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 out of fiscal year 2020 third quarter earnings results by Samsung Electronics. The conference will start with a presentation followed by a divisional Q&A session. If you have a question, please press start one, that is start anyone on your phone during the Q&A. For cancellation, please press star 2, that is star and 2, on your phone. Now we shall commence the presentation on the Fiscal Year 2020 Third Quarter Earnings Results by Samsung Electronics.

Good morning. This is Ben Seo from Investor Relations. Thank you for joining our earnings call for the third quarter of 2020. With me representing each of the business units are Mr. Hanjin Man, Senior Vice President of the Memory Marketing Team, Mr. Shin Dongho, Senior Vice President of the System and Assign Marketing Team, Mr. Han Seunghoon, Senior Vice President of the Foundry Marketing Team, Mr. Choi Beonyoung, Vice President of Samsung Display, Mr. Lee Jongmin, Vice President of the IT and Mobile Business, and Mr. Kim Wonhee, Vice President of the Visual Display Business. In addition, Mr. Kang Taegyu 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. Before we begin, and with great sadness, I would like to take a moment to reflect on our chairman, Connie Lee, who passed away on October 25th with his family at his side. Chairman Lee was a true visionary who drove the historic transformation of Samsung from a relatively small electronics company into the global IT leader that we are today. In particular, his new management initiative in 1993 was the driving force behind his vision of delivering the best technology to help advance global society. All of us at Samsung will cherish his memory and everlasting legacy. With that, I would like to discuss the results for the third quarter. Today is our third earnings call after the COVID-19 pandemic started. And unfortunately, its effects are still being felt heavily around the globe. As we continue to keep our employees' health as our top priority, the company's management and employees are also focused on overcoming challenges to ensure that we meet our customers' needs, even under difficult-to-predict market conditions. This readiness has helped us achieve our highest-ever quarterly revenue and our performance to exceed market expectations. Total revenue in the quarter was 67 trillion won, a 26.4 percent quarter-on-quarter increase. Demand for consumer products was much stronger than expected, and timely responses utilizing our global supply chain management capabilities were the key factor for the significant increase in sales. A recovery in component demand in the mobile segment also contributed to the gain. On a year-on-year basis, total revenue grew 8% on the back of sales performances of multiple key products. Gross profit increased 5.9 trillion won sequentially to 27 trillion won led by the mobile business and C division and gross margin grew slightly to 40.3%. Both gross profit and gross margin also improved substantially year on year. SG&A expenses increased as a significant rise in sales resulted in higher marketing and other expenses. As a percentage of sales, however, they declined 2.5 percentage points to 21.9% due to efficient cost execution. Operating profit totaled 12.4 trillion won of 4.2 trillion won quarter on quarter due to the dramatic revenue increase as well as thorough cost management efforts. Operating margin improved considerably to 18.4 percent. On a year-on-year basis, both operating profit and operating margin increased sharply, backed by an improved environment for the memory business and strong sales of consumer products. I will now briefly review the results for each business unit. The memory business performed well despite a decline in ASP with shipments exceeding prior guidance thanks to solid mobile and PC demand and a continuation of cost improvements. System semiconductor earnings grew as demand improved for major mobile components for system LSI. and orders increased from foundry customers for HPC and other products. In display, earnings improved sequentially with growing sales of mobile panels for customers' newly launched products and an improved supply and demand environment for large panels. On a year-on-year basis, however, profits declined due to a later-than-usual launch of new smartphone models by a major customer. In the mobile business, earnings grew considerably quarter-on-quarter as a nearly 50 percent increase in smartphone sales, which included flagship models, resulted in a significant economy of scale advantage on top of profitability gains from efficient cost management. The CE division also improved its earnings markedly both quarter-on-quarter and year-on-year as sales of premium TVs and digital appliances increased sharply. we were able to respond effectively to this surge in demand using our leading global supply chain management capabilities. Regarding currency effects, a weak U.S. dollar and strong euro against the Korean won was positive for the IM and CE divisions, but negative for the component business, resulting in a net neutral position. Next, I would like to share our business outlook. In the fourth quarter, we expect overall profitability to decline due to intensifying competition in the mobile business and C division, alongside a continuation of soft demand from server customers. For memory, despite an increase in node process migration and solid demand for mobile and notebook PCs, we expect profitability to decline due to weak pricing in the server segment as customers continue to adjust inventory. And there will also be initial cost increases associated with the ramp up of our new lines. In system semiconductor, system LSI will start mass shipment of 5 nanometer 5G SOCs, while for foundry, HPC and mobile SOC customer orders are expected to increase. For display, mobile panel earnings should improve as we expect to see a significant quarter on quarter increase in sales. The large panel business will continue QD display preparations as planned, as it also fully addresses LCD demand. We expect mobile profitability to decline due to a decrease in smartphone sales, coupled with an increase in marketing costs in the upcoming seasonally competitive quarter. In CE, we anticipate seeing solid demand backed by strong year-end seasonality. However, profitability is likely to decrease due to increased competition and costs. Now let's move on to our outlook for 2021. Global demand is forecast to increase year-on-year, but uncertainties are unlikely to ease given the possibility of additional waves of the pandemic. The component business will focus on strengthening market leadership through next-generation node processes and timely investments. We believe there may be some risks regarding mobile inventory adjustment as a result of overlapping component demand from multiple customers that started at the end of the third quarter. We will continue to monitor this carefully. For the memory business, we will enhance market leadership by expanding node migrations and by flexibly adjusting our product mix. For investments, we will continue to adhere to our strategy to be ready to meet mid- to long-term demand while maintaining flexibility regarding near-term demand. System LSI will actively address the growing demand for 5G SOCs and high-resolution sensors by offering differentiated products. And Foundry will accelerate growth by expanding into new applications within HPC and other areas, as well as by attracting additional large customers. For display, the mobile panel business will work to improve earnings by leveraging our differentiated technologies and cost competitiveness. The large panel business will focus on successfully launching QD display. For the mobile and CE products, we will strive to improve profitability by further strengthening premium lineups and operational efficiency. On top of the above, the mobile business will expand its foldable and 5G smartphone offerings in an effort to increase sales and enhance profitability. The network business will strengthen its global business foundation by continuing to expand 5G commercialization and explore new business opportunities. PE will strive to sustain growth by expanding its premium lineup and strengthening its online and B2B businesses. Now I will address capital expenditures. Third quarter capex was 8.4 trillion won with 6.6 trillion won allocated to semiconductor and 1.5 trillion won to display. The cumulative total for this year as of the end of the third quarter is 25.5 trillion won with 21.3 trillion won allocated to semiconductor and 3.1 trillion won to display. We expect full year capex to reach approximately 35.2 trillion won with 28.9 trillion won allocated to semiconductor and 4.3 trillion won to display. As a reminder, the full year numbers are projections, and the actual figures may differ depending on factors such as market conditions and the timing of equipment deliveries. For the memory business, capex should exceed last year's total due to investments in node migrations and capacity expansions to address future demand. Foundry CapEx will increase year on year as we expand capacity, including for 5 nanometer EUV. Display investments will also increase, mainly for QD display capacity and new technological processes for mobile panels. Next, I would like to address the third quarter dividend. The Board of Directors today approved a quarterly dividend of 354.1 for both common and preferred stock. The total payout is the same as it was in the first and second quarters, which is 2.4 trillion won, or one-fourth of the planned annual total of 9.6 trillion won. In closing, let me share some updates in our sustainability management. Samsung Electronics believes water management is the first step in environmental protection at our sites and is an integral part of a manufacturer's management activities. For more than 10 years, we have committed to water management by focusing on the three Rs, reduce, reuse, and recycle, and by including water reduction as a performance indicator. On September 22nd, Samsung Electronics was recognized for such endeavors, achieving another first in the semiconductor industry. Our Hwasong campus earned a water footprint certification from Carbon Trust, a UK-based entity that recognizes eco-friendly organizations or products. The certification is given to an organization based on a comprehensive evaluation of water use and management over a three-year period. Next, I will address our activities over the past year regarding Cobalt for Development, an initiative to improve the living and working environment for communities involved with the artisanal cobalt mines in the Democratic Republic of Congo. Cobalt is a key component in the production of batteries for electronic devices and electric vehicles, and we are working to minimize the negative impacts that artisanal mining in Congo has on society and the environment, including human rights violations and environmental issues. After launching in September 2019 as a joint project between Samsung Electronics, the German Society for International Cooperation, Samsung SDI, BMW, and BASF, Cobalt for Development has reached out to and helped more than 1,800 people in the communities by providing new learning facilities and a wide range of educational programs. We will continue to support the initiative to improve access to education on human rights, the environment, and safety for the minors. On a separate note, Interbrand announced their best global brand list on October 20th, and our estimated brand value reached a new high of $62.3 billion. We are in the top five for the first time after having ascended to the sixth spot in 2017. Interbrand cited our rapid response to COVID-19 as well as our sustainability management activities as some of the factors that played a critical role in the growth of the Samsung brand. We will continue our efforts in sustainability management and will be sure to keep you updated. I will now turn the conference call over to the gentlemen from each business unit to present third quarter performances and outlooks for their corresponding business segments. Thank you.

