Samsung Elect Ltd

Good morning and good evening. First of all, thank you all for joining this conference call. And now we will begin the conference of the fiscal year 2020 second quarter earnings research by Samsung Electronics. This conference will start with a presentation followed by a Q&A session. If you have a question, please press star one, that is star and one on your phone during the Q&A. For cancellation, please press star two, that is star and two on your phone. Now we shall commence the presentation on the fiscal year 2020 second quarter earnings results by Samsung Electronics.

Good morning. This is Ben Seo from Investor Relations. Thank you for joining our earnings call for the second quarter of 2020. With me representing each of the business units are Mr. Hanjin Man, Senior Vice President of the Memory Marketing Team, Mr. Shindong Ho, Senior Vice President of the System LSI Marketing Team, Mr. Han Seung-hoon, Senior Vice President of the Foundry Marketing Team, Mr. Choi Geon-young, Vice President of Samsung Display, Mr. Lee Jong-min, Vice President of the IT and Mobile Business, and Mr. Kim Won-hee, Vice President of the Visual Display Business. In addition, Mr. Kang Tae-gyu from Investor Relations is present on this call as well. I would like to remind you that some of the statements we will be making today are forward-looking, based on the environment as we currently see it. And all such statements are subject to certain risks and uncertainties that may cause our actual results to be materially different from those expressed in today's discussion. We began the second quarter amid strong headwinds. COVID-19 was declared a pandemic in March, and started to spread rapidly across the globe in April. This stifled demand and caused closures or slowdowns at production sites and stores for our key products. We have responded to this pandemic from its onset with a wide range of timely and effective measures to keep the health and safety of our employees with our top priority. In addition, we actively managed to differentiate managed our differentiated global supply chain to ensure customers have reliable access to our products and services. And we did our utmost to minimize impacts of COVID-19 through efficient cost execution and by strengthening our online sales channels. These efforts to overcome the unprecedented challenges, along with a partial demand recovery from gradual reopening of the global economy starting in May, were behind our solid earnings performance in the quarter. I would like to thank our employees, partners, and customers for their incredible contributions and support in such a difficult environment. Now let's move on to the second quarter results. Total revenue in the quarter was $53 trillion, a 4.3% decrease quarter on quarter. Although memory revenue increased due to solid demand from data centers and PCs, Some key set products, such as smartphones, recorded weaker results due to COVID-19. For similar reasons, total revenue also declined on a year-on-year basis by 5.6%. Despite the revenue decline, gross profit increased sequentially by $0.5 trillion to $21.1 trillion, led by process migration-related cost reductions in memory. Accordingly, gross margin increased by 2.7 percentage points to 39.8%. STNA expenses decreased by 1.2 trillion won or approximately one percentage point as a percent of sales compared to the last quarter due to enhanced cost efficiency that included a reduction in marketing costs. Amid the global pandemic, Operating profit totaled $8.1 trillion, up $1.7 trillion sequentially, mainly due to improved memory profitability, a one-off gain in the display business, and strong seasonality for home appliances. Operating margin improved significantly to 15.4%. Our set business outperformed market expectations due to a quicker than anticipated demand recovery efficient response measures utilizing our global supply chain management infrastructure, and cost reduction efforts. Operating profit and operating margin also improved year on year, led by higher profitability in memory and efficient cost management in the set business. I will now briefly review the performance of each business unit. In the memory business, earnings improvement was mainly driven by a solid increase in demand from data centers and PCs. Our NAND bit growth, however, was below market due to weak mobile demand and also due to an inability to fulfill demand in some application areas. System LSI saw its earnings decline with sluggish demand from mobile applications, but Foundry improved its performance thanks to a partial recovery in customer demand. In display, Mobile panel earnings grew quarter-on-quarter on the back of a one-off gain despite weaker smartphone demand. In the large panel business, rising monitor sales helped overcome weaker TV demand to slightly narrow the business's loss. For the mobile business, smartphone shipments and sales softened sequentially as COVID-19 suppressed demand. However, we managed to maintain solid profitability via efficient cost execution, which included a reduction in marketing and other costs. For the CE division, earnings improved quarter on quarter thanks to seasonal growth in sales of air conditioners and dryers, an improved product mix led by premium TVs, including QLED models, and enhanced operational efficiency. Harman's operating loss continued due to an unfavorable environment in the global automotive industry, even though demand for customer products started to recover. Regarding currency effects, a strong U.S. dollar against the Korean won in the second quarter had a positive effect on operating profit, mainly in the component business. But the overall effects were offset by negatives in the set business, caused by significant weakness in currencies of some of our major emerging markets against the Korean won. CapEx in the second quarter was 9.8 trillion won with 8.6 trillion won allocated to semiconductor and 0.8 trillion won to display. The cumulative total for the first half of the year was 17.1 trillion won with 14.7 trillion won allocated to semiconductor and 1.6 trillion won to display. For memory, we invested mainly in equipment for process migration and capacity expansion to address anticipated future demand. For foundry, investment focused on capacity expansions for 5 and 8 nanometer to respond to customer demand for advanced process nodes. Next, I would like to share our business outlook. In the second half of 2020, that demand is forecast to recover gradually, although ongoing uncertainties related to COVID-19 and intense industry competition will remain risk factors. However, given the currently solid set demand, we are focusing on our global supply chain management capabilities to ensure timely supply to our customers. For memory, Mobile and graphic demand is expected to recover, mainly driven by the launch of new smartphone models and game consoles. Considering the market situation, we will maintain flexibility in our investments and adjust product mix to account for supply-demand dynamics in each application area, while also considering inventory levels and investment strategies at major customers, including data centers. We will also bolster our technology and cost competitiveness by enhancing leadership in node migration and accelerating the shift toward the EUV processes. System semiconductors will focus on expanding sales of products, including and relating to high resolution sensors, 5G SOCs, and GPUs. For display, mobile panel will work to boost profitability by actively addressing demand from product launches by major customers. However, we expect our performance to improve mainly in the fourth quarter as market recovery in the third quarter is likely to center on mass market models. The large panel business will fully support customer demand this year while also accelerating development of QD display products. The mobile business will launch flagship models such as Galaxy Note and Galaxy Fold and expand sales of mid to low-end models while also seeking to improve profitability. However, with a gradual recovery in demand, competition is also expected to intensify. For the network business, we will continue to explore new business opportunities for future growth. Consumer electronics will remain focused on enhancing profitability during the period of strong seasonality by expanding sales of premium products such as QLED TVs and bespoke appliances, and by implementing efficient marketing and promotional activities. Harman's earnings are likely to pick up as the automotive industry recovers and consumer audio sales grow. Along with our pursuit of financial achievements, we remain committed to creating environmental and social value to support sustainable growth and to communicating transparently with our shareholders on ESG issues. As part of such efforts, our sustainability report 2019 disclosed our actions on climate-related issues based on the TCFD framework for the first time. And we enhanced this disclosure in the 2020 report published in June by consolidating the information in a more structured manner in the climate actions chapter. I would like to add that as of 2019, 92% of the electricity used in our sites in the United States, Europe, and China was generated by renewable sources, and we are well on our way to achieving the target of 100% by the end of this year, a goal we announced in June of 2018. In our 2020 sustainability report, we included SASB standards to share our actions and achievements in each SASB sustainable management category. On another front, our smart factory support program has provided innovative manufacturing technologies and know-how to more than 2,000 SMEs since its launch in 2015. As we mentioned in our previous earnings call, Samsung's help in the first half of the year also included engaging mask manufacturing companies at home and abroad to boost productivity and output amid the global pandemic. We will continue to strengthen communications with our investors to form a common understanding on issues related to sustainable management. And we will also continue to carry out our management philosophy of devoting our human resources and technology to contribute to a better global society. Finally, I would like to address the second quarter dividend. Today, the Board of Directors approved a quarterly dividend of 354.1 for both common and preferred stock. The total amount of payout is the same as the first quarter, which is 2.4 trillion won, one fourth of the planned annual total of 9.6 trillion won. The company's management and employees have focused on overcoming the many challenges brought on by COVID-19. And as a result, our operations are currently running at nearly normalized levels. That said, we are still facing significant uncertainties as the global number of confirmed new COVID-19 cases are still setting daily records. Samsung Electronics will continue to stay abreast of the situation work to ensure the safety of our employees, and deliver high-quality products and services to our customers. Amid the challenges, we are looking ahead to the post-pandemic world, preparing to secure future growth and address changes in society and the economy alike. We will continue our investments to boost competitiveness in key businesses such as semiconductor, display, and smartphone, and will develop technologies in emerging areas, including AI, 5G, software, and automotive applications. I will now turn the conference call over to the gentlemen from each business unit to present second quarter performances and outlooks for their corresponding business segments. First, we will start with the memory business.

