on industry-leading technology and through the ramping-up production of solution products adopting double-stack based 176-layer 7th generation V-NAND in the second half.

The System LSI Business increased supply of mobile SoCs and image sensors in the first quarter backed by launches of flagship and high-end smartphones, but earnings remained mostly flat QoQ due to impacts of mobile DDI supply issues caused by foundry production disruption. However, the Company reinforced technological leadership by releasing the Exynos 2100, its first premium 5G-integrated mobile processor, as well as a 50-megapixel ISOCELL image sensor with advanced Dual Pixel Pro.

In the second quarter, demand for mobile components is expected to weaken due to a seasonal decline in smartphone demand and continuing effects of the disruption of foundry production in the previous quarter. As for the second half, amid the possibility that the current supply shortages will persist, the Company will maximize its capability to supply chips by strengthening cooperation with the in-house foundry and expanding the use of outsourced foundries.

The Foundry Business saw its earnings decline in the first quarter due to a disruption of production at the Austin fab in the U.S. from a major power outage. However, the Company continued its efforts to strengthen its technological leadership by starting the development of the 2nd generation 3-nm process and completing the development of the 14-nm and 8-nm RF processes to lead the 5G market.

The production line in Austin has been fully normalized in the second quarter. The Company will prepare to expand supply in the second half of the year through the start of mass production at the Pyeongtaek Line 2 and continue to lead technological leadership by reinforcing its differentiated package solutions. In the second half, growth in the foundry market is expected to exceed previous projections due to the acceleration of 5G penetration, a resumption of corporate IT investments, and growing demand from customers securing safety stock. The Company will respond to increasing customer demand through active supply expansions via full operation of the Pyeongtaek Line 2, and will expand its global customer bases and diversify applications.

Display Earnings Improve YoY on Wider OLED Adoption; Demand Expected to Weaken in 2Q

The Display Panel Business posted KRW 6.92 trillion in consolidated revenue and KRW 0.36 trillion in operating profit for the first quarter.

Mobile display earnings declined QoQ because of chip shortages affecting major smartphone customers and weak seasonality. However, earnings improved year-on-year (YoY) as the expanded adoption of OLED displays from flagship to entry-level models drove growth. Large displays saw a drop in earnings due to ongoing conversion of manufacturing lines in preparation for the next generation TVs.

Looking ahead to the second quarter, Samsung expects weak demand for mobile displays compared to the previous quarter because of the seasonal impact and as consumers hold off buying new smartphone models until later in the year. The Company aims to raise utilization rate and secure profitability by advancing the production. For large displays, it will continue to smooth the way for the transition to new business model based on QD display technology.

In the second half, the smartphone market is forecast to continue its recovery thanks to the growing demand for 5G smartphones. The Company will strive to have panel components secured and technology development completed in time to deliver panels in a stable manner for major customers.

In particular, demand for foldable phones and other IT devices is expected to continue to grow in the post-pandemic era. The Company will focus on addressing such demand and exploring new applications such as automotive to strengthen its leadership in the OLED market. For large displays, Samsung will channel all its efforts towards preparing for the mass production of QD displays, the next generation panel technology.

Mobile Profitability Strengthens in 1Q; To Strengthen Leadership in Premium Segment

The IT & Mobile Communications Division posted KRW 29.21 trillion in consolidated revenue and KRW 4.39 trillion in operating profit for the first quarter.

While market demand decreased QoQ amid weak seasonality, the Company saw overall demand recovering from a year earlier when the market was significantly impacted by COVID-19. The Mobile Communications Business saw material growth in both revenue and profits from the previous quarter. Flagship smartphone sales increased QoQ underpinned by the launch of Galaxy S21, as well as mass-market models such as Galaxy A-Series maintaining solid sales performance. Device Ecosystem products including tablet, PC and wearables also contributed to the profit growth in the first quarter.

Looking ahead to the second quarter, sales of new Galaxy A products such as A72 and A52 are expected to ramp up and tablets, wearables and Galaxy Book – a newly-introduced notebook PC – are expected to remain solid. However, diminishing new product effects for the flagship model and the component supply shortages are likely to weaken revenue of the Mobile Communications Business QoQ. By rebalancing supply with its global SCM capabilities, the Company will minimize the business impact and strive to secure profitability.

For the second half, market demand is forecast to recover to the pre-COVID level on an annual basis backed by a gradual economic recovery and continued expansion of the 5G market. The Company will strive to achieve solid profits and strengthen its leadership in the premium segment by popularizing the foldable category, while also enhancing competitive mass-market 5G lineup and further growing its tablet, PC and wearable businesses.

As for the Network Business, sales in the first quarter increased QoQ with robust profitability mainly led by business growth in North America and Japan. The Company will continue with its 5G equipment expansion in Korea and network rollouts in overseas market including North America and Southwest Asia. The Company will remain active in commercializing 5G network globally while exploring new business opportunities.

Strong Earnings for TVs and Appliances as Stay-at-Home Demand Continues

The Consumer Electronics Division, comprised of the Visual Display and Digital Appliances businesses, recorded KRW 12.99 trillion in consolidated revenue and KRW 1.12 trillion in operating profit in the first quarter.

Demand for TVs declined QoQ following the year-end peak in the previous quarter, but increased YoY due to sustained demand in advanced markets. The Company posted both stronger sales and profit YoY as it leveraged its global SCM capabilities to swiftly respond to heightened demand. It also saw increased sales of its premium products, including strong initial sales of the new Neo QLED lineup.

In the second quarter, the Company expects TV demand to increase YoY with major sporting events including the UEFA Euro 2020 and the Summer Olympic Games expected to take place. However, risks persist around COVID-19 as new surges across the globe lead to additional lockdown measures. The Company will aim to increase profitability by focusing on sales of its Neo QLEDs, responding to strong demand for home entertainment products, and successfully launching its new Micro LED products for home.

In the second half, a switch of demand from home entertainment to outdoor activities is expected as more countries reach herd immunity, resulting in weaker demand for TVs. The Company will closely monitor market conditions and respond in a flexible manner, while continuing its focus on sales of premium and lifestyle product categories.

Demand remained strong in the first quarter for the Digital Appliances Business, despite traditionally weak seasonality. Earnings rose due to strong sales of premium products such as customizable Bespoke refrigerators, as increased time at home led to stronger interest in home appliances and interior design.

While demand is expected to stay strong in the second quarter, rising material and logistics costs are expected to pose a risk. The Company plans to respond by focusing on the expansion of its Bespoke Home platform, introducing new product categories and expanding into additional markets.

Uncertainties are expected to continue in the second half for the digital appliance market. The Company will continue to focus on the global expansion of its Bespoke lineup while further strengthening its online and B2B sales capabilities.

The Company posted KRW 61.55 trillion in consolidated revenue and KRW 9.05 trillion in operating profit in the quarter ended December 31, 2020. For the entire year, it reported KRW 236.81 trillion in revenue and KRW 35.99 trillion in operating profit.

Although challenges from the COVID-19 pandemic continue, company-wide efforts to ensure a stable supply of products and services globally helped Samsung’s fourth-quarter results. Profit rose 26.4 percent year-on-year led by display and memory chip businesses, but fell 26.7 percent from the third quarter due to weaker memory prices and sluggish consumer products sales, as well as higher marketing costs and negative impact from the Korean won’s appreciation.

The local currency’s value rose sharply against the U.S. dollar, euro and key emerging market currencies, resulting in a negative impact equivalent to about KRW 1.4 trillion compared with the previous quarter, mostly in semiconductor and display businesses.

The Memory Business saw earnings decline quarter-on-quarter despite solid shipments, weighed down by a continued decline in chip prices, the won’s strength and initial costs from new production lines. The System LSI and the Foundry Business also took a hit from the stronger won, even though orders from major global customers increased. Profit from the Display Panel Business grew significantly both QoQ and YoY, thanks to a sharp rise in mobile display production and improved demand in the large panel market.

The Mobile Communications Business posted a QoQ decline in profit due to weaker sales and higher marketing spending. However, the results were in line with its earnings a year earlier, supported by continued efforts to optimize costs. The Networks Business saw improved earnings on the back of 5G service expansion in Korea and continuing 4G/5G rollouts globally.

The Consumer Electronics Division reported a quarterly fall in profit, as increased costs outweighed stronger year-end sales in developed markets.

Looking ahead, Samsung Electronics expects overall profit to weaken in the first quarter of 2021. The Memory Business will likely continue to be affected by the ongoing strength in the won and costs associated with new production lines, despite solid demand from mobile products and data centers.

The System LSI Business plans to expand shipments of system-on-chips (SoCs), image sensors and display driver ICs (DDIs), while the Foundry Business is set to increase 5-nm SoC and 8-nm high-performance computing (HPC) chip production. In displays, mobile display sales are expected to drop considerably after a strong performance in the fourth quarter.

The Mobile Communications Business is set to see robust sales of flagship smartphones such as the Galaxy S21 and new mass market models. The Consumer Electronics Division will likely post stable results despite weakness in seasonal demand, underpinned by new product launches and introduction of new premium lineups.

For 2021, the Company expects a recovery in overall global demand but uncertainties persist over the possibility of recurring COVID-19 waves.

The Memory Business, specifically the DRAM market, is expected to see a recovery during the first half thanks to strong demand from mobile and server applications, but geopolitical and economic uncertainties will likely continue. The Company will accelerate migration to 1z-nm DRAM and 6th-generation V-NAND to enhance cost competitiveness and technology leadership. The System LSI Business will actively respond to demand for 5G SoCs and high-resolution sensors with differentiated products. The Foundry Business also aims to expand mass production based on the 5-nm extreme ultraviolet lithography (EUV) process and diversify application areas.

The Display Panel Business will further enhance its leadership in mobile displays while focusing on timely development of new quantum-dot (QD) display products in large-sized panels.

The Mobile Communications Business plans to increase sales of flagship, foldable and new mass market 5G models while continuing efforts to improve costs. The Consumer Electronics Division aims to expand its premium lineup including Neo QLED, MICRO LEDs and Bespoke appliances.

Samsung’s capital expenditures in 2020 reached a total of KRW 38.5 trillion, including KRW 32.9 trillion spent on semiconductors and KRW 3.9 trillion on displays. Spending on memory semiconductors grew significantly for capacity expansion and introduction of advanced process technology, while investment in the Foundry Business also jumped on expansion of 5-nm EUV facility. The Company also increased investment for QD displays and new mobile screen technologies.

Semiconductor Earnings Weaken on Foreign Exchange Impact; Foundry Reports Record Sales

The Semiconductor businesses posted KRW 18.18 trillion in consolidated revenue and KRW 3.85 trillion in operating profit in the fourth quarter.

Overall demand in the Memory Business was strong, led by continued strong mobile demand, as well as solid demand from data centers and PCs. However, earnings declined due to the weak dollar and initial costs associated with ramping up new production lines.

For DRAM, mobile demand showed strength as major customers launched new smartphone models and as consumer confidence improved, while server demand was solid with cloud computing companies increasing investment in data centers. PC demand remained strong, led by Chromebooks and gaming notebooks, and graphic demand increased with the release of new GPUs and gaming consoles. The Company achieved solid shipments by actively addressing demand from mobile and as sales of consumer products, including TVs, increased.

For NAND, mobile demand remained solid helped by increasing demand from Chinese customers and growth in content-per-box. For servers, demand was relatively weak as inventory adjustments at major OEMs continued, while for client SSD, low- to mid-priced notebook sales was strong on the back of work-from-home demand along with demand for new gaming consoles.

Looking to the first quarter, earnings are expected to decline from the previous quarter due to continued weakness in the dollar and costs related to the ramp-up of new production lines.

For DRAM, the market for mobile is expected to expand with the release of new products and wider support of 5G for low- and mid-end smartphones. For servers, demand is improving as data centers increase purchasing and boost capex following inventory adjustments. PC demand is projected to be solid as demand for notebooks remain robust. The Company plans to optimize its product mix to actively address demand across all applications and strengthen market leadership and cost competitiveness.

As for NAND, mobile demand is expected to be solid despite weak seasonality as demand from Chinese customers increase and sales of 5G smartphones grow. For server SSD, data center demand is expected to gradually increase, while demand for client SSD is projected to remain robust. The Company will actively respond to demand from mobile and client SSD, while increasing production of 6th-generation V-NAND to strengthen technology leadership and cost competitiveness.

In 2021, business activities delayed by COVID-19 are expected to regain momentum. Mobile demand is expected to be robust on the back of Chinese customers and growth in content-per-box, as well as the expansion of 5G models. Server demand is likely to recover as data centers resume investment, while content-per-box for PCs will continue to increase. However, uncertainties remain such as geopolitical risks and a weaker dollar.

The Company will maintain flexibility in the product mix and accelerate the conversion to 1z-nm DRAM and 6th-generation V-NAND to strengthen cost and product competitiveness The Company will also continue cooperating with major global customers and proactively introduce next-generation products such as the world’s first multi-step EUV-based 1a-nm DRAM and 7th-generation V-NAND.

Earnings for the System LSI Business declined due to a weak dollar, even as demand for mobile DDIs and image sensors increased. With the release of the Exynos 1080, the Company’s first 5-nm SoC product, we solidified our foothold to continue leading the market and expand our customer base.

In the first quarter, demand is expected to increase mainly for mobile SoCs and we plan to expand supply of 5G mobile processors and ultra-high-pixel image sensors for new flagship and high-end smartphones in Korea and China. For 2021, amid uncertainties including the possibility of a prolonged pandemic, the market is expected to recover on increased demand from smartphone manufacturers and the Company aims to achieve double-digit revenue growth for the year.

The Foundry Business achieved a new record quarterly revenue, led by strong demand for 5G chips and image sensors as well as increased demand for high-performance computing chips. However, earnings declined due to the foreign exchange impact. The Company completed the design of 2nd generation 5-nm and 1st generation 4-nm mobile products, proving our leading-edge process competitiveness.

In the first quarter, demand is likely to remain strong for all process technologies and supply shortages is expected to continue for the time being. The Company will operate its lines flexibly by expanding the portion of advanced processes and will focus on developing 1st and 2nd generation 3-nm processes. For 2021, the overall foundry market will continue to grow and the Company plans to secure more global customers and diversify applications by expanding capacity centered on advanced processes.

Display Earnings Highest Ever On Strong Mobile Panels, Higher TV Screen Prices

The Display Panel Business posted KRW 9.96 trillion in consolidated revenue and KRW 1.75 trillion in operating profit for the fourth quarter. It recorded its highest-ever quarterly earnings, thanks to an ongoing recovery in demand for smartphones and TVs amid an economic rebound during the second half of 2020.

Mobile display earnings grew sharply QoQ as surging demand from major customers lifted factory utilization. Losses from large displays narrowed QoQ, helped by steady demand and rising average prices of TV and monitor panels, led by the expansion of contactless services.

Looking ahead to the first quarter, the Company expects mobile display earnings to decline QoQ due to a decrease in demand from major customers. However, utilization is projected to improve YoY as major customers increase adoption of OLED displays within their product lineups to align with the pace of 5G commercialization.

For large displays, the Company is preparing to launch QD Display products as scheduled while also continuing to fulfill LCD orders for some customers as planned.

In 2021, for the mobile display business, the Company expects OLED panel demand to rise for high-end models and OLED penetration to increase in mid-range segments, driven by full-blown expansion of the 5G smartphone market alongside a recovery of smartphone demand.

The Company will further solidify its leadership in the OLED market and diversify applications across note PCs, tablets and automotives, responding to uncertainties from the prolonged impact of the COVID-19 pandemic and increasing competition.

Samsung will also leverage its technological excellence and cost competitiveness and lead growth in innovative form factors such as foldable and slidable displays.

For large displays, the Company will develop QD display products as scheduled and build a stable customer portfolio to create a foundation for QD display to cement its place within premium product segments.

Mobile to Focus on Flagship and Foldable, Expanding Mass Market 5G Lineup

The IT & Mobile Communications Division posted KRW 22.34 trillion in consolidated revenue and KRW 2.42 trillion in operating profit for the fourth quarter.

While overall market demand increased QoQ as a result of strong year-end demand and gradual economic recovery, the Mobile Communications Business saw revenue and profits decrease QoQ on intensifying competition and higher marketing expenses. However, the Company maintained a double-digit profit margin by improving the cost structure through measures such as component standardization.

Looking ahead to the first quarter, market demand for smartphones and tablets is expected to decline QoQ amid weak seasonality. However, both revenue and profit for the Mobile Communications Business are expected to rise, driven by flagship model sales on the launch of the Galaxy S21 series and product mix improvement. Upcoming release of new mass-market products will also contribute to the growth in the first quarter.

In 2021, market demand is likely to recover to pre-COVID levels backed by gradual recovery in the economy and accelerating expansion of the 5G market. The Mobile Communications Business aims to strengthen its leadership in the premium segment through the Galaxy S21 series and expansion of the foldable category including the Galaxy Z Fold and Galaxy Z Flip.

The Company will also strive to improve its overall sales by expanding 5G device lineup for the mass market, as well as tablets and wearable products. It will also continue to expand the Galaxy ecosystem through strategic collaborations with global partners while enhancing the cost structure and operational efficiency further.

For the Networks Business, the Company improved performance QoQ by actively responding to 5G expansion in South Korea as well as growing 4G and 5G services overseas. The Company will continue with its network rollouts focusing on overseas markets including North America and Japan, and actively commercialize 5G network globally while seeking to expand new business opportunities.

Consumer Electronics to Focus on Premium Products

The Consumer Electronics Division, comprised of the Visual Display and Digital Appliances businesses, recorded KRW 13.61 trillion in consolidated revenue and KRW 0.82 trillion in operating profit for the fourth quarter of 2020.

In the fourth quarter, earnings for the Visual Display Business decreased QoQ due to intensifying competition in the peak season and rising costs. However, sales improved thanks to strong year-end demand in advanced markets.

The Company responded preemptively by expanding online sales, as well as O2O services. As a result, the Company successfully expanded sales in premium products like QLED, super large screen TVs, and gaming monitors.

In the first quarter, the Company expects the overall TV market to grow YoY despite weak seasonal demand. It will focus on driving sales by successfully launching Neo QLED TVs and prioritizing high-value products such as super large screen TVs and lifestyle TVs, while also developing tailored promotions for each region. For 2021, Samsung will respond to any changes in the global TV market in a flexible manner and leverage its global supply chain management (SCM) capabilities.

For the Digital Appliances Business, the market demand increased slightly in the fourth quarter thanks to expansionary policies and “At-home trend” amid the continuing COVID-19 pandemic. Flexible peak season promotions and premium product sales drove profit higher than last year, in both advanced and emerging markets including India and Latin America.

In 2021, the appliances market is expected to grow from pent-up demand from advanced markets. The Company will continue to focus on premium products, expanding the Bespoke platform to other product categories and enhancing global SCM capabilities. It will also further strengthen online and B2B sales, executing effective and tailored marketing strategies for each region.

Even as the COVID-19 pandemic continues around the world, reopening of key economies led to significant increase in consumer demand. Samsung Electronics was able to respond aggressively through flexible global supply chain management (SCM), reporting its highest-ever quarterly revenue.

Quarterly operating profit rose 52 percent from the previous quarter, thanks to a boost in demand for smartphones and consumer electronics as well as efficient cost management. Third-quarter operating profit was also 59 percent higher year-on-year on stronger sales of memory chips and consumer products.

The Memory Business posted solid earnings as healthy demand for mobile and PC products led to higher-than-expected shipments, outweighing the impact of lower memory chip prices. The System LSI Business also saw profit rising over demand for mobile phone components, while the Foundry Business benefitted from increased orders for high-performance computing (HPC) chips and other applications.

The Display Panel Business reported higher profit quarter-on-quarter led by growing mobile display sales on customers’ new product launches and improved supply-demand environment for large panels.

A near 50 percent jump in sales of smartphones including new flagship products, coupled with improved cost management, lifted earnings at the Mobile Communications Business from the previous quarter. The Consumer Electronics Division also witnessed a sharp growth in sales of premium TVs and appliances, supported by flexible management of supply chain and sales channels.

Looking ahead, Samsung Electronics expects profit to decline in the fourth quarter amid weakening memory chip demand from server customers and intensifying competition in mobile phones and consumer electronics.

Soft prices in server memory due to customers’ inventory adjustments will likely weigh down the Memory Business despite stable demand for mobile and laptop memory. The System LSI Business will begin supplying 5-nm 5G system-on-chips (SoCs) in earnest and the Foundry Business expects increased demand for HPC chips and mobile SoCs. In displays, mobile panel sales are set to rise significantly from the third quarter.

The Mobile Communications Business is likely to see smartphone sales decline and marketing costs increase due to competitive market environment. In Consumer Electronics, profitability is expected to weaken on growing competition and rising costs, despite solid demand.

For 2021, the Company expects a recovery in overall global demand but uncertainties will remain over the possibility of recurring epidemic waves of COVID-19.

Samsung aims to enhance its leadership in memory chips through expansion of next-generation process node, flexible production management to meet immediate demand and timely investment to address demand over the mid- to long-term.

The System LSI Business will focus on differentiated 5G SoCs and high-resolution sensors, while the Foundry Business seeks to accelerate growth by diversifying applications to HPC and securing new major customers.

As the Display Panel Business plans to launch new Quantum-Dot (QD) Displays in 2021, it will also focus on improving earnings by enhancing leadership in mobile displays.

The Mobile Communications Business plans to expand foldable and 5G model offerings globally, while the Networks Business will strengthen its global positioning on the back of growing commercial 5G services. The Consumer Electronics Division will strengthen its online and B2B presence and expand its premium product lineup.

The Company’s capital expenditures in the third quarter stood at KRW 8.4 trillion, including KRW 6.6 trillion spent on semiconductors and KRW 1.5 trillion on displays.

Robust Mobile Demand Drives Semiconductor Earnings; Foundry Reports Record Sales

The Semiconductor businesses posted KRW 18.8 trillion in consolidated revenue and KRW 5.54 trillion in operating profit in the third quarter.

Overall demand in the Memory Business was better than expected as demand for mobile applications began to recover, even as demand for servers was somewhat weaker than the first half.

For DRAM, mobile demand increased due to strong seasonality and higher sales of low- and mid-end smartphones, while it was also positively impacted by the expansion of 5G and inventory buildup from Huawei. Server demand was relatively soft due to inventory adjustment by major customers, while PC demand rose on stronger sales of laptops. In addition, graphic demand also increased with the production of new gaming consoles. The Company achieved a higher bit growth for DRAM in the quarter than its previous guidance.

For NAND, mobile demand was strong as major manufacturers launched new models along with orders from Huawei. For servers, demand declined due to inventory adjustment of major customers, while for client SSD, low- and mid-end laptop demand was robust and SSDs for new gaming consoles increased significantly. Overall NAND shipments rose across all applications, helping the Company surpass the market’s bit growth in the quarter.

Looking to the fourth quarter for DRAM, mobile demand is expected to increase with new smartphone launches, while server demand is expected to remain weak as inventory adjustments continue. For PC, low- to mid-end laptop demand is likely to remain solid, while for graphic, demand will continue to see growth with the launch of new GPUs and gaming consoles.

As for NAND, mobile demand is expected to rise on the back of improving consumer sentiment and demand from Chinese manufacturers. For server SSD, demand is likely to remain weak and prices are expected to decline as customers continue to adjust their inventory and manage their capex conservatively. However, demand for client SSD is expected to be robust as low- to mid-end laptop demand will remain solid.

For the outlook next year, while geopolitical issues and the possibility of a prolonged impact from COVID-19 remain, mobile demand is expected to show solid growth until the first half as 5G continues to expand to low- and mid-end models. For servers, it is highly likely that demand will turn around in the first half as inventory levels normalize and investments by customers recover.

The Company will continue to maintain product competitiveness by accelerating the conversion to 1z-nm DRAM and 6th-generation V-NAND, as well as developing next-generation products such as EUV-based 1a-nm DRAM and 7th-generation V-NAND.

Earnings for the System LSI Business improved on the back of a recovery in mobile components, including CIS and SoCs. Display-related products especially showed significant growth as demand for tablets and laptops increased.

In the fourth quarter, Samsung will focus on expanding the mobile SoC business as it begins to supply 5G 1-Chip SoCs, our first products to feature the 5-nm process technology. In 2021, as market demand for mobile components is expected to recover, the Company will focus on expanding shipments of 5G SoCs, high-resolution sensors and DDIs.

The Foundry Business achieved record quarterly revenue on the back of a recovery in mobile demand and increased demand for HPC chips. The Company has established a position for future growth by beginning the shipment of 5-nm mobile products and 2.5D packages.

In the fourth quarter, the business aims to achieve another record quarterly revenue by expanding mobile SoC and HPC chip shipments to major customers. In 2021, the Company expects growth in the Foundry Business to exceed the industry’s growth significantly. It plans to diversify applications to HPC, consumer and network products, and secure additional major customers.

Display Earnings Improve, Expects Higher Demand in Q4

The Display Panel Business posted KRW 7.32 trillion in consolidated revenue and KRW 0.47 trillion in operating profit for the third quarter. Its earnings improved driven by increasing sales of smartphone, TV and monitor panels, despite the impact of COVID-19.

Mobile display earnings rose as recovering demand from major customers for smartphone screens lifted utilization rate. Losses from large displays narrowed slightly QoQ on increasing panel prices and higher sales of ultra-large TV and high-performance monitor panels.

Looking ahead to the fourth quarter, the Company expects solid demand for mobile displays led by new smartphone launches. It will actively respond to customer demand and enhance product mix to increase sales and profit. For large displays, the Company will continue to address existing LCD customer demand and accelerate the transition to new QD Display technology.

While uncertainties will likely continue in 2021 due to COVID-19 and global trade conflicts, the Company expects a gradual recovery in the smartphone market driven by 5G services and will focus on enhancing its leadership in OLED panels.

Samsung will also accelerate innovation to deliver new form factors and expand adoptions by new applications. For large displays, the Company plans to launch QD Displays in due time and build the foundation of new premium panel business.

Strong Smartphone Sales Drive Mobile Profit; Competition to Intensify in Q4

The IT & Mobile Communications Division posted KRW 30.49 trillion in consolidated revenue and KRW 4.45 trillion in operating profit for the third quarter.

Overall market demand increased in the third quarter as stimulus measures helped many economies recover following lockdowns during the second quarter. The Company’s smartphone sales rose sharply from the previous quarter, with the launch of new flagship models such as the Galaxy Note20 and Galaxy Z Fold2, as well as stronger sales of mass-market models in key regions including India.

Efficient cost management through component standardization and reduction in marketing expenses led to a significant improvement in profitability. Sales increase in tablets and wearables including the Galaxy Tab S7, Galaxy Watch3 and Buds Live also contributed to the profit growth in the third quarter.

Looking ahead to the fourth quarter, the overall market demand is expected to increase QoQ due to strong year-end seasonality and continued recovery in the overall demand. However, smartphone sales are expected to decline QoQ due to subsiding effects from new flagship model launches. Higher marketing expenditure to respond to intensifying competition and year-end seasonality is also likely to weigh down profit.

In 2021, while mobile market demand is expected to increase YoY backed by continuous economic recovery and accelerating migration towards 5G networks, uncertainties persist over the COVID-19 pandemic. The Mobile Communications Business aims to expand its smartphone sales by strengthening lineup for foldable phones and mass-market 5G models.

For the Networks Business, the Company strengthened its foundation for 5G business by signing a large-scale supply contract with Verizon in the U.S. The Company will continue to expand its 5G coverage in South Korea and push to expand the business globally including North America and Japan.

Appliances, TV Earnings Improve on Increased Demand

The Consumer Electronics Division, comprised of the Visual Display and Digital Appliances businesses, recorded KRW 14.09 trillion in consolidated quarterly revenue and KRW 1.56 trillion in operating profit.