Good morning. This is Hanjin Man from the memory marketing team. In the third quarter, server demand weakened somewhat relative to the strength it showed in the first half. But overall demand was higher than expected as mobile demand started to recover, mainly in the low to mid-priced segments. For DRAM, demand for mobile increased as strong seasonability This novelty and improved consumer confidence helped drive an increase in sales that centered on low to mid-price smartphones, while effects of 5G expansion and Huawei's urgent orders also contributed to the rise. For server, demand was weak, mainly from OEMs, while major customers utilized their inventories. Overall demand was relatively solid backed by Huawei's inventory buildup. For PC, along with strong demand for laptops such as Chromebooks, demand increased led by set bills ahead of seasonal events like Black Friday. Graphic demand increased as on top of strong seasonal effects, demand from gaming expanded due to increased game access related to the stay-at-home trend and accelerated production of new game consoles. We expanded sales to mobile applications by preemptively converting our product mix. And we actively responded to PC demand, mainly for laptops, linked with an ongoing expansion of the number of people working from home and learning online. As a result, we exceeded our previous speed growth guidance. Next, I'll talk about demand. For mobile, as was the case for DRAM, demand was strong, bolstered by launches of new models by major manufacturers, the recovery of consumer confidence in Huawei's urgent orders. For server, demand declined due to inventory adjustment at major customers related to the increased purchasing in the first half. For client SSD, demand was strong for low to mid-price laptops as more people walk and study from home, while demand for SSDs for new game consoles also increased significantly. Our bid growth exceeded that of the market due to increased shipments for overall applications thanks to our active responses to strong mobile demand. which includes demand from the inventory buildup at Huawei and that related to expanded sales of SSDs for new game consoles. Next, let's talk about the outlook for the fourth quarter. For DRAM, mobile build demand is likely to see another quarter of growth, mainly led by Chinese manufacturers, due to the release of new smartphones and the recovery of domestic demand in China. While for server, We expect demand to remain weak as customers continue to adjust inventory. For PC, we expect to see solid demand for low to mid-price laptops such as Chromebooks, but desktop demand will probably stay soft due to conservative IT investment from enterprises. For graphic, we expect demand for graphics cards to appear with the release of new higher performance GPUs while demand for new game consoles should stay solid. In the face of continued uncertainties, we will actively address rising demand from major mobile customers by optimizing our product mix. And we will continue to strengthen our cost competitiveness through a stable production ramp-up and timely sales of 1G nanometer DRAM. For NAND, in the fourth quarter, Along with signals of an economic recovery, such as improving economic indicators, we expect demand from mobile to increase, mainly led by Chinese mobile manufacturers. For server SSD, we expect demand to remain soft due to ongoing inventory adjustment in customers and effects of conservative CAPEX in major customers caused by prolonged COVID-19, which should result in a slight decline in prices. For client SSD, we believe demand will be robust backed by continuing demand for low to mid-price laptops while content per box should increase. We will actively respond to increasing demand in the client SSD and mobile markets and continue to expand sixth generation VNN conversion to enhance technology leadership and cost competitiveness. Now let's move to the outlook for 2021. First of all, I would like to ask you to understand that it is difficult to provide a detailed forecast given the current number of uncertainties, which include possibilities of a prolonged pandemic as well as numerous geopolitical issues. However, I can provide a general outlook. For mobile, bill demand, which has increased thus far in this fourth quarter, is likely to stay solid throughout the first half of next year as more low-end to mid-range smartphones adopt 5G technology. On the other hand, for server, we believe demand, which has been weighed on by inventory adjustments at customers in the second half, is highly likely to turn around in the first half of next year, influenced by impacts of a newly released CPU and the recovery of previously shrinking investment on top of healthy inventory levels. In this volatile market for overall applications, we believe that it is very important to quickly detect changes and respond accordingly. Therefore, while concentrating on flexibility in our product mix to increase responsiveness to changes in demand, we will keep adding to competitiveness by accelerating conversion to 1Gnm DRAM and 6th generation VNET. In addition, We will continue to develop next-generation products such as EUV-based 1A nano DRAM and seventh-generation VNAND to strengthen competitiveness for a post-pandemic era in newly growing markets such as AI and edge computing. Thank you.