Good morning. This is Hanjin Ma from the memory marketing team. In the second quarter, on the continuing impacts of COVID-19, mobile sales were relatively weak. The cloud memory demand remained robust due to an increase in the number of people working and studying at home. For DRAM, server demand increased mainly for data centers based on cloud demand since the first quarter from the booming staying at home economy, which encompasses video conferencing and online activities to name a few. In mobile, on top of weak seasonality, demand was slow due to ongoing impacts of COVID-19, such as lockdowns in the United States, India, and other parts of the world. For PC, as effects of closures of some manufacturing sites in the first quarter dissipated from the second quarter, set bills increased and demand stayed solid, centering on low-end laptops as more people worked and studied from home. For graphics, overall demand was strong despite seasonality, thanks to a boom in graphics card sales and rising demand for HBM, mainly from data centers. Despite the uncertainties, such as persisting COVID-19, we exceeded bid guidance for the quarter by actively responding to demand from major customers and by leveraging our product mix flexibility according to market conditions. Next, I will talk about the NAND market. For server, SSD demand continued to increase thanks to the release of new services mainly by U.S. data centers and the expansion of demand for remote services by Chinese companies and a surge in SNS usage overall. On the other hand, in mobile, prolonged effects of COVID-19, such as an extension of the lockdown in India, delayed the recovery of consumer sentiment throughout the overall mobile market. Under these circumstances, the share of low-end to mid-range products in the market has expanded and mobile demand has weakened as a result. For client SSD, demand was strong due to an increase in set bills mainly for low to mid-price laptops, thanks to a significant rise in remote activities as well as demand for the last quarter that was pushed into the second quarter by COVID-19. On top of weak mobile demand, which accounts for a high portion of our sales, our shipments decreased as we were temporarily unable to meet all demand in some applications. Yet we improved our profits by expanding migration to fifth-generation VNAT. Next, let's talk about the outlook for the second half. In the case of DRAM, for mobile, under continuing impacts of COVID-19, Although there are still remaining issues like the possibility of delayed rate of increase in content per box and the geopolitical issues like trade conflicts, we expect demand to pick up centering on the low to mid-price segments in newly launched smartphones. For server, basically stay-at-home demand is likely to stay solid in the second half. However, increased demand in the first half, primarily from major customers, was partly attributable to inventory build-ups, so customers' inventory level has risen. And since there still remains uncertainty around COVID-19 as to whether it will be contained, we should keep a close eye on inventory and investment strategies as server customers, as well as developments regarding COVID-19. For PC, because companies are focusing IT budgets on infrastructure investments, desktop demand is expected to be slow. On the other hand, demand for low-end laptops for studying at home should be robust. For graphics, new game consoles slated to launch in the second half should increase both set shipments and content per box, leading to strong demand growth. In NAND, the situation is similar for mobile. Despite continuing uncertainties such as the lockdown in India and escalating trade conflicts, growth in low to mid-price set demand should lead a demand recovery. For Server SSD, demand is expected to remain strong for stay-at-home activities such as high-capacity, high-quality streaming. We will also check the effects on demand of increased inventory levels at customers. Client SSD is expected to decline because of weak desktop demand, but it is possible that content per box will grow until the end of this year, and the market will show some signs of a recovery. Moreover, newly launched game consoles will increase set shipments and probably have a positive effect on SSD demand. In 2020 thus far, COVID-19 has disrupted our lives and has led to some tragic results. Yet this year may also be remembered as an inflection point for technological and social trends around the world. The online presence and activities of governments, businesses, and educational institutions, which have taken off in earnest this year, is a new trend that will keep expanding. and the corresponding demand for memory for cloud and various IT devices should keep growing solidly. In addition, along with the establishment of 5G infrastructure, the expansion of next generation applications such as AI and autonomous cars implies memory will become increasingly important to advance the IT industry. As a result, We will focus on maintaining flexibility in our product mix and investment, considering demand forecast for each application. For DRAM, not only will we establish mass production system with EUV and conduct sampling for large customers in the second half, we will also strengthen our technological leadership by enhancing related technologies, such as development of high-sensitive, high-performance photo resist. And for NAND, We will focus on bolstering our cost competitiveness with differentiated single-stack technical advantage while accelerating node migrations to sixth-generation Freenet. Thank you.