Demand for TVs surged both QoQ and YoY as the “At-home” trend buoyed sales of high-resolution home cinema. The Company responded to the strong demand in time with online marketing and global SCM capabilities, increasing sales in QLED, super large screen TVs and Lifestyle TVs.

In the fourth quarter, uncertainties from COVID-19 will linger and rising costs during the year-end peak season remain a risk. The Company plans to continue to expand online sales and online-to-offline (O2O) special promotion to enhance premium lineup such as QLED and Lifestyle TVs.

For the outlook next year, the Company expects further changes to the TV market environment from the pandemic. It will continue to introduce premium models such as QLED, Micro LED for home, in order to lead the super large-screen TV segment.

The Digital Appliances Business saw growth in the third quarter from recovering sales of premium lineup including Bespoke refrigerator and Grande AI washer/dryer. Increased sales of dryers and Air Dressers (garment refreshers) also helped, as COVID-19 raised consumers’ interest in better hygiene.

As a recovery in developed markets is expected to lead demand in the fourth quarter, Samsung will focus on flexible seasonal promotions and strengthen logistics and online marketing to improve profitability.

In 2021, gradual recovery is expected in the digital appliance market. The Company will strengthen premium lineup such as Bespoke for sustainable growth, as well as expanding online and B2B business.

Samsung Electronics’ Third Quarter 2020 Capital Expenditures

In the third quarter, Samsung Electronics’ capital expenditure reached KRW 8.4 trillion, including KRW 6.6 trillion spent on semiconductors and KRW 1.5 trillion on displays. The cumulative total for the January-September period is KRW 25.5 trillion, with KRW 21.3 trillion allocated to semiconductors and KRW 3.1 trillion to displays.

The full-year capital expenditure is expected at approximately KRW 35.2 trillion, including KRW 28.9 trillion allocated to semiconductors and KRW 4.3 trillion to displays.

This year’s capital expenditures on the Memory Business will exceed last year’s total due to migrations to advanced process nodes and capacity expansion to address future demand. Annual investment in the Foundry Business is also expected to increase as the Company expands production capacity, including the 5-nm EUV facility. Capital expenditures by the Display Panel Business is also set to rise on investment in new Quantum-Dot (QD) Displays and improved processes for mobile panels.

Even as the spread of COVID-19 caused closures and slowdowns at stores and production sites around the world, the Company responded to challenges through its extensive global supply chain, while minimizing the impact of the pandemic by strengthening online sales channels and optimizing costs.

Quarterly operating profit rose 26 percent from the previous quarter and 23 percent from a year earlier, thanks to firm demand for memory chips and appliances, as well as a one-off gain at its Display Panel Business.

A partial recovery in global demand since May also helped offset some COVID-19 effects, resulting in higher earnings than initially expected. Revenue in the quarter fell 4 percent from the previous quarter and 6 percent from a year earlier due to reduced sales of smartphones and other devices.

Earnings from the Memory Business improved, led by solid demand from datacenters and PCs. However, slower demand for mobile memory resulted in weaker NAND bit growth compared to the market. System LSI reported lower earnings amid weakness in the mobile market while the Foundry Business saw a recovery in customer demand.

In the Display Panel Business, a one-off gain boosted profits from mobile displays while the Company saw losses from larger panels narrow slightly on increased sales of monitors.

The Mobile Communications Business reported solid profitability on marketing cost reductions and other cost optimizations, despite weaker sales of smartphones.

The Consumer Electronics Division posted higher earnings over growing sales of appliances such as air conditioners and dryers, as well as premium TVs including QLED models. HARMAN reported an operating loss amid deteriorating market conditions in the global auto industry.

Looking ahead to the second half of 2020, Samsung Electronics expect a gradual recovery in demand for mobile devices and consumer electronics. While risks remain due to persisting uncertainties from COVID-19 and growing competitions, the Company will respond to reviving demand through flexible global supply chain management (SCM) to ensure stable supply to customers.

For the Memory Business, the Company expects demand for mobile and graphic memory to recover driven by new smartphones and game consoles. It will focus on flexible and timely management of product mix and investment to meet changing demand for each application.

For system semiconductors, the Company will focus on expanding sales of key products such as high-resolution sensors and 5G system-on-chips (SoCs).

For the Display Panel Business, a full-fledged rebound in earnings from mobile displays is expected in the fourth quarter, as a recovery in mobile phone demand during the third quarter will likely be limited to mid- and low-end models. For large-sized panels, the Company will accelerate development of quantum-dot (QD) displays as planned.

The Mobile Communications Business plans to unveil new flagship smartphones including the Galaxy Note and a foldable phone, while seeking to expand sales of mid-tier models. The smartphone market is expected to witness intensifying competition amid a gradual recovery in demand in the second half of the year.

Samsung also aims to enhance profitability from the Consumer Electronics Division through sales of premium products, including QLED TVs and the Bespoke home appliance series, and more efficient marketing. HARMAN is expected to benefit from the improving business outlook for automobiles and higher consumer audio sales.

In the second quarter, Samsung Electronics’ capital expenditure reached KRW 9.8 trillion, including KRW 8.6 trillion spent on semiconductors and KRW 0.8 trillion on displays. Total capital expenditure in the first half was KRW 17.1 trillion, including KRW 14.7 trillion for semiconductors and KRW 1.6 trillion for displays.

Investment in the Memory Business was spent mainly on equipment for finer process technology and capacity expansion in light of expected growth in memory demand. For the Foundry Business, the Company invested mostly in the advanced 5- and 8nm processes to increase its production capacity.

Memory Business Drives Semiconductor Earnings, to Strengthen Cost Competitiveness in H2

The Semiconductor businesses posted KRW 18.23 trillion in consolidated revenue and KRW 5.43 trillion in operating profit in the second quarter.

The Memory Business saw robust demand for cloud applications related to remote working and online education as the impact from COVID-19 continued, while demand for mobile was relatively weak.

For DRAM, datacenter demand increased as a boost in online activities and video conferencing drove demand for server products. Mobile demand was weak due to seasonality and lockdowns related to COVID-19 in parts of the world including the United States and India. For PC, demand remained solid on the back of low-end laptops, while the impact from manufacturing site closures eased in the second quarter.

For NAND, server SSD demand continued to grow as new services were introduced by datacenters in the U.S. and as demand for social networking and remote services expanded in China. For mobile, demand remained weak as consumer sentiment was impacted by COVID-19 and as the share of mid- to low-end mobile products rose. For client SSD, demand was robust due to increased production of mid- to low-priced laptops. Overall NAND shipments decreased because of weak mobile demand and a temporary lack of product availability to meet all the demand for some applications.

Looking to the second half, overall demand for DRAM is expected to pick up from new smartphone launches, while uncertainties remain around geopolitical issues including trade disputes and the pace of higher content-per-box adoption. Likelihood of solid server demand continues in the second half, but server customers’ inventory and investment plans remain to be closely scrutinized. For PC, desktop demand is expected to be weak but low-end laptop demand is likely to remain solid. For graphic, demand will continue to see strong growth with the launch of new game consoles.

As for NAND, mobile demand is expected to recover on the back of growing mid- to low-end products despite continuing uncertainties. For server SSD, demand is likely to remain strong as online services and activities increase. Demand for client SSD is expected to decline on weak PC demand, but there is a possibility of a recovery as content-per-box grows toward the end of the year.

The Company will focus on flexible product mix and investment, while strengthening the technological leadership in DRAM with the full-fledged application of 1Z-nm and EUV-based products. For NAND, the Company will focus on cost competitiveness and accelerate conversion to 6th-generation V-NAND.

Meanwhile, earnings for the System LSI Business decreased due to a decline in demand for mobile components including SoCs. However, the Company continued to diversify the business with the launch of big-pixel image sensors with ultra high-speed autofocus features and the ‘CC EAL6+’ certified security chip solution, which provides strong privacy protection in smart devices. The Company also diversified its global customer base and increased the portion of overseas revenue.

As for the second half, the number of 5G subscribers and launches of mid- to low-priced 5G smartphones are expected to increase while adoption of high-resolution and triple/quad camera for mobile devices is expected to grow. The Company will seek to expand market opportunities through new products based on its technology leadership.

The Foundry Business achieved record quarterly and half-yearly revenue as customers’ inventory build-ups increased. The Company began mass production of 5nm products and is developing 4nm process technology. The Company also strengthened the foundation for expansion by starting investments in production lines in the Pyeongtaek complex.

In the second half, while the impact from COVID-19 will persist, the Company plans to mass produce mobile and high-performance computing (HPC) products based on advanced process technology. In addition, the Company plans secure stable sales and improve profitability by diversifying applications beyond mobile products and into HPC and consumer products.

Display Earnings Improve on One-off Gain; Demand Expected to Recover in H2

The Display Panel Business posted KRW 6.72 trillion in consolidated revenue and KRW 0.30 trillion in operating profit for the second quarter. Its earnings improved QoQ thanks to a one-time gain despite weaker demand for overall display panels.

Mobile displays saw unfavorable business conditions persist as the global spread of COVID-19 weighed down smartphone sales globally. For large displays, the operating loss narrowed slightly on increased sales of monitors as more people worked from home.

Looking ahead to the second half, Samsung expects demand to recover for mobile displays as major customers are planning to launch new products while risks remain due to continuing uncertainties from COVID-19.

The Company aims to increase sales and profitability by actively meeting demand from its customers and offering mobile panels with differentiated performance and design. It will also focus on expanding the presence in new applications including displays for foldable phones and other IT devices.

For large displays, Samsung will continue to meet demand from its LCD customers until the end of the year and accelerate product development based on new technologies such as QD Displays.

Mobile Profitability Remains Solid in Q2; Shipments Increase amid Market Competition in Q3

The IT & Mobile Communications Division posted KRW 20.75 trillion in consolidated revenue and KRW 1.95 trillion in operating profit for the second quarter.

Amid lockdowns in regions including North America and Europe and store closures due to the global impact of COVID-19, overall market demand decreased QoQ and the Company’s smartphone shipment and revenue declined from the previous quarter. However, efficient cost management, including reductions of marketing expenses and offline promotions, helped the Company report solid profits.

Looking ahead to the third quarter, smartphone sales are expected to rise QoQ, backed by a stronger product mix thanks to the launch of new flagship models, including the Galaxy Note and a new foldable phone, to be introduced at the upcoming virtual Galaxy Unpacked event on August 5th.

For the second half, the overall mobile market is expected to show a gradual recovery. However, uncertainties related to COVID-19 will continue to persist, with market competition expected to intensify as companies strive to make up for weak performance during the first half.

Amid increased market uncertainty, the Company will respond timely to recovering demand in various regions by launching new flagship models as well as strengthening its mass-market lineup. It will also continue efforts to enhance profitability through optimizing product portfolio, building on the improvement in profitability in mass market models since last year.

As for the Networks Business, investments in 5G services were delayed in both domestic and overseas markets due to the global spread of COVID-19. While there are still uncertainties over network operators’ investment schedules, Samsung will continue to explore new opportunities for business expansion.

Appliances, TV Notch Earnings Growth on Premium Products, Supply Chain Management

The Consumer Electronics Division, comprised of the Visual Display and Digital Appliances businesses, recorded KRW 10.17 trillion in consolidated revenue and KRW 0.73 trillion in operating profit in the second quarter.

Profit for the Visual Display Business rose despite softness in sales as the Company sought new sales opportunities online to overcome difficulties sparked by global lockdowns. The Company also boosted profits by using its diverse locations for sales and production and targeting consumers’ needs for smart TVs. As a result, sales in premium products like QLED and ultra-large models grew both QoQ and YoY in the second quarter. Cost reduction as well as operational efficiency also boosted profits in the second quarter.

The Digital Appliances Business saw earnings in the second quarter improve both on-quarter and over a year earlier as consumer spending in some economies picked up thanks to an easing of lockdowns in some regions. During this bump in demand in the second quarter, the Company expanded sales of premium products including its Grande AI washers and dryers as well as its Bespoke refrigerators. Seasonal demand for air conditioners on top of cost-effective marketing strategies also helped earnings.

For the second half of the year, both TVs and digital appliances are expected to see better performance in sales versus the first half of 2020 once pent-up demand is released after COVID-19 lockdowns ease and year-end holiday spending. Slowdowns in the global economy, rising unemployment and fluctuations in foreign exchange rates will be risks to earnings for the rest of the year, in addition to the ongoing pandemic. The Company will aim to increase profitability going forward through premium product sales and more efficient marketing.

Enhancing Shareholder Communication on ESG

Samsung remains committed to creating environmental and social value to support sustainable growth, and to communicating transparently with shareholders on ESG issues.

In Samsung’s 2020 Sustainability Report, the Company enhanced its disclosure of climate actions based on the Taskforce on Climate-related Financial Disclosure framework. In the report, published in June, Samsung also introduced Sustainability Accounting Standards Board standards for the first time to share its actions and developments in sustainable management.

Operating profit was lower by KRW 0.7 trillion quarter-on-quarter to KRW 6.45 trillion, affected by the same factors that weighed on revenue with a corresponding decrease in operating margin, even though memory earnings were higher. Compared with a year earlier, operating profit increased by KRW 0.2 trillion with an improved product mix in the mobile business and additional diversification of the Company’s customer base in mobile OLED.

In the quarter, foreign exchange movements had little impact on the overall operating profit as the positive effects from a stronger U.S. dollar and euro against the won – felt mainly in the component business – were offset by weakness in currencies in major emerging markets.

Earnings from the Memory Business improved as demand was solid mainly from servers and PCs, while demand from mobile remained steady. Profits from the logic chip business rose as supply of mobile components increased to major customers and the foundry business saw a profit decline due to lower demand for high-performance computing (HPC) from China.

In the Display Panel Business, mobile displays posted a decline in earnings amid weak seasonality and lower sales in China due to COVID-19 related shutdowns, while losses narrowed in the large panel business.

The Mobile Communications Business saw profits increase from the previous quarter and from a year earlier despite weakening sales toward the end of the first quarter. The profit improvement was a result of an improved product mix with the launch of flagship Galaxy S20 devices and efficient management of marketing expenses.

The Consumer Electronics Division posted lower earnings as weaker seasonality and impact from COVID-19 affected quarterly results. Compared to the previous year, profits from the TV business declined amid pricing pressure from intensifying competition, while home appliances saw an improvement on the back of strong sales of new premium products.

Looking ahead to the second quarter, the Company expects the memory business to remain solid, but overall earnings are likely to decline from the previous quarter because COVID-19 will significantly impact demand for several of its core products.

For the component business, memory demand is expected to remain robust for servers and PCs as more people work from home, but it is possible the mobile market may soften. Earnings from OLED screens are likely to be weaker due to a stagnant smartphone market.

Sales and profits of set products business, including smartphones and TVs, are expected to decline significantly as COVID-19 affects demand and leads to store and plant closures globally. To address this, the Company will leverage its global production flexibility and supply networks as well as strengthening its online sales capabilities.

In the second half, uncertainties driven by COVID-19 will persist as the duration and impact of the pandemic remain unknown. The Company plans to focus on optimizing resource allocation in the short term, while continuing to strengthen its technology leadership and develop innovative set products.

For the Memory Business, the Company plans to address market changes through flexible investments and product mix adjustments. For OLED, it will actively meet demand for new product releases and expand presence in new application areas such as foldable displays.

The Mobile Communications Business aims to strengthen its product lineup by introducing new premium models and expanding offerings of 5G models for the mass market. The Networks Business will focus on developing technologies and enhancing global competitiveness to reinforce the 5G business.

For the Consumer Electronics Division, under the risk of current economic uncertainties, the Company will closely monitor the market situation and will continue to focus on minimizing negative impacts by investing in efficient marketing and promotions tailored to each region and by optimizing its logistics.

In the first quarter, Samsung Electronics’ capital expenditure totaled KRW 7.3 trillion, including KRW 6.0 trillion spent on semiconductors and KRW 0.8 trillion on displays.

Semiconductor Earnings Improve Despite Weak Seasonality

The Semiconductor businesses posted KRW 17.64 trillion in consolidated revenue and KRW 3.99 trillion in operating profit in the first quarter.

The Memory Business saw solid demand in the period, despite weak seasonality and the effects of COVID-19, thanks to continued investments in 5G infrastructure and increased demand from cloud applications related to remote working and online education.

Specifically for DRAM, datacenter demand remained solid as usage of streaming services and online shopping rose. For mobile, decrease in set demand due to effects of COVID-19 and seasonality was offset by expanded adoption of high-density products by major customers. For PC, demand remained steady on the back of the increase in virtual meetings.

For NAND, mobile demand was relatively solid due to the expansion of products from major customers adopting high-density storage greater than 128GB. Demand for server SSD, mainly for datacenters, continued to grow alongside rising demand for high-volume content.

Looking to the second quarter, demand for DRAM is expected to remain firm across all applications due mainly to robust growth in server demand caused by the rapid rise in remote working, online education and streaming services. However, mobile demand may face high uncertainty. The Company will flexibly manage its product mix with a focus on growing server demand and strengthen cost competitiveness by expanding technology migration.

As for NAND, the market is seen as continuing to stabilize in the second quarter as the impacts from a decrease in smartphone set demand are offset by growing SSD demand from datacenters. The Company will focus on expanding demand for high-density server SSD of more than 2TB while continuing to extend migration to 5th-generation V-NAND.

For the second half, while mobile demand – most affected by COVID-19 – remains as one of the uncertainties, overall memory conditions are likely to be favorable due to server and PC demand for a faster and more reliable cloud service experience. However, a prolonged COVID-19 crisis poses risks of reduction in overall demand.

Despite the challenges, the Company expects the recent proliferation of cloud-based services to accelerate further in the mid- to long-term. This will result in continued demand growth for high-end, high-performance memory. With a flexible product mix and investment approach based on market changes, the Company will focus on accelerating transition to 1Z-nm DRAM and 6th-generation V-NAND.

Meanwhile, earnings for the System LSI Business increased on the back of rising demand for 5G mobile processors and ultra-high-resolution image sensors for flagship smartphones. In the second quarter, the Company expects demand to contract owing to fading effects of launches of flagship smartphones and weak consumer sentiment due to COVID-19. However, the Company will focus on minimizing impacts by maximizing the supply of high-pixel image sensors and expanding the 5G SoC market.

As for the second half, launches of 5G smartphones are expected to boost demand for 5G SoC while demand for premium image sensors is forecast to remain solid. In response to continued uncertainties due to COVID-19, the System LSI Business will closely monitor the market and respond flexibly while also seeking to expand opportunities through highly competitive new products.

The Foundry Business saw a slight decrease in earnings due to a decline in demand for HPC chips from Chinese customers. In the second quarter, the Company aims to expand EUV leadership, beginning with the start of mass production of 5nm products, while closely monitoring the uncertain market situation caused by COVID-19.

In the second half, to address current uncertainties, the Foundry Business will focus on diversifying applications beyond mobile to include areas such as consumer and computing applications. It will also continue investing in advanced processes for the future and will start mass-producing 5nm products this year and focus on the development of GAA 3nm process.

Display Earnings Decline on Lower Shipments; Demand Expected to Weaken in Q2

The Display Panel Business posted KRW 6.59 trillion in consolidated revenue and KRW 0.29 trillion in operating loss for the first quarter. It posted an operating loss due to sales decline of mobile displays.

Mobile display earnings saw a profit decline because of slower sales and lower fab utilization amid weak seasonality. For large displays, the operating loss narrowed, helped by short-term market factors including a smaller drop in ASP and favorable foreign exchange movements.

Looking ahead to the second quarter, the Company expects a further drop in mobile display earnings due to falling demand in the US and Europe, driven by the impact from COVID-19. The Company will strive to enhance profitability by offering more panels with distinctive design and performance.

For large displays, earnings are likely to remain weak owing to the market slowdown accelerated by the postponement of mega sporting events such as the Summer Olympic Games. The Company will focus on providing value-added products such as panels for ultra-large and 8K TVs as well as curved monitors.

In the second half, uncertainties are forecast to linger due to the effects of COVID-19. Under these circumstances, the Company will prepare for various scenarios by establishing a system to respond quickly to market changes including new mobile product launches. The Company is also strongly committed to keeping continued leadership in the OLED market by exploring new applications including displays for foldable phones and other IT devices.

For large displays, while it winds down the LCD business, the Company will continue to address demand from its customers and accelerate product development based on new technologies such as QD Displays.

Mobile Demand to Decline Sharply on COVID-19; Market Uncertainty to Remain High

The IT & Mobile Communications Division posted KRW 26 trillion in consolidated revenue and KRW 2.65 trillion in operating profit for the quarter.

Due to the impact of COVID-19, overall market demand fell significantly QoQ and the Company’s smartphone shipments also declined in the first quarter. However, the Company maintained sound profitability by improving the product mix, increasing the sales portion of 5G models and using marketing expenses efficiently during the period. In particular, the ASP of flagship smartphones increased compared to last year on the back of higher-than-expected share of Galaxy S20 Ultra sales as well as solid sales of the Galaxy Z Flip.

Looking ahead to the second quarter, demand is expected to drop sharply in most regions due to an economic downturn caused by COVID-19. The Company expects a decline in product sales and its overall business performance as the market shrinks and effects of store closures continue to have direct impacts. Amid the market uncertainty, the Company will focus on improving cost efficiency and strengthening its online and B2B channels. In case of any additional disruptions at production facilities, the Company will respond by flexibly utilizing its diversified manufacturing capabilities across the globe.

For the second half, amid uncertainties including the possibility of a prolonged pandemic, market competition is forecast to intensify as manufacturers strive to recover from the weakness in the first half. The Company will continue to offer differentiated products in the premium segment with the launch of new foldable and Note models. The Company also plans to enhance product competitiveness by expanding 5G adoption to mass-market smartphones and improve operational efficiency across all areas throughout R&D, production, supply, channel and marketing.

As for the Networks Business, earnings in the first quarter improved QoQ thanks to the expansion of 5G commercialization in South Korea and other markets. While the possibility of a delay or cutback in 5G investment in the second quarter exists due to the impact of COVID-19, the Company will solidify its core competencies and improve 5G business capabilities for the mid- to long-term.

Premium Appliances Support Sales in Q1; Second Quarter Market Conditions to Worsen

The Consumer Electronics Division, comprised of the Visual Display and Digital Appliances businesses, recorded KRW 10.3 trillion in consolidated revenue and KRW 0.45 trillion in operating profit in the first quarter.

Demand for TVs declined both QoQ and YoY due to weak seasonality and lower global demand seen since March due to COVID-19. Digital appliances saw slight improvement from the previous year on the back of strong sales of new premium products including the Grande AI Washing Machine and Dryer.

In the second quarter, sales of TVs are expected to decline on weakened consumer demand prompted by the impact from COVID-19, cancelation of major global sporting events and the postponement of the Summer Olympic Games. As such, the Company will focus on risk management and identifying new sales opportunities in online demand.

For the second half, the TV and digital appliances divisions will address risk factors including the extension of global uncertainties and potential further economic downturn. Under these possibilities, the Company will strengthen our efforts in target marketing and expand its online product lineup and promotional offerings. Samsung will also strive to bolster cooperation with channels to optimize marketing strategies.

For 2019, Samsung reported KRW 230.40 trillion in revenue and KRW 27.77 trillion in operating profit.

Fourth quarter profit dropped from a year earlier due to the continued fall in memory chip prices and weakness in display panels. Improving demand for memory used in servers and mobile products, as well as solid sales of flagship smartphones, helped ease the decline in overall earnings.

The Memory Business reported a year-on-year decline in profit as DRAM prices continued its downward trend despite rising shipments. However, earnings increased from the previous quarter, underpinned by increasing demand from data centers and other major applications as well as cost reduction. The logic chip business posted a YoY profit growth on demand for high-resolution image sensors and HPC (high performance computing) chips.

The Display Panel Business suffered weak demand for some premium mobile screens and saw widened losses from the large panel business.

Quarterly earnings improved significantly for the Mobile Business in annual terms, thanks to solid sales of flagship Galaxy smartphones and lineup changes to improve profitability for mass-market models. Profit fell from the previous quarter, however, due to the fading effect from a new flagship product launch.

The Consumer Electronics Business also reported a YoY increase in earnings, led by growing sales of premium products including QLED TVs and new appliance offerings.

In the first quarter of 2020, the Company expects weak sales from seasonality in memory chips, OLED and consumer electronics.

The seasonal effects will likely limit profits in the Memory Business while the outlook is also negative for the Display Panel Business due to slowing demand.

First quarter profit from the Mobile Business is seen steady quarter-on-quarter, as new flagship and foldable models will improve sales but incur additional marketing costs.

Looking ahead to 2020, Samsung expects improvements in overall business performance but also sees continued uncertainties in the global business environment.

Memory market conditions will likely improve gradually thanks to increasing demand from data center companies and 5G smartphone adoption. However, the actual pace of 5G expansion and its effects on DRAM content remain to be seen. The Company expects inventory to return to levels seen in previous years within the first half of this year and will focus on transitioning to the next-generation chip production; 1Z-nm DRAM process and 6th-generation V-NAND.

The System LSI Business will offer differentiated 5G System-on-Chip products and high-resolution sensors. The Foundry Business plans to expand production from the 5nm and 7nm EUV (extreme ultraviolet lithography) processes while working on developing next-generation 3nm GAA (gate-all-around) technology. In Displays, Samsung will prioritize on responding to growing adoption of OLED and folding screens.

The Mobile Business aims to improve profits by expanding sales of premium models, such as the enhanced 5G lineup and new foldable devices. The Network Business will focus on addressing the global 5G market as its Korean business is set to shrink following last year’s nationwide 5G adoption.

In the Consumer Electronics Division, the Company will seek to increase sales of QLED 8K TVs and launch new premium appliances such as Bespoke and new lifestyle models.

Samsung Electronics’ capital expenditure in 2019 totaled at KRW 26.9 trillion, including KRW 22.6 trillion spent on semiconductors and KRW 2.2 trillion on displays. In 2020, the Company will be flexible in capex execution to meet changing demand from markets, while continuing investment in infrastructure and mid- to long- term business opportunities.

Weakness Looms After Semiconductor Demand Rises in Fourth Quarter

The Semiconductor businesses posted KRW 16.79 trillion in consolidated revenue and KRW 3.45 trillion in operating profit in the fourth quarter.

The Memory Business saw solid market demand in the fourth quarter, led by growing demand from server customers. Demand for major applications like those related to 5G network expansions also contributed to gains. On a quarterly basis, earnings improved on cost reduction from process migration and increased sales of differentiated products.

The Company also exceeded its shipment volume guidance for the fourth quarter on proactive responses to demand for all applications.

In the case of DRAM, server demand increased primarily centered on high-density products as datacenters, as well as customers in China boosted orders as a result of new CPU adoption. For mobile, the growing sophistication of mid-to-high end smartphones drove up content per handset in addition to positives linked to 5G network expansions. For PC, negative issues like a CPU shortage were offset by an increase in set-builds at OEM customers, keeping purchasing demand solid.

For NAND, demand was higher than expected thanks to new smartphone launches generating orders for high density models. Increased demand for SSD from server applications also helped performance.

In the first quarter of 2020, overall DRAM demand is seen softening on seasonal effects, although some purchases for mobile and server applications will remain relatively solid. The Company aims to reinforce its cost competitiveness by expanding node migration to 1Y-nm-scale products and utilizing its flexible product mix to respond to demand for high density products.

Also in the January-March period, NAND prices are expected to keep rising mainly on server demand as the market stabilizes. To boost profitability and competitiveness, the Company plans to accelerate the migration process to 6th generation V-NAND in the first half of 2020.