Good morning. This is Dongho Shin from the system at SI business. In the third quarter, our earnings improved due to a recovery in demand for mobile components such as image sensors and SoCs, following increased production by global manufacturers, and improved smartphone consumption sentiment, which had both been suppressed by effects of COVID-19. In particular, the performance of display drive ICs improved significantly as the demand for tablet and laptops increased due to growing momentum of contact-free environments such as telecommuting and remote education. In image sensors, we strengthened leadership in ultra-small and high-resolution pixels by establishing a line of various products based on 0.7 micrometer pixels. In the fourth quarter, We expect the demand for SoCs and other mobile-related components to increase as major smartphone manufacturers attempt to expand market share and add new 5G smartphones to their lineups. We will, under these conditions, focus on expanding the mobile SoC business by starting the supply of 5G integrated SoCs built on advanced 5-nanometer EUV process. In 2021, although external uncertainties such as the duration of COVID-19 outbreak will remain factors, we expect the market to recover due to increased demand following aggressive expansion strategies of major smartphone manufacturers. We will expand shipment centered on our 5G integrated SoCs, high resolution image sensors, and display products amid solid demand. In addition, we will increase our market share by diversifying applications for security products and by strengthening technology such as high frame rate for mobile DDIs. By doing so, we plan to achieve double digit sales growth next year. Thank you.

Good morning. This is Sean Han from the Foundry Business. In the third quarter, we achieved a new high for quarterly sales on backup, improved consumer sentiment, recovery of demand from mobile, and resumption of production at manufacturers and an increased demand for HPC chips from major customers. In addition, we have solidified a foot forward for growth by providing the competitiveness of our advanced process technology with the start of shipments of five nanomobile products and mass production of 2.5D packages. In the fourth quarter, we aim to set even higher level for quality sales by expanding shipments of mobile SoCs and HPC chips to major customers. And we will continue our effort to widen our lead in advanced processes by completing the design of second generation of 5nano products and the first generation of mobile use 4nano products. Moreover, we will continue to strengthen the five foundry ecosystem, both at home and abroad, to optimize the reserves of our cooperation with our partners utilizing events such as yesterday's SAFE Forum, we call it SAFE Forum 2020. In 2021, We will continue to diversify applications not only in mobile but also in HPC, consumer products, and network, and we will try to add more stability to our business structure by attracting additional large customers. In addition, we expect demand to stay strong for our entire process portfolio, and we will do our best to ensure a stable supply of our products by expanding capacity and improving efficiency. Through this, we expect our growth rate to significantly exceed that of the market. Thank you.