Good morning. This is Dongho Shin from the system design business. In the second quarter, system design earnings decreased quarter over quarter due to a decline in demand for mobile components, including associates, which was caused by effect of COVID-19, such as disruption in global manufacturing and a slowdown in smartphone consumer sentiment. However, in terms of technological progress, we continue to diversify in image sensors with the launch of big pixel product that features ultra high speed autofocus and the launch of a CCEAL 6 Plus certified security chip solution, which provides strong privacy protection in smart devices. In addition, we continue to boost our long-term growth potential by diversifying our customers, which we believe will lead our overseas portion of sales to increase by over 10 percentage points on a full year basis. In the second half of this year, we expect to see an expansion in number of 5G subscribers, an increase in launches of low to mid-priced 5G smartphones, and further adoption of high resolution and triple quad cameras on mobile devices. However, market uncertainties related to COVID-19 are likely to persist, which makes it difficult to determine the timing and shape of economic recovery. To minimize impacts of these uncertainties, we will strengthen our SCM and closely monitor the market to respond flexibly to market fluctuations while expanding market opportunities through new products leveraging our product technology, leadership, and competitiveness. Thank you.

Good morning. This is Sean Han from the Foundry Business. In the second quarter, despite weak demand for mobile due to uncertainties caused by COVID-19, Foundry earnings reached the new quarterly and half-year highs due to an increase in demand for inventory accumulations related to concerns over disruptions in the component supply chain. In terms of process roadmap, we started mass production of the 5-nano process, and the 4-nano process also has been under development. In addition, through the launch of the development of second generation 5 nano and 4 nano processes with improved PPA, power, performance, and area, we are preparing a wider process portfolio and striving to maintain process leadership. Furthermore, In order to respond to an increase in future demand for cutting-edge products based on EUV, we are strengthening the foundation for expansion by starting investment in production lines in the Pyeongtaek complex. In the second half of the year, even though the recovery in demand is expected to be delayed, Due to the continued influence of COVID-19, we will try to overcome the situation through full-scale mass production of advanced process mobile and HPC products. In addition, we plan to secure stable sales and improve profitability by expanding supply to various global customers and diversifying applications beyond mobile into areas such as HPC and consumer. For our process roadmap, we are planning to increase the scale of mass production and our customer base for 5-nano products. We will also prove our competitive edge in advanced processes through seamless development of the 4-nano second generation process We improved PPA. Thank you.

Good morning. This is from the planning department of Samsung Display. Compared to the previous quarter, earnings improved on the back of one-off gain, despite an overall weakening of demand for the display panels. To be more specific, unfavorable business conditions persisted as the global spread of COVID-19 reduced smartphone shipments mainly in developed countries and influenced consumer sentiment toward low and mid-priced products. For the larger display business, payday demand remained weak due to a downturn in the market triggered by disruption to several sporting events. such as the Summer Olympic Games and Euro 2020. However, compared to the first quarter, losses slightly narrowed, helped by an increase in the sale of monitors as more people work from home. Next, let me share the outlook and core strategies for the second half of this year. For mobile display, launches of new smartphone models are projected to boost demand. But it's, it is still true uncertainties are forecast to linger, given the looming possibilities of second wave of COVID-19 infections. In response, we are going to actively engage in our main customers, new product release to meet market demand and enhance profitability. Furthermore, we also seek to increase the sales of high-value-added mobile panels featuring differentiated performance and design. With the lingering COVID-19 in daily life, we anticipate that consumers further tend to rely on mobile and IT devices, driving customers' need to be more sophisticated. Therefore, we are planning to expand our presence in new OAD application areas such as foldable and IT devices beyond mobile phones to prepare for the resulting increase in market demand. Looking ahead to the third quarter, earnings may improve somewhat as the smartphone market is expected to show signs of recovery. led by low and mid-priced models. From the fourth quarter, however, we expect earnings to start improving in earnest. The large display business will continue to address customer demand and speed up development of products based on new technologies as it winds down its LCD production line.

Thank you. Good morning. I'm Jongmin Lee from the mobile communications business. I'd like to share our second quarter result and second half outlook for the IMD vision. In the second quarter, overall market demand decreased quarter on quarter amid lockdowns in major regions, including North America and Europe, following the global spread of COVID-19. For the mobile business, our smartphone business achievements and revenue decreased quarter on quarter due to effects of COVID-19, which included store closures. However, we maintained solid profitability by managing costs efficiently, such as by reducing marketing costs, including those for offline promotions. For the network business, domestic and overseas 5G related investments were also delayed compared to original plans due to the impact of COVID-19. Now, let's move on to the outlook for the second half of this year. The market has been showing a gradual recovery since June, but uncertainties related to the pandemic are still present. In addition, we expect competition to intensify as companies try to make up for the first half. We will timely respond to demand recovery by reason with the launch of new flagship models and strengthening of our mass market lineup. Furthermore, we will continue our efforts to improve profitability by enhancing operational efficiency and improving cost competitiveness. Our efforts over the past year to optimize our mass market lineup have produced tangible reserve model profitability has improved, and we will strive to keep it at stable levels. In the third quarter, we expect our smartphone sales to expand quarter on quarter. In particular, we expect our product mix to improve thanks to the launch of new flagship models such as Galaxy Note and Fold, which should boost overall performance. However, as I mentioned earlier, there are still uncertainties related to COVID-19. As COVID-19 brings a new era, unlike any before us, every aspect of our lifestyle is changing, including communication, work, education, shopping, and healthcare. Mobile technology has played a critical role so far, and we believe it will become more vital than ever before. On August 5th, at the upcoming Galaxy Unpacked event, which will be held online, we will introduce innovative Galaxy devices for the new era in our changing environment. Through a connected experience between these devices, we expect to bring changes to our customers' lives, allowing them to work more efficiently, have more fun, and enjoy more convenient lifestyle. For the network business, despite uncertainties such as changes in 5G investment timelines by operators, we will continue to explore new business opportunities, striving to build on our foundation for growth. Thank you.