In 2020 on a whole, server demand for DRAM is seen solid on the back of increased investments by data centers. For mobile, the pace of 5G expansion and its effects should be monitored closely but the Company sees demand picking up around mass-market models as major manufacturers expand their 5G smartphone lineups. Construction of 5G networks in China will also drive demand for consumer products this year.

In the case of NAND, server SSD demand from data centers is expected to continue growing this year while the expansion of 5G networks may reinforce the high-density memory demand for mobile devices. The Company also expects new demand from applications such as gaming and automotive.

Meanwhile, earnings for the System LSI Business declined on-quarter as the peak season for mobile handsets faded. In the first quarter of 2020, the Company plans to maximize shipments of major components like APs, image sensors and DDIs adopted by Samsung’s major customers for new flagship smartphones.

In 2020, the System LSI Business plans to expand its 5G chip business by promoting one-chip solutions for mass-market devices. Demand for image sensors is seen rising in 2020 on intensifying competition for better camera specs.

Lastly, the Foundry business saw solid results in the fourth quarter on 5G chips and high-resolution image sensors. Earnings were also helped by demand for HPC chips from Chinese customers. This year, revenue growth is expected to climb and reach double-digits on mass production of 8nm computing chips and demand for 5G related chips.

In 2020, the Company plans on completing the product design for the 4nm process and a number of 5nm-based product designs in order to diversify its customer base and expand applications using Samsung products.

As Earnings Suffer, Display Business to Focus on Securing Profitability

The Display Panel Business posted KRW 8.05 trillion in consolidated revenue and KRW 0.22 trillion in operating profit for the fourth quarter. Overall display earnings decreased QoQ due to weak performance across the business.

Mobile display earnings saw profit decline because of a higher cost burden caused by lower fab utilization amid weaker demand for some premium products. Large displays suffered a bigger loss from a continued decline in LCD panel prices.

Looking ahead to the first quarter of 2020, Samsung expects a further drop in mobile displays earnings due to weak demand from some customers. The Company will strive to enhance profitability by offering more panels with distinct designs, expanding its IT product customer base and strengthening price competitiveness.

Large displays are likely to stay in the red owing to stagnant sales amid weak seasonal effects.

In 2020, for the mobile display business, demand for OLED screens is forecast to grow with wider adoption of 5G smartphones despite intensified competition. The Company will make efforts to expand sales and boost utilization with a broader customer base and stronger product competitiveness. Especially, Samsung will seek to actively address demand for new applications such as foldable devices and other IT products.

For large displays, weak earnings are likely to continue this year as panel oversupply persists and conversion efforts for next-generation QD-Display production incur costs. The Company will focus on securing profitability by expanding sales of value-added products such as ultra-large and 8K TV panels and premium monitor panels.

Mobile To Focus On New Flagship and Foldable Models

The IT & Mobile Communications Division (IM) posted KRW 24.95 trillion in consolidated revenue and KRW 2.52 trillion in operating profit for the fourth quarter of 2019.

While overall demand for smartphones and tablets increased QoQ as a result of year-end seasonality, revenue for the Mobile Business decreased QoQ as the effect from new flagship model launches faded. However, the profit drop was capped by effective use of marketing expenses for the holiday season and as the profitability of major smartphones including the Galaxy A series held steady.

Looking ahead to the first quarter, weak demand is seen for smartphones and tablets due to low seasonal demand. In these circumstances, Samsung expects smartphone revenue to rise on improved product mix with the launch of new flagship models and foldable smartphones. However, operating profits are expected to remain flat due to higher marketing expenses used to boost flagship smartphone sales.

For the whole of 2020, while demand for 5G smartphones is expected to increase, market competition is also forecast to intensify as manufacturers increasingly adopt high performance components including APs, memory and cameras. In response, the Company plans to differentiate its premium smartphones by expanding 5G adoption and introducing new designs for foldable products.

Furthermore, Samsung will expand its 5G product portfolio and strengthen product competitiveness of mass-market smartphones by quickly adopting innovative technology based on market needs. With these efforts, the Company aims to improve earnings YoY by expanding sales of premium smartphones and enhancing the competitiveness of its mid- to low-end lineup.

As for the Network Business, while total revenue in the fourth quarter decreased QoQ as 5G network adoption in South Korea was concentrated in the first half, 5G revenue increased in overseas markets, including the United States and Japan. For 2020, although 5G business in the domestic market is expected to decline YoY, Samsung will expand 5G network solutions in overseas markets by solidifying its core competencies and increasing cooperation with major business partners.

Premium TVs and Appliances Shine in Fourth Quarter; Risks Mixed Ahead

The Consumer Electronics Division, comprised of the Visual Display and Digital Appliances businesses, recorded KRW 12.71 trillion in consolidated revenue and KRW 0.81 trillion in operating profit for the fourth quarter of 2019.

In the fourth quarter, earnings for the Visual Display Business improved both QoQ and YoY on the back of successful promotion efforts during the year-end peak season. Sales of QLED TVs and TVs with 75-inches-and-above screens were especially notable, showcasing an improved product mix for the Company.

In particular, QLED TV sales in the fourth quarter exceeded twice the amount sold in the same period a year ago.

However, the Company forecasts market demand in the first quarter to decline QoQ following the year-end peak season, and also YoY due to weaker demand in developed markets.

In 2020 on a whole, the global TV market faces geopolitical risks, but global TV demand is expected to climb thanks to sports events like the UEFA European Football Championship and the Summer Olympic Games.

For the Digital Appliance Business in the fourth quarter, earnings rose on increased demand in emerging markets including India. Revenue and profit both improved YoY as sales of premium products like the Bespoke refrigerator and large dryers grew.

Samsung plans to continue launching new lifestyle digital appliances and premium products to seek growth in the first quarter. For the whole year, the Company sees uncertainties from global economic sluggishness but will aim to offset risks through the expansion of its premium lineup and more B2B opportunities.

※ Consolidated Sales and Operating Profit by Segment based on K-IFRS (2017~2019)

Note 1: Sales for each business include intersegment sales

Note 2: CE (Consumer Electronics), IM (IT & Mobile Communications), DS (Device Solutions), DP (Display Panel)

Note 3: Information on annual earnings is stated according to the business divisions as of 2019

Third quarter profit fell sharply from a year earlier but improved from the previous quarter, as stronger smartphone sales and improved utilization in mobile OLED screens were weighed down by continued weakness in the memory chip market.

Both the U.S. dollar and euro strengthened against the Korean won, resulting in about KRW 0.4 trillion in positive effects toward quarterly operating profit, mainly in the component business.

Earnings from the Memory Business slumped significantly year-on-year as memory chip prices continued its downward trend amid the industry-wide weakness since the end of 2018. The logic chip business saw demand rise for image sensors and display driver ICs (DDIs), but also suffered from price declines in mobile application processors (APs).

The Display Panel Business saw profit from mobile displays increase YoY with solid sales of OLED screens, improved capacity utilization and reduced costs. However, losses continued in the large panel business due to ongoing capacity expansions in the broader industry.

In the Mobile Business, strong sales of the Galaxy Note 10 and A series boosted profit, along with improved margins for mass-market models. The business also expanded its 5G product offerings and launched the Galaxy Fold, demonstrating Samsung’s technology leadership. Meanwhile, the Network Business reported higher earnings YoY on growing commercialization of 5G service in Korea.

The Consumer Electronics Division posted a YoY decline in profit from the TV business amid pricing pressure from intensifying competition, despite growing shipment of premium models such as QLED and ultra-large size TVs. Earnings from home appliances rose on increased sales of premium products.

Looking ahead to the fourth quarter, the Company expects demand for components to turn sluggish in general amid weak seasonal effects, while marketing expenses are likely to increase to address year-end smartphone sales.

Memory chip demand is seen rising slightly quarter-on-quarter on the back of inventory building by customers in response to global macroeconomic uncertainties. Mobile displays will likely report weaker results in the fourth quarter, as demand falls short of initial expectations for certain premium smartphones and costs increase due to lower utilization in some production lines. Large panel prices are also likely to continue declining.

The Company expects fourth-quarter earnings in the Mobile Business to decrease QoQ as marketing costs are set to rise and shipments to decline slightly, with flagship model sales weakening from their post-launch peaks. The Consumer Electronics Division will likely log stronger earnings helped by year-end seasonal demand.

For 2020, Samsung expects growing sales in 5G products and foldable devices; the logic chip business is forecast to report accelerated growth as it expands mass production of next-generation extreme ultraviolet lithography (EUV) based products.

However, uncertainties linger over the memory chip market as demand is seen recovering but risks from global industry circumstances persist. As Samsung plans to manage investment and capacity operation flexibly depending on market conditions, DRAM inventory is expected to normalize in the first half of 2020. The Company also remains committed to investments to meet demand in the mid-to-long term.

The System LSI Business will introduce differentiated 5G System-on-Chip products and high-resolution sensors, while the Foundry Business will seek to diversify its client base and expand production from the 5nm and 7nm EUV processes.

In Displays, Samsung plans to leverage its leadership in mobile screens, offering power-efficient and slimmer products to capture demand from 5G and other premium products. It will also transform its large panel business to focus on quantum-dot (QD) displays, with the existing LCD business addressing value-added products such as ultra-large and 8K TVs as well as high-end monitors.

The Mobile Business aims to improve profitability through enhanced leadership in premium products such as 5G and foldable devices as well as improved mass-model lineup. The Network Business will further its efforts to expand its 5G business globally including the United States and Japan.

In the Consumer Electronics Division, the Company will continue to lead the premium TV market by expanding adoption of QLED 8K and ultra-large models and offer stronger lineups of innovative home appliances such as Bespoke products.

Semiconductor Demand to Remain Solid Amid Uncertainties

The Semiconductor Business posted consolidated revenue of KRW 17.59 trillion and operating profit of KRW 3.05 trillion for the quarter.

For NAND, demand showed stronger growth than expected driven by new smartphone launches and continued trend toward higher density memory, as well as increased adoption of solid state drives for PCs and expansion of high-density storage for server customers.

For DRAM, demand from all applications has greatly increased due to strong seasonal effects as well as inventory restocking at customers responding to global macroeconomic factors such as tariff issues and semiconductor-material export regulations. For servers, demand rose mainly for high-capacity products, while for PCs, replacement demand for corporate systems also increased ahead of the end of support for Windows 7. For mobile, demand was driven by higher portion of smartphones with storage over 8GB.

Looking ahead to the fourth quarter for NAND, demand for high-capacity storage is expected to remain robust and prices are expected to rebound across all applications. For SSD, data centers are expected to adopt high-density, high-performance products, while for mobile, the trend of higher density storage is expected to continue with the launch of new high-end models. The Company will focus on strengthening competitiveness in the premium market, and enhance technology leadership and profitability by transitioning to 6th-generation V-NAND within this year.

For the fourth quarter outlook for DRAM, although there may be some impact from recent inventory restocking at customers, overall demand is likely to remain solid and to show some increase QoQ. For servers, demand from data centers will continue to be solid supported by high-density products, while for PCs, overall demand will be similar to that of the third quarter. For mobile, continuing trend to high-density products with the launch of new 5G smartphones is expected to help demand remain solid. The Company will focus on enhancing technological leadership by expanding high-capacity product sales for servers and actively responding to early demand for mobile LPDDR5.

Looking ahead to 2020, while challenging to provide a detailed forecast due to ongoing uncertainties involving macroeconomic issues, there are positive signs on the demand outlook from data center customers, while expansion of 5G smartphones is expected to continue to lead the higher density trends. However, demand for 2020 should be viewed with caution as uncertainties remain in the macroeconomic environment. As such, the Company plans to focus more on flexible investment and capacity operation depending on market conditions.

For the System LSI Business, earnings improved as demand increased for high-resolution image sensors and mobile APs/PMICs/OLED DDIs for flagship smartphones. The Company strengthened its technology leadership by being the first to commercialize 108-mega pixel sensors.

In the fourth quarter, while demand for high-resolution image sensors such as 64Mp and 108Mp products will continue to increase, earnings are likely to remain flat from the previous quarter due to weaker demand for mobile APs and DDIs. For 2020, the Company will expand its line-up of differentiated products such as 5G System-on-Chips produced on EUV 5/7nm process and high-resolution products such as 108Mp and above sensors.

For the Foundry Business, earnings increased from the previous quarter driven by demand for mobile APs based on the EUV 7nm process and high-resolution image sensors. In particular, the Company completed the tape-out of the EUV 5nm process and secured new orders for 5nm-based consumer products.

In the fourth quarter, the Company expects to generate solid earnings on mass production of EUV 7nm products, while setting up 4nm design infrastructures for future growth. For 2020, demand for mobile APs/modes/RFs and high-resolution image sensors is expected to increase significantly on the back of the growing 5G market. The Company will accelerate the diversification of its customer base by expanding orders for 5G/AI/Auto/IoT/Power and fingerprint recognition applications and strive to complete the development of the GAA 3-nano process.

Display Business Improves on Demand for Flexible OLED

The Display Panel Business posted KRW 9.26 trillion in consolidated revenue and KRW 1.17 trillion in operating profit for the third quarter. Overall display earnings improved QoQ thanks to strong sales of small to mid-sized OLED panels despite weak performance in the large display business.

Mobile display earnings increased amid favorable seasonal effects, led by higher demand from major customers and improved OLED utilization rates. Large displays took a hit from a continued decline in LCD panel prices.

Looking ahead to the fourth quarter, mobile display profitability is expected to decline due to a product mix change and a cost increase from lower utilization of some production lines. Samsung will strive to enhance profitability by improving production efficiency and expanding adoption of the cutting-edge technology.

Large displays are also likely to see weak profitability for the fourth quarter as it continues to face falling demand and dropping price. Samsung will seek to secure profitability with product diversification including monitors and PIDs.

In 2020, for the mobile display business, demand for OLED screens is seen to grow steadily with wider adoption of 5G smartphones despite intensified competition. The Company will continue to focus on expanding sales and boosting utilization with a broader customer base and stronger cost competitiveness. Additionally, Samsung will aim to actively address demand for foldable display panels and minimize seasonal impacts with wider applications.

For large displays, Samsung will look to realign its business structure to focus on QD-Display. It will continue to secure profitability by expanding sales of value-added products such as ultra-large panels, 8K TVs and premium monitors.

Galaxy Note 10 Props Up Mobile Business Earnings; 5G Momentum Driver in 2020

The IT & Mobile Communications Business posted KRW 29.25 trillion in consolidated revenue and KRW 2.92 trillion in operating profit for the September quarter.

Mobile earnings in the third quarter improved significantly QoQ on robust shipments of the flagship Galaxy Note 10, a better product mix and higher profitability in the mass-market segment. The Galaxy Note 10 in the third quarter exceeded its predecessor’s sales performance, presenting double-digit growth in volume. Cost reduction brought on by the completion of the A series lineup transition also contributed to improved profitability.

Notably in the third quarter, the Company firmed up its global technology leadership with the expansion of 5G smartphones, in addition to the launch of the Galaxy Fold featuring a new form factor.

For the Network Business, the Company continued expanding 5G coverage in South Korea and shipments for LTE expansion outside the country.

In the fourth quarter, while mobile demand is expected to decline YoY on seasonal effects and persistent global economic uncertainties, the Company’s mass-market smartphones, including the new A series, are projected to maintain solid sales. However, Samsung expects profit to decrease due to dissipating new model effects of the Galaxy Note10 and increasing marketing costs under strong seasonality.

Looking ahead to 2020, consumer demand for 5G devices is expected to rise as 5G networks expand globally, while competition is likely to remain fierce. The Company plans to offer more 5G devices and foldable products to enhance its competitiveness and build a foundation for further growth. For the Network business in the fourth quarter and the coming year, the Company will remain an active player in expanding South Korea’s 5G coverage and foster growth in other global markets like the United States and Japan.

Premium TVs, Innovations Such as Bespoke Key Focus for Consumer Electronics

The Consumer Electronics Division, comprised of the Visual Display and Digital Appliances businesses, recorded KRW 10.93 trillion in consolidated revenue and KRW 0.55 trillion in operating profit for the third quarter of 2019.

Profits for TVs were down slightly in annual terms in the third quarter due to heightened price competition, but strong sales of premium TVs such as QLED and ultra-large models helped the division maintain revenue growth compared to a year ago.

In the fourth quarter, the Company forecasts TV demand will soften YoY on downside risks including global economic sluggishness and unfavorable foreign exchange rates stemming from trade protectionist practices. To mitigate the fallout from these risks, the Company plans to expand sales of QLED TVs and broaden the lineup of super-large screen products, cementing its leading position in the premium market. For 2020, TV demand will likely bounce back on global sports events like the Olympic Games in Tokyo while the Company plans to seek new business growth from 8K TVs and MicroLEDs.

Digital appliances saw increased earnings in the third quarter from a year ago on new product releases like the customizable Bespoke refrigerator. Demand in developed markets in North America and Europe was stagnant but this was offset by sales in emerging market countries including India.

For the December quarter, the Company plans to boost sales of products such as dryers and Air Dressers (garment refreshers) while simultaneously launching year-end, peak season promotion events. In the year ahead, demand will grow centered around emerging market countries, while the Company is expected to expand its premium lineup with other Bespoke products and strengthen its B2B business.

※ Consolidated Sales and Operating Profit by Segment based on K-IFRS (2017~2019 3Q)

Note 1: Sales for each business include intersegment sales

Note 2: CE (Consumer Electronics), IM (IT & Mobile Communications), DS (Device Solutions), DP (Display Panel)

Note 3: Information on annual earnings is stated according to the business divisions as of 2019

First quarter earnings were weighed down by the weakness in memory chips and displays, although the newly launched Galaxy S10 smartphone logged solid sales.

The Semiconductor Business saw a drop in memory chip prices as inventory adjustments continued at datacenter companies, while demand for high-density memory for mobile phones increased thanks to new flagship smartphones. Earnings improved at the System LSI and Foundry businesses over the sales of smartphone application processors (APs).

The Display Panel Business reported a quarterly loss due to decreased demand for flexible displays and increasing market supplies for large displays.

In the IT & Mobile Communications (IM) Division, despite solid sales of the Galaxy S10, profitability in the mobile business declined YoY as competition intensified in the low- to mid-range segment. In addition, amid softer demand in the overall smartphone market, revamping of the Company’s mass-market lineup led to a YOY decrease in sales volume.

Earnings from the Network Business increased, buoyed by the launch of 5G telecommunication service in Korea. Sales of premium TVs such as QLED TVs and ultra-large size models contributed to the YOY earnings growth in the Consumer Electronics (CE) Division.

Looking ahead to the second quarter, Samsung expects limited improvement in the memory chip market, as demand will likely begin to improve for major applications such as mobile products but price declines will likely continue.

Demand is seen increasing for APs and CMOS Image Sensors in the System LSI and Foundry businesses. For Displays, Samsung expects higher demand for rigid panels.

The IM Division is set to focus on flagship products such as the world’s first 5G smartphone and the enhanced mass-market lineup with innovative cameras and display features. The CE Division is likely to report growth in the second quarter on strong seasonal demand for air conditioners and sales of new premium TVs.

For the second half of 2019, the Company expects memory chip demand for high-density products to increase, but uncertainties in the external environment will persist. A further recovery is seen for the Display Business as demand for flexible screens is set to rise on new smartphone launches.

Growing competition in the mature TV and smartphone markets is expected to pose a challenge in the second half, and Samsung will focus on strengthening its leadership in the premium segment.

Over the mid- to long-term, the Company aims to strengthen competitiveness of key businesses by diversifying applications and delivering innovations in components and new device form factors. Samsung will also continue to expand its capabilities in automotive technology, leveraging HARMAN’s solutions, and in artificial intelligence.

In the first quarter, Samsung Electronics’ capital expenditure totaled KRW 4.5 trillion, including KRW 3.6 trillion spent on semiconductors and KRW 0.3 trillion on displays.

Semiconductor Sees 2H Demand Improvement Despite Uncertainties

The Semiconductor Business posted consolidated revenue of KRW 14.47 trillion and operating profit of KRW 4.12 trillion for the quarter.

Overall, the Memory Business saw demand for NAND and DRAM steadily weaken amid macroeconomic uncertainties, weak seasonality and inventory adjustments by datacenter firms. This weakness was partially offset by increased adoption of high-density memory products for mobile and launches of flagship smartphones.

In the second quarter, the overall memory market is likely to remain slow during weak seasonality, although the Company expects demand for some applications to gradually improve.

For NAND, demand for high-density server SSD such as All-Flash-Array is expected to increase, while launches of high-end smartphones with 256GB and higher storage will likely keep demand stable in the second quarter. For the second half, NAND demand is expected to grow across key applications as prices soften. Samsung will seek to actively generate new demand while responding to customer demand for high-density memory, and also strengthen cost competitiveness by expanding supply of 5th generation V-NAND.

For DRAM, server demand will likely improve among datacenter companies with lower inventory levels, starting from the end of the second quarter. PC demand is seen increasing, while high-density adoption in new smartphone models is set to help demand for mobile DRAM. The Company plans to actively address demand for differentiated high-end products, such as LPDDR4X for mobile devices, while also focusing on the transition to 1Y-nm in major applications.

As for the second half, DRAM demand is expected to rise thanks to seasonal effects despite lingering uncertainties. Also, demand for high-density products for server and mobile products is likely to be solid due to expanded adoption of new CPUs in servers and the trend toward high-density in mobile. Samsung plans to flexibly manage its capacity and strengthen competitiveness by ramping up production of 1Y-nm products.

For the System LSI Business, despite slowing demand for image sensors amid weak smartphone seasonality, earnings improved in the first quarter on the back of increased supply of APs and modems. The Company also successfully commercialized the world’s first 5G chipset solution.

In the second quarter, earnings for the business are expected to improve slightly as demand for image sensors and DDIs recovers and demand for 5G chipsets rises. In the second half, despite sluggish demand, smartphone makers are expected to continue to adopt high-spec components. Samsung plans to expand its lineup of image sensors and 5G chipset solutions to address demand for high-end mobile phones. It also plans to diversify product offerings with 3D/fingerprint-on-display sensors and chips for automotive and IoT applications.

For the Foundry Business, earnings were stagnant QoQ due to sluggish global foundry conditions and weak seasonality in the smartphone market. The Company began mass production of 5G and IoT mobile products by adopting the eMRAM process and secured new orders for computing chipsets through FinFET 8-nm process.

Looking ahead, Samsung aims to strengthen its competitiveness through tape-out of the EUV 6-nm process and by completing 5-nm process development. In the second half, based on its mass production of EUV 7-nm process, the Company will focus on developing the EUV 4-nm process and the next-generation architecture.

Display Sees Moderate Improvement In 2Q

The Display Panel Business reported KRW 6.12 trillion in consolidated revenue and KRW 0.56 trillion in operating loss in the first quarter. It posted an operating loss due to weaker profitability in both mobile and large displays.

Mobile displays suffered slower demand and intensifying competition with LTPS LCDs. Large displays also took a hit from a continued decline in LCD panel prices amid weak seasonality.

Looking ahead to the second quarter, Samsung expects limited improvement to earnings as demand for flexible displays is likely to remain weak. The Company will focus on improving earnings by boosting sales of rigid OLEDs and offering differentiated products featuring new technology such as Infinity Display and fingerprint-on-display.

For large displays, the Company forecasts growing demand for value-added products such as large-sized and high resolution TV panels in the second quarter, although concerns over supplies continue. It will focus on actively addressing demand for its core products, providing differentiated technology and improving cost structure.

In the second half, demand for flexible smartphone OLED panels is expected to rebound although pressure on LCD panel prices will persist. Under these circumstances, Samsung will actively respond to demand from major smartphone customers and broaden its OLED business scope with new applications.

As for large displays, despite uncertainties from capacity expansions in the LCD industry, the Company expects demand for the premium TV panels to continue to grow including UHD, 8K and ultra-large TVs. In response, it will strive to improve profitability by focusing on value-added products.

Mobile Supported by Strong Galaxy S10 Sales

The IT & Mobile Communications Division posted KRW 27.2 trillion in consolidated revenue and KRW 2.27 trillion in operating profit for the quarter.

Overall market demand for smartphones decreased QoQ as the industry moved into a seasonally weak period, but Samsung reported a QoQ rise in revenue thanks to solid sales of the Galaxy S10.

However, growth in smartphone shipments was limited as sales of previous models fell due to a lineup reorganization of mid- to low-end products. Increased expenses from adoption of high-end features, marketing and the lineup revamp pressured profitability. Earnings for the Networks Business also improved thanks to the commercial launch of 5G in South Korea.

Looking ahead to the second quarter, as weak seasonality continues, market demand for smartphones is expected to increase slightly QoQ. Samsung will strengthen its product lineup through innovations such as Galaxy S10 5G and Galaxy A80 and continued reorganization of its product offerings.

For the second half, despite intensified market competition, Samsung expects smartphone sales to increase led by new models in all segments from the Galaxy A series to the Galaxy Note amid strong seasonality. In the premium segment, the Company will strengthen its leadership through the new Galaxy Note as well as its innovative products such as 5G and foldable smartphones. Samsung also aims to secure profitability by improving cost efficiency.

For the Networks Business, Samsung will strive to maintain solid performance in the second quarter on commercialization of 5G as well as expansion of overseas LTE networks. In the second half, the Company will continue to expand LTE networks globally and supply 5G equipment for markets such as South Korea and the United States.

Consumer Electronics Eyes High-Value Products for Growth

The Consumer Electronics Division, which includes the Visual Display and Digital Appliances businesses, recorded KRW 10.04 trillion in consolidated revenue and KRW 0.54 trillion in operating profit for the first quarter of 2019.

Earnings for the Visual Display Business fell QoQ as the global TV market entered a slow season, but improved YoY thanks to the early adoption of new models. The expansion of premium product sales contributed, as Samsung solidified its global leading position in premium and ultra-large screen TVs.

Demand for TVs in the second quarter is projected to weaken slightly due to softening demand from emerging markets. Sales are also seen decreasing from a year earlier because of a lack of global sporting events this year. The Company will seek to improve results through further expanding the sales of high-value-added products such as QLED TVs and bringing forward the introduction of new models.

For the Digital Appliance Business, despite a slower global demand, growth in the domestic market has been robust with demand centering on new lifestyle home appliances such as garment refreshers and air purifiers. For the second quarter, the Company plans to improve its performance by bolstering sales of air conditioners, expected to be in peak demand thanks to the summer season.

Looking ahead to the second half of 2019, the TV market is projected to grow slightly YoY despite global economic challenges. Demand for appliances is also expected to rise compared with the first half as political tensions surrounding global trade ease.

※ Consolidated Sales and Operating Profit by Segment based on K-IFRS (2016~2019 1Q)

Note 1: Sales for each business include intersegment sales
Note 2: CE (Consumer Electronics), IM (IT & Mobile Communications), DS (Device Solutions), DP (Display Panel)
Note 3: Information on annual earnings is stated according to the business divisions as of 2019
Note 4: From Q1 2017, earnings from the Health & Medical Equipment Business (HME) are excluded from the CE Division

For 2018, Samsung reported KRW 243.77 trillion in revenue and KRW 58.89 trillion in operating profit. This marked a second straight year of setting record financial results, even as unfavorable business and macroeconomic factors led to slower performance in the final quarter. The year also saw many technology breakthroughs and innovations across its businesses, which solidified the foundation for future growth.

Fourth quarter earnings were affected by a drop in demand for memory chips used in data centers and smartphones. The System LSI and Foundry businesses also saw profits decline due to weak seasonality.

Overall earnings at the Display Panel Business decreased slightly due to growing competition between mobile display makers.

In the IT & Mobile Communications (IM) Division, smartphone shipments and prices fell in the fourth quarter in a stagnant but highly competitive market, despite strong seasonal demand. However, the Networks Business reported gains on the back of 5G equipment installations and expansion of LTE networks.

Quarterly earnings increased in the Consumer Electronics (CE) Division, led by strong sales of premium TVs, such as QLED TVs.