Good morning. This is Kwon Young Choi from the planning team of Samsung Display. In the third quarter, despite the effects of the pandemic, Earnings in the display business improved, driven by increased sales for smartphones, TVs, and monitors. To be more specific, the mobile display business recorded earnings growth by increasing utilization and expanding sales of OLED panels to respond to new product release at major customers amid a gradual pickup of previously stagnant smart home demand. In the logic display business, the losses narrowed quarter on quarter, supported by brisk demand and an increase in ASP under strong seasonality, led by sales of ultra-large TVs and high-performance monitor panels as people spend more time at home. Let me share the outlook of the fourth quarter. For mobile display, we expect full-fledged sales of our main customers' new products to keep demand at a solid level. In response, we'll improve our sales and profitability by fully meeting customer demand and by enhancing our product mix. The large display business will continue to service customer demand and at the same time accelerate the transition of business structure based on new technologies. Finally, I will share our outlook for the display market and our core strategies for 2021. For the mobile display business, we expect uncertainties regarding a demand recovery to linger given the chances of additional waves of COVID-19 and risks associated with the U.S.-China trade dispute. However, we expect to see a gradual recovery of the smartphone market driven by the expansion of 5G networks. We'll ensure our OLED panels emerge as a mainstream display in the mobile product market by expanding our differentiated design and new technologies, which offer lower power consumption, high refresh rates, alongside our efforts to reinforce cost competitiveness. Moreover, we'll strengthen our market presence by spurring innovation in form factor with technology such as foldable, slideable, and rollable displays, and by adding new application areas such as notebooks and tablets. For the large display business, we'll develop our differentiated QD display technology according to schedule. establish a strong foundation for QD display in the premium segment. Thank you.

Good morning. I'm Jongmin Lee from the mobile communications business. I will now share our third quarter results and outlook for the IM division. In the third quarter, the market showed a gradual recovery led by positives such as economic stimulus packages. with demand rising quarter-on-quarter from levels caused by lockdowns in major regions. For the mobile business, our smartphone sales increased sharply quarter-on-quarter thanks to launch of flagship models, the Galaxy Note20 and Z Fold2, and a demand recovery for mass market models in many regions, including India. Alongside the increase in sales, profitability improved dramatically quarter-on-quarter as a result of improvement to our cost structure, including component standardization and efficient execution of marketing expense. In addition, rising sales of tablets and wearables also contributed to profit growth in the third quarter. We launched new Galaxy devices such as premium Tab S7, Watch 3, and Buzz Live, along with Note 20 in August. In September, we unveiled GeForce 2, featuring refined hardware technology and user experiences, as well as S20 FE, which is packed with features tailor-made for our fans. We will continue to expand our Galaxy ecosystem based on competitive products that fully reflect the needs of our customers. For the network business, domestic and overseas projects were delayed due to COVID-19 impact. However, We strengthen our foundation for growth in the 5G business by signing a large-scale contract with Verizon to supply of network equipment. Now, let me move on to the outlook for the fourth quarter. We expect market demand to increase quarter on quarter amid strong year-end seasonality as the market continues to recover. For the mobile business, it seems inevitable that smartphone sales will decline and our product mix will somewhat weaken compared to the previous quarter, given seasonal factors such as subsiding new model effects of flagships. Furthermore, we expect our profits to decrease due to an increase in the marketing costs as we face intensifying market competition and year-end peak seasonality. For the network business, we will continue to expand 5G coverage in Korea and also push for expansion in global 5G market, including North America and Japan. Last, let me share our outlook for next year. Mobile market demand is expected to increase amid gradual economic recoveries and full-scale migration towards 5G. However, it will take some time to recover to pre-COVID levels and uncertainties related to COVID-19 will remain. For the mobile business, we will expand smartphone sales by strengthening our 5G lineup for the mass market we will further differentiate our flagship lineup by reinforcing the competitiveness of our foldable phones to help popularize them in the market. At the same time, we will continue our efforts to bolster profitability by enhancing both our product mix and operational efficiency. For the network business, We will actively attract new orders for our global 5G business and continue our timely response to 5G commercialization in both the domestic and overseas markets. Thank you.