Morning, I'm Kim Wonhee from Sales and Marketing, Visual Display Business. First of all, I'd like to review the market condition and our performance in the second quarter of 2020. The rapid spread of COVID-19 and subsequent lockdowns in many countries weighed heavily on TV demand, which declined both quarter on quarter and year on year. Thus, we look to the online market to find a new sales channel to overcome the obstacles caused by the closure of retail stores. We are strengthening cooperation with major channels, such as new model distribution and promotions, to prepare to capture pent-up demand when shutdowns ease. Based on our global SEM capability, we were able to respond to demand growth in the short term by also reducing costs via operational efficiency and does improve their profits despite the overall reduction of sales in the quarter. Also, by promptly responding to changes in lifestyles and consumers' needs, such as an increased use of IT devices amid prolonged stays at home, we materialized new sales opportunities. We expanded sales of premium TVs, such as QLED and Super Large Screen TVs, and lifestyle TVs on both the quarter-to-quarter and year-on-year basis by improving not only basic features like feature quality and sound, but also differentiated functions on Samsung Smart TV that help with homeschooling, home office, and home fitness. Thanks to our work, we continue to lead the TV industry in these dynamic circumstances and increase our market share compared to last year. For digital appliances, although market demand declined rapidly in Q2, Due to the global spread of COVID-19, lockdowns in the United States and Europe have been gradually easing since the end of May, partially revitalizing the economy as well as market demand. Under these circumstances, Samsung expanded sales of premium products, including Grande AI washers, dryers, and bespoke refrigerators. Also, seasonality for air conditioners and effective marketing help improve earnings quarter on quarter and year on year. Now let's move on to the second half outlook. With the TV and home appliance market in the second half, we expect to release a pent-up demand in Q3 ahead of the strong seasonality in Q4. However, external risks, such as a global economic downturn, an increase in unemployment, and risks related to foreign exchange movements still remain. Also, concerns are growing over new or renewed lockdowns in the United States, Latin America, and other regions. The sales uncertainties related to the spread of COVID-19 are expected to keep rising. Thus, we should respond swiftly to market dynamics and secure profitability. First, we will lead online market by enhancing our competitiveness in non-contact sales, a key strength in this environment. To do so, we will improve our online sales infrastructure and strengthen cooperation with both online and omnichannel as we continue to explore new sales opportunities. Secondly, we will capture pent-up demand to increase sales of premium products such as QLED and super-large-screen TVs, new chef collection, as well as bespoke appliances. Also, we will work hard to create new demand with our customized home appliances reflecting various styles and tastes of our consumers and with our lifestyle TVs which deliver new screen value. Finally, we will keep working to improve profitability by optimizing our operations and executing costs efficiently. Thank you.

Okay. Thank you. That sums up the second quarter results presentation. Before we move on to the Q&A session, I would like to share several data points in key business areas. Considering the continued COVID-19 related uncertainties, we will not be providing any annual guidance at this time. First, for semiconductor. For DRAM, in the second quarter, our bid growth increased by a low single-digit percentage, and ASP rose by around 10%. For the third quarter, we expect our DRAM bid growth to be similar to that of the market, which we forecast to be flat. For NAND, in the second quarter, our bid growth declined by a low single-digit percentage, while ASP rose by mid-single-digit. In the third quarter, market growth is expected to be in the mid-single digits, and our growth is likely to exceed that. For the display panel business in the second quarter, the OLED portion of sales was in the high 80% and sales volume saw a decline in the high single digits. In the mobile business, sales volume totaled 57 million units for handsets and 7 million units for tablets. The blended ASP, including tablets, was $226, and the smartphone portion of handset sales volume was in the mid-90%. In the third quarter, we expect to see a quarter-on-quarter increase in shipments of both handsets and tablets, and the blended ASP should also rise. The smartphone portion of handset sales is expected to be in the low 90%. Finally, for TV, our unit sales volume declined by a mid-teen percentage in the second quarter. We expect unit shipments in the third quarter to rise in the low 40% range. With that, I will now move on to the Q&A session.

지금부터 질의응답을 시작하겠습니다. 질문을 하실 분은 전화기 버튼의 별표와 1번을 눌러주시기 바랍니다. 질문을 취소하시려면 별표와 2번을 눌러주시면 됩니다. Now Q&A session will begin. Please press Start 1, that is Start and 1 if you have any questions. Questions will be taken according to the order you have pressed the number Start 1. For cancellation, please press Start 2, that is Start and 2 on your phone. The first question will be presented by Young-gun Kim from Mirae Assetto. Please go ahead with your question.

Hello, I'm Young-gun Kim from Mirae Assetto. Thank you for the opportunity to ask a question. I would like to ask you a question about memory. Please tell us about the 2-minute application breakdown and the 3-minute demand outlook of memory. In particular, what applications are I have one question regarding memory.

Can you give us the breakdown of your memory in second quarter by application? And can you also share with us your demand forecast for third quarter memory? Which applications do you think are showing the earlier signs or faster signs of recovery given the impact of COVID-19?

As COVID-19 continued, mobile demand continued to fall. In the meantime, the demand was recovering on the basis of the low-cost model. On the other hand, due to the increase in home work and online activities, the demand for the server continued to rise in the second quarter following the first quarter. And the demand for PCs continued to rise, focusing on laptops.

To look at the second quarter demand by application, with the impact of COVID-19 continuing, mobile memory demand continued to show weakness. But within mobile memory, we saw some signs of demand recovery around mass tier models. On the other hand, server memory demand remained strong, continuing from the first quarter, driven by growth in traffic, with remote working and online activities increasing. PC and laptops were also a solid source of demand.

Thanks to that, DRAM was able to improve the performance of the existing bitguidance. In the case of NAND, as I mentioned earlier, it was able to greatly lower the guidance due to the reduction in mobile storage and the temporary lack of additional capacity in some applications.

This helped DRAM results to come in above our existing bid guidance, but for NAND, as mentioned earlier, we were slightly short of our guidance, mainly due to the decrease in mobile content per box, and also some temporary availability shortages in certain applications.

In the second half of the year, overall, mobile demand will recover, and the growth of graphics demand is expected. In the case of the server, basically, COVID-19 and the uncertainty of the competition continue, The demand for untaxed activities seems to be maintained, but the supply level of customers in the first half seems to have increased, so I think there will be some impact on demand depending on how customers operate in the second half.

Looking towards the second half, we do expect mobile demand overall to recover and also graphic demand to grow. For servers, the memory demand driven by this stay-at-home activities seems to continue as COVID-19 and other uncertainties continue. But we also think that customers may have increased their inventory somewhat during the first half. So another variable to the second half demand is the direction of our customers' inventory management.