Looking ahead, Samsung expects demand in the Memory Business to remain weak in the first quarter due to seasonality and macroeconomic uncertainties as well as inventory adjustments by major customers. For OLED, profitability is likely to decline, weighed on by slow sales of premium smartphones and rising competition with LTPS LCD products. As for LCD, earnings are expected to decline as a result of large-scale capacity expansions in the industry.

Earnings in the IM Division are likely to improve in the first quarter, helped by the planned launch of the new flagship Galaxy smartphone and the introduction of commercial 5G telecom services in Korea. The CE Division will unveil new TV models and focus on premium home appliances, in order to prioritize profitability in a slower season.

For 2019, the Company expects overall annual earnings to decline due to weaker performance by the Memory Business. Demand for memory products and OLED panels is expected to pick up from the second half.

Under its commitment to achieving sustainable growth over the mid- and long-term, Samsung will focus on enhancing its existing leadership and developing new growth areas. The Company plans to boost R&D activities, expand external technology collaboration and actively invest in strengthening core capabilities.

In the component business, Samsung will continue to improve its technology lead and offer new solutions to meet increasing demand for automotive and AI chipsets. The Company also aims to bring new innovation to OLED screens for smartphones and develop new applications.

Samsung is offering new product innovations this year including foldable smartphones and MicroLEDs. In AI, an enhanced Bixby will enable greater connectivity and build an AI-powered services platform to support more devices and applications. In 5G, Samsung is set to bolster its position in the market by providing solutions across network equipment, devices and chipsets.

In 2018, Samsung Electronics’ capital expenditure was KRW 29.4 trillion, with KRW 23.7 trillion allocated to semiconductors and KRW 2.9 trillion to displays. In the Memory Business, capex increased slightly YoY due to expansion at the Pyeongtaek campus. Capex in the Foundry Business, however, returned to levels seen in prior years as the 10nm line expansion was completed in 2017. Capex for flexible OLED panels was significantly lower than it was in the previous year.

Semiconductor Recovery Seen in Second Quarter

The Semiconductor businesses posted KRW 18.75 trillion in consolidated revenue and KRW 7.77 trillion in operating profit in the fourth quarter.

The Memory Business saw overall market demand for NAND and DRAM drop due to macroeconomic uncertainties and adjustments in inventory levels by customers including datacenter companies and smartphone makers. For NAND, overall demand was low, as major customers opted to hold back on orders in anticipation of further reduction in price.

Amid the lackluster sale of smartphones, a trend toward high-density in mobile persisted, and the All-Flash-Array portion increased in the fourth quarter. In the case of DRAM, server demand declined due to inventory adjustments by datacenter companies. For mobile, while mobile set demand reduced due to weak sales of new smartphones by major customers, growing orders of high-density products over 6GB content partly eased the negative trend.

Although DRAM earnings decreased QoQ due to the rapidly shrinking demand brought by the global economic volatility, Samsung worked to strengthen and maintain cost competitiveness by expanding its 1Xnm process migration and design-in of 1Ynm to secure its technological leadership.

Looking at the first quarter, the Memory Business will continue to face slow demand set off by weak seasonality and major customers staying the course with inventory adjustments. For NAND, even under the overall sluggish demand, growth in high-density, high-performance SSDs for datacenters and All-Flash-Array replacements implemented by the enterprise sector are projected to continue.

Meanwhile, demand for storage over 128GB for flagship and premium smartphones will remain solid, even though sales of mobile devices are anticipated to be soft. For DRAM, inventory adjustments primarily by server companies will squeeze demand, but Samsung will carry out 1Ynm process migration and boost shipments of innovative products such as high-density server products, High Bandwidth Memory (HBM) and GDDR6.

On a positive note, demand for memory is seen gradually recovering from the second quarter, as the high-density trend in major applications continues due to the seasonal effects in the second half of 2019. As NAND price is softened, the demand across all applications will increase while orders for high-density NAND chipsets edge up. In particular, server and smartphone companies in need of high-performance, high-density memory will be strong and Samsung will intensify cost competitiveness by expanding the supply of fourth-generation and beyond V-NAND.

DRAM demand will post gains in the second quarter, as customers wrap up inventory adjustments and the seasonal effect drives growth in the demand for set builds. As the trend toward high-performance cloud service continues along with the launch of a new CPU in the second quarter, demand growth for high-density server DRAM will be solid.

In mobile, the adoption of high-density mobile DRAM over 8GB will expand and memory content for mid- to low-segment models will increase. Samsung will closely monitor changes in the market demand, all the while continuing to invest flexibly and managing capacity. While focusing on 1Ynm product ramp-up, it will develop 1Znm product. Samsung will also strengthen its memory offerings with 16Gb based high-density server products, uMCP over 8GB and HBM, to meet its customers’ needs

As for System LSI Business in the fourth quarter, overall earnings declined due to slowing demand for image sensors, as the Chinese market entered a weak season. In the first quarter, Samsung will improve profitability by increasing the supply of APs, image sensors and DDIs for flagship smartphones. For 2019, the Company will commercialize the world’s first 5G modem chips and expand its image sensor offerings.

For the Foundry Business, earnings fell in the fourth quarter on weak seasonality and as the struggling crypto currency market put in less orders for mining chips. Foundry demand in the first quarter will remain stagnant due to the slow demand for mobile components and crypto currency mining chips.

The Company, while concentrating preparations for a full-scale production of the 7-nano EUV process in the second half, will complete the development of the 5-nano EUV process. Additionally, the Foundry Business will increase its customer base by over 40 percent from the previous year, as part of efforts to further stabilize the business structure.

Display to Improve Profitability with Differentiated Products

The Display Panel Business reported KRW 9.17 trillion in consolidated revenue and KRW 0.97 trillion in operating profit in the fourth quarter. Overall earnings decreased slightly QoQ as sales of mobile displays declined due to rising competition with LTPS LCD panels despite strong demand for flexible OLED panels. For large displays, earnings improved QoQ driven by increased sales in the premium segment such as high-resolution and ultra-large TV panels.

Looking to the first quarter of 2019, sales of mobile displays are likely to be affected by unfavorable market conditions like intensifying competition and sluggish smartphone demand. To maintain profitability, Samsung will actively respond to demand from major partners and expand its customer portfolio.

In large displays, the Company forecasts ASP pressure on LCD panels under weak seasonality and ongoing capacity expansions in the industry in the first quarter. Samsung will strive to improve profitability by focusing on reducing cost and improving production efficiency.

In 2019, Samsung expects demand for flexible OLED panels for smartphones to rebound from the second half. Against this backdrop, the Company will make efforts to expand the OLED market through innovative technologies for new applications and increase the portion of OLED panels for smartphones through differentiated features.

As for LCD in 2019, despite uncertainties from capacity expansions in the industry, the Company expects demand for the premium TV panels to continue to grow including UHD, 8K and ultra-large TVs. In response, Samsung will focus on enhancing profitability by delivering high-margin products.

Mobile Business Seeks Growth From New Flagship Smartphones

The IT & Mobile Communications Division (IM) posted KRW 23.32 trillion in consolidated revenue and KRW 1.51 trillion in operating profit for the fourth quarter of 2018.

In Q4, operating profit decreased QoQ due to a decline in both smartphone sales volume and revenue amid a sluggish smartphone market overall despite strong seasonal demand.

Looking ahead to the first quarter, demand for smartphones and tablet PCs is projected to decline due to the seasonal slowdown in the market. Samsung will unveil the Galaxy S10 next month at the Unpacked event in San Francisco and its new flagship model smartphones are expected to prop up sales and business performance in the coming months.

However, overall smartphone shipments are likely to remain at a similar level QoQ as shipments of the Company’s mass-market models have temporarily declined due to a lineup reorganization. This reorganization is being carried out to better promptly respond to rapid changing market trends and the needs of target customers.

For the whole of 2019, demand for smartphones is expected to maintain the same level seen in 2018 while market ASP is projected to rise due to a trend toward adopting high-end features such as large screens, higher memory capacity, and multi-cameras. The environment overall will remain challenging due to the sluggish growth of the global smartphone market and material cost burden.

Acknowledging the hurdles ahead, Samsung plans to boost smartphone sales and achieve solid business performance in 2019 by launching differentiated products and bolstering target marketing strategies.

This year, Samsung aims to lead trends in the market by launching foldable and 5G devices in efforts to ensure sustainable growth. By cooperating with business partners, Samsung will secure optimized content and expand into new markets. User retention will be increased by strengthening connectivity between devices. As part of this plan, Samsung will expand Bixby to various devices and connected services while improving its AI capabilities.

For the Networks Business, performance improved in sequential terms in the fourth quarter on the back of LTE network expansions by Samsung’s major overseas customers and as Samsung began to supply 5G network equipment to the United States and South Korea. This year, Samsung will expand its equipment supply for the first markets for 5G in South Korea and the United States, laying the foundation for global growth.

Consumer Electronics to Focus on Premium Products

The Consumer Electronics Division, including the Visual Display and Digital Appliances businesses, recorded KRW 11.79 trillion in consolidated revenue and KRW 0.68 trillion in operating profit for the fourth quarter.

In the fourth quarter, the global TV market grew by double-digits QoQ thanks to the year-end peak season, but slower demand in emerging markets limited growth YoY.

Earnings for the Visual Display Business improved both QoQ and YoY thanks to increased sales of QLED and ultra-large-sized TVs backed by successful year-end promotions and product mix improvement. In particular, sales of QLED TVs nearly tripled YoY, with QLED 8K TV and super-large-screen TVs of 75 inches and above solidifying leadership in the premium TV market.

The TV market in the first quarter is forecast to slightly weaken under slow seasonal demand. Samsung will continue to strengthen its sales of QLED and super-large-screen TVs and release new QLED 8K TV to the global market in full scale.

The TV market in 2019 is projected to be similar to last year despite negative factors including a lack of global sports events and economic slowdowns in emerging markets. The Company will aim to secure profitability and growth by expanding the premium lineup including QLED 8K TVs, super-large-screen TVs, and MicroLED products.

For the Digital Appliance Business in the fourth quarter, the growth in demand has slowed due to the sluggish US housing market and higher prices driven by foreign exchange fluctuations. Under these circumstances, earnings saw slight improvement both QoQ and YoY through strong sales of premium products such as Family Hub refrigerators, large-capacity dryers and Cube air purifiers.

In the first quarter, Samsung will expand its sales of new home appliances including AirDresser (garment air refreshers) and dryers, while boosting B2B business through built-in home appliances and system air conditioners.

Looking ahead to 2019, the digital appliances market is expected to slightly grow in advanced markets. Samsung will aim to secure future growth by increasing sales of premium products and strengthening online and B2B businesses.

Note 1: Sales for each business include intersegment sales

Note 2: CE (Consumer Electronics), IM (IT & Mobile Communications), DS (Device Solutions), DP (Display Panel)

Note 3: Information on annual earnings is stated according to the business divisions as of 2018

Note 4: From Q1 2017, earnings from the Health & Medical Equipment Business (HME) are excluded from the CE Division

In the third quarter, operating profit reached a new quarterly high for the Company driven mainly by the continued strength of the Memory Business. Total revenue increased YoY and QoQ on the back of strong sales of memory products and OLED panels.

The Korean won remained weak against the U.S. dollar, resulting in a positive QoQ effect of approximately KRW 800 billion, experienced mainly in the components businesses. However the Korean won rose against major emerging currencies, which weighed slightly on the set businesses.

By business unit, the Semiconductor Business recorded higher earnings YoY and QoQ amid strong seasonal demand, particularly for server and mobile memory. While NAND and DRAM demand remained high, the Memory Business improved its earnings by concentrating on sales of premium products, improving yields, and ramping up production of high-density chips at its Pyeongtaek plant.

For the Display Panel Business, despite unfavorable supply-demand conditions in the LCD market, earnings improved on-year thanks to higher sales of flexible OLED panels to major customers. On a quarterly basis, earnings significantly grew due to increased utilization of flexible OLED panel capacity.

Amid intense market competition, the IT & Mobile Communications (IM) Division reported a drop in earnings despite solid sales of its flagship smartphones. Overall, its smartphone shipments remained flat due to a decrease in sales of mid- to low-end products. Profit was also down due to increased promotional costs and a negative currency impact.

For the Consumer Electronics (CE) Division, earnings improved both YoY and QoQ thanks to robust sales of premium TV products, such as QLED and ultra-large screen TVs of 75-inches and above.

Looking ahead to the fourth quarter, Samsung expects overall earnings across the company to decline as it enters a period of weak seasonality for the semiconductor market.

For the components businesses, earnings from memory chips are expected to decline on weaker seasonality, but remain strong for OLED panels thanks to continued high demand from major customers.

Among the set businesses, although shipments of smartphones are forecast to rise, increased marketing expenses during the year-end peak season will affect profitability. Meanwhile, the Networks Business will look to cement its position at the forefront of 5G technology as it begins supplying 5G equipment; shipping to customers in North America and Korea in the fourth quarter.

The CE Division will benefit from strong year-end seasonality in the fourth quarter. It expects earnings to rise on the back of higher consumer demand for QLED TVs and premium home appliances.

Looking further ahead to 2019, earnings are forecast to be weak for the first quarter due to seasonality, but then strengthen as business conditions, particularly in the memory market, improve.

Moreover, Samsung will continue to focus on strengthening its competitiveness in emerging technologies, such as 5G, AI and automotive electronics. By doing so, the Company aims to sustain mid- to long-term growth based on its technological leadership as markets for these new areas expand.

Semiconductor Continues Earnings Momentum

 The Semiconductor Business posted consolidated revenue of KRW 24.77 trillion and operating profit of KRW 13.65 trillion for the quarter.

The Memory Business achieved strong results as overall demand increased mainly for server and mobile.

For NAND, Samsung posted solid earnings by responding to continued robust demand for higher density products used in mobile and servers. For DRAM, demand for all applications increased QoQ amid peak seasonality while mobile demand was driven by new product launches and the trend toward higher densities for smartphones.

Looking at the fourth quarter outlook for NAND, price declines are forecast to continue amid increasing industry supply of 64-layer 3D NAND. In response, the Company will continue to enhance its product competitiveness and strengthen market leadership by focusing on the premium market for All-Flash-Array solutions and high-density UFS. Looking ahead to 2019, supply-demand conditions are expected to improve gradually as demand increases, mainly from the public cloud market, and mobile storage expands. Thus Samsung will actively respond to demand and focus on enhancing cost competitiveness through expansion of 5th-generation V-NAND.

As for the fourth quarter DRAM outlook, although prices may stabilize, overall memory demand is expected to remain solid. In response, Samsung will focus on achieving solid earnings by maximizing sales with a flexible product mix and by strengthening product competitiveness. Looking to 2019, while the memory market may slow down in the first quarter due to seasonal effects, supply and demand dynamics are forecast to stabilize from the second quarter thanks to an increase in overall demand, mainly from server and mobile. Samsung will solidify its technology leadership by expanding sales of differentiated products such as high-density server products, HBM2, and high-density MCP for mobile.

For the System LSI Business, overall earnings improved thanks to the growing demand for image sensors in China and for OLED DDIs used in flagship smartphones. In particular, the image sensor business achieved record-high quarterly results driven by greater adoption of multiple cameras and high-resolution sensors by smartphone makers.

Looking ahead, despite a likely rise in demand from products slated to launch next year, weak seasonality for mobile image sensors and DDIs is expected to dampen growth in the fourth quarter.

For 2019, Samsung expects solid earnings growth to continue, bolstered by rising demand for image sensors used in more sophisticated camera specifications. Additionally, Samsung plans to diversify its customer base in China and the U.S. by enhancing SoC competitiveness using 5G modem technology. The Company will also focus on diversifying its product line-up to include 3D sensors, fingerprint-on-display sensors, and chips used in automotive and IoT applications.

For the Foundry Business, earnings continued to grow QoQ thanks to increased demand for mobile APs and image sensors, despite a decline in demand for cryptocurrency mining chips. In particular, Samsung secured technological leadership in advanced processes by completing development and starting production of the EUV-based 7-nanometer process.

Looking to the fourth quarter, demand for mobile APs and image sensors is expected to decline amid weak seasonality for smartphone components.

In 2019, Samsung will focus on achieving solid results by ensuring a stable supply of major products—such as mobile APs and image sensors—and diversifying its customer bases in AI, automotive, and 8-inch areas. Additionally, the Company will strive to maintain its technology leadership through full-scale mass production of the 7-nanometer EUV process, and plans to expand its customer base by more than 30 percent.

Display Improves on Demand for Flexible OLED

The Display Panel segment posted KRW 10.09 trillion in consolidated revenue and KRW 1.10 trillion in operating profit for the third quarter. Total earnings for the Display Business increased QoQ due to increased shipments of both OLED and LCD panels.

For the OLED business, improved QoQ earnings were led by increased demand for flexible displays from major customers. For the LCD business, a slight improvement in earnings QoQ was driven by an increase in shipments of value-added products, such as panels for high-resolution and ultra-large screen TVs.

Looking ahead to the fourth quarter, Samsung expects solid demand to continue in the OLED business and will therefore focus on enhancing technical differentiations in flexible panels and improving productivity of rigid panels. The LCD business, however, is likely to face unfavorable supply and demand dynamics due to ongoing capacity expansions in the industry and weak seasonality. Thus, Samsung will strive to secure profitability by improving yield and increasing sales in high-end, value-added products.

In 2019, the OLED business will look to expand into new product categories by continuing to offer technologically differentiated products and to broaden the customer base with flexible panels. Samsung will also aim to further its leadership by enhancing the technical readiness of new applications for foldable, automotive and IT displays. Additionally, the OLED business will seek to reinforce partnerships with major smartphone manufacturers and improve cost competitiveness to ensure continued growth.

For the LCD business, due to uncertainties caused by capacity expansions in the industry, Samsung will focus on growth in value-added products such as Quantum Dot, 8K resolution and ultra-large screen TVs.

Mobile Profit Declines Despite Solid Flagship Sales

The IT & Mobile Communications Division posted KRW 24.91 trillion in consolidated revenue and KRW 2.22 trillion in operating profit for the quarter.

Although Samsung achieved solid sales of flagship models in the quarter, its total smartphone shipments remained flat due to decreased sales of mid- to low-end products. Overall profit for the division decreased on-quarter due to increased promotional costs and a negative currency impact. Earnings for the Networks Business also decreased on-quarter, following the concentration of LTE investments from major overseas carriers in the first half.

Looking to the fourth quarter, Samsung expects its smartphone shipments to rise during the year-end peak season, particularly for its enhanced mass product lineup including the new Galaxy A7 and A9. However, earnings are forecast to decrease due to increased marketing expenses. For the Networks Business, Samsung aims to supply 5G equipment to major advanced markets, i.e. the U.S. and Korea.

As for the outlook for 2019, smartphone market demand is expected to slightly grow mainly driven by premium segments. However, competition is likely to intensify across all segments as key features of premium models continue to expand to mid- to low-end models.

Samsung will strive to expand sales of premium smartphones through differentiated design and a diversified lineup. The Company will also solidify its market leadership by adopting cutting-edge technologies across its entire Galaxy lineup, including the Galaxy A series. Moreover, Samsung will strengthen its competitiveness in the mid- to long-term by leading innovation with the launch of foldable and 5G smartphones as well as enhancing its Bixby-based AI and IoT services.

The Networks Business will proactively respond to growth in the 5G market in 2019 by expanding its business to other markets, based on its experience of commercializing 5G in the U.S. and Korea.

Consumer Electronics Rises on QLED TV Sales

The Consumer Electronics Division, including the Visual Display and Digital Appliances businesses posted KRW 10.18 trillion in consolidated revenue and KRW 0.56 trillion in operating profit for the third quarter.

Earnings for the Visual Display Business improved both YoY and QoQ thanks to increased sales of premium products such as UHD and ultra-large screen TVs. In particular, QLED TV sales tripled YoY thanks to favorable market feedback for picture quality and differentiated features such as Ambient Mode and One Invisible Connection.

Looking to the fourth quarter, the Company projects the TV market to grow slightly YoY. Samsung will aim to strengthen its leadership in the premium TV segment by preemptively capitalizing on year-end peak season demand through close partnerships with distributors and by extending sales of strategic products such as QLED and ultra-large screen TVs.

In 2019, overall TV market demand is expected to remain the same as this year. Samsung will seek to improve profitability by solidifying its leadership in the premium market with QLED and ultra-large screen TVs while expanding sales of QLED 8K TV and reinforcing its lineup of ultra-large TVs of 75-inches and above.

For the Digital Appliances Business, earnings decreased slightly YoY despite increased sales of premium products such as Chef Collection refrigerators and Flex-Wash washers, amid economic slowdowns in emerging markets.

In the fourth quarter, although market demand may decline due to the global trade issues and foreign exchange risks in emerging markets, Samsung will focus on strengthening regional peak-season promotions through partnerships with distributors and continue to increase sales of premium products such as large size dryers and Air Cube air purifiers.

Looking ahead to 2019, Samsung will focus on improving profitability by releasing innovative premium products, expanding online sales, and strengthening its B2B business with built-in appliances and system air conditioners.

※ Consolidated Sales and Operating Profit by Segment based on K-IFRS (2017~2018 3Q)

Note 1: Sales for each business include intersegment sales
Note 2: CE (Consumer Electronics), IM (IT & Mobile Communications), DS (Device Solutions), DP (Display Panel)
Note 3: Information on annual earnings is stated according to the business divisions as of 2018
Note 4: From Q1 2018, earnings from the Health & Medical Equipment Business (HME) are excluded from the CE Division

Second quarter revenue fell due to softer sales of smartphones and display panels, despite robust demand for memory chips. The continued strength of the Company’s memory business contributed to the higher operating profit. Net profit was little changed from a year earlier due to higher income tax.

Both revenue and operating profit decreased from the previous quarter. The Korean won weakened against the US dollar but rose against the euro and several other key currencies, resulting in a negative impact of net KRW 400 billion on the quarterly operating profit compared with the previous quarter.

By business unit, the Semiconductor Business continued to deliver strong earnings, driven by demand for DRAM chips used in data centers and NAND flash memory for high-capacity storage, amid a softening of NAND prices. Samsung solidified its competitive positioning by focusing on value-added products, including 64GB and higher-density server DRAM based on the 1X nanometer technology and 128GB and higher for NAND mobile storage.

In the Display Business, the Company saw weak demand for flexible OLED panels in the second quarter while the shipment and price for LCD panels also fell.

Amid the stagnant high-end smartphone market, the IT & Mobile Communications Division reported a drop in earnings, both year-on-year and quarter-on-quarter, over slow sales of the Galaxy S9. The network business, however, achieved solid growth led by investments in LTE networks by key global customers.

Stronger sales of premium TVs such as the QLED models, helped by a major global soccer event, lifted profits from the Consumer Electronics Division, although the Digital Appliances Business saw earnings decline due to weak demand for air conditioners.

Looking ahead, Samsung expects sustained strength in the memory market and growing demand for flexible OLED panels to drive earnings higher in the second half.

The outlook for the memory chip business remains strong across all applications thanks to demand for server and PC memory as well as new mobile product launches. Samsung will proactively address demand for differentiated products such as high-density server memory and High Bandwidth Memory. The Company will also strengthen its technological leadership by increasing the portion of 10 nanometer-class products and expanding mass production of 5th generation V-NAND.

The System LSI and Foundry businesses are set to benefit from higher demand for mobile APs and image sensors. Flexible OLED shipments are expected to rise, even as competition is seen intensifying over rigid products.

The mobile market condition will likely remain challenging in the second half amid pricing competition and new product launches. The Company will respond through the early introduction of the Galaxy Note and competitive mid- and low-end models with new features. Earnings from the TV business will continue to improve as Samsung expands sales of new innovative premium models including QLED and 8K TVs.

Over the mid- and long-term, Samsung expects new opportunities in the component business from the ongoing transformation in the industry, led by the Internet of Things (IoT), artificial intelligence (AI) and 5G technologies. The set businesses will also benefit from the introduction of new form factors and innovative technologies to support growing demand for connected devices.

In the component business, Samsung will use its cutting-edge semiconductor technology to capitalize on new demand for chipsets used in automotive and AI applications. The Company will also leverage its strength in OLED panels to take advantage of wider applications in the IT and automotive industries.

The Company’s capital expenditure in the second quarter was KRW 8.0 trillion, including KRW 6.1 trillion for the Semiconductor Business and KRW 1.1 trillion for the Display Business. It brings the total spent in the first half of 2018 to KRW 16.6 trillion.

Semiconductor to see Continued Strong Demand in Second Half

The Semiconductor Business posted consolidated revenue of KRW 21.99 trillion and operating profit of KRW 11.61 trillion for the quarter. The memory business achieved strong results despite weak seasonality, as overall demand growth was solid, driven by servers for data centers.

For NAND, demand remained robust on the back of the continuing trend toward higher density for smartphones and the increase in demand for server SSD due to expansion of cloud infrastructure. Samsung posted solid earnings by responding to new mobile device launches and demand for higher density products. The Company also focused on value-added and high-density SSD for servers.

For DRAM, server demand stayed strong owing to the ongoing shift to higher density and expansion of data center infrastructure. PC demand remained robust, driven by increasing demand from large OEMs, while strong gaming demand helped the graphics segment. In the mobile market, despite concerns over a slowdown in smartphone growth, increase in memory content per device continued.

For the second half outlook for NAND, adoption of SSD is expected to expand into more sectors and all product segments are projected to use more high-density eStorage. For servers, demand for SSD for data centers is forecast to remain strong, while for enterprise, adoption of high-density server SSD over 8TB is expected to continue.

In mobile, demand for high-density storage for new smartphones and high-end models is likely to remain robust. Samsung will increase server SSD supply and respond to high-density eStorage demand based on 64-layer 3D NAND products and competitiveness of high-density solutions.

As for the second half DRAM outlook, strong demand from all applications is expected to continue. For servers, demand growth is forecast to persist due to expansion of data center demand from the US and Chinese markets, while high-performance cloud services are also projected to launch.

In mobile, in addition to new flagship smartphone launches, memory content is projected to increase in mid-range models as they begin to support high-specification mobile games, on-device AI and dual camera features. In addition, PC demand will be driven by back to school sales, while graphics demand will be led by the buildup for game consoles. Samsung will focus on strengthening product competitiveness via continuous expansion of 10 nanometer-class technology migration and expanding sales of high value-added products, such as high-density server DRAM, HBM2 and LPDDR4X.

In the mid- to long-term, the trend toward high-performance and higher density servers for data centers is expected to continue due to expansion of AI-related services based on machine learning and adoption of in-memory database. In mobile, demand growth is projected to continue, as the need for high-performance devices increases with the rise of high-density content. Samsung will closely monitor the market condition and the supply and demand conditions of each segment to maintain sustainable earnings in the mid- to long-term with the industry’s leading technology.

For the System LSI Business, overall earnings declined due to weaker demand for mobile application processors and DDIs, but demand for image sensors continued to increase on the back of higher adoption of dual cameras from Chinese smartphone manufacturers. In the third quarter, earnings are expected in increase QoQ on demand for image sensors and DDIs amid strong seasonality for smartphones.

In the second half, overall earnings are projected to improve compared with the first half, led by strong demand for OLED DDIs and high-pixel image sensors. In addition, Samsung plans to diversify its customer base for mobile APs from China and develop chips for use in automotive and IoT applications. Mid- to long-term, the Company will focus on developing chipsets for 5G, multiple cameras and display panels, seeking to achieve higher growth compared to that of the market.