Morning, everyone. I'm Kim Wonhee from Sales and Marketing, Visual Display Division. First, I'd like to review the market conditions and our performance in the Q3 of 2020. The TV marketing Q3 grew both year-on-year and quarter-on-quarter with a significant release of pent-up demand for the benchmarking. The TV replacement demand was boosted as consumers spent more time at home. We responded promptly to the growth in demand with our global SM capabilities and captured the pent-up demand by strengthening cooperation with major channel partners and by preemptively preparing promotions. In response to the new non-contact era, we continue to foster online sales and enhance digital marketing. We proactively targeted the consumer's needs for great picture quality in home cinemas and the rising popularity of smart TVs with increased use of at-home services such as OTT. As a result, we expanded sales of new models and premium products such as QLED and super large screen TVs. With growing consumers' needs and desires to customize the home environment and interior, we also increased sales of our lifestyle TVs, which are designed to fit various styles and consumer tastes. These efforts led to our strong performance in Q3, and we recovered sales decline in the first half of the year. For digital appliances, the market demand in advanced markets recovered after a temporary drop helped in part by expansionary policies of governments. Revenue in Q3 grew considerably as we preemptively addressed pent-up demand, resulting in increased sales of our premium products, including bespoke refrigerators and Grande AI washer and dryers. Rising sales of dryers and air dressers also contributed to the strong results amid growing awareness of how home appliances can lead to better hygiene. Now let us look at our outlook for Q4 and 2021. The TV market in Q4 is projected to grow year on year in the traditional peak season. However, the risks of COVID-19 and corresponding social and economic changes may continue to increase uncertainty. We believe Q4 will be very different from before as social distancing policies are likely to affect offline consumption, and peak sales season events will be spread over a longer period of time than before. And with all these changes, we expect to see much fiercer competition. Also, entering year-end peak sales season after the flood of panted demand, the industry may face many challenges, including the risk of rising costs. Under these circumstances, We will work closely with our channel partners to overcome these challenges and secure profitability. We will continue to improve our online sales infrastructure to prepare for changes to offline consumption and expand sales of premium products, including QLED and lifestyle TVs with online and O2O special promotions. We will also continue to lead the super large screen TV market by focusing on customers' needs for bigger TVs and encouraging size upgrades through effective marketing campaigns. For the digital appliances, we will run seasonal promotions flexibly based on demand, which is recovering mainly in advanced markets. We will also work to secure profitability by strengthening online marketing and optimizing operations with efficient logistics. The TV market in 2021 may see dynamic changes as a result of COVID-19. With our experiences from this year, we will implement a sales strategy to respond swiftly to any changes in the market and continue to expand sales of newly launched lifestyle TVs such as the Terrace and the Premier. In addition, we will continue to innovate cutting-edge technologies with a new level of QLED TVs as well as micro-LED products for homes and lead the super large-screen TV market as the industry leader. For digital appliances in 2021, it is expected that the market will recover gradually in advanced countries. We will continue to work in sustaining growth by improving our premium lineup, like bespoke products, and strengthening our online and B2B businesses through efficient marketing strategies that are tailored to the conditions for each region. Thank you.

Thank you. That sums up the third quarter results presentations. Before we move on to the Q&A session, I would like to share with you several data points in key business areas. For DRAM in the third quarter, our bid growth increased in the mid single-digit percentage range and ASP declined in the upper single-digit percentage range. For the fourth quarter, we expect market bid growth to be in the lower single-digit percentage range and our bid growth to be above the market level. For the full year, we expect market bid growth and our growth to be similar at around 20 percent. For NAND, in the third quarter, our bid growth grew to the high teens percentage range, while ASP declined by about 10 percent. In the fourth quarter, market growth is expected to decline by a low single-digit percentage, but we expect to outperform the market. For the full year, market bid growth is forecast to be in the high 20% range, and our bid growth is expected to be slightly below that level. For the display panel business in the third quarter, the oil ED portion of sales was in the low 80% range. and sales volume increased in the high teen percentage range. In the mobile business, in the third quarter, sales volume totaled 88 million units for handsets and 9 million units for tablets. The blended ASP, including tablets, was $229, and the smartphone portion of handset sales volume was in the low 90% range. In the fourth quarter, We expect quarter-on-quarter shipments to decline for handsets, but increase slightly for tablets. And we expect blended ASP to decline compared to the third quarter. The smartphone portion of handset sales should remain in the low 90s. In the TV business, sales volume in the third quarter increased in the low 70% range. We expect shipments in the fourth quarter to rise the low single-digit percentage range. On a full year basis, we project shipments growth will be in this low teen percentage range.

With that, I will now move on to the Q&A session. 질문을 하실 분은 전화기 버튼의 별표와 1번을 눌러주시기 바랍니다. 질문을 취소하시려면 별표와 2번을 눌러주시면 됩니다. Now Q&A session will begin. Please press star 1, that is star and 1 if you have any questions. Questions will be taken according to the order you have pressed star and number 1. For cancellation, please press star 2, that is star and 2 on your phone. 처음으로 질문해 주실 분은 시티그룹의 이세철님입니다. The first question will be presented by Peter Lee from Citigroup. Please go ahead with your question.

Hello, I'm Lee Se-chul from Citigroup. First of all, congratulations on your good performance in the third quarter. I have a question about the military. And I have a question about semiconductors. First of all, I have a question about the military's shareholder policy. From 2018 to 2020, There was no mention of the remittance of the owner-owner policy and the next owner-owner policy. Please tell us about the future plans for this. And secondly, I would like to ask a question related to EUV on the semiconductor side. Samsung Electronics is applying EUV at the same time as DRAM and Foundry, unlike other Foundry or DRAM companies. I'd like to ask if you think there is a synergy factor in terms of technical aspects of each other. This may be difficult to explain in terms of the standard, but I'd like to ask you to give us a detailed explanation of the EV and the foundry.

I have two questions. First question is about the shareholder return policy. I noticed that in today's conference call, you did not mention if there was any additional financial resources that will be used for the shareholder return for the 2018 to 2020 period or the shareholder return policy for the following period after 2021. Can you share with us any plans or details regarding that? Second question is about the EUV technology. I think Samsung is a bit special and differentiated in that it uses EUV in both the DRAM and the foundry business. Is there any synergy effect in terms of technology or engineering that you think that you're enjoying because you're using EUV in both of these areas? It may be difficult to quantify, but can you at least describe on a qualitative basis if there are any synergies that you are experiencing?