In the second half, mobile is expected to show recovery, especially around the master models supported by a positive functionality

Also, the launch of new smartphones and the continued introduction of new 5G devices, especially in China, are expected to drive demand recovery in the second half.

In addition, I think that the increase in the demand for graphics due to the launch of the new game console will have a positive impact on the overall demand for memory. In particular, the new game console has increased the capacity of the graphics DRAM compared to the existing console,

An additional source of demand growth for the second half is the graphic memory demand with the launch of the new game console. The new game console has more graphic DRAM than the previous model, so with the new console launch driving up set sales, we expect graphic DRAM demand in the second half to also be solid.

Yes, thank you for your answer.

I'll take the next question. The next question is from J.J. Park of J.P. Morgan. The next question will be presented by J.J. Park from J.P. Morgan. Please go ahead with your question.

Yes, thank you for your question. I have two questions. As you mentioned in the presentation, COVID-19 has reduced the demand for premium smartphones in general. Please tell us about the demand for the entire smartphone market in the second half of the year. Please tell us about the release strategy of new flagship products in the high-end and mid-range sectors. And the second question seems to be related to the war. If you look at it, COVID-19 is I have two questions. First question is to the mobile side.

It seems that due to the impact of COVID-19, the premium segment especially is showing weak demand. In that context, can you give us your outlook on overall mobile demand in the second half? And can you also give us some details about your strategies around the new product launches for both the high end, the premium segment, and the mass tier segments? Second question is for the overall company level. The COVID-19 impact is continuing and some are talking of a possible second or third wave. And many countries actually are returning back to lockdown status. And this is creating a lot of production and operational issues for companies around the world. Given the very wide global exposure Samsung Electronics has in terms of its operation, can you share with us your plans of how to respond and contain this risk?

Yes, I will answer the first question. In the first half of this year, due to COVID-19, stores were shut down in Gyeonggi and especially in the major markets such as North America and the U.S., and the premium market was somewhat depressed. There is still uncertainty, but fortunately, the market demand is showing gradual recovery in June, and in particular, new technologies such as 5G and foldable are encouraging the demand for short-term replacement,

To answer your first question about the mobile side, in the first half, due to economic weakness brought on by COVID-19, as well as store closures in key markets, including North America and Europe, the premium segment has been somewhat dampened. Even though uncertainty still exists, fortunately, the market demand has started to show signs of gradual recovery from June. And the new technology drivers, that is 5G and foldable, we believe will stimulate the replacement demand for handsets and also lead market recovery.

As mentioned in the speech, the company will hold a Galaxy Unpacked event online on August 5. The new Note 10 model, which will be released in the second half of the year, will maximize its entertainment experience and productivity, and the Fold 10 model will further evolve its innovative form factor.

As we mentioned during the speech, the Galaxy Unpacked event will be held on August 5th as an online event, and you will find that the new note that we are introducing has maximized its entertainment experience and productivity, while the new fold that will be unveiled has taken the innovative form factor to the next level.

We're also closely working with global top-tier partners to provide a richer and expanded user experience.

So please stay tuned for the unpack event to find the details of our new product launches. And looking towards the second half, we will actively capture the market recovery demand as well as the year-end seasonal demand. Your second question regarding our global supply chain, that question, I will answer that.

As of the end of last year, Dangsan has about 230 production, sales, and R&D centers around the world. As such, we believe that we have a relative strength in combination with the very systematic supply chain management aspects that we have built over the years, such as global production, supply, and sales. As of end of last year, Samsung Electronics had production, sales, or R&D sites in 230 countries around the world.

Supply chain management is one of our key differentiating strengths that we have been able to obtain by building a very diverse global production, supply, and sales network. Our SEM capabilities played a very critical role in delivering the solid second quarter results by maintaining supply stability despite the various uncertainties brought on by COVID-19.

However, as you said, due to the long period of COVID-19 and the conflict between countries, it is expected that business conditions will be very uncertain in the future.

So, our company is preparing a medium-term strategy in preparation for this and considering various situations in general to strengthen the global SEM system. Our goal is to make sure that That said, the effects of COVID-19 are persisting.

And there are various other variables and uncertainties, including possible tensions increasing between countries. So that given and expected, we are already preparing a bid to long-term strategy to enhance our global SEM capabilities by considering various factors. And our goal in terms of SEM is to create and maintain a resilient production and supply system that can withstand any type of shock.

The next question will be presented by SK Kim from Daiwa Capital Market.

Please go ahead with your question. I don't think the supply companies and customers have a high supply level. But I think the mobile OEM supply is still quite high. Please give us your opinion on the current supply level of the company and the customer's DLAM land. Second, I think there is still uncertainty about the demand in the second half of the server. In the market, the situation is similar to 2018. I have two questions both about memory.

The first question is about memory inventory. Even though the inventory at both the suppliers and the customers, the OEMs, do not look high, at least compared to what we saw in the second half of 2018, at least on the mobile side, the mobile OEMs appear to be carrying high levels of inventory. In that context, can you give us your opinion on where the inventory levels currently stand at your side, as well as the OEMs for DRAM and NAND? Second question is about second half demand uncertainties. There are still a lot of uncertainty around demand, especially, for example, including servers. And because of this uncertainty, some people in the market are concerned that maybe this second half will end up being a repeat of what we saw in the second half of 2018. Given these concerns, can you give us an explanation or share with us your plans of how to respond to these uncertainties?

Yes, first of all, we maintain a dynamic operation in all aspects, including inventory management, production, investment, and so on. The company's inventory is maintained at the appropriate level of D-RAM and NAND. In order to increase the response power of recent customers' urgent orders, we have increased the inventory level to a normal level.

First of all, as you know, Samsung Electronics always tries to maintain flexibility in its operation. This would include inventory, production, and investments to reflect the market situation. To share with you our inventory levels, both DRAM and NAND inventory is currently at normal levels, and this is even though we have recently slightly added to our inventory to better respond to customer rush orders.

It's hard for us to tell you exactly about the level of customer removal, but as I mentioned earlier, we're seeing that the level of removal has increased in the first half of the purchase expansion. However, we don't see a rapid change in the supply and demand. We're going to keep checking this part.

Even though we can't say anything in detail about customer level inventory, it is likely that server customers in general may be carrying more inventory now since they have been increasing their buy during the first half. We don't think that the customer inventory levels will be a factor that could rapidly or suddenly disrupt the situation in the market, but we will be continuously monitoring the impact of this factor.