For the Foundry Business, total earnings continued to grow QoQ due to strong demand for High Performance Computing (HPC) chipsets, mobile APs and image sensors. In addition, by securing orders for 8-inch specialty products, the Company has established a base for achieving stable earnings going forward. Earnings are expected to be solid in the second half on the back of higher demand for mobile APs and image sensors. Samsung will also strengthen process technology leadership by beginning 8-nanometer mass production and EUV-based 7-nanometer test production.

The Company expects revenue to exceed USD 10 billion in 2018, following sales of USD 9.8 billion in 2017, securing a strong second place in the foundry market.

Display to Rebound in Second Half Led by Flexible OLED

The Display Panel Business posted KRW 5.67 trillion in consolidated revenue and KRW 0.14 trillion in operating profit for the quarter.

For OLED, earnings decreased QoQ despite improved factory utilization for rigid products, as demand from major customers for flexible panels remained slow. Earnings from LCD also declined from the previous quarter as the shipment and average panel price continued the downward trend.

Looking ahead to the second half, OLED sales are expected to rebound on recovering demand for flexible displays. Samsung aims to increase market share by actively addressing customer demand while enhancing technological and price competitiveness. The Company will incorporate more value-added features into panels and reinforce its competencies in new applications such as foldable displays, seeking new growth drivers.

For LCD, Samsung expects demand to grow in the second half for premium TV panels that are used in high-resolution and ultra-large models, amid peak seasonality. Intensified competition and the industry’s capacity expansion will limit improvements in profits, but the Company will continue to focus on profit with differentiated high-end products such as Quantum Dot and 8K resolution TV panels.

Mobile Posts Sluggish Sales, Networks Grows on LTE Expansion

The IT & Mobile Communications Division posted KRW 24.0 trillion in consolidated revenue and KRW 2.67 trillion in operating profit for the quarter.

Amid the sluggish premium smartphone market and intensifying competition, Samsung’s smartphone shipments and revenue declined QoQ due to the slow sales of Galaxy S9 and S9+ as well as the phasing out of older low-end models.

The Company posted a drop in quarterly operating profit due to higher marketing expenses. Meanwhile, the Networks Business saw a healthy sales growth as major overseas carrier partners increased investments in LTE expansion.

Demand for smartphones and tablets is forecast to increase in the second half as the market enters a period of strong seasonality, but competition is seen intensifying as new smartphone models are released. In response, Samsung will seek to expand sales by introducing a new Galaxy Note earlier than usual, which offers exceptional performance for a reasonable price. Also, Samsung plans to strengthen price competitiveness and adopt advanced technology in the mass models.

Looking to the future, the Company will continue to reinforce product competitiveness based on hardware leadership, by adopting cutting-edge technology and new form factors and gaining leadership in 5G. Furthermore, based on the ever-evolving Bixby ecosystem which connects smartphones, TVs, refrigerators and other IoT devices, Samsung aims to offer personalized service to customers and create synergy with other services such as Samsung Pay.

As for the Networks Business, the Company will supply its major partners with 5G network solutions and continue to invest to become the global leader in next-generation network solutions.

Consumer Electronics to Maintain Premium Market Leadership

The Consumer Electronics Division, including the Visual Display and Digital Appliances businesses, posted KRW 10.4 trillion in consolidated revenue and KRW 0.51 trillion in operating profit for the second quarter.

The overall TV market saw demand grow from a year ago as a major global soccer event lifted sales. Samsung reported a significant boost in earnings in the TV business due to strong sales of its premium products, including QLED and ultra-large screen TVs.

Following a successful restructuring of its product line-up, Samsung led expansion of the premium TV market, winning more than 50% market share in the ultra-large screen segment of 75-inches and above.

For the Digital Appliances Business, the overall market decreased YoY largely due to the instability in emerging markets, although developed markets posted a moderate growth. Samsung continued to expand sales of its premium products in the second quarter, including the Family Hub refrigerator and premium air purifier “CUBE”. However, earnings decreased slightly YoY, due to weak demand for air conditioners.

Looking to the second half, the TV market is projected to grow YoY, especially in developed economies. Samsung will work to further improve profitability by focusing on sales of premium TVs and maximizing shipments during the year-end peak season. The Company’s second half release of the industry’s first AI- based 8K QLED TV is expected to further solidify its position as a leader in the premium TV market.

As for the Digital Appliances Business, the Company will focus on profits by enhancing peak-season promotions in key regions including Black Friday, and expanding sales of premium products and built-in home appliances.

※ Consolidated Sales and Operating Profit by Segment based on K-IFRS (2016~2018 2Q)

Note 1: Sales for each business include intersegment sales

Note 2: CE (Consumer Electronics), IM (IT & Mobile Communications), DS (Device Solutions), DP (Display Panel)

Note 3: Information on annual earnings is stated according to the business divisions as of 2018.

Note 4: From Q1 2018, earnings from the Health & Medical Equipment Business (HME) are excluded from the CE Division

First quarter revenue was primarily led by Samsung’s Memory Business and increased sales of its flagship mobile products, including the Galaxy S9.

Total revenue grew approximately 20 percent YoY to KRW 60.6 trillion. Operating profit for the quarter was a record high, posting an increase of KRW 5.7 trillion YoY. Profitability improved significantly in the quarter thanks to the Semiconductor Business and the early global launch of the Galaxy S9. All in all, the operating margin in the first quarter was 25.8 percent, up 6.2 percentage points YoY.

By business unit, the Semiconductor Business’ significant earnings performance was driven by demand for memory chipsets for high value-added servers and graphics products. The System LSI and Foundry businesses also contributed to first quarter earnings, backed by strong demand for chips used for smartphones and crypto-currency mining.

For the Display Panel segment, which manufactures OLED and LCD screens, profits were affected by slow demand for flexible OLED panels and greater competition between rigid OLED and LTPS LCD. An imbalance between supply and demand in the LCD market, brought on by competitors’ increased production capacity, also weighed on earnings.

For the IT & Mobile Communications Division, the early launch of the Galaxy S9 and solid sales of the Galaxy S8 smartphones resulted in considerable growth in earnings.

As for the Consumer Electronics Division, earnings by the Visual Display Business slid YoY following an adjustment in its TV lineup where some mid-range to low-end products were removed. As for the Digital Appliances Business, rising raw material prices and other factors impacted profitability.

For the second quarter, Samsung expects the Memory Business to maintain its strong performance, but generating overall earnings growth across the company will be a challenge due to weakness in the Display Panel segment and a decline in profitability in the Mobile Business amid rising competition in the high-end segment.

Demand for server and mobile DRAM is expected to be robust and orders for high-density storage chips will grow as the price of NAND softens in the second quarter. For the System LSI and Foundry businesses, shipments of 10-nanometer APs and crypto-currency mining chips will expand but earnings will be impacted due to sluggish demand for smartphone components.

The Display Panel segment will seek profitability in OLED by cutting costs and improving yield, amid the weak demand for flexible products. As for LCD panels, oversupply is anticipated despite an expected boon in TV sales in time with an upcoming major global soccer event.

In the Mobile Business, profitability is expected to decline QoQ due to stagnant sales of flagship models amid weak demand and an increase in marketing expenses. Meanwhile, earnings for the Consumer Electronics Division are projected to improve due to increased shipments of new products such as QLED TVs and strong seasonal demand for air conditioners.

The overall business outlook for the second half regarding components is positive, as the company looks forward to strong demand for DRAM and increased sales of OLED panels.

For set products, Samsung aims to sustain profitability by strengthening its market leadership in the sales of premium products despite challenging global market conditions.

In the mid to long term, Samsung will strengthen its business capabilities by delivering differentiated technology in the component business and solidifying its leadership in cutting-edge technologies such as AI and 5G. The company believes opportunities will widen for the set business, as digital devices become increasingly connected.

Total capital expenditure in the first quarter was KRW 8.6 trillion including KRW 7.2 trillion for the Semiconductor Business and KRW 0.8 trillion for the Display Panel segment.

Samsung has not yet finalized its capex plan for 2018, but the company expects it to decline YoY. Capex rose substantially in 2017 due to efforts to respond to market growth and emerging technologies, which included expanding the production capacity for flexible OLED panels.

Semiconductor Posts Solid Earnings on Strong Memory Performance

The Semiconductor businesses posted KRW 11.55 trillion in operating profit on consolidated revenue of KRW 20.78 trillion for the quarter.

Overall, the Memory Business achieved strong earnings, despite weak seasonality, thanks to a continuation of favorable market conditions as well as strong server demand.

For NAND, demand remained stable due to an expansion of cloud infrastructure and the continuation of a trend toward higher density solution products. Samsung posted solid earnings by concentrating on sales of high-density mobile storage and value-added solutions, including SSDs over 2TB for datacenters and over 8TB for enterprise, backed by a stable ramp-up of 64-layer 3D NAND production at the company’s Pyeongtaek plant.

For DRAM, demand stayed strong thanks to growth in servers and graphics products. Server demand remained high due to continuous expansion of datacenter infrastructure. Mobile demand saw a stable increase thanks to content growth across all segments while PC demand saw moderate growth in line with seasonal patterns. In graphics, total demand increased thanks to strong demand for both graphics and crypto-currency mining cards.

Looking at the second quarter outlook for NAND, total demand is expected to increase. Datacenters will remain a key driver for SSD demand, and mobile demand is forecast to be strong as the high-density trend continues. Samsung will continue to increase high-density server SSD supply and drive more eStorage strategies. Looking further ahead to the second half, server and mobile demand is expected to be solid, as the trend of SSD replacing HDD accelerates and storage expansion across smartphone segments continues. The company will focus on continued migration to 64-layer while also strengthening product and cost competitiveness and ramping up next-generation products in a timely manner.

As for the second quarter DRAM outlook, strong server demand is anticipated due to datacenter expansion in the US and China. Mobile demand, driven by content growth, is expected to remain solid. Samsung will focus on expediting qualification of 1Ynm and expanding 1Xnm products, while maintaining a flexible product mix. For the second half, demand from all applications is set to increase. Robust server demand will continue while AI and machine learning will drive demand for high-performance High Bandwidth Memory (HBM). For graphics, strong demand for consoles and VGA cards for crypto-currency mining will continue. Solid mobile demand is expected as manufacturers consider high-performance and high-density memory for flagship devices. Samsung will focus on flexible supply and investment, and expanding value-added sales through high-density server DRAM and differentiated products such as HBM2 and LPDDR4X.

For the System LSI Business, mobile DDI earnings declined due to slow OLED panel demand, but overall earnings increased amid strong demand for mobile processors and image sensors. In the second quarter, demand for premium smartphone components is expected to slow, and Samsung will focus on the stable supply of mobile processors and image sensors for flagship models. Looking further ahead to the second half, demand for image sensors is expected to rise as manufacturers increasingly adopt dual cameras and 3-stack FRS sensors. The company will focus on sustaining growth in mobile processor sales and expanding its offerings from mobile to areas such as IoT, VR and automotive.

For the Foundry Business, despite weak seasonality, total earnings grew QoQ due to increased demand for High Performance Computing (HPC) chipsets. During the quarter, the company also broke ground on an EUV-line at its Hwaseong plant to address future demand for 7-nano and below products. In the second quarter, solid demand for high performance chipsets is expected. Samsung plans to expand HPC and 10-nano mobile products and promote FD-SOI and 8-inch processes. In 2018, despite slowing mobile demand, the company aims to diversify its customer and application bases and continue to offer derivative processes, including those for 8- and 11-nano chips. Through these efforts, the company expects to achieve over USD 10 billion in sales and maintain a strong second place in the foundry market in 2018.

Display to Improve Production Efficiency

The Display Panel business posted KRW 7.54 trillion in consolidated revenue and KRW 0.41 trillion in operating profit for the quarter.

For the OLED business, QoQ earnings declined due to a slowdown in demand and intensified competition between rigid OLED and LTPS LCD panels.

For the LCD business, despite a decrease in shipments under weak seasonality and a continued decline in LCD panel ASPs, earnings remained flat QoQ thanks to cost reductions and an expansion in the sales portion of value-added LCD products, boosted particularly by UHD and large-sized panels.

Looking ahead to the second quarter, amid forecasts for weak demand for OLED panels, Samsung will strive to secure profitability by reducing costs and improving production efficiency. For LCD, under unfavorable supply-demand conditions due to capacity expansions in the industry, the company will focus on developing value-added and differentiated products as well as reducing costs.

For the second half, OLED panels in the smartphone industry are expected to see a rebound in demand, especially as demand for flexible panels remains strong in the high-end segment. Under these circumstances, Samsung will strengthen cost competitiveness and diversify its customer base through new products and technologies in order to increase market share. The company will also aim to secure new growth engines by applying its competencies in new applications on top of smartphones.

For LCD in the second half, while the company foresees market uncertainties due to growing competition and capacity expansions, Samsung will continue to strengthen its strategic partnerships with major business partners and differentiate its value-added products, including large-sized and high resolution TV panels.

Mobile Earnings to Decrease in Q2 with Higher Marketing Costs

The IT & Mobile Communications Division posted KRW 28.45 trillion in consolidated revenue and KRW 3.77 trillion in operating profit for the quarter.

While overall market demand for smartphones and tablets declined during weak seasonality, Samsung’s smartphone shipments increased QoQ due to an early release of the Galaxy S9 and S9+ as well as solid sales of the Galaxy S8. As a result of increased sales, mainly driven by premium models, revenue and profit significantly increased both QoQ and YoY. Earnings for the Networks Business also improved due to LTE investments from major overseas partners and an expansion of new solutions for optimization of network operations.

Looking ahead to the second quarter, Samsung expects earnings to decrease QoQ due to a slowdown in sales of its flagship models and increased marketing expenses to address the situation. Samsung will aim to maintain sales momentum of the Galaxy S9 and S9+ by expanding the operation of experiential stores, strengthening the cooperation with partners, and reinforcing promotional programs such as trade-ins.

For the second half, Samsung will seek to strengthen sales in the premium market by launching a new flagship model and maintaining long-tail sales of the Galaxy S9, S9+, and flagship models from the previous year. In the mass segment, Samsung will introduce new models optimized for specific markets and strengthen both offline and online sales channels. Moreover, Samsung will continuously invest in expanding the Bixby 2.0 open ecosystem to provide a seamless multi-device experience for consumers.

For the Networks Business, the company expects increased earnings QoQ for the second quarter and will focus on continued growth by expanding its LTE business and leading the world’s first commercialization of 5G.

Consumer Electronics to Focus on Premium Products  

The Consumer Electronics Division posted KRW 9.74 trillion in consolidated revenue and KRW 0.28 trillion in operating profit for the quarter.

Overall, the TV market decreased QoQ due to slow seasonality following the year-end holiday, but grew YoY due to increased demand in emerging markets such as the CIS, the Middle East, and Latin America.

Although earnings were slightly down YoY, due to a restructuring of the sales mix with a defocus on the entry lineup, the company maintained its leading position in the premium TV market by continuing to achieve high market share in the USD 2,500 and above premium segment, thanks to expanded sales of flagship models, including QLED and ultra-large screen TVs.

Looking to the second quarter, TV market demand is projected to deliver YoY growth, driven mainly by demand momentum from the major global soccer event and growth in emerging markets. Samsung will aim to improve results by expanding sales of new models, particularly during the soccer competition. For 2018, the market is forecast to slightly grow. With the addition of the company’s launch of 8K and Micro LED displays in the second half, Samsung will seek to solidify its premium leadership and focus on ensuring sustainable and profitable growth in the mid to long term.

For the Digital Appliances Business, the market saw moderate growth in the first quarter due to increased demand in both developed and emerging markets. Samsung’s sales improved YoY thanks to strong sales of premium products, including the FlexWash washing machine, Cube air purifier and system air conditioners. However, earnings decreased slightly YoY due to an increase in prices of raw materials and operating costs of the new factory in North America.

Looking to the second quarter, Samsung will aim to accelerate growth by expanding its premium lineup, including QuickDrive washing machine and POWERStick PRO vacuum cleaner, and by increasing air conditioner sales during the peak season. For 2018, the company will continue to focus on strengthening premium sales in advanced markets, reinforcing its B2B business for built-in appliances and system air conditioners, and expanding its online business.

※ Consolidated Sales and Operating Profit by Segment based on K-IFRS (2016~2018 1Q)

Note 1: Sales for each business include intersegment sales

Note 2: CE (Consumer Electronics), IM (IT & Mobile Communications), DS (Device Solutions), DP (Display Panel)

Note 3: Information on annual earnings is stated according to the business divisions as of 2018.

Note 4: Earnings from the Health & Medical Equipment Business (HME) are excluded from the CE Division in 1Q 2018.

Overall, the company reported full-year revenue of KRW 239.58 trillion and full-year operating profit of KRW 53.65 trillion.

Fourth quarter earnings were driven by the components business, with the largest contribution coming from the Memory business that manufactures DRAM and NAND, as orders for high-performance memory products for servers and mobile storage were strong. However, weak seasonality impacted growth for the System LSI and Foundry businesses.

The Display Panel business, which manufactures OLED and LCD screens, saw increased shipments of OLED panels for premium smartphones, but profitability for LCD panels decreased due to weak seasonality, which dampened sales and ASP.

For the IT & Mobile Communications Division (IM), earnings in the mobile business declined due to a hike in marketing costs under strong seasonality. Total smartphone shipments decreased due to the lineup optimization of low-end models, while shipments of flagship products, such as the Galaxy Note 8, increased from the previous quarter. In the network business, customers’ LTE investments concentrated in the first half, resulting in the weak earnings in the second half.

The Consumer Electronics Division, comprising the TV and home appliances businesses, posted gains for the quarter. TV earnings increased QoQ on increased sales of premium products including ultra large-size and QLED models. For home appliances, demand for high-end washing machines and ovens in North America and Europe was responsible for stronger revenue on a YoY basis.

As indicated in Samsung’s preliminary earnings announcement in early January, operating profit was affected by the appreciation of the Korean won against the U.S. dollar and other major currencies, with the impact amounting to approximately KRW 660 billion QoQ. A one-off incentive paid to employees of the semiconductor division also affected earnings.

Looking ahead, the first quarter, despite being a traditionally slow season, is expected to show strong demand for memory products used in datacenters. Shipments of System LSI products are forecast to pick up, as orders for APs and image sensors for flagship devices are expected to improve.

The Display Panel business in the first three months of the year is likely to face challenges such as intensified competition from LTPS LCD vendors and seasonally weak LCD demand. In spite of this, Samsung will try to improve profitability by increasing the high-end LCD portion of screens and enhancing productivity of flexible OLED panels, among other measures.

In the first quarter, the company expects the mobile business to improve its earnings, led by an increase in sales of flagship products with the launch of Galaxy S9. Samsung’s TV business will be affected by weak seasonality, but is aiming to be profitable by expanding sales of premium products and pushing for the early release of new models. Meanwhile, the Digital Appliances Business will focus on achieving growth by increasing sales of premium products and strengthening marketing.

In 2018, demand for NAND is likely to remain strong and market conditions are forecast to be stable. Samsung will expand 64-layer V-NAND production mainly at its Pyeongtaek plant. As for DRAM, the company expects solid demand growth due to new datacenter builds and will increase product competitiveness by expanding 10nm-class process migration. As for Foundry, Samsung will lead the technological process leadership with a risk production of 7-nano.

For the Display Panel business in 2018, the company expects OLED to become a mainstream panel in the smartphone industry and will reinforce its competencies in new applications such as foldable, automotive, and IT displays. In the case of LCD panels, it will focus on meeting the market’s needs for ultra large-size and high-resolution TVs and strengthening partnerships with strategic customers.

For Mobile in 2018, the company will pursue earnings growth by increasing premium products sales and maintaining profitability of mid-range to low-end products. The Networks Business plans to expand the supply of network solutions for 5G commercialization to major markets including Korea, the U.S., and Japan.

For the CE Division this year, sales of ultra large-size TVs will continue to grow as the global market gears up for major international sporting events, including the FIFA World Cup and Winter Olympics. The Digital Appliances Business is expected to improve earnings by expanding its B2B business and online sales.

Total capital expenditure (capex) executed in 2017 was KRW 43.4 trillion. Investment in the display panel segment reached KRW 13.5 trillion, while the Semiconductor business was accountable for KRW 27.3 trillion. The total was up significantly YoY because of investments in the Pyeongtaek plant and efforts to address demand for the foundry business and flexible OLED panels. Samsung’s capex plan for 2018 has yet to be finalized, but we expect the total amount to decrease on a YoY basis.

Looking at the mid to long term, Samsung expects the components business to see demand expand from new applications. For the set business, the company expects to enjoy increased opportunities mainly related to software, connected devices, and services based on AI/IoT platforms.

In semiconductors, as demand for high-density memory products for cloud servers and for chipsets required for automotive electronics and AI is expected to increase, Samsung will boost its technology competitiveness with cutting-edge processes and solutions with next-generation packaging.

The OLED panel business will strengthen its competitiveness in the premium segment with the release of foldable panels, and focus on expanding new applications in areas such as automotive electronics by capitalizing on its technology and cost competitiveness.

As for the Mobile business, Samsung will continue its efforts to differentiate its smartphones by adopting   cutting-edge technologies, such as foldable OLED displays. It will also drive forward new businesses related to AI/IoT by strengthening the ecosystem based on Bixby and building on Samsung’s 5G technology.

The CE Division will bolster its leadership in the TV market by applying new technologies, such as 8K and Micro LED. Samsung will also improve the connectivity and usability of home appliances by expanding the application of Bixby.

Semiconductor Maintains Strong Earnings

The Semiconductor businesses posted KRW 10.90 trillion in operating profits on consolidated revenue of KRW 21.11 trillion for the quarter.

The Memory Business achieved strong earnings amid favorable market conditions. For NAND, overall demand was strong due to strong seasonality for mobile, particularly high-density mobile products, as well as solid growth for server SSD. Samsung strengthened profitability and posted solid earnings by promptly responding to strong demand for higher-density and value-added memory products for newly launched mobile models and server SSD. For DRAM, demand for all applications increased QoQ amid peak seasonality. Server demand remained solid due to cloud expansion, new datacenters, and higher-density trends. Mobile demand also remained strong thanks to increasing set numbers and content growth, mainly from new flagship model launches. The company posted improved earnings by meeting demand for differentiated products, such as high-density server DRAM over 64GB and low-power LPDDR4X, and by flexibly managing its product mix.

Looking at the first quarter outlook for NAND, server SSD demand from major cloud providers is expected to remain strong despite weak seasonality, and the high-density trend from high-end smartphones is likely to continue. Therefore, overall demand is expected to remain steady QoQ. On the supply side, supply is forecast to be limited despite industry expansion of 64-layer products. Samsung will focus on accelerating 64-layer transition and strengthening product differentiation via its V-NAND-based solutions. For 2018, stable market conditions and strong demand are anticipated and the company will focus on mass production of V-NAND while strengthening technology leadership through a ramp-up of the next generation product after 64-layer.

As for the DRAM outlook in the first quarter, datacenter demand is expected to offset slow seasonality. Mobile demand is likely to decrease under the weak seasonal effect, however the decline is likely to be less than it was in the previous year thanks to demand for high density at the high-end and content growth at the low-end. Samsung will focus on continuing its flexible product mix strategy and strengthening cost competitiveness through expansion of 1xnm process migration. For 2018, continued demand for servers is expected due to new datacenter builds and increasing memory usage. Mobile demand is also expected to grow due to increasing requirements for high performance games, on-device AI, and hardware upgrades such as dual cameras. Samsung will look to enhance cost competitiveness through 10nm-class migration and expanding sales of high-density server DRAM.

For the System LSI Business, earnings slowed as sales of mobile processors and image sensors decreased under weak seasonality. In the first quarter, Samsung will seek to ramp-up production of mobile processors for premium phones and expand sales of high-valued-added 3-stack Fast Readout Sensors (FRS). In 2018, demand for image sensors is expected to grow as smartphone vendors increase adoption of dual camera and 3-stack FRS. The company aims to post solid earnings by increasing mobile processor sales and expanding offerings to IoT, VR and automotive applications.

For the Foundry Business, earnings decreased on weak seasonality. That said, sales in China increased as the company secured new customers. In the first quarter, earnings are expected to rise on the ramp-up of 2nd generation 10nm process products for this year’s flagship smartphones and growing demand for cryptocurrency mining chips. In 2018, Samsung will provide 8nm and 11nm processes to meet customers’ needs and start a risk production of 7-nano. In addition, we will increase its mass production capabilities at the new S3 and S4 lines for various products including mobile processors and image sensors.

Display Posts Quarterly Growth

The Display Panel business posted KRW 11.18 trillion in consolidated revenue and KRW 1.41 trillion in operating profit for the fourth quarter. Despite decreased revenue from LCD panels due to lower ASPs under weak seasonality, total earnings for the display business grew QoQ, driven by increased shipments of OLED panels for flagship smartphones.

In 2018, OLED is expected to become the mainstream panel in the smartphone market, specifically in the high-end segment. Samsung will make efforts to actively address customers’ demands and differentiate its technology over LTPS LCD, as well as seeking new growth engines.

As for LCD in 2018, while the company foresees market uncertainties due to intensified competition, Samsung will strive to solidify its position by offering differentiated products based on its technology leadership. Moreover, Samsung will reinforce its strategic partnerships and expand the sales of value-added products.

Looking to the first quarter, the OLED business is likely to be affected by declining demand due to weak seasonality and by intensifying competition with LTPS LCD in the smartphone market. To secure profitability, Samsung will focus on product line-ups for flagship smartphones and expand its customer portfolio. In addition, the company will improve the productivity of flexible OLED panel manufacturing.

For LCD in the first quarter, even though a decline in LCD demand is expected under weak seasonality, the company forecasts stable utilization thanks to rising demand for large-sized and high-resolution TVs led by major sporting events in the first half. Samsung will also focus on cost reduction and yield improvement as well as expansion of value-added products such as UHD, large-sized, and Quantum Dot products to enhance its profitability in response to market conditions.

Mobile Sees Strong Flagship Sales

The IT & Mobile Communications Division posted KRW 25.47 trillion in consolidated revenue and KRW 2.42 trillion in operating profit for the fourth quarter.

While total smartphone shipments decreased compared to the last quarter, mainly in mass smartphones, sales of flagship models such as Galaxy Note 8 increased. Mobile business earnings decreased due to an increase in marketing cost amid strong seasonality.

Looking ahead to 2018, demand for smartphones is expected to rise thanks to growing replacement demand for premium smartphones. In order to expand the sales of premium smartphones, Samsung will strengthen product competitiveness by differentiating core features and services, such as the camera and Bixby, and reinforce the sell-out programs and experiential stores. In addition, Samsung plans to continue optimizing its mid- to low-end lineup and enhancing productivity in order to achieve qualitative growth of the smartphone business.

In the first quarter, amid forecasts for weak demand for smartphones and tablets due to low seasonality, the company expects to increase its smartphone shipments backed by the newly launched Galaxy A8 and A8+ and upcoming release of the Galaxy flagship, which will launch next month. Both sales and operating profit are expected to grow QoQ due to the rise in ASP.

For the Networks Business, the second half of 2017 saw weak earnings following the completion of LTE investments from its major overseas partners in the first half. Samsung aims to strengthen its business foundation by supplying LTE base stations, mainly in North America, in the first quarter. For 2018, the company will focus on continuing to expand the supply of 5G-ready network solutions into major markets, including Korea, the U.S., and Japan.

Consumer Electronics to Focus on Premium Products

The Consumer Electronics Division, including the Visual Display and Digital Appliances businesses, posted KRW 12.72 trillion in consolidated revenue and KRW 0.51 trillion in operating profit for the fourth quarter.

In the fourth quarter, the global TV market grew by double-digits QoQ thanks to the year-end holiday season, but the market declined YoY due to lower demand in North America, China, and the Middle East. Under these circumstances, earnings slightly declined YoY due to the company scaling back on its mid-range to low-end product lineup and lower product prices from intensified competition. However, earnings improved QoQ thanks to solid sales of premium products during the year-end peak season.