First of all, I'd like to make a statement.

You asked about two things related to housing. First, I'd like to talk about the current housing policy, child support. Based on these uncertain numbers, rather than talking about child support, I think it's appropriate to talk about it with certain numbers after the child support is confirmed. To answer your first question about our shareholder return policy, first of all, regarding the first part of that question, which was

whether there is and the size of any additional financial resources that will be used for the current shareholder return policy or program. We thought that it was more appropriate to not mention that because we only have uncertain or undetermined numbers currently of any additional financial resources. And we thought it was more appropriate to mention that once the numbers have been finalized. And that's why we are planning to share with you and to execute the additional financial resources after we close the 2020 results. And we will share that with you during the earnings conference call in late January next year. uh regarding our shareholder return policy for year 2021 and after that uh we are currently looking into various alternatives and plan but given the high amount of macro uncertainty, we would like to take some more time in considering that, and we will announce our plans together in the earnings conference call in late January next year.

Yes, I will answer the question related to EUB. You are showing a lot of interest in introducing EUB as a leading company. Many have been watching us closely as we have been adopting the EUV as a leader.

And as we have mentioned, leveraging the experience of applying EUV successfully in the D1X node We are currently applying the D1EUV in the D1D process partially and currently in the process of sampling with a key customer.

We were able to increase the technical completeness in the application of DRAM because we had the experience of applying the EUV first in the foundry. We were also able to have competitiveness in terms of securing infrastructure.

I think our experience of already applying EUV on the foundry side has definitely given us the advantage of being able to reach a higher level of technology and engineering perfectness in terms of applying EUV to DRAM. Also, it's given us an edge in terms of securing and bringing in the infrastructure.

In addition, EUV is not only used to produce equipment, but also to produce masks, EUV is much more than just purchasing the equipment and using it to produce the product.

based on experience it is critical in terms of euv to have a strong ecosystem for all of the related technology areas such as mask cleaning inspection and material and to build the know-how and to internalize that know-how and that is why we currently are we are currently operating euv dedicated organization in order to maximize the synergies in terms of the technology side of technology

So, in order to create a differentiated ecosystem like this, we are working hard to secure additional IPs. We are building know-how such as software, hardware, and process technology. Based on this competitiveness, starting from D1A process, we will apply EUV in earnest to secure price competitiveness and break the limit of semiconductor micro-processes.

Knowing the importance of having a strong EUV ecosystem, we are currently focusing on creating a differentiated EUV ecosystem by focusing on adding additional intellectual property and also building up our know-how in terms of software, hardware, and the process technology. And that is why we are planning to apply EUV at full scale from D1A. And also, this will give us the cost competitiveness and will give us the power to overcome the challenges of the cutting-edge nodes.

Thank you for your answer.

Next question, please. Next up is Nicola Godoa from UBS. The next question will be presented by Nicolas Godoy from UBS. Please go ahead with your question.

Hi. Good morning. Thanks for taking my questions. First question is on smartphones. Looking into 2021, how should we think about affordable product strategy and expected volumes and will the product category reach a point of maturity which actually would be sufficient so that you would actually consider fully merging foldables into your high-end smartphone product segmentation and possibly replacing the Note in particular. And second question is regarding DRAM. It seems that some of the smartphone customers have engaged into long-term agreements for 2021. How are hyperscale customers reacting to this so far as they may need to secure capacity for server DRM as they get into 2021 as well? Could that lead altogether to a more positive momentum than for DRM pricing in 2021 in your view? Thank you.

There are two questions. The first is a wireless-related question. Please share with us what kind of strategy you are going to pursue next year regarding foldable. And please share with us what kind of strategy you are going to pursue next year regarding foldable. Please share with us what kind of strategy you are going to pursue next year regarding foldable. Please share with us what kind of strategy you are going to pursue next year regarding foldable. For example, are you considering a way to replace the Note? The second question is about DRAM. I heard that some smartphone customers are trying to make a long-term contract in 2021. I wonder if hyper-scale customers are reacting to this. Because hyper-scale customers also need to secure a CAPA for server DRAM. Are hyper-scale customers responding to the movement of smartphone customers? And if this is the case, do you think it can be a source of strength for the price improvement of DRAM next year?

I will answer the first question. Foldable phones are being criticized by the market and the real world by providing a new mobile experience including innovative compactors, different designs, and large-screen multitasking. It's a category that is expected to grow high in the future. In particular, GD Flip and GD Fold 2, which were released this year, are showing a strong sales trend despite the premium demand from COVID-19.

To answer your first question about our foldable phones, as you know, the foldable phones has been receiving very strong responses from both the market and actual users by providing a totally new mobile experience through an innovative form factor, differentiated design, and also the multitasking through a larger screen. Foldable phones as a category, we're expecting to record high growth in the future. Especially the Z Flip and the Z Fold 2 actually recorded very solid sales trends despite the overall difficulties in the relatively weak demand for premium segments amid COVID-19.

So far, the foldable phone is not a large share of the entire smartphone sales, but based on the flexible technology that the company has accumulated over the years, It is planned to expand the operating price of the product and continue to strengthen the portfolio. As a result, the sale of foldable products seems to increase every year. The flagship portfolio is optimizing for technology development and customer needs, and we will continue to operate in a variety of situations for foldable products.