In the case of mobile, it seems that the supply of customers has increased slightly in the second quarter. I don't think it's a concern when considering the uncertain situation from the point of view of SCM due to various seismic issues. In addition, it is expected that demand will recover mainly in the second half of the year, so I think that the supply level will gradually decrease in the second half of the year.

For mobile, as you mentioned, yes, even though mobile OEM inventory appears to have increased during the second quarter, we think that given the uncertainties around the SEM with many geopolitical issues still in play, we don't think that there's a reason to be concerned about the mobile OEM inventory levels. Also, given the expected recovery of mobile set demand in the second half, especially around the masks, your handsets, We think that mobile OEM inventory will likely decrease as we pass through the second half.

The second question is about server demand. I will answer it in more detail. As COVID-19's influence continues until the second half of the year, I think the cloud demand will also appear in the second half of the year, depending on the stay-at-home economy in the first half of the year.

To give you a bit more detail about your second question, which was a server demand outlook for memory, we do think that this cloud-related server demand will continue to remain in the second half as the impact of COVID-19 is likely to continue even in the second half.

However, as I mentioned earlier, in the first half, there was a demand to secure stock among the expanded purchases of server contractors, and due to this stock,

But we also have to count in that part of the purchases made by server customers during the first half was for their inventory. So when we consider this factor compared to the first half, second half server demand will probably be somewhat toned down.

That said, that difference between first and second half is, I think, narrow enough to be offset by any shifts in the customer's inventory or investment strategy.

So we will be focusing on enhancing the accuracy of our server demand forecast by closely communicating with our customers.

The next question will be presented by Peter Lee from Citigroup. Please go ahead with your question.

Hello, this is Citigroup's Lee Se-chul. I have two questions for you. One is for Memory and the other is for IAM. First of all, there is a lot of talk about the lack of 6th generation VNAND in terms of memory. I would like to ask you to explain how to deal with this in the future. Secondly, it seems that the demand for smartphones has been recovering a lot recently, focusing on the middle price. According to this, in the second half of the year, it seems that the competition will be more severe due to the release and marketing enhancement of various new products by smartphone companies. I asked two questions.

The first question is about memory. We're hearing that there's a bit of difficulty or struggle in your sixth generation lean and yield. Can you give us your thoughts as well as your plans of responding to this situation? Second question is about the mobile side. It seems that the mass tier is where the demand recovery is mainly concentrated. And so this would likely mean that other OEMs would also be focusing on the mass tier by launching various new models and also focusing their marketing activities in the mass tier. This would mean that there would probably be more competition in mass tier in the second half as well. So in that context, can you share with us the details of your master response strategy for mobile?

Yes, our single-stack-based 6th generation VNND is currently improving its performance. And our customer design is also becoming more serious, so ramp-up is going to be a priority from the second half of this year.

Actually, our single-stack sixth-generation VNAND is currently improving its yield very smoothly. At the same time, we have started to gain design-ins with customers, so we are ready for visible ramp-up of our sixth-generation VNAND from the second half.

Second question. To answer your second question about our master mobile strategy, as you know, with the Galaxy A and the M series, we actually cover the master line.

We have a master lineup that covers a very wide price range from entry to the high end. We have been focusing, when it comes to our mass-tier handsets, on highlighting our useful and essential features, such as large screens, high-resolution selfie cameras, as well as large battery capacity, which enhances the product competitiveness of our mass-tier offering.

This year, the 5G introduction has been expanded into a medium-range model, which has received good responses from customers and traders, Because of this, despite the deterioration of the COVID-19 situation in the second quarter, the medium-sized model was able to maintain the sales trend of the first quarter.

This year, especially in the mass-tier, we have further expanded our 5G offering to even the mid-segment within the mass-tier, which has actually received positive responses from both customers and the carriers. And this has helped us maintain, in the second quarter, mass-tier sales trends similar to the previous quarter, despite the impact of COVID-19.

In addition to the positive sales trends, the profitability of individual master models

is also continuing to improve. And so as far as our mid-tier strategy is concerned, we will continue to improve the business fundamentals of the overall smartphone business by enhancing our operational efficiency and also further gaining our cost competitiveness.

Yes, thank you for your answer. I'll take the next question.

The next question will be presented by Nicola Godoa from UBS. Please go ahead with your question.

Yes, good morning. Thanks for taking my question. The first one relates to DRAM. Last week, one of your peers called for DRAM pricing to bottom out in H220. i.e. to start then inflecting positively in the first quarter of 21. Do you broadly share that view and what do you see as the top two or three key factors to influence this trajectory into the next six to 12 months? And my next question also relates to DRAM more on the production and technology side. In last conference call, you alluded to not moving all DRAM products at the same pace to one ZNR meter. Would you say that more than 50% of UEFA starts currently are still at 1x and 2z nanometer, which is perhaps the highest portion in more legacy DRM nodes you had for quite a while? And if so, as you accelerate migration to 1z nanometer in 2021 and prepare for 1 alpha nanometer, would that imply that you need to accelerate investment in new DRM capacity to offset UEFA capacity loss for this tech migration? Thank you.

Yes, there are two questions related to memory. The first is, last week, a coin company It is expected that the price will hit the bottom in the second half of this year and rise again from the first quarter of next year. Do you agree with the overall price outlook? If you were to pick two or three factors that could have a major impact on the change in the price of DRAM in the future, what do you think will be important in the next 2 to 12 months? The second question is related to D-RAM technology and process transformation. In the last quarter of 2014, there was an agreement that D-RAM products would not be converted to 1D at the same speed, and that the conversion speed would be differentiated. As of now, more than 50% of WFST is still in 1x or 2g nano. In that case, the ratio of legacy DRAM nodes is much higher than before. Then, if we think about the future of the process transition, if we prepare 1A nano in 2021, should we accelerate the investment in DRAM and CAPA in the future in order to minimize the wafer CAPA loss that can come out depending on the process transition?

First of all, I think it would be good to briefly talk about the price of DRAM in the upper half of the year.

To answer your first question about the DRAM price and the expected trajectory, I think a good way to start my answer would be to give you a brief recap of the DRAM prices in the first half. During the first half, especially with a rapid increase in demand around servers, overall DRAM prices already showed fast recovery.

Now that said, during the second half, many factors would play into the prices, including COVID-19 and how it will unfold.

Also, the customer inventory, which has increased somewhat during the first half. And then the customers, we think, would expect that the suppliers would be dedicating a larger portion of their capacity to server applications. So that may also play into the prices.