As for the TV market in 2018, demand for ultra-large screen and premium TVs is expected to grow led by major sporting events. As the premium market continues to expand, the company will aim to strengthen its new lineup, including ultra-large screen QLED TVs as well as 8K TVs, and bolster marketing activities. Also, Samsung will provide new experiences and add value by applying Bixby and SmartThings to its TVs.

In the first quarter, TV demand is expected to decline both YoY and QoQ under weak seasonality. Nevertheless, Samsung will aim to strengthen its market leadership in the premium segment by expanding premium product sales and bringing new products to market earlier.

For the Digital Appliances Business in the fourth quarter, the market saw moderate YoY gains due to continued growth in North America and economic recoveries in Europe and CIS. The business’s revenue grew YoY thanks to strong sales of premium products, including the FlexWash washing machine and the Flex Duo with Dual Door oven, in advanced markets. However, an increase in material costs and B2B investments in North America weighed on profit.

Looking ahead, in 2018, Samsung will focus on new growth by strengthening its B2B business and expanding distribution channels including online ones. In the first quarter, the company will expand its premium lineup—with products such as the new Family Hub refrigerator and washing machines with QuickDrive technology—and reinforce global marketing activities.

※ Consolidated Sales and Operating Profit by Segment based on K-IFRS (2016~2017 4Q)

Note 1: Sales for each business include intersegment sales

Note 2: CE (Consumer Electronics), IM (IT & Mobile Communications), DS (Device Solutions), DP (Display Panel)

Note 3: Information on annual earnings is stated according to the business divisions as of 2017.

In the third quarter, the company invested KRW 10.4 trillion, including KRW 7.2 trillion for the semiconductor business and KRW 2.7 trillion for the display segment. This brings the cumulative capital expenditure to KRW 32.9 trillion, as of the end of the third quarter.

In the Memory Business, investments are mainly focused on:

• the Pyeongtaek fab to expand capacity to address rising demand for V-NAND;
• DRAM process migration; and
• supplementing any capacity loss resulting from the migration.

For the foundry business, Samsung is increasing its 10nm capacity to address rising demand for cutting-edge process technology. For the OLED business, Samsung has been concentrating its investments on expanding capacity for flexible panels to respond to growing demand.

In the fourth quarter, a substantial portion of the investments will be made in the semiconductor business to build infrastructure related to new sites and clean-rooms.

On October 31, 2017, Samsung Electronics Board of Directors (BOD) approved the fourth and final phase of the share buyback and cancellation.

The final phase will start on November 1, 2017 and take approximately three months to complete, in which the company will repurchase and cancel 712,000 common shares and 178,000 preferred shares.

Samsung announced in January that it would implement a share buyback of KRW 9.3 trillion won in 2017. With the expected conclusion of the fourth phase, the company’s share buyback and cancellation of 2017 will be completed.

For the first three phases, Samsung has invested approximately KRW 7 trillion. It repurchased and cancelled 1.02 million common shares and 255,000 preferred shares in the first phase; 900,000 common shares and 225,000 preferred shares in the second phase; and 670,000 common shares and 168,000 preferred shares in the third phase. In sum, it is 2.59 million common shares and 648,000 preferred shares that have been repurchased and cancelled in the first three phases.

Quarterly Dividends

The BOD also approved the third quarter dividend of KRW 7,000 per share for both common and preferred.

In the third quarter, strong demand for high-performance memory chipsets for servers and flagship mobile devices was a contributing factor to the company’s overall robust performance. The Semiconductor Business registered significant earnings growth both YoY and QoQ, and the System LSI added to the earnings rally through increased sales of DDIs and image sensors. The display panel segment posted an earnings decline despite the expanded sales of flexible OLED panels for premium smartphones. The Mobile Business saw strong shipments thanks to the launch of Galaxy Note 8 and solid sales of the new Galaxy J series, but its earnings declined QoQ due to the higher sales proportion of mass-market smartphones.

The Memory Business achieved strong earnings results for the quarter on the back of high seasonal demand for all memory applications, the trend toward higher density chips and a continuation of favorable supply and demand conditions and prices. For NAND, the launch of flagship smartphones and the expansion of cloud infrastructure drove strong demand. For DRAM, demand for applications used in servers, mobile devices, PCs and game consoles also remained solid.

For the OLED business, an increase in shipments of flexible displays for customers’ new flagship smartphone launches drove an increase in sales. However, QoQ earnings declined due to an increase in start-up costs of the new OLED production line and increased competition within rigid OLED products. For the LCD business, third quarter earnings declined, as an imbalance in supply and demand led to a decrease in the ASP of LCD panels. Further, capacity expansion in the LCD industry continues to impact prices.

The Mobile Business saw smartphone shipments increase on the back of the global roll-out of the newly launched flagship, Galaxy Note 8, and solid performance of the new Galaxy J series. However, overall revenue and earnings decreased QoQ due to the higher sales of mid- to- low tier models.

Samsung’s TV business saw significant improvements in QoQ earnings driven by increased sales of premium products including QLED TVs. However, due to the higher cost of LCD TV panels and weakening demand of the TV market, YoY earnings were modestly lower.

Looking ahead to the fourth quarter, the company anticipates tight supply and demand conditions to continue for the Memory Business due to strong demand for servers and mobile devices. For the Display Panel segment, increased shipments of flexible OLED products and the release of new rigid OLED panels will improve earnings. However, the LCD segment will be met by weak seasonality, coupled with expanded panel supply. For the Mobile Business, the company will try to maintain solid earnings by increasing flagship sales through the global roll out of the Galaxy Note 8. Meanwhile, the Digital Appliances Business expects to continue revenue growth by ramping up sales of new products including washing machines with QuickDriveTM technology and POWERstick PRO vacuum cleaners. The TV business will focus on increasing sales of premium products including QLED and ultra-large screen TVs.

Moving on to business prospects for 2018, the company expects earnings to grow primarily from the component businesses, as conditions in the memory market are likely to remain favorable and the company expects increased sales of flexible OLED panels. For the Memory Business, demand for high-density, high-performance NAND will increase, as the need for larger data capacity in servers and mobile devices grows.

The company expects positive growth in the DRAM market, due to the development of technologies in big data, artificial intelligence and machine learning, in which faster processing and analysis of data are critical. The technological advancement of mobile devices with dual camera, 3D sensors and on-device AI will spur DRAM growth. As for next year’s outlook for the System LSI and Foundry Businesses, Samsung will continue to drive favorable earnings growth by increasing the supply of 10-nano products and image sensors, and will also focus on strengthening the competitiveness in the sub 7-nano process through investment in the EUV-related infrastructure.

In the display segment, Samsung will continue seeking growth by addressing market demand for flexible OLED display panels with differentiated technology, as OLED is set to become a mainstream feature in smartphones. Although global competition in the LCD panel business is expected to intensify in 2018, Samsung will strive to ensure its profitability by solidifying partnerships with key customers and enhancing the lineup of ultra-large size, high resolution, quantum dot and frameless panels.

As for the Mobile Business, Samsung will strengthen its leadership in the high-end market with flagship smartphones and improve profitability through optimizing product lineups. Moreover, the company will strive to secure business growth opportunities through new technologies such as 5G and by strengthening the services and software competencies.

For the consumer electronics business, Samsung will continue to focus on expanding premium product sales and enhancing its B2B businesses.

Semiconductors Deliver Strong Performance

The Semiconductor businesses posted KRW 9.96 trillion in operating profits on consolidated revenue of KRW 19.91 trillion for the quarter.

The Memory Business achieved strong earnings for the quarter due to strong demand from all applications amid solid supply and demand conditions. For NAND, while overall demand remained solid due to the launch of flagship smartphones and the expansion of cloud infrastructure, Samsung actively responded to demand from value-added and high density markets such as datacenter NVMe SSD. For DRAM, the expansion of cloud services and the trend for higher density drove strong demand. The company focused on maximizing profit by satisfying demand for differentiated products such as server DRAM over 64GB and low-power mobile DRAM.

Looking at the fourth quarter prospects for NAND, tight supply conditions are expected to remain for mobile and SSD applications, due to continued strong demand for high-density mobile products and expansion of datacenters, respectively. In response, the company will pursue a more profit-focused product mix. Looking further ahead to 2018, the trend toward high-performance, high-density mobile NAND is forecast to continue while server SSD adoption is expected to accelerate as big data needs rise. In response, Samsung will focus on expanding V-NAND supply while developing and ramping-up 5th generation V-NAND.

As for the fourth quarter DRAM outlook, high seasonal demand for mobile and PC is expected while datacenter expansion continues. Against this backdrop, the company will concentrate on cost competitiveness by expanding 1xnm process migration. Looking to 2018, high demand from datacenter infrastructure expansion is forecast to continue while demand for contents growth in mobile products will rise on the wide-spread adoption of dual camera, 3D sensors and on-device AI offerings. In response, the company will focus on ramping-up 10nm-class products and expanding sales of differentiated products such as HBM, high bandwidth LPDDR4X.

Turning to the System LSI Business, solid earnings were achieved through increased sales of mobile processors for mid- to low-end smartphones and image sensors for smartphones, while flagship phone launches lifted sales of OLED DDIs. Looking ahead, weak seasonality for processors and image sensors is expected to dampen growth in the fourth quarter. For 2018, the company will focus on sustaining growth of mobile processor and OLED DDI sales and increasing sales of image sensors amid greater adoption of dual camera features on smartphones. Further, Samsung will aim to expand its offerings to IoT, VR and automotive applications.

As for the Foundry Business, favorable results were achieved thanks to increased sales of 10-nano mobile products benefiting from stabilized yields and strong seasonality. Increased demand for differentiated products such as 32-nano mobile DDIs and 65-nano image sensors also contributed to earnings. Looking to the fourth quarter, although growth is likely to be limited, the company expects to diversify the 10-nano node from mobile to cryptocurrency mining applications, while diversifying the customer base for new 8-nano offerings. For 2018, Samsung will increase supply of 10-nano products and image sensors through mass production in line S3 and transformation of memory line 11 to foundry, respectively, and strengthening sub 7-nano process competitiveness by investing in EUV-related infrastructures.

Display to Improve on Flexible OLEDs

The Display Panel segment posted a KRW 8.28 trillion in consolidated revenue and KRW 0.97 trillion in operating profit for the third quarter. Revenues increased due to strong sales of flexible panels. However, total earnings declined driven by increased costs for starting-up new OLED production and decreased ASP for LCD panels.

For the OLED business, an increase in shipments of flexible displays for customers’ new flagship launches drove an increase in sales QoQ. However, QoQ earnings declined due to increased competition within rigid OLED products and startup costs of the new OLED production line.

For the LCD business, third quarter earnings declined, due to a decrease in the ASP of LCD panels. Further, capacity expansion in the LCD industry continues to impact prices.

Looking ahead to the fourth quarter, Samsung expects sales in the OLED business to grow based on increased shipments of flexible and rigid products. However, in the LCD business, Samsung continues to expect some supply-demand imbalance due to increased industry capacity as well as decreased seasonal demand. In response, Samsung will seek to ensure profitability through cost reduction and yield improvement, in addition to expanding the portion of high-end, value-add products such as ultra-large size, high resolution and quantum dot panels.

For 2018, Samsung expects OLED products to become mainstream in the smartphone industry, especially as flexible panels increase within high-end devices. The company plans to focus on achieving continuous growth through customers’ demand for flexible displays and through differentiated high-end products. In the LCD business, intensified competition among panel makers as well as capacity expansion within the industry is expected to be balanced with a growing market for premium TV panels, such as UHD and ultra-large sized. In light of these market conditions, Samsung will continue to improve profitability through reinforcing strategic partnerships with major customers, as well as expanding the value-added product lineup.

Mobile Maintains Solid Smartphone Performance

The IT & Mobile Communications Division posted KRW 27.69 trillion in consolidated revenue and KRW 3.29 trillion in operating profit for the quarter.

Samsung’s smartphone shipment increased on the back of the global roll-out of the newly launched flagship Galaxy Note 8 and solid performance of the new Galaxy J 2017. However, overall revenue and earnings decreased QoQ due to the higher sales portion of mid-to-low tier models.

Looking ahead to the fourth quarter, both smartphone and tablet demands are forecast to increase during the year-end peak season.

Although competition is expected to intensify in the premium segment, the company plans to focus on maintaining solid sales and profit QoQ through increased shipment of flagship models thereby enhancing the product mix.

As for the outlook for 2018, smartphone market growth is expected to recover; however, the difficult business environment is likely to continue due to intensifying competition and higher materials costs.

The company will strive to enhance leadership in the premium segment and to improve profitability through optimizing product lineups. Moreover, the company will aim to secure business growth opportunities through new technologies such as 5G and by strengthening services and software competencies.

Meanwhile, the Networks Business saw decreased sales and profit in Q3 QoQ due to a decline in LTE-related investment from global clients. Looking into the fourth quarter and beyond, the company expects to expand the supply of next generation 5G network solutions in the major advanced markets.

Consumer Electronics to Focus on Premium Products

The Consumer Electronics Division, including the Visual Display and Digital Appliances businesses, posted KRW 11.13 trillion in consolidated revenue and KRW 0.44 trillion in operating profit for the third quarter.

Despite lower demands from advanced markets, significant improvements in QoQ earnings for Samsung’s Visual Display Business were led by increased sales of premium QLED TVs. However, due to higher cost of LCD TV panels and weakening demand of the TV market, YoY earnings were modestly lower.

In the fourth quarter, Samsung will focus on profitability, by increasing the dominance in the premium QLED and ultra-large TV lineups, as well as reinforcing B2B growth including digital signage and Cinema LED businesses.

Looking ahead to 2018, major sports events, including the World Cup and Winter Olympics, are expected to drive demand for UHD and ultra-large screen TVs. Samsung will reinforce its market leadership in the premium market and further improve profitability by increasing the QLED and ultra-large TV lineups.

In Digital Appliances, investment costs in B2B business resulted in a decrease of YoY earnings, despite a modest increase in overall market demand and strong sales of air conditioners and washing machines in Korea.

New products like washing machines with QuickDriveTM technology and POWERstick vacuum cleaners are expected to drive revenue growth in the fourth quarter.

In 2018, Digital Appliances business looks to improve earnings by increasing shipments of premium products as well as expanding the B2B businesses and increasing online channel sales.

※ Consolidated Sales and Operating Profit by Segment based on K-IFRS (2016~2017 3Q)

Note 1: Sales for each business include intersegment sales

Note 2: CE (Consumer Electronics), IM (IT & Mobile Communications), DS (Device Solutions), DP (Display Panel)

Note 3: Information on annual earnings is stated according to the business divisions as of 2017.

In the second quarter, the components businesses drove significant earnings growth, both YoY and QoQ, thanks primarily to strong memory demand for high-density DRAMs and SSDs for servers. System LSI contributed to earnings through increased sales of AP and CIS products while the Display Panel Business expanded sales of flexible OLED panels for premium smartphones and high-value LCDs under stable prices. Profits from the Mobile Business, driven by robust sales for the Galaxy S8 and S8+, also increased significantly QoQ.

The Memory Business posted significant earnings growth, both YoY and QoQ, amid tight supply-demand conditions while strong ASPs coupled with increased demand from the server market also contributed to profits. The System LSI Business increased sales of mobile processors and image sensors.

For the Display Panel business, OLED earnings improved QoQ with the help of increased shipments of flexible displays for premium smartphones. LCD panels enhanced profitability QoQ due mainly to increased sales of high-end, large-size UHD panels, amid stable ASP conditions.

The Mobile Business saw a significant increase in earnings QoQ with the global rollout of the Galaxy S8 and S8+. However the operating profit margin declined slightly YoY due to strong component prices. Earnings for the TV business declined due to increased panel prices and slow demand from Europe and China. For the home appliances business, continued B2B investment led to a decline in earnings YoY.

Regarding Harman’s earnings in the quarter, it registered solid results from operations with USD 1.9 billion in sales and around USD 200 million in operating profit. However, with costs associated with the acquisition, net operating profit was approximately USD 5 million. Samsung expects such costs to continue to impact Harman’s results by an average of USD 100 million each quarter for the next few quarters.

Looking ahead to the third quarter, the company expects favorable semiconductor conditions to continue, although overall earnings may slightly decline QoQ as earnings weaken for the Display Panel and Mobile businesses. For the Display Panel Business, an increase is expected in initial start-up costs for the new OLED production line, and intensifying price competition is forecast from LTPS LCD in the mid- to low-end rigid OLED segment. For the Mobile Business, earnings are forecast to decline due to increased marketing costs related to the launch of a new Note device, with reduced profit contributions from the Galaxy S8 and S8+.

Moving on to the outlook for second half, the company expects earnings to grow primarily from the component businesses, as conditions in the memory market are likely to remain favorable and the company expects increased sales of flexible OLED panels. However, ASP pressures on LCD panels and on rigid OLED panels, prompted by the industry’s increase in LCD supply, may remain a concern.
For the Memory Business, solid demand for servers and mobile devices will continue due to the expansion of new server platforms, cloud services and new smartphones to market in the second half. By expanding the supply of 1Xnm DRAM and 64-layer V-NAND, Samsung will further enhance product competitiveness.

The System LSI and Foundry businesses are also expected to post positive results, while the display segment anticipates an increase in revenue from the expanded supply of flexible OLED panels.

The Mobile Business will aim to sustain the strong sales momentum of premium smartphones through the release of a new Galaxy Note smartphone and continued sales of the Galaxy S8 and S8+. It will also continue to improve the lineup efficiency in the mid- to low-end segment to maintain profitability.

For the TV business, Samsung will focus on improving profitability by expanding its high-end offerings, including ultra-large size and UHD TVs. Additionally, the company expects to solidify its leadership in the premium segment with products such as The Frame and QLED TVs. Meanwhile, the Digital Appliances Business will seek to improve profits in the B2B segment.

Looking at the mid- to long-term, the company will strongly focus on enhancing the competitiveness of the company’s core businesses. To this end, Samsung will reinforce its technological leadership in the semiconductor and OLED industries and will focus on strengthening its design and manufacturing capabilities to transform the System LSI and Foundry businesses as future growth engines.

To respond to a paradigm shift in the IT industry, the company is set to develop new growth engines by making strategic investments and securing advanced technologies through M&As. Challenges lie ahead, however, due to volatilities in the global business environment.

Total capital expenditure (CAPEX) executed in the second quarter was KRW 12.7 trillion, including KRW 7.5 trillion for the semiconductor business and KRW 4.5 trillion for the display segment. Although the capex plan for 2017 has not been finalized, the annual capex is expected to be significantly higher than the previous year.

The Memory Business plans to expand the Pyeongtaek fab to respond to increasing demand for V-NAND. The business also expects to spend capex on converting a part of existing planar capacity to V-NAND. Despite the increase in 2017 capex for the Memory Business, the memory supply outlook of Samsung for this year remains unchanged. The Foundry Business is increasing 10nm capacity to address demand for cutting-edge process technology. In addition, it expects to allocate sizable capex for converting part of line 11 from DRAM to image sensor production in the second half. Further, Samsung is continuously investing in flexible OLED capacity to respond to increasing demand from customers.

Semiconductor Maintains Strong Performance

The Semiconductor businesses posted KRW 8.03 trillion in operating profits on consolidated revenue of KRW 17.58 trillion for the quarter.

The Memory Business achieved solid earnings growth in the quarter thanks to continued strong demand for high-density server DRAM and SDD, despite weaker seasonal demand for mobile. Limited supply conditions also remained in the industry, which allowed for favorable supply-demand conditions and prices. For NAND, earnings were driven by expanded sales of value-added products, such as mobile products over 64GB, datacenter NVMe SSD and enterprise SSD. For DRAM, demand for differentiated products, such as high-density server products and HBM, contributed to earnings growth.
Looking at the second half outlook for NAND, Samsung expects strong industry demand from flagship smartphone launches and expansion of new datacenters, while restricted supply conditions will also remain. The company will focus on ramping up production of 64-layer V-NAND at its Pyeongtaek fab, and will seek to improve profitability by expanding sales of differentiated products such as V-NAND-based server SSDs.

As for the DRAM outlook, demand for high-density products over 64GB is expected to remain solid due to expansion of new server platforms and continued demand for datacenter servers. Mobile demand will also remain solid thanks to high-end smartphone launches. The company plans to actively respond to increasing demand by expanding 1Xnm migration, while also enhancing profitability through sales of high value-added products, such as mobile DRAM over 4GB and server DRAM over 64GB.

Turning to the System LSI Business, earnings improved QoQ due mainly to increased sales of processors for flagship smartphones and steady sales of 14nm processors for mid- to low-end smartphones. Sales of image sensors also contributed to earnings. Looking ahead, continued growth is expected thanks to stable supply of 10nm mobile processors and increased supply of OLED DDIs for flagship smartphones. Growing market adoption of dual camera solutions will also boost image sensor shipments. In the mid-to-long term, System LSI will seek to diversify its customer base and product portfolio with offerings for various applications, including IoT, automotive and VR.

As for the Foundry Business, which became independent from System LSI in the second quarter, favorable results were achieved thanks to mass production of 10nm processors for flagship smartphones and increased sales of 14nm mobile processors. Looking ahead, Samsung plans to actively respond to demand for 10nm mobile processors by expanding capacity and improving production efficiency. It will also look to maintain technology leadership by completing development of the 8nm process and preparing advanced infrastructures including EUV.

Display Panel Continues Solid Earnings

The Display Panel segment posted KRW 7.71 trillion in consolidated revenue and KRW 1.71 trillion in operating profit for the quarter driven by increased sales of premium OLED displays and high-end, large-size LCD panels.

For the OLED business, earnings improved QoQ on the back of increased shipments of premium flexible displays for flagship smartphones while the LCD business saw profitability enhanced QoQ due mainly to increased sales of high-end, large-size UHD panels amid stable ASP conditions.
Looking ahead to the second half for the OLED business, although the company forecasts increased sales of premium flexible displays, the initial costs of the new OLED production line during the third quarter is expected to weigh on profit. Growing competition from LTPS LCDs will also pose a challenge for the mid- to low-end rigid OLED segment. Samsung plans to maintain profitability by actively addressing customer demand for new products through stable ramp up of the new OLED production line.

As for the LCD business in the second half, while the company forecasts continued growth in the premium, large-size, high-resolution UHD TV panel segment, increased panel inventory of set makers amid capacity expansion in the LCD industry is expected. Samsung will focus on enhancing profitability through improved cost competitiveness and by expanding its portfolio of high-end products including ultra-large size, high-resolution, frameless and curved panels.

Mobile Division Posts Significant Increase

The IT & Mobile Communications (IM) Division posted KRW 30.01 trillion in consolidated revenue and KRW 4.06 trillion in operating profit for the quarter.

Samsung’s earnings significantly increased QoQ driven by the strong sales of the Galaxy S8 and S8+ smartphones. The Galaxy S8 and S8+ have outsold the Galaxy S7 series in almost all regions, thanks to the new Infinity Display design and enhanced features including water and dust proofing and iris recognition. The overall product mix also improved as the sales proportion of the Galaxy S8+ accounted for over 50 percent of the total Galaxy S8 series.

However, despite the strong sales performance of premium smartphones, Samsung’s total smartphone shipments remained at a similar level QoQ, due to decreased sales of mid- to low-end products.
In the second half, demand for smartphones and tablets is forecast to increase as the market enters a period of strong seasonality. However, competition is expected to intensify as new smartphone models are released by competitors. In response, Samsung will launch a new Galaxy Note with enhanced performance and features, to maintain the strong sales momentum of its premium smartphones, together with the Galaxy S8 and S8+.

For the mid- to low-end segment, Samsung will actively respond to demand from emerging markets and maintain profitability with enhanced products such as the Galaxy J series 2017 editions which are equipped with elegant metal designs, high-definition selfie cameras and specialized services such as Samsung Pay.

Looking into the third quarter, revenue and profit are expected to decline QoQ due to increased marketing expenses associated with the launch of the new Galaxy Note and the reduced launching effect of the Galaxy S8 and S8+.

Putting customer safety first and foremost, the company will continue to reinforce product competitiveness based on technological leadership and also strengthen its differentiated services across all of its products. In particular, the company will foster differentiated services by creating an open ecosystem that promotes full connectivity between key services such as Samsung Pay, Samsung Cloud, Bixby, and other third-party services, while enhancing connected services among its various product categories.

As for the Networks Business, solid revenue and profit were maintained QoQ due to increased LTE investment by major global partners in the second quarter. The company will focus on next generation network business such as IoT while continuing to expand LTE-A into major advanced markets.

Consumer Electronics Focuses on Premium Products

The Consumer Electronics Division, including the Visual Display and Digital Appliances businesses, posted KRW 10.92 trillion in consolidated revenue and KRW 0.32 trillion in operating profit for the second quarter.

In the second quarter, overall TV market demand declined YoY, owing to heightened demand in 2016 due to major global sporting events, as well as a slowdown in the Chinese market. Although the company maintained its leading position in the premium market by increasing sales of UHD and ultra large-size TVs, profit declined YoY due to increased panel prices.

For the appliances market, overall demand showed a moderate increase due to growth in the North American market, strong demand for air conditioners in the Korean market and economic recovery in emerging markets such as Southwest Asia and CIS. Samsung maintained revenue growth thanks to increased sales of premium products such as the Wind-Free air conditioner. However, profit decreased YoY due to increased raw material costs and investments in the B2B market.

Looking to the second half, TV market demand is projected to show slight growth YoY while panel prices are expected to stabilize. Samsung will secure profitability by expanding the sales portion of premium products including UHD and ultra large screen TVs. Led by The Frame and QLED TVs, the company will solidify its premium leadership in the market. To maximize QLED TV sales, Samsung will strengthen marketing investment and implement sales promotions tailored to local markets.

As for the Digital Appliances Business, the company will strengthen its partnerships with distributors and seek to improve profitability through increased sales of premium products, including Family Hub refrigerators and FlexWash washers. In addition, Samsung will strengthen its B2B business with built-in home appliances and system air conditioners.

※ Consolidated Sales and Operating Profit by Segment based on K-IFRS (2016~2017 2Q)

Note 1: Sales for each business include intersegment sales

Note 2: CE (Consumer Electronics), IM (IT & Mobile Communications), DS (Device Solutions), DP (Display Panel)

Note 3: Information on annual earnings is stated according to the business divisions as of 2017.

In the first quarter, sales for the memory and display businesses increased, owing to high ASPs and strong sales of premium products. However, revenue from the mobile business decreased due to a decline in flagship product sales.

Profits were driven by the components businesses, namely the semiconductor division and the display panel segment.

The memory business posted significant earnings growth, both YoY and QoQ, led by favorable supply-demand conditions and sales growth of premium high-density enterprise SSDs. The System LSI business improved its earnings on the back of increased sales of application processors for flagship smartphones and greater demand for image sensors and display driver IC (DDI).

For the display panel business, LCD maintained solid earnings QoQ due to robust sales of large high-resolution panels under favorable ASP conditions. Overall OLED performance improved YoY, due to strong demand, and slightly improved QoQ as a result of increased sales of new flexible products.

For the IT & Mobile Communications (IM) Division, earnings declined QoQ due to price adjustment of the Galaxy S7. As for the Consumer Electronics (CE) Division, earnings for the TV business declined YoY due to higher panel prices.

Regarding the recently acquired Harman, its earnings were consolidated into Samsung’s first quarter results beginning March 11. As a result, its impact on the first quarter financials was minimal.

Looking ahead to the second quarter, the company expects to achieve growth on the back of continued robust memory performance together with improved earnings from the mobile business following the global rollout of the Galaxy S8 and S8+.

For the components businesses, semiconductor earnings growth is expected to continue. This will be driven by solid demand for high-density DRAM and SSDs in the server market, increased shipments of 10nm AP, and sustained strong demand for image sensors and DDI.