So even though, as of yet, foldables do account for a relatively small portion of our overall smartphone sales, we are planning to continue to increase our foldable portfolio and to widen the price ranges that we offer foldable options by leveraging the flexible technology that we have already built over several years. And therefore, we are expecting foldable phone sales to increase for several years going forward. Regarding our flagship portfolio plans, we continuously optimize our flagship portfolio, depending on the technology development as well as customer needs. And foldables, in this case, will also be operated by considering various factors.

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

The next question will be presented by Dongwon Kim from KB Securities. Please go ahead with your question.

Yes, hello. I am Dongwon Kim from KB Securities. Thank you for your question. I would like to ask a question about memory and display. In the case of NAND, it seems that the supply and demand of data centers will continue to increase, unlike DRAM, which is being reduced. Please tell us about Samsung's NAND strategy and NAND supply prospects that are relatively active in this situation. Next, I would like to ask if you are planning to continue the active strategy to reduce NAND ASP and profitability in the future. Next, I would like to ask if you are planning to continue the active strategy to reduce NAND ASP and profitability in the future.

Before we answer those questions, I think we did not answer the second question by Mr. Nicolas Godoa, so we will answer that question first before moving on to the additional questions. The second question by Mr. Nicolas Godoa was about the DRAM and the movements that we're seeing from different application customers as well as next year pricing implications. Before answering that question, I think a way of answering that question would be to just recap what we saw in the DRAM market in third quarter.

The most noticeable part of the third quarter was the recovery of mobile demand. It was the most affected by COVID-19 until the first half of the year, and the mobile demand, which continued to decline, began to expand mainly in this quarter, focusing on middle-priced price sets. Basically, I think it's because of the stability of the middle-class COVID-19 situation, the improvement in consumer sentiment, and the new products released by major customers. In addition, some of Huawei's emergency stock acquisition costs have also been affected.

Looking back at third quarter, I think the key highlight was the comeback, the strong comeback of the mobile demand. Mobile demand was weak during the first half of this year. But in the third quarter, we saw a strong comeback, especially around the mass mobile or smartphone segments. This is explained mainly, first of all, due to the improvement in consumer sentiment, especially in the Chinese area. and also due to the launch of new products by our key smartphone customers. And on top of that, there was also the urgent orders that were placed by Huawei during the third quarter.

In the case of the server, the server COE, which had been continuously increasing until the first half of the year, included COE to secure the stock of customers, and as this stock was actively being stored, the customer's purchase of memory was reduced. However, On the other hand, during third quarter, server demand turned around to a weaker direction.

Server demand had been very strong in the first half, but a part of that demand was to inventory. And as customers worked through their inventory, their actual memory purchases during third quarter decreased. But also closer to the end of the third quarter, Huawei came to the market with its orders. And overall, this reduced the amount of demand decrease that happened for servers in third quarter.

Next, I would like to talk about demand. Mobile seems to have a significant increase in customer demand in the fourth quarter. Recently, there seems to be an increase in orders, focusing on middle-class customers. Now about demand forecast going forward.

First of all, mobile It appears that in fourth quarter, the mobile customers will continue to expand their build demand. What we're seeing right now is that especially the Chinese mobile customers are placing orders and that with new smartphones being launched by the larger OEMs, the demand for mobile in fourth quarter will remain solid. Looking towards first half of next year, there would actually be a growth momentum being supported by the 5G rollout. And so even for first half of next year, we expect that mobile demand will stay stable.

As for the server, it is difficult for us to tell you exactly about the stock level of the client, but from what we have observed so far, the stock control will continue until the fourth quarter. However, as we move into the first half of next year, the production control effect will make the production level more stable. So, I think that some of the investment that was run conservatively in the second half of this year will be reimbursed. In addition, the spread of the server CPU based on the new 8-channel is expected, so the top-level growth is also expected. So, I think that the server CEO will rebound in the first half of next year.

In the case of servers, it's difficult for us to mention exactly where our customers' inventories currently stand, but according to what we're observing, it seems that the inventory adjustment will probably continue until the fourth quarter. Looking towards first half of next year, we think that because as a result of the inventory adjustments, inventory levels would reach comfortable levels. and also some of the investments, which this year remained a bit conservative, would be resuming next year. So we think that on top of that, if we consider the adoption of the new eight-channel server CPU, which would drive up content, we think that server demand would probably rebound and turn around during the first half of next year. And then to the new set of two questions, there were two questions. The first question was about the NAND prices and how the company plans to respond to that. NAND prices are continuing to decline and even though there is the visibility of the data center we demanded demand and supply is restricted, unlike the DRAM side where there is visibility of DRAM demand and supply is rather limited, in the NAND side it seems that this oversupply will probably continue. So in that context, can you give us your outlook on the NAND situation next year in terms of the supply and the demand side and about your strategies or whether you will continue to respond actively to the NAND market despite the price decline. The second question was about the LCD business. The company has announced that it would be exiting from the LCD business, but the LCD market has recently been rebounding. So is there a possibility that the company may extend its LCD business, keep it for longer? And would that have any impact on its plans of launching a QD display business?

First, I will answer in relation to NAND. To answer your question about NAND, as we have already mentioned, it's very difficult to give you a detailed outlook because of all of the uncertainties right now. It is expected that the demand for PC will be strong until the first half of next year.