However, not only COVID-19, but also the U.S.-China trade war and various uncertainties exist throughout the market.

So given the many uncertainties that still exist, including COVID-19, as well as trade tensions, and also the possibility that customers themselves may change their inventory investment strategies depending on how the macro environment unfolds, I think it is still difficult to tell when a price inflection point will come.

I think it is still difficult to tell when a price inflection point will come.

you've also asked about the key factors that we think would impact the price changes i think one would be the macro environment included covet 19 and how that will unfold and also second would be the memory inventory levels both at the suppliers level as well as the customers these would be the factors to watch To answer your second question, which was about our migration, as of end of second quarter, in terms of wafer input, the share of advanced nodes, that's 1x and more advanced nodes, was mid-70%.

and we expect the share to increase gradually and reach around 80% by year-end.

Also, as you know, according to our investment approach of focusing on infrastructure investments that prepare for the mid- to long-term fundamental demand and then to execute our equipment investments flexibly depending on market situation, we analyze the market on a quarterly basis and then we flex this into our investment execution.

This KEPA management is not only due to the change in the existing process, So our capacity management plans include not only the pace of migration of our legacy notes, but also, for example, the bid loss that is expected during the earlier stages of the migration,

and yield improvement plans and other very detailed factors. And so as we decide additional capacity investments, we will be counting in or considering various factors, including the changes that are expected on the demand side and how our supply strategy needs to change to flexibly respond to that.

Thank you for your answer. I'll take the next question.

The next question will be presented by Dongwon Kim from KB Securities.

Please go ahead with your question. Next, the second quarter of the C segment, which exceeded market expectations, seems to have contributed to an increase in online sales as well as a quick recovery of TV demand. Please give us your opinion on the online sales of the second quarter and the future strategy for expanding the online sales market according to the non-face-to-face environment. Thank you.

I have two questions. The first question is about the display business. It does seem that many are expecting the foldable display market to grow and expand in the future. So can you share with us your business strategy regarding foldable displays and also whether you have plans of investing in new display lines to respond to foldable display demand? Second question is about your CE business. Your CE business delivered business results that actually was above market consensus during the second quarter. It seems that not only the rapid recovery of the TV demand, but also increase of online channel sales contributed significantly in the strong performance that we saw in the second quarter. So in that context, How much did online sales actually increase for CE in second quarter? Can you also give us your strategy on how to better tap online sales and also your outlook about online sales in the CE division?

First of all, I would like to answer the display question. Foldable is an optimal product that can meet the needs of consumers and multitasking. uh uh uh uh

To answer your first question about the foldable display business, we do believe that foldable displays are the optimum product to satisfy the needs that customers have for larger screens as well as multitasking. It also enables a differentiated design that is different and unique from the bar type that people are used to that does appeal to consumers. The wider adoption of 5G technology is expected to be a catalyst that accelerates the growth of the foldable market. And our focus in terms of technology development for the foldable screen and display is to develop foldable displays that enable a differentiated experience for key applications or use cases such as video streaming and games.

We are preparing a variety of form factor foldable products based on ULTRA DIN GLASS and plastic-based cover window technology. In order to do this, we will strengthen our customer and technology cooperation and present high-quality products. In order to promote foldable display to the general public, we are cooperating with various set partners and customers, and we will respond to demand.

Also, we are preparing differentiated form factors of foldable products by using ultra-thin glass UTG as well as PI-based cover window technology. And we will be introducing foldable displays that meet even a higher standard of completion through close cooperation with our customers. The investments will be considered according to market needs and technology advancements, but as of yet, we have not decided in any specific investment plans.

The second question is for CE. Since offline stores in major regions such as the U.S. and Europe have been closed since March of last year, the online purchase trend for TV and home appliances

To answer your second question about CE and online sales increases, with offline stores closed in key regions, including the US and Europe, and online becoming a trendier channel for TV and consumer electronic purchases, as you mentioned, yes, the online consumer electronics market did grow very rapidly.

And so given this trend, we strengthen the content that we offer on the websites of our channels as well as our own websites.

to offset the restricted offline sales and to also expand our online sales. We also, for example, provided live product demos using social media and also focused on providing a delivery and installation service that emphasizes hygiene as a way of a new marketing initiative.

Also, in the case of household appliances, the installation method is slightly different for each product. Also because each product has a different way of installation and many customers wanted to install the products themselves, we started to provide self-guides that help consumers

do the installation on their own. And so thanks to all of these initiatives and efforts, even though our overall TV and consumer electronics revenue decreased, our online sales actually outpaced the online sales growth rate of the market.

In the second half of the year, the importance of the online market will continue to grow. As I explained in my speech, we will continue to improve the online sales infrastructure We will expand our online collaboration with distribution companies and increase our competitiveness in non-face-to-face sales. At the same time, we will continue to promote customer-oriented marketing and promotion based on data and accelerate our online sales growth.

We do expect online to remain an important market even in the second half. And as mentioned during our presentation, we will improve our online sales infrastructure and expand our online collaboration with our key channels to build up our non-face-to-face sales competitiveness. At the same time, we will continue to strengthen our data-based customized marketing promotion initiatives to further accelerate online sales growth.

Two more questions before we end.

The next question will be presented by Jongwoo Yoo from Korean Investment and Securities. Please go ahead with your question.

Thank you for the question. I have two questions. The first one is about memory, and the second one is about the network. As you've said, we don't have a clear picture of the future of memory. So I'd like to ask you a question about our equipment investment. As far as I know, the plan we set up in the beginning of the year is still going on. But I'd like to know if there's a possibility of a change in the production plan in the second half of the year. It's time to make a public plan for next year, but I'd appreciate it if you could compare the direction of the infrastructure investment next year. Second, last year, the network business had a lot of file-based investments in domestic telecommunications businesses, so we were very successful. I have two questions.

First question is about the memory as well as memory production plans. We understand that your CAPEX plans have not changed. You are maintaining the CAPEX plans that you had set at the start of the year. But do you see any room for changing your production plans for the second half, given the large amount of uncertainty that still remains in the overall memory industry? Also, in terms of where we stand in the calendar, this is probably a time for you to start doing your supply planning for next year. So can you give us at this point some guidance or direction regarding the capex plans that you think would happen next year, at least versus the capex plans you had this year? Second question is about the network business. Last year, especially with Korean carriers investing in their 5G infrastructure, your network business delivered strong performance this year due to COVID-19 and other factors. Globally, there is a relatively weaker performance on the 5G equipment side or infrastructure side. But it seems that recently there has been some changes in carriers and their 5G infrastructure investment plans. In that context, can you give us what you see in terms of the changes in Korean companies, Korean carriers' 5G investments, and whether you think that there will be – and can you give us some outlook for the rest of the year?