As for the display business, the company will focus on fulfilling strong demand for flexible OLED panels, and look to maintain profitability in LCD through enhanced cost reduction.

For the set businesses, operating profit is expected to improve in the mobile business following the global expansion of the Galaxy S8 and S8+. In the CE Division, earnings will likely improve with the launch of QLED TV and strong seasonal demand for air conditioners.

Moving on to the outlook for the full year ahead, the company expects overall earnings to grow YoY. This will be led mainly by the components businesses based on favorable supply-demand conditions for memory and greater shipments of OLED panels. The set businesses, meanwhile, will focus on maintaining profitability through expanded sales of flagship products.

For the memory business, amid strong demand for servers and mobile devices, the company will look to maintain profitability by enhancing cost competitiveness through sales of 1xnm DRAM and 64-layer V- NAND. Meanwhile, the possibility of an increase in the industry’s supply of 3D NAND in the second half of 2017 exists.

For OLED, revenue is expected to grow YoY due to an increase in the supply of flexible panels in the second half. However, in the mid- to low-end segment, the company anticipates possible competition from LTPS LCDs.

For the mobile business, market competition is expected to intensify in the second half. Against this backdrop, the company will strive to maintain profitability through robust sales of the Galaxy S8 and S8+ and the launch of a new flagship smartphone in the second half. Moreover, Samsung will also look to sustain profitability in the mid- to low-end segment by launching new products and streamlining the lineup.

For the TV business, Samsung will focus on increasing profitability by expanding its high-end lineup, including ultra-large size and UHD TVs. Additionally the home appliance business will continue to secure new sources of revenue by increasing investments in the B2B segment.

Looking at the mid- to long-term, the growth of IoT, AI and automotive businesses in the IT industry is expected to drive demand for components, particularly high-performance energy-efficient memory products, SoCs and sensors, as well as flexible OLED panels for new form factors.

Meanwhile new business opportunities are expected in the set business with developments in cloud, AI and connectivity solutions for smartphones and smart home products.

In response to these paradigm shifts, the company is aware of the need to strengthen its capabilities via strategic investments and M&As. However, uncertainties in the business environment may pose challenges.

Total capital expenditure (CAPEX) executed in the first quarter was KRW 9.8 trillion, including KRW 5.0 trillion for the semiconductor business and KRW 4.2 trillion for the display segment. Although the capex plan for 2017 has not been finalized, the overall annual capex is expected to increase significantly particularly for investments in V-NAND, System LSI and OLED.

Differentiated Chips & Stable Demand to Drive Profitability

The Semiconductor business posted KRW 6.31 trillion in operating profits on consolidated revenue of KRW 15.66 trillion for the quarter.

Samsung improved earnings in the first quarter in both DRAM and NAND by focusing on high-density and value-added products for datacenters, enterprise SSDs and flagship smartphones. Even amid slower demand due to weak seasonality compared with the previous quarter, the prices of memory products remained strong due to limited supply.

For NAND, Samsung continued to post solid growth in the quarter by actively meeting demand for high-density server SSD over 4TB and mobile products over 64GB and by expanding 48-layer V-NAND supply.

On the DRAM side, strong demand for datacenter DRAM and customers stocking up to preempt any market uncertainties in the second half have contributed to solid supply and demand and strong pricing. The company’s efforts to enhance profitability through cost competitiveness in expanding the 1xnm process also boosted gains in the first quarter.

Looking ahead to the second quarter, while overall demand is expected to be solid due mainly to demand for high-density server SSD, overall supply will remain tight due to constraints on the industry’s 3D NAND supply. However, Samsung will improve profitability and product competitiveness by expanding 48-layer V-NAND supply and mass producing 64-layer V-NAND.

In DRAM, with the expansion of new server platforms in the market, demand for high performance server DRAM over 64GB is forecast to increase. New mobile device launches and adoption of higher density DRAM in the second quarter will increase demand for mobile DRAM. Samsung will remain profitable with high performance, high value-added chipsets.

In the second half, overall supply and demand in the memory market will be stable amid peak seasonality and new mobile devices being released in the market. However, tight supply-demand conditions may change due to possible expansion of industry supply.

With regards to the System LSI business, Samsung improved its earnings in the first quarter on the back of strong sales of APs, DDIs and image sensors for flagship smartphones and 14nm APs for mid- to low-end smartphones. In the second quarter, the company expects to secure growth with solid market demand for 10nm APs, image sensors and DDIs.

For 2017, System LSI will diversify its 14nm product line-up for automotive, IoT and wearable industries and produce differentiated products with innovative technologies.

Display Panel Segment Maintains Solid Performance

The Display Panel segment posted KRW 7.29 trillion in consolidated revenue and KRW 1.30 trillion in operating profit for the quarter.

For OLED, earnings improved YoY due to higher utilization rates driven by strong demand while also gaining QoQ due to increased shipments of flexible displays and strong demand for rigid OLED panels.

For LCD, the company maintained solid earnings QoQ by increasing sales of large-size high-resolution panels under favorable supply and demand conditions. An expansion in the portion of value-added LCD products, particularly large-size UHD panels, helped strengthen profitability for the quarter.

Looking to the second quarter, the company plans to actively address the expected continuous rise in demand for OLED panels, including flexible displays. For LCD, demand for large-size and UHD panels is forecast to continue and the company will focus on securing profits through expansion of value-added products, including ultra large-size and curved panels, and by improving yields and reducing costs.

For 2017, although YoY revenue growth in the OLED business is forecast on the back of increased flexible panel shipments in the second half, growing competitiveness from LTPS LCD panels against OLED in the mid- to low-end segment will present challenges. For the LCD business, under expanding market conditions the company will continue to focus on strengthening profitability and competitiveness through value-added and differentiated products such as frameless and curved TVs.

Flagships Sales Expansion to Strengthen Mobile Leadership

The IM Division – comprising the Mobile Communications and Networks Businesses – posted KRW 23.50 trillion in consolidated revenue and KRW 2.07 trillion in operating profit for the quarter.

While smartphone and tablet market demand saw a slight decrease QoQ due to seasonal effects, smartphone shipments for the division slightly increased. This increase was largely due to the newly released Galaxy A 2017 series and solid sales in the mid- to low-end segment in emerging markets. However, overall profit for the division decreased due to price adjustments of Galaxy S7 and S7 edge.

Looking ahead to the second quarter, while market demand for smartphones and tablets is forecast to remain flat, the worldwide rollout of latest flagship models, Galaxy S8 and S8+, is expected to help the division increase revenue and profit QoQ, while smartphone shipments are expected to remain flat due to decreased sales of mid- to low-end smartphones. The Galaxy S8 and S8+, which were launched on April 21, show robust initial sales.

As for the year ahead, Samsung anticipates market demand in smartphones to slightly increase with solid replacement demand growth in the mid- to high-end segment. However, competition is expected to intensify with newly launched smartphones in the market. The company will aim to improve performance YoY by maximizing sales of the Galaxy S8 and S8+ and successfully launching a new flagship smartphone in the second half. In addition, the company will maintain profitability in the mid- to low-end segment.

For the Networks Business, the company will seek growth through the continued rollout of LTE services in new markets around the world, expanded business opportunities with next generation networks, including IoT and LTE-A Pro, and preparation for 5G broadband services.

Consumer Electronics to Focus on Premium Products

The Consumer Electronics Division, including the Visual Display and Digital Appliances businesses, posted KRW 10.34 trillion in consolidated revenue and KRW 0.38 trillion in operating profit for the first quarter.

In the first quarter, the TV market is projected to decline QoQ due to weak seasonality as well as decreased demand in the European and Latin American markets. Although the company achieved sales growth and maintained its leading position in the premium market thanks to its high-end product line-ups including Quantum Dot TV and curved TV, profit declined YoY due to increased panel prices and currency fluctuations.

For the appliances business, sales improved YoY led by continued growth in the North American market and increased sales of innovative premium products such as Chef Collection refrigerators and Activewash washers. However, earnings remained flat YoY due to investments in the North American B2B market.

Looking to the second quarter, TV market demand is projected to show a slight decrease YoY due to sluggish demand mostly in Europe. Under these circumstances, Samsung will aim to secure profitability and solidify its market leadership by expanding its premium TV line-ups including UHD and curved TVs, as well as beginning sales of new premium products such as QLED TVs and The Frame.

As for the Digital Appliances Business, the company will strengthen its partnership with retailers and expand sales of seasonal products, including air conditioners, and focus on the launch of new products such as Family Hub 2.0 refrigerators and FlexWash washers in the second quarter.

For the TV market in 2017, demand is forecast to slightly increase due to recovery in emerging markets and strong UHD TV demand. While market competition is expected to intensify, Samsung will focus on sales of premium products to solidify its leadership in major markets.

As for Digital Appliances in 2017, Samsung will strengthen its B2B business by making full-scale advancement into the North American builders market, boosting online sales through key distribution channels, and expanding sales of premium products to achieve stronger performance.

※ Consolidated Sales and Operating Profit by Segment based on K-IFRS (2016~2017 1Q)

Note 1: Sales for each business include intersegment sales
Note 2: CE (Consumer Electronics), IM (IT & Mobile Communications), DS (Device Solutions), DP (Display Panel)
Note 3: Information on annual earnings is stated according to the business divisions as of 2017.

Overall, the company reported full-year 2016 revenue of KRW 201.87 trillion and full-year 2016 operating profit of KRW 29.24 trillion.

Fourth quarter earnings were driven by the components businesses, mainly the Memory business and the Display Panel segment, which manufactures OLED and LCD screens. Robust sales of high-end, high-performance memory products and expanded process migration in V-NAND, plus strong shipments of OLED and large-size UHD panels contributed to profitability. The stronger US dollar against the Korean won also had a positive impact on operating profits.

The Mobile business registered gains YOY due to solid sales of flagship products such as Galaxy S7/ S7 edge and improved profitability of mid-to-low end models. The Consumer Electronics division posted an earnings decline, despite increased sales of premium TVs including SUHD and curved TVs. The Digital Appliances business also saw positive demand in the fourth quarter, but new investments in B2B resulted in a slip in earnings.

For 2016, Samsung achieved solid results despite the Note 7 discontinuation in the second half as a result of continuous efforts during past two to three years to strengthen its component business competitiveness by focusing on value-added products and widening the technology gap in the DRAM business as well as strategic investments in V-NAND and OLED. The company also made several key acquisitions and divestures which will enable the future growth.

In 2017, the components businesses expect solid demand for value-added semiconductor products and for flexible OLED and large-size LCD panels. The company will seek to improve profitability in DRAM and NAND amid continued growing demand for data center servers and mobile devices. System LSI will continue to diversify its customer base in order to increase earnings. For display panels, earnings from high-end flexible OLED are expected to increase YOY due to an expansion in supply, and Samsung expects to meet stronger competition in the LCD market with value-added products focusing on UHD and large-size TV panels.

For Mobile in 2017, the company will continue to innovate both in software and hardware across its entire line-up and prioritize consumer safety. Although the growth of the global smartphone market is expected to slow this year, new services such as artificial intelligence (AI) will be a differentiating factor. The mobile business will seek to strengthen its leadership in the premium market and boost competitiveness of mid-to-low end smartphones by adding innovative features available in high-end models.

For Consumer Electronics in 2017, the company will aim to strengthen its market leadership in the premium TV market with QLED TV and large-size UHD TV and enhance its brand in the B2B sector of the home appliances market.

Moving into the first quarter, overall earnings are expected to decline QOQ, as earnings in the set businesses are projected to decrease resulting from increased marketing expenses in the Mobile business and a sales decrease of TVs due to weak seasonal demand.

For the Memory business, the company aims to achieve solid earnings despite seasonal weakness of the first quarter with a focus on high-density and high-performance products. The ramp up of 10nm mobile AP production by System LSI is expected to maintain stable revenue. The Display Panel segment will seek to stay profitable by meeting demand for OLED panels and expanding shipments of value-added LCD panels.

Total capital expenditure (CAPEX) executed in 2016 was KRW 25.5 trillion, which is lower than the previous guideline of KRW 27 trillion. This was mainly due to the year-end investments carrying over to 2017. Investment in the display panel segment reached KRW 9.8 trillion, while the Semiconductor business was accountable for KRW 13.2 trillion in CAPEX, with an 8:2 split between the Memory and System LSI businesses.

The CAPEX plan for 2017 has not been finalized.

Looking at the mid- to long-term, based on paradigm shifts in the IT industry from the growth of IoT, AI and automotive businesses, new demand is expected to spur growth in the components business. Additionally, new designs and usages are expected to emerge in the set businesses.

In the Semiconductor business, the company expects to see huge growth in demand for high-density, high-performance memory for processing big data in the server market and chipsets for automotive and AI-related businesses.

In the OLED business, the demand for value-added flexible panel is projected to grow substantially from the innovations in smartphone form factors.

In the set business, the importance of cloud and AI solutions for mobile devices will expand rapidly, as well as connectivity solutions for smart homes.

Through these new developments, Samsung expects significant new business opportunities. However, the company remains mindful of uncertainties in the global business environment. These circumstances could potentially bring challenges to the execution of its mid- to long-term business strategies, such as M&A and investment decisions and developing new growth engines.

Semiconductor Posts Strong Growth

The Semiconductor business registered KRW 4.95 trillion in operating profits on consolidated revenue of KRW 14.86 trillion for the quarter.

The memory division achieved strong earnings growth in the fourth quarter by focusing on high profitability and a differentiated product mix.

For NAND, demand for mobile products such as high-density SSD remained solid while industry supply was restricted. The company posted significant QOQ growth by responding to demand for high-end enterprise SSD based on V-NAND.

For DRAM, supply and demand conditions remained favorable. The company achieved solid earnings by concentrating on a profit-focused product mix and addressing increased mobile demand, particularly for smartphones, high-end PCs and data center servers.

Looking to the memory outlook for 2017, stable demand from mobile and servers is expected to continue.

For NAND, earnings will be driven by higher demand for high-density SSD including NVMe over 256GB and increased adoption of high-density SSD in data centers and enterprise servers. Demand for mobile storage will grow as smartphones transition to larger storage. Although the industry’s 3D NAND supply will be a key variable, supply and demand is expected to remain favorable throughout the year. The company is also preparing for mass production at its Pyeongtaek site while enhancing its leadership through 64-layer process migration.

For DRAM, demand will remain solid throughout the year led by higher densities in data centers and smartphones. Samsung will focus on maximizing profitability through sales of high-density and low-power products, and by expanding 1Xnm process migration.

Looking at the first quarter, weak seasonality will impact demand although overall conditions will remain solid due to limited industry supply. For NAND, stable demand for value-added products such as high-density storage will continue and the company aims to strengthen profitability through 48-layer V-NAND and mass production of 64-layer V-NAND. For DRAM, adoption of higher densities will continue and Samsung plans to expand supply of the industry’s first mass-produced10-nm class products.

Regarding the System LSI business, increased sales of mid-to-low end mobile AP, image sensors, and DDI driven by the growth of China’s mobile market contributed to solid earnings results in the fourth quarter. The company also maintained its technological leadership with the mass production of industry’s first 10-nm process.

For 2017, System LSI will focus on securing growth through high utilization ratio by diversifying 14nm product line-ups and by responding to rising demand for image sensor and DDI products. It will also continue to strengthen technological competitiveness by securing stable supply of 10-nm products. In the first quarter, the company will ramp up mass-production of 10-nm products for flagship smartphones, and actively respond to demand for 14-nm products for mid-to-low end smartphones.

Display Continues Solid Performance

The Display Panel segment posted KRW 7.42 trillion in consolidated revenue and KRW 1.34 trillion in operating profit for the quarter, driven by increased shipments from OLED panels and improved earnings from large-sized LCD TV panels.

For OLED, the company achieved solid earnings in the fourth quarter by increasing sales through customer diversification and by continued cost reduction.

For LCD, earnings improved QOQ under stabilized ASPs led by favorable supply-demand conditions. Moreover, the company increased profitability through improved yield and cost reduction, and the expansion of value-added products, especially large-size UHD TV panels.

Looking ahead to 2017, the company will strive to improve earnings YOY by increasing shipments of flexible OLED through its technological leadership and expansion of capacity. For LCD, although competition will intensify, the market for premium TV panels is expected to grow. In response, the company will aim to strengthen profitability by improving the competitiveness of value-added products, focusing on UHDs and large-size panels, as well as expanding the portion of differentiated products such as frameless and curved TV panels.

For the first quarter, OLED demand is expected to rise as smartphone makers pursue product differentiation. Under these circumstances, the company will focus on actively addressing customer demand and enhancing its product mix. As for LCD, weak seasonality will dampen demand although migration toward UHD TV and larger screens is expected to continue amid favorable supply-demand conditions. In turn, the company will focus on cost reduction and yield improvement as well as expansion of value-added products such as ultra-large size, high resolution and curved panels.

Premium Products to Drive Mobile Growth

The IT & Mobile Communications (IM) Division posted KRW 23.61 trillion in consolidated revenue and KRW 2.50 trillion in operating profit for the quarter. The fourth quarter saw higher market demand for smartphones and tablets on year-end peak seasonality.

The Mobile business saw its earnings increase YOY on the back of continued robust sales of the flagship Galaxy S7 and S7 edge as well as improved profitability in the mid-to-low end segment.

Looking ahead to 2017, while slow growth in smartphone demand is forecast, new services such as AI are expected to be differentiating factors for the industry this year.

Samsung will look to reinforce its market leadership and drive growth in the premium smartphone segment with differentiated design and innovative features. The company also plans to enhance the competitiveness of its mid-to-low end models by introducing water and dust-proof features and fingerprint recognition.

In addition, the company will continue to strengthen its software and service competencies to provide new customer values by expanding the roll out of services such as Samsung Cloud and Samsung Pay, and by introducing AI-based services on premium smartphones.

This year, the company’s priority will be to ensure consumer safety and product quality by enhancing product assurance processes, implementing new preventive measures and augmenting a dedicated team of experts.

In the first quarter, although weak demand for smartphones and tablets is forecast due to seasonality, increased shipments of Samsung smartphones such as the mid-tier Galaxy A and J series is expected to contribute to QOQ sales growth, while profit will decrease slightly QOQ due to increased expenses including marketing.

As for the Networks Business, the continued roll out of 4G LTE services in global markets helped increase sales and enhance earnings in the fourth quarter. Samsung aims to maintain solid sales in the first quarter thanks to new 4G opportunities in emerging markets as well as LTE business expansion with existing customers.

In 2017, the company will continue to maintain the current sales momentum by expanding LTE business in emerging markets, and next generation IoT network business in advanced markets.

Consumer Electronics Posts Decline in Profit

The Consumer Electronics Division, including the Visual Display and Digital Appliances businesses, posted KRW 13.64 trillion in consolidated revenue and KRW 0.32 trillion in operating profit for the fourth quarter.

In the fourth quarter, global TV market demand remained flat YOY due to weakness in emerging markets, despite the positive performance in developed markets. Under these circumstances, we were able to outperform the market growth rate and strengthen our market share in the premium segment led by promotional sales in the year-end peak season.

However, 4Q earnings decreased YOY due to increased panel price and currency fluctuations.

Looking to the TV market in 2017, demand is expected to slightly increase as emerging markets recover and replacement purchases increase. Also, the company foresees the demand in premium large-size UHD TV models will continue to grow. In spite of such forecasts, currency fluctuation in major markets may potentially dampen growth and competition is likely to intensify. In 2017, the company will expand its premium lineup including the newly introduced QLED TV. By providing innovative new products, Samsung will aim to secure profitability and solidify its market leadership.

In the first quarter, TV demand is expected to decline under weak seasonal demand. Under these circumstances, the company also forecasts a slight decline in sales as a result of panel price fluctuations.  Nevertheless, Samsung will focus on improving profitability by bringing new premium products to market earlier.

For the Digital Appliances business, in the fourth quarter, overall demand slightly decreased amid weakness in emerging markets despite growth in North America. The company achieved YOY sales growth by expanding sales of premium products, including Add Wash and the Chef Collection series, while new B2B investments had a negative impact on overall earnings.

In 2017, the company will focus on the premium market by introducing innovative products such as the Family Hub 2.0 refrigerator and Flex Wash & Flex Dry. Moreover, in the B2B market, Samsung will aim to enhance its brand value and competitiveness by expanding investments in product development, marketing, etc.

※ Consolidated Sales and Operating Profit by Segment based on K-IFRS (2014~2016)

Note 1: Sales for each business include intersegment sales

Note 2: CE (Consumer Electronics), IM (IT & Mobile Communications), DS (Device Solutions), DP (Display Panel)

Note 3: Information on annual earnings is stated according to the business divisions as of 2016.

For the components businesses, operating profit increased QOQ due to expanded sales of high-end products, such as SSDs and flexible OLED panels, but decreased marginally YOY due to a price correction for DRAM during the first half of 2016.

For the IT & Mobile Communications Division, earnings declined due to the Galaxy Note7 discontinuation. However, the Consumer Electronics Division achieved solid earnings growth YOY driven by strong sales of SUHD TVs and premium home appliances.

The company estimated that the stronger Korean won against major currencies in the third quarter negatively impacted operating profit by approximately KRW 700 billion, mostly on the components business side.

Looking ahead to the fourth quarter, the company expects earnings to improve YOY driven by strong performance in the components business. The mobile business expects a recovery in its earnings to a similar level with that of the fourth quarter of 2015, led by solid sales of the Galaxy S7 and S7 edge.

For the semiconductor business in the fourth quarter, the company expects earnings to improve YOY due to increased sales of V-NAND based SSD. Earnings for the display business are projected to improve YOY due to recovery in LCD, amid declines in flexible OLED panel shipments QOQ resulting from the discontinuation of the Galaxy Note7.

Looking to 2017, the company will focus on achieving solid earnings growth through normalization of the mobile business while improving earnings for the components businesses through expansion of V-NAND and OLED panels.

Regarding the memory business, the company expects earnings in NAND to increase significantly, led by the supply expansion of the highly profitable V-NAND. It also expects to strengthen its technological leadership by expanding 64 layer V-NAND and 1Xnm DRAM.

In the System LSI business, the company will aim to sustain growth momentum by expanding leadership in 10-nanometer process technology.

For the OLED business, the company expects to achieve significant earnings improvement YOY, by expanding the supply of high-end flexible OLED panels.

Regarding the mobile business, the company will focus on expanding sales of new flagship products with differentiated design and innovative features, as well as regaining consumers’ confidence. Samsung will concentrate on strengthening its competitiveness by continuously enhancing solution capabilities such as KNOX, Samsung Pay and cloud-related and artificial intelligence-related services.

For the Consumer Electronics business, the company will look to further solidify its leadership in the premium TV market based on Quantum Dot technology and improve earnings in home appliances by expanding sales of premium products and strengthening its B2B business.

The company estimates total capital expenditure (CAPEX) for 2016 will be over KRW 27 trillion, a record high for the company. CAPEX for the semiconductor business is expected to reach KRW 13.2 trillion, while CAPEX for the display business will reach KRW 10.9 trillion, more than double the figure of 2015.

In particular, the company is focusing on investments on OLED and V-NAND with significant demand increase expected in OLED in 2017 as well as solid demand growth in V-NAND.

Semiconductor Delivers Strong Growth

The Semiconductor business posted KRW 13.15 trillion in consolidated revenue and KRW 3.37 trillion in operating profit for the quarter.

Samsung saw significant growth in the Semiconductor business. In particular, demand for memory chips saw a remarkable increase, due mainly to high-density, high-performance mobile and server products, including V-NAND based SSD.

System LSI posted solid earnings on the back of 14-nanometer foundry demand and increased sales of mid-to-low end system-on-chip (SOC) and image sensors.

In the fourth quarter, strong demand for NAND is expected to continue thanks to the expanded adoption of SSD in all segments and the growing need for high-density chips for mobile devices. Market conditions for DRAM will remain stable, despite low seasonality, as mobile DRAM demand is expected to be solid due to new smartphone launches and increased shipments of high-density memory chips. For the memory business, the company will seek to further improve its product mix with differentiated products like V-NAND and 20-nanometer DRAM to drive revenue.

Meanwhile, Samsung anticipates leadership in logic process technology to be enhanced when it begins mass production of the industry’s first 10-nanometer process and rolls out products in the fourth quarter.

Looking ahead to next year, the semiconductor business expects to improve profitability with differentiated products and solid market demand for high-performance and high-density products.

Particularly, with the rising need for greater storage capacity in mobile devices, demand for high-density mobile storage over 64GB will increase, while the adoption of high-density SSDs for enterprise, data centers and PCs will contribute to earnings. The company also expects to secure differentiated profitability through industry-leading products, including 48-layer V-NAND, and a focus on 64-layer migration.

In DRAM, the market will remain stable as demand for server and mobile memory chips is expected to grow due to the expansion of cloud services and high density mobile product.

In System LSI, the business will strive to ensure continuous growth through the full-scale ramp of 10-nanometer technology, while maintaining a high utilization rate of 14-nanomerter capacity.

Continued Improvement in Display Performance

The Display Panel segment posted KRW 7.06 trillion in consolidated revenue and KRW 1.02 trillion in operating profit for the quarter driven by increased earnings of OLED panels and increased shipments of large-sized LCD TV panels.

For the OLED business, third quarter earnings improved significantly QOQ due to an overall increase in shipments and expanded sales of high-end products including flexible displays.

For the LCD business, the third quarter saw a continued recovery as earnings turned to a profit and shipments of TV panel units grew significantly. The company secured profitability by increasing shipments of value-added products such as large-sized UHD panels, while also benefiting from improved supply-demand conditions and higher production yields and cost reduction.

Looking to the fourth quarter, Samsung expects continued demand growth for OLED panels under strong seasonality for the smartphone market. Against this backdrop, the company will seek to actively address demand for flagship products and achieve solid results by delivering an enhanced product mix.

As for the LCD market in the fourth quarter, Samsung expects a continuation of UHD TV market growth and migration toward larger screens. In response, the company will focus on improving sales and profitability by reducing manufacturing costs and enhancing production yields, as well as expanding its portfolio to value-added products such as ultra-large size, high resolution and curved panels.

Looking toward 2017, Samsung plans to improve earnings for the OLED business significantly YOY by expanding its supply of flexible displays to address demand for major smartphone customers. For the LCD business, against a forecasted continuation of demand growth for premium TV panels, Samsung will focus on strengthening profitability and the competitiveness of value-added products such as UHD and large-sized TV panels.

Mobile Posts Decline in Profit

The IM Division posted KRW 22.54 trillion in consolidated revenue and KRW 0.10 trillion in operating profit for the quarter.

The Mobile business saw its earnings decrease significantly QOQ due to the effects of the discontinuation of the Galaxy Note7. However, smartphone shipments remained solid due to continued stable sales of its existing flagship devices, including the Galaxy S7 and S7 edge, and steady growth in the mid-tier Galaxy A and J series.

Looking ahead to the fourth quarter, smartphone and tablet demand is forecast to increase during the year-end peak season.

The company will strive to achieve comparable YOY earnings in the fourth quarter, helped by solid sales of the Galaxy S7 and S7 edge, while maintaining profitability in the mid-to-low end segment through increased shipments of new models.

As for 2017, the company anticipates a turnaround with the launch of new flagship smartphones. Next year will also see expansion of Samsung Pay rollouts and cloud-related services as well as the introduction of artificial intelligence related offerings.

Meanwhile, the Networks business expects to see continued improvement in profitability on the back of 4G LTE expansion in markets around the world.

Consumer Electronics Boosted by Premium Products

The Consumer Electronics Division, including the Visual Display and Digital Appliances businesses, posted KRW 11.24 trillion in consolidated revenue and KRW 0.77 trillion in operating profit for the third quarter.

