Samsung Electronics today announced financial results for the third quarter. Samsung’s revenue for the quarter was R55.45 billion, a decrease of R47.3 billion Year-on-Year (YOY), while operating profit for the quarter was R63.5 billion, a decrease of R26.7 billion YOY.

For the components businesses, operating profit increased Quarter-on-Quarter (QOQ), due to expanded sales of high-end products such as Solid State Drives (SSDs) and flexible organic light-emitting diode (OLED) panels, but decreased marginally YOY due to a price correction for dynamic random-access memory (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 Super Ultra High Definition (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 R8.5 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 of 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 also 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 Liquid Crystal Display (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 normalisation 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 Large-Scale Integration (LSI) business, the company will aim to sustain growth momentum by expanding leadership in 10-nanometre 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 R329.8 billion, a record high for the company. CAPEX for the semiconductor business is expected to reach R161.2 billion, while CAPEX for the display business will reach R133.1 billion, 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 R160.6 billion in consolidated revenue and R41.2 billion 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-nanometre 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-nanometre 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-nanometre 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 centres 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-nanometre technology, while maintaining a high utilisation rate of 14-nanometre capacity.

Continued Improvement in Display Performance

The Display Panel segment posted R86.2 billion in consolidated revenue and R12.5 billion 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 R275.3 billion in consolidated revenue and R1.2 billion 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 R137.3 billion in consolidated revenue and R9.4 billion 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 customised products for local markets.

 

About Samsung Electronics Co., Ltd.:

 

Samsung Electronics Co., Ltd. inspires the world and shapes the future with transformative ideas and technologies. The company is redefining the worlds of TVs, smartphones, wearable devices, tablets, cameras, digital appliances, medical equipment, network systems, and semiconductor and LED solutions. For the latest news, please visit Samsung Newsroom at http://news.samsung.com.

* Notice: Details about Samsung Electronics’ capital expenditure and shareholder returns will be made available when disclosures have been filed with the nation’s financial regulator before the 3Q earnings conference call.

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.

Samsung Electronics Co., Ltd. have announced financial results for the first quarter ended March 31, 2016. Samsung’s revenue for the quarter was 49.78 trillion Korean Won (KRW), or R618.18 billion. This was an increase of 5.7 percent year-on-year (YoY). Operating profit for the quarter was KRW 6.68 trillion (R82.92 billion), an increase of 12 percent YoY. In the company’s earnings guidance disclosed on April 7, 2016, Samsung estimated first quarter consolidated revenues would reach approximately KRW 49 trillion with consolidated operating profit of approximately KRW 6.6 trillion.

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 14 nm supply of System LSI products and increased sales of organic light emitting diode (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 dynamic random access memory (DRAM) and Negative AND (NAND). Earnings for the Systems LSI Business increased YoY, led by increased demand for 14 nm products while quarter on quarter (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, driven mainly by the Galaxy S7. The liquid crystal display (LCD) business experienced temporary yield issues, due to new process technology adoption, 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 line-ups. Although the company had a one-time royalty settlement expense in the quarter, the impact on operating profit was equivalent to less than one 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 (R5 billion), 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 an earnings improvement compared to the previous quarter as LCD profitability is forecast to rise on stabilised 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 stabilising 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 14 nm shipments and enhancing mid-to-low-end system on a chip (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 value-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 (R57.5 billion), which includes KRW 2.1 trillion (R26 billion) for the Semiconductor business and KRW 1.8 trillion (R22.5 billion) 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 (R140 billion) in consolidated revenue and KRW 2.63 trillion (R32 billion) in operating profit for the quarter. The Memory Business accounted for the bulk of sales with KRW 7.94 trillion (R99 billion) 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 10 nm-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 centres. Samsung expanded its 20 nm 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 64 GB 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 the 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 20 nm high-density products, such as 8 Gb 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 14 nm 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 14 nm foundry customer base and enhancing its product line-up of mobile SoC. In addition, Samsung expects to begin mass production of 10 nm products by the end of the year.

Display Panel Segment Seeks Improved Product Mix

The Display Panel segment posted KRW 6.04 trillion (R75 billion) in consolidated revenue and KRW 0.27 trillion (R3.37 billion) 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 (R345 billion) in consolidated revenue, a 6.6 percent YoY increase, and KRW 3.89 trillion (R48.6 billion) 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 line-up 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 (R132 billion) in consolidated revenue and KRW 0.51 trillion (R6.25 billion) 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.

About Samsung Electronics Co., Ltd.

Samsung Electronics Co., Ltd. inspires the world and shapes the future with transformative ideas and technologies. The company is redefining the worlds of TVs, smartphones, wearable devices, tablets, cameras, digital appliances, printers, medical equipment, network systems, and semiconductor and LED solutions. For the latest news, please visit the Samsung Newsroom at news.samsung.com

* Notice: Details about Samsung Electronics’ capital expenditure and shareholder returns will be made available when disclosures have been filed with the nation’s financial regulator before the 1Q earnings conference call.

※ 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.