To take your first question about the

about our memory capex as well as production plans. There were some recent press reports about our finishing work of Pyeongtaek Fab 2 and also the new construction of Pyeongtaek Fab 3. And this media coverage seems to have caused some questions in the market asking us about whether we're planning to increase our memory investments going forward. At the same time, others are asking whether we still will be delaying our capacity expansion

CapEx due to uncertainties in COVID-19.

You may have heard this several times before, but our investment approach and policy is to carry out optimum investments to drive continuous growth in the future. And so we continue to analyze various scenarios that reflect a lot of different possibilities, including a possible increase of COVID-19 or geopolitical risk. And then based on these analysis results, revisit our investments byproduct on a quarterly basis.

Recently, we have been investing in Sihan and Pyeongtaek in the second half of the year, and we are planning to contribute to the development of both. And we have been investing in infrastructure for the long-term fundamental demand, and we have been investing in infrastructure for the long-term fundamental demand, and we are maintaining investment standards like this.

The recent executed investments in Xi'an and Pyeongtaek will contribute to mass production from second half, according to our original plan. And we continue to stand by our investment policy or approach of executing infrastructure investments preemptively, and then executing the equipment investments with maximum flexibility, depending on the market situation.

I would like to add one more thing. Recently, there has been a lot of uncertainty, I think there are some people who feel uncomfortable about the fact that the company is talking about a preemptive infrastructure investment. There was a price rebound, but if you look at the memory price for a while, there was an inevitable decrease in profit and loss, but on the other hand, the mobile market, client, and server markets in this period have also accelerated in high capacity. In particular, in the case of a market with high price elasticity,

To add, given the unprecedented level of uncertainty right now, some of you may find it odd that we are talking a preemptive infrastructure investment. But I think we need to look past. Even though recently prices have started to rebound, there was a period during which memory prices were soft for some time. And even though that did bring some margin squeeze, if you look also, this was a period when there was an increase in the density that is adopted by, for example, mobile and client server markets. And so we think that the markets, these markets that have a higher price elasticity, has definitely helped the market return to a stable growth.

In the recent performance announcement and the recent performance announcement, I said that the COVID-19 situation could be a new turning point for digital transformation. As Samsung's company leader, we are preparing an active response to investment and customer demand so that this transformation can be quickly enhanced and the IT industry can continue to grow.

We have been saying today, as well as during the last conference call, that COVID-19 and what it brought may be the new inflection point for a dramatic digital transformation. And as the market leader, Samsung Electronics, has been actively preparing to make the investments and to capture the customer demand to enable the industry as a whole to continue growth by quickly sensing the shift.

Therefore, we will continue to work with the company

So we want to actively capture the customer demand around markets that have higher price elasticity, such as clouds, which is an area expected to maintain solid growth into the mid to long term. So our investment approach towards preemptive infrastructure investment should be understood in that broader context.

Second, I'd like to respond to your question about the network business. As you said, Korea has been focusing on 5G investment for 19 years, and 5G investment has been continuing for 20 years. In other countries, due to COVID-19, there are uncertainties in the 5G investment schedule of businessmen, but in order to expand the 5G supply,

To answer your second question about the network 5G infrastructure side, as you mentioned, in Korea, there was concentrated 5G infrastructure investments made in 2019, but we are also seeing the 5G investments in Korea continuing even in this year, 2020. Looking towards the overseas, there is still some uncertainty overseas with carriers possibly changing their 5G investment schedules, but we are closely coordinating with our customers in order to minimize the impact of COVID-19 on our 5G infrastructure business.

The last question.

The next question will be presented by Claire Kim from Hana Financial Investment. Please go ahead with your question.

Yes, hello. Thank you so much for the question. The first question is related to Foundry. Recently, there has been a lot of talk about the low efficiency of 5nm through overseas media, and the development of 4nm. . . . .

I have two questions. First question is a foundry question. As you may have heard, recently there was an overseas media report that started to mention that there were low yield issues in the 5-nano and that you are planning to skip development of 4-nano and directly going to 3-nano. So given that report and the rumors, can you share with us your current status of your 5-nano mass production and whether you are planning to develop 4-nano? Second question is about the memory side. Recently, JEDEC announced the standards for the DDR5 DRAM for PCs and servers. So given that, can you give us your strategy of how to respond to DDR5 opportunities by application?

Yes, I will answer the question related to the Foundry. In the second quarter of the Onano process,

to answer your first question about fine foundry to give you an update on our five nano we already started mass production in second quarter and plan to start full scale mass production by widening the customer pool during the second half in terms of yield yield is improving as planned

You've mentioned a rumor about skipping 4nano development, but that rumor is unfounded.

And our 4nano first-generation node development and mass production is moving on schedule. And we are also in parallel developing the second-generation 4nano nodes. And we'll be continuing to focus on expanding our applications and enhancing our product competitiveness.

DDR5 is a solution for not only the traditional PC and server applications,

also the rapidly growing cloud and data center applications. It is the next-generation product that supports the performance and capacity that's necessary in the era of AI. Also, compared to DDR4, DDR5 has enhanced stability features and is more immune and resilient to errors in complex computing and application environments.

In the 21-year supercomputing project that the global governments are promoting,

You may have heard that recently the supercomputing projects pursued by many global governments started to look into using DDR5 products, and this is in part because of the superior performance and stability that DDR5 delivers.

The CPU that supports DDR5 is expected to be released by 2022. The network infrastructure such as 5G, which requires ultra-high speed and ultra-low latency, is also reviewing the installation of DDR5 products, so we think it will expand its influence as a key component for the implementation of next-generation technology. In line with this, we are also cooperating with major companies.

In terms of timeline, we expect CPUs that support DDR5 to be launched by year 2022, and also even network equipment that... including 5G equipment that have ultra-high speed and ultra-low latency requirements are looking into using DDR5 products. So DDR5 will likely become a key component for implementation of many next-generation technologies. So we are currently in collaboration with key industry players and expect to see the first shipments from second half of 2021 With crossover occurring, we currently expect sometime around second half of 23 and first half of 24.

That completes our conference call.

We wish all of you and those close to you stay strong and in good health. Thank you.