Earnings for Samsung’s Visual Display business improved YOY led by expanded sales of premium products, such as SUHD and Curved TVs, despite global TV demand decreasing compared to the same period last year.

In the fourth quarter, Samsung expects to maintain solid performance by focusing on increasing sales of premium products, such as Quantum Dot SUHD TVs, and strengthening year-end promotional activities.

Looking ahead to 2017, Samsung will continue to provide innovative products based on Quantum Dot technology. Furthermore, the company will diversify sales through a focus on B2B products, such as LED signage, outdoor signage and gaming monitors, as well as expansion of online sales channels.

As for the Digital Appliances business, earnings improved YOY led by increased sales of premium innovative products such as Chef Collection kitchen appliances and new air conditioner models.

In the fourth quarter, the appliances business will continue to focus on its premium product lineup and expand its B2B business while reinforcing online marketing. For next year, Samsung will create new market opportunities and increase sales by introducing innovative premium products as well as customized products for local markets.

※ Consolidated Sales and Operating Profit by Segment based on K-IFRS (2014~2016.3Q)

Note 1: Sales for each business include intersegment sales

Note 2: CE (Consumer Electronics), IM (IT & Mobile Communications), DS (Device Solutions), DP (Display Panel)

Note 3: Information on annual earnings is stated according to the business divisions as of 2016.

The second quarter saw significant earnings growth led by strong performance both in the set and component businesses. Overall earnings of the set business improved YOY as well as QOQ due to the continuous sales increase of premium products.

The IT & Mobile Communications (IM) Division saw substantial earnings improvement led by expanded sales of flagship products such as the Galaxy S7 and S7 edge. A streamlined mid-to low-end smartphone lineup also contributed to improved profitability. Operating profit for the IM Division was KRW 4.32 trillion.

The Consumer Electronics (CE) Division achieved significant earnings growth YOY led by strong sales of its premium lineup such as SUHD TVs, Chef Collection Refrigerator, AddWash washer and newly launched air conditioner.

The component business achieved solid performance although overall earnings decreased YOY due to ASP declines in the industry. Earnings for the Display Panel segment improved QOQ led by increased OLED capacity utilization and stabilized LCD panel yields. Demand for semiconductors for mobile and SSD increased and the company achieved solid growth with a competitive edge in differentiated products, including 20-nanometer DRAM, V-NAND and 14-nanometer mobile AP.

The company estimated that the stronger Korean won against major currencies in the second quarter negatively impacted operating profit by approximately KRW 0.3 trillion, reflected mainly in the component business earnings.

Looking ahead to the second half of 2016, the company expects its solid performance to continue compared to the first half, mainly driven by earnings increase in the component business due to sales growth in high value-added products and stable demand and supply conditions. The set business is expected to continue its stable earnings while the IM Division expects marketing expenditure to increase.

In the third quarter, the company expects the component business to maintain its solid performance due to improved demand and supply conditions for memory chips and LCD panels and stable earnings for OLED and System LSI. For the set business, the company forecasts marketing expenditure for the IM business to increase mainly due to a new flagship product launch and fierce competition in the industry. Meanwhile, weak seasonality is likely to impact the CE business.

Capital expenditure (CAPEX) for the second quarter was KRW 4.2 trillion, which includes KRW 2 trillion for the Semiconductor business and KRW 1.6 trillion for the Display Panel business. The accumulated total CAPEX for the first half was KRW 8.8 trillion.

The annual plan for CAPEX has not yet been confirmed but is projected to increase slightly compared to last year. This year’s CAPEX will be concentrated on OLED and V-NAND capacity as the company sees strong market demand for OLED panels for smartphones and V-NAND SSD.

Demand for High-Density, High-Valued Products Drives Higher Earnings

The Semiconductor business posted KRW 12 trillion in consolidated revenue and KRW 2.64 trillion in operating profit for the quarter.

The memory business enjoyed solid growth in demand in the second quarter. Orders for high-density NAND and DRAM products contributed to solid earnings QOQ. This was coupled by a reduction in cost from continuous process migration.

In NAND, shipments of SSD remained strong in the quarter, as enterprise companies increasingly made the transition from HDD to SSD so as to reduce total cost of ownership (TCO). Orders for high-density mobile storage products over 32GB also helped drive sales, mainly due to the expanded adoption by Chinese companies. Samsung actively responded to orders for high-density mobile products over 64GB and enterprise SSD over 4TB and increased supply of the industry’s first 48-layer V-NAND.

In DRAM, demand climbed QOQ as smartphone manufacturers bought more high-density mobile DRAM and demand for high-density products increased following the launch of a new server platform.

A supply imbalance of some applications led to greater demand for Samsung’s 20-nanometer high-density, high value-added mobile and server products.

Looking ahead, for NAND, increased adoption of high-density products and strong seasonality will further drive demand growth in the second half. Growth in high-density, premium SSD products will continue, and the launch of new products by smartphone manufacturers is expected to raise demand for mobile storage. However, supply and demand will be tighter in the second half, due to soft industry supply growth.

For DRAM, the launch of new smartphones and the increasing adoption of 6GB memory chips in high-end smartphones will spur shipments of mobile DRAM in the second half. Shipments of high-density server products will be strong, as more data centers make the transition to a new server platform.

The System LSI business saw gains QOQ, thanks to stronger demand for 14-nanometer mobile AP in premium smartphones and increased sales of high megapixel image sensors. In the second half, increased sales of mid- to low-end mobile AP and LSI products are expected to provide a stable revenue stream.

Improved Display Performance on Strong OLED Sales and LCD Recovery

The Display Panel segment posted KRW 6.42 trillion in consolidated revenue and KRW 0.14 trillion in operating profit for the quarter driven by increased shipments of OLED panels and enhanced yields for new LCD TV panel production technology.

For the OLED business, second quarter earnings improved QOQ due to healthy sales of flagship smartphones and increased demand for flexible panels. High fab utilization rates with the help of an expanded mid to low-end product portfolio also contributed to improved earnings.

For the LCD business, the second quarter saw a continuation of QOQ growth under a gradual recovery in the supply-demand balance. The company was able to achieve growth thanks to improved yields for new TV panel production technology as well as expanded TV sales particularly for large-sized UHD panels.

Looking ahead to the second half, the OLED business, Samsung expects demand for OLED panels to rise despite a likely slowdown in the smartphone market. To remain competitive, the company plans to actively address customer demand and reinforce profitability by expanding the proportion of high value-added products such as flexible and high-resolution displays. Samsung will also seek to secure supply capacity according to market demand while expanding its customer base and new applications.

As for the second-half outlook for the LCD industry, Samsung expects supply and demand to improve thanks to increased demand under strong seasonality as well as continuous UHD TV market growth and size migration towards larger screens. In response, the company will focus on enhancing profitability by improving cost competitiveness and expanding its portfolio to high value-added products including ultra-large size, high-resolution and curved panels.

Mobile Unit Strengthens Competitiveness Amid Slow Global Market

The IM Division posted KRW 26.56 trillion in consolidated revenue and KRW 4.32 trillion in operating profit for the quarter.

Samsung’s earnings improved QOQ thanks to strong sales of its flagship Galaxy S7 and S7 edge smartphones. Additionally the company achieved growth in the second quarter by maintaining the profitability of mid- to low-end models, such as the Galaxy A and J series, and improving the product mix by raising the sales proportion of the Galaxy S7 edge to over 50 percent.

Demand for smartphones and tablets in the second half is forecast to increase, however, market competition is expected to strengthen as other companies release new mobile devices. Despite this outlook, Samsung will focus on YOY earnings increase by strengthening its high-end line-up and maintaining solid profitability of mid to low-end products.

Looking into the third quarter, the release of a new large-screen flagship smartphone will help to maintain solid sales of high-end smartphones led by the Galaxy S7 and S7 edge. Samsung will also focus on expanding smartphone sales including this year’s new Galaxy A and J series and the debut of the Galaxy C series exclusively for the China market.

Samsung will focus on increasing smartphone sales under strong seasonality with the launch of a new model, while expecting marketing expenses to increase QOQ due to seasonality.

As for the Networks business, earnings improved due to increased LTE investment of major carriers in the second quarter.

Solid Performance for Consumer Electronics Despite Sluggish Market

The Consumer Electronics Division – encompassing the Visual Display (VD), Digital Appliances (DA), Printing Solutions and Health & Medical Equipment (HME) businesses – posted KRW 11.55 trillion in consolidated revenue and KRW 1.03 trillion in operating profit for the quarter.

In the second quarter, global TV demand remained flat YOY due to sluggish economic conditions in major emerging markets that offset the growth experienced in developed markets. Amid these challenging conditions, Samsung achieved solid YOY earnings by successfully launching new products, including SUHD TVs, and increasing sales of premium products on the back of global sporting events.

For the appliances business in the second quarter, although growth momentum continued in North America, global demand declined YOY due to slower growth in China and the impact from the economic slowdown in emerging markets. Despite these circumstances, earnings improved from the same period of the previous year thanks to increased sales of premium products such as the Chef Collection refrigerator and the AddWash and activ dualwash washing machines.

Looking ahead to the second half, TV demand is expected to decline YOY due to weakened demand in Europe and a prolonged economic slowdown in emerging markets. In response, Samsung will focus on improving profitability and increasing sales through collaborations with local channel partners and through region-specific promotions. To reinforce its leadership in the premium TV segment, the company will also seek to grow sales of its premium SUHD TV line-up, particularly products featuring its Quantum Dot technology.

Concerning the outlook for appliances in the second half, market growth is expected to be limited due to the aforementioned concerns in Europe and emerging markets. Despite these conditions, Samsung will actively seek opportunities to counter the challenging market dynamics by launching innovative products that offer superior consumer experiences. The company also plans to achieve further growth by enhancing its B2B business in this sector, particularly for built-in kitchens and system air conditioners.

※ Consolidated Sales and Operating Profit by Segment based on K-IFRS (2014~2016.2Q)

Note 1: Sales for each business include intersegment sales

Note 2: CE (Consumer Electronics), IM (IT & Mobile Communications), DS (Device Solutions), DP (Display Panel).

Note 3: Information on annual earnings is stated according to the business divisions as of 2016.

The first quarter saw overall earnings growth led by the early launch and successful sales of the flagship Galaxy S7 and S7 edge, improved memory product mix, expanded 14nm supply of System LSI products and increased sales of OLED panels.

For the Semiconductor business, despite weak memory demand due to seasonality, the Memory Business achieved solid earnings by expanding sales of high value-added products, while continuously reducing costs through technology migrations for DRAM and NAND. Earnings for the Systems LSI Business increased YoY led by increased demand for 14nm products while QoQ earnings decreased.

Overall earnings of the Display Panel business decreased due to a sharp decline in LCD panel earnings although earnings of OLED panels improved mainly driven by the Galaxy S7. The LCD business experienced temporary yield issues while adopting new process technology as well as TV panel price decline.

The IT & Mobile Communications (IM) Division saw a substantial earnings improvement both YoY and QoQ mainly driven by the early launch of Galaxy S7 and its strong sales and improved cost efficiency through the streamlining of mid-to-low-end smartphone lineups. Although the company had a one-time royalty settlement expense in the quarter, the impact on operating profit was equivalent to less than 1 percent of IM revenue.

The Consumer Electronics (CE) Division achieved significant earnings growth YoY led by expanded sales of premium TV models such as SUHD TV and Curved TV in developed markets, and also a notable sales increase of premium home appliance products in North America.

The company estimated that the weaker Korean won against major currencies in the first quarter positively impacted operating profit by approximately KRW 0.4 trillion, reflected mainly in the component business earnings.

In the second quarter, the company expects its solid performance to continue led by steady earnings in the Mobile and Semiconductor businesses plus improvement of the CE and Display Panel businesses.

The IM Division is expected to secure solid earnings by expanding sales of the Galaxy S7 along with strong profitability of mid-to-low-end products. The CE Division expects to see improvements as seasonality should improve air conditioner sales, while flagship SUHD TV sales are expected to increase.

The Semiconductor business will continue to maintain solid earnings by improving the high-value added memory product mix such as V-NAND SSD for servers, and by expanding the supply of System LSI components for premium smartphones.

The Display Panel segment is expected to see earnings improvement compared to the previous quarter as LCD profitability is forecast to rise on stabilized TV panel yields and improved demand and supply conditions.

Looking ahead to the rest of 2016, the company expects the set business to continue to generate higher earnings while focusing on stabilizing the component business in the second half.

For the Semiconductor business, the company’s DRAM business will continue to focus on sustaining solid profitability while enhancing technology competitiveness. For NAND, the company will expand its V-NAND SSD for servers with strong technology leadership. The System LSI Business will strive to improve profitability YoY by increasing 14nm shipments and enhancing mid-to-low-end SoC line-ups.

For the Display Panel business, OLED earnings are expected to improve due to growth driven by an increase in flexible and high-resolution panels. LCD panel profitability is expected to improve in the second half driven by high valued-added products amid better supply and demand conditions.

For the IM Division, the company expects the sales of flagship products to increase YoY, especially with strong demand for flagship products such as the Galaxy S7 and new model launches in the second half. In addition, the company will continue to manage cost efficiencies by streamlining its smartphone lineups.

For the CE Division, the company will focus on profitability by increasing premium products such as SUHD and Curved TVs. With the Olympics and other global sporting events forecast to drive global demand for large-size TVs, the company expects strong improvements in operating results YoY.

The Digital Appliances Business will strive to improve earnings by expanding sales of premium products, including smart appliances, and enhancing its enterprise business.

Meanwhile, capital expenditure (CAPEX) for the first quarter was KRW 4.6 trillion, which includes KRW 2.1 trillion for the Semiconductor business and KRW 1.8 trillion for the Display Panel business. The annual plan for CAPEX has not yet been confirmed but is projected to increase slightly compared to last year’s CAPEX based on various business opportunities. CAPEX for the Display Panel segment may increase as the company sees strong market demand for OLED panels. DRAM CAPEX will remain flexible based on supply and demand conditions but is expected to be lower than 2015.

Solid Performance to Continue in Semiconductor Business

The Semiconductor business – including Memory and System LSI – posted KRW 11.15 trillion in consolidated revenue and KRW 2.63 trillion in operating profit for the quarter. The Memory Business accounted for the bulk of sales with KRW 7.94 trillion in revenue.

Despite weak seasonality during the first quarter, the Memory Business achieved solid earnings by expanding sales of high value-added products, while reducing cost through technology migrations for DRAM and NAND.

For NAND, demand for high-density enterprise SSDs and  mobile storage products increased and the company enhanced profitability and cost competitiveness by expanding production of third-generation V-NAND and 10nm-class planar process migration.

For DRAM, despite weak PC demand, smartphone density continued to grow and server DRAM demand remained solid driven by high-density data centers. Samsung expanded its 20nm product portfolio in the quarter and secured solid profitability through its product mix.

In the second quarter, strong growth in high-density SSD and high value-added solution products over 64GB is expected to continue, led by expansion of cloud services and rising shipments of high performance smartphones. Increased demand for DRAM is also forecast due to a partial recovery in the PC market and launches of new smartphones.

Samsung will seek to maintain its market leadership with differentiated, high value-added products based on its V-NAND competitiveness. The company will also drive DRAM sales by increasing sales of 20nm high-density products, such as 8Gb DDR4/LPDDR4.

As for System LSI, while earnings declined QoQ as a result of component inventory adjustment by customers, solid growth was maintained YoY thanks to increased demand for 14nm process products. In the second quarter, earnings are expected to improve driven by new premium smartphone launches and inventory restocking by customers.

Looking ahead in 2016, Samsung will further improve product competitiveness by diversifying its 14nm foundry customer base and enhancing its product line-up of mobile SoC. In addition, Samsung expects to begin mass production of 10nm products by the end of the year.

Display Panel Segment Seeks Improved Product Mix

The Display Panel segment posted KRW 6.04 trillion in consolidated revenue and KRW 0.27 trillion in operating loss for the quarter.

In the first quarter, shipments of OLED panels improved from the previous quarter, driven by launches of new high-end smartphone panels and strong demand for smartphones in the mid-to-low-end space. Conversely, the company’s LCD panel shipments decreased, affected by weaker demand during low seasonality.

Looking ahead to the second quarter, for OLED panels, Samsung hopes to actively address demand for new products and expand its customer base, while focusing on improving profitability of LCD panels by increasing shipments of strategic premium products such as UHD and large-size panels.

In 2016, the company expects OLED demand will continue to rise helped largely by growth in the mid-to-low-end smartphone segment while the LCD market will continue to be over supplied. In this market, Samsung hopes to actively address demand for new products, increase sales of value-added products and reinforce its leadership by developing new panel applications.

Premium Flagships Enhanced Mobile Profitability

The IM Division – comprising the Mobile Communications and Networks Businesses – posted KRW 27.60 trillion in consolidated revenue, a 6.6-percent YoY increase, and KRW 3.89 trillion in operating profit for the quarter, a 42-percent YoY increase.

While smartphone and tablet demand saw a slight QoQ decrease due to seasonal effects, overall operating profit for the Division increased. This increase was largely due to the early launch and strong global performance of the flagship Galaxy S7 and S7 edge, as evidenced by robust sell-out figures and low inventory levels compared to their predecessors. A streamlined mid-to-low-end smartphone lineup also contributed to improved profitability.

Looking ahead to the second quarter, while demand for smartphones and tablets is forecast to remain flat due to continued weak seasonality, the worldwide rollout of the latest flagship models as well as an increase in shipments of the mid-to-low-end Galaxy A and J series are expected to help the company maintain robust sales momentum and profit.

As for the year ahead, Samsung anticipates softening demand in the smartphone market and negative growth in the tablet market. The company will reinforce its leadership in the premium smartphone segment on the back of the Galaxy S7 and S7 edge, while continuing to increase volume and improve profitability in the mid-to-low-end segment. In addition, the company will continue to expand the Samsung Pay service to global markets and look into new business opportunities.

For the Networks Business, the company will seek growth through the continued rollout of 4G LTE services in new markets around the world, including Southeast Asia.

Positive Outlook for Premium TVs and Home Appliances

The Consumer Electronics Division – encompassing the Visual Display (VD), Digital Appliances (DA), Printing Solutions and Health & Medical Equipment (HME) businesses – posted KRW 10.62 trillion in consolidated revenue and KRW 0.51 trillion in operating profit for the quarter.

In the first quarter, TV market demand decreased YoY due to weak seasonality and economic downturn in emerging markets. Earnings for the VD Business showed significant growth YoY, led by increased sales of premium products such as SUHD and Curved TVs.

For the appliances business, earnings improved compared to the corresponding quarter last year, led by continued growth in the North American market and increased sales of innovative premium products such as Chef Collection refrigerators and the Activewash washing machine.

In the second quarter, TV demand is expected to slightly increase riding on sports events such as the Olympics. The company plans to further improve profitability by continuing to focus on the new and improved SUHD TVs with the world’s only cadmium-free Quantum dot display, while also increasing sales of premium products such as UHD TVs and Curved TVs.

Digital appliance demand is expected to rise due to seasonal growth for air conditioners, despite global market uncertainties. Against this backdrop, Samsung aims to increase profitability by expanding sales of innovative premium products such as a newly launched air conditioner and Family Hub Refrigerator. Additionally, the company expects to improve performance by expanding its enterprise business including built-in kitchens and system air conditioners.

※ Consolidated Sales and Operating Profit by Segment based on K-IFRS (2014~2016.1Q)

Note 1: Sales for each business include intersegment sales.

Note 2: CE (Consumer Electronics), IM (IT & Mobile Communications), DS (Device Solutions), DP (Display Panel).

Note 3: Information on annual earnings is stated according to the business divisions as of 2016.

Samsung posted KRW 53.32 trillion in consolidated revenue and KRW 6.14 trillion in operating profit for the quarter.

Overall, the company reported full-year 2015 revenue of KRW 200.65 trillion and full-year 2015 operating profit of KRW 26.41 trillion.

Facing global economic headwinds, including a sharp fall in oil prices, the company’s fourth quarter earnings fell QoQ, as the components side of the business was impacted by weakened prices for DRAM chips and LCD panels due to overall softer demand in the IT market and PCs.

In terms of currency, due to the strength of the Korean Won compared to major currencies in the fourth quarter, the positive FX impact that significantly contributed to the component business earnings in the third quarter changed to a negative impact of approximately KRW 400 billion, which was generated mostly from the set business.

Expecting challenges in 2016 to maintain earnings due to a difficult business environment and slowing IT demand, the company will strive to improve performance in the second half, by capitalizing on strong seasonal demand for set business products and enhancing the product mix in components business.

The company will make efforts to secure profitability for each business unit while it will also focus on reinforcing mid- to long-term business competitiveness, including new business areas such as the Internet-of-Things (IoT). For IoT, the company plans to focus initially on Smart Home and Smart Health, leveraging the strength of our overall ecosystem.

For the memory business, the company plans to improve competitiveness of its products and solidify its technological leadership by expanding its leading-edge process. As for the System LSI business, the company plans to diversify its foundry customers and enhance the SoC (System-on-Chip) line-up.

For the Display Panel segment, the company plans to secure mid- to long-term growth momentum by leveraging its OLED technology for the development of new panel applications such as transparent, mirror, head-mounted and automotive displays, while strengthening its flexible display technologies.

For the mobile business, the company will focus on strengthening the competitiveness of its software, along with hardware, services and wearable products. For the consumer electronics business, the company plans to lead the Smart Home era with diverse IoT-enabled products.

Looking at the first quarter specifically, challenging business conditions will likely remain due to weak seasonal demand and a slowdown in the IT industry. Therefore, the components business will focus on expanding the proportion of value added products, while the set business will focus on major launches of its new products.

Regarding shareholder return, the company announced a KRW 11.3 trillion special buyback program and a three-year shareholder return policy last year. It completed the first phase of the buyback program on January 12, of which 2.23 million common shares and 1.24 million preferred shares worth KRW 4.25 trillion were repurchased and cancelled.

Capital expenditure (CAPEX) for 2015 totaled KRW 25.5 trillion, including KRW 14.7 trillion and KRW 4.7 trillion for semiconductors and displays, respectively. The 2016 CAPEX plan remains under review.

Samsung to Maintain Leadership with Differentiated Chips

The Semiconductor business registered KRW 2.80 trillion in operating profits on consolidated revenue of KRW 13.21 trillion for the quarter.

In the fourth quarter, weak demand across certain markets, including PCs, impacted the Memory business’s overall revenue, but sales of mobile and server DRAM were solid.

Growing demand for solution products helped lift NAND demand for high-density mobile devices and enterprise SSD for servers and PCs that require greater storage.

System LSI’s profits improved QoQ, driven by the 14-nm foundry business, despite weaker seasonal demand for SoC and LSI (Large-Scale Integration) chips.

Looking ahead in 2016, demand for memory chips will increase due to growth in contents stored in high density servers featuring DRAM and SSD, as well as smartphones with more advanced features.

Samsung will maintain its leadership in the market and drive sales with differentiated, high value-added products. To this end, the company will expand 20-nm process migration and develop 10-nm class process in DRAM. For NAND, production of third-generation V-NAND and SSD products will be expanded to enhance competitiveness. In System LSI, Samsung will continue pursuing customer diversification and expanding its product line-up to achieve long-term growth.

Demand for memory chips in the first quarter, which is a traditionally weak season, will be soft but Samsung will focus on profitability by lifting sales of high density DRAM and NAND storage products, and strengthening cost competitiveness by expanding 20-nm DRAM and third-generation V-NAND production.

Moreover, Samsung will further boost product competitiveness by beginning mass production of second-generation 14-nm process and supplying chips for new premium smartphones.

ASP Decline Weighs on Display Panel Profit

The Display Panel segment posted KRW 6.53 trillion in consolidated revenue and KRW 300 billion in operating profit for the quarter.

In the fourth quarter, the LCD panel segment saw a earnings decline QoQ due to a decrease in shipments of large-size panels and continued decline in Average Selling Price (ASP). For OLED panels, positive factors such as increased shipments and improved line utilization were hampered by a decline in ASP brought on by an expansion in the proportion of mid- to low-end panel sales.

Looking to the first quarter, the LCD market will likely be affected by intensifying competition among panel makers and declining demand due to weak seasonality. In response to these challenging conditions in the first quarter and beyond, Samsung will focus on improving cost efficiency and inventory management while also continuing efforts to expand its customer base.

As for OLED panels, due to an expected slowdown in the smartphone display market in the first quarter, Samsung will concentrate on reinforcing cost competitiveness and promptly responding to market demand for new product releases by key customers. Throughout 2016, the company expects smartphone momentum to slow YoY, with most growth coming from low-end products.

Differentiated Mobile Portfolio to Maintain Solid Performance

The IM Division posted KRW 25.00 trillion in consolidated revenue and KRW 2.23 trillion in operating profit for the quarter.

A slight QoQ decrease in smartphone shipments due to a year-end inventory adjustment and an increased portion of the mid- to low-end products led to the decline in sales while a seasonal increase in marketing expenses slightly impacted profit. As for tablets, quarterly shipments and sales increased due to seasonal demand and steady sales of the Galaxy Tab A and Tab S2.

In the first quarter, although slowing demand for smartphones and tablets is forecast due to seasonality, and in spite of slowing shipments of Samsung smartphones, an enhanced product mix with the introduction of new line-ups, such as the Galaxy A (2016) series, is expected to help stabilize sales and profitability.

As for the outlook for 2016, Samsung expects single-digit percentage growth in both the smartphone and tablet categories amid softening demand and intensifying competition. Despite this challenging environment, the company will focus on increasing smartphone shipments and maintaining a double digit margin through releases of competitive devices and an optimized product portfolio.

Specifically, in the premium smartphone segment Samsung aims to reinforce its market leadership and drive growth with differentiated and innovative products. For the mass market segment, the company will focus on increasing shipments and profitability through competitive product line-ups.

Meanwhile, tablets and wearable devices are expected to expand their contributions to overall business performance while new services such as Samsung Pay will continue to be developed.

As for the Networks Business, continued roll out of 4G LTE services in global markets helped enhance its earnings for the quarter. Looking ahead, Samsung will look to build on its experience and actively expand its LTE services globally.

Premium TVs and Home Appliances to Enhance Profitability

The Consumer Electronics Division – encompassing the Visual Display (VD), Digital Appliances (DA), Printing Solutions and Health & Medical Equipment (HME) businesses – posted KRW 13.85 trillion in consolidated revenue and KRW 0.82 trillion in operating profit for the fourth quarter.

In the fourth quarter, TV market demand increased significantly entering the year-end peak season. Earnings for the VD Business showed strong growth QoQ, led by promotional sales such as Black Friday in North America, and increased sales of premium products such as SUHD TVs.

As the TV market is expected to grow this year, riding on global sporting events including the Olympics, Samsung will continue to focus on securing profitability by actively expanding its SUHD TV line-up with enhanced picture quality and design, while increasing sales of premium products such as curved TVs and large-size TVs that are 60 inches or above.

In the first quarter, however, as TV demand enters a period of weak seasonality, the company will concentrate on introducing the new line-up of SUHD TVs.

For the appliances business, earnings improved QoQ led by continued market growth in North America and increased sales of innovative premium products such as the Chef Collection refrigerators and activewash washing machine.

Looking ahead in 2016, as growth in the appliances market is expected to slow, Samsung will concentrate on improving its performance by increasing sales of premium products such as the Family Hub refrigerator and expanding the enterprise business including air conditioners.

※ Consolidated Sales and Operating Profit by Segment based on K-IFRS (2014-2015)

Note 1: Sales for each business include intersegment sales.

Note 2: CE (Consumer Electronics), IM (IT & Mobile Communications), DS (Device Solutions), DP (Display Panel.

Note 3: Information on annual earnings is stated according to the business divisions as of 2015.