But if we can share with you what we see in terms of NAND market by application next year, we do think that at least until the first half of next year, mobile demand, which is continuing to show signs of recovery, as well as PC-related NAND demand, which is being driven by increase of the tax ratios as well as content, would remain solid.

And the service ratio that was weak due to the stock adjustment of customers in the second half of this year On top of that, on the server side, once the customers go through their inventory adjustments, we do think that server demand will start to show signs of recovery.

However, in the NAND market, there will also be a continuous increase on the supply side, and that is why we think that it remains to be seen how the supply and demand situation will unfold.

And you asked about our NAND strategy. As I said in my performance presentation in the last quarter, we have not changed at all in terms of actively responding to customer demand in the NAND market, which has high price elasticity.

You've asked about our NAND business strategy, and our strategy is that we will actively respond to customer demand in the NAND market, which shows high price elasticity, and this strategy has not changed.

And through strategic infrastructure investment, the economy is recovering, and server environments are being built around the world. To actively respond to this fundamental demand increase, we have secured supply capacity,

In order to implement that strategy, we will continue to make the preemptive infrastructure investments to secure the supply capability so that we will be able to actively respond to fundamental demand increases. For example, that could be driven by an economic recovery in the future as well as a build out of server infrastructure globally. Also, at the same time, we will be expanding our sixth-generation VNAND migration in order to further enhance our cost competitiveness.

Yes, and the 7th generation VNAND, which is the first to apply double-stack technology, is also being developed smoothly. In particular, the cell etching technology applied to the leading industry in single-stack

Also, in terms of our future products, we are currently developing our seventh generation VNAN according to schedule. This will be the first VNAN that uses a double-step technology. Also, we would be leveraging the cell etching technology that we have already been developing to the top level in the industry using our existing single stack. And so the seven generation VNAND will be giving us a further cost competitiveness. And we plan to go into mass production of the seven generation VNAND next year.

Yes, I will answer the display part. First, I will answer the QD display business support concerns. As you know, The company is changing its business structure from LCD to QD display to strengthen its business competitiveness in the field of large display. Currently, we are in the process of building and setting up the equipment as planned. In particular, the company is making the most of the successful release and market landing of QD display products. We are in the process of negotiating with customers and receiving good reactions from the market,

Your second question was about the QD display business and the LCD business and our business strategies to these. As you know, we are in the process of changing our display business structure from LCD to QD display in order to strengthen our business competitiveness in the large display area. Currently for the QD display business, we are bringing in the equipment and doing the setup as originally scheduled. Our top priority is to successfully launch the QD display product and to make it adopted in the market successfully. We're currently talking with customers and we are keenly focused on launching the QD display successfully so that it becomes the new standard in the premium segment.

Next, I'd like to answer the question about the extended operation of the LCD market recovery. Recently, large LCD panels have shown a gradual rebound in demand and ASP due to pent-up demand after the COVID-19 pandemic. As a result, some customers have been forced to supply the panel uh... uh... I'll check the company's profits first.

That said, you've also asked about our plans, whether our plans for the LCD panel business has changed. As you mentioned, recently there's been a very short-term rebound or pickup of both the large LCD panel demand and ASP, which is driven by the pent-up demand of the COVID pandemic. We're also getting some inquiries from some customers about whether we can extend in the near term the panel supply. And so given this customer inquiry, we are currently considering studying the possibility of extending our LCD panel supply short term by using the capacity of the lines that are not being converted to QD display, but we have not reached any decision as of yet. Regardless of what we would do with the LCD panel supply, there will be no impact to our overall business transition to the QD display. And whether we will extend the LCD panel supply will be decided by placing the company's interest as the top priority.

Thank you. I'll take the next question.

The next question will be presented by Kyungmin Kim from Hana Financial Investments.

Please go ahead with your question. I have a question regarding Huawei.

We've heard that you've applied for a license with the U.S. Department of Commerce about doing business with Huawei. Can you give us an update on what you've heard back from the U.S. government? And also, without Huawei, do you think that other customers would be able to fill its space starting from the fourth quarter?

First of all, what we applied for the US Department of Commerce was an export license.

We have not yet heard back and so we cannot share with you the developments that followed our application.

Yes, but after the sanctions have been lifted, the number of upsides have been observed in the mobile sector. In addition, as the consumer mentality that had frozen to the first half of the year has been restored, the mobile market recovery rate based on the middle-class set that appeared from the third quarter has also been consistently seen. Thanks to that, we expect that the fourth quarter mobile market will withstand both DRAM and NAND.

Now, regarding what we're seeing on terms of our DRAM and NAND business for the mobile side, since the announcement against Huawei, we're actually seeing that there's an upside in the demand by other Chinese mobile customers. Also, with the consumer sentiment recovering in the third quarter, there has been a demand recovery, especially around the mass-tier mobile side. And so we think that even in the fourth quarter, mobile demand will remain solid for both DRAM and NAND.

In 2021, we expect a strong mobile demand due to the expansion of the set sales recovery tax and the 5G mid-range segment. In particular, we will continue to check the influence of the market situation depending on the availability of licenses and the timing.

Looking towards next year, we do think that mobile demand will remain solid given the fact that or being driven by the recovery in the mobile handset demand and sales, as well as the rollout of 