• Consolidated Sales: Approximately 59 trillion Korean won
• Consolidated Operating Profit: Approximately 7.1 trillion Korean won

The above estimates are based on K-IFRS. Please note that Korean disclosure regulations do not allow earnings estimates to be offered as a range. To comply with such regulations, the above figures represent the median of the estimate ranges provided below.

• Sales: 58 ~ 60 trillion Korean won
• Operating Profit: 7.0 ~ 7.2 trillion Korean won

※  2019 3Q and 2018 4Q consolidated figures based on K-IFRS are as follows

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 TVs 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.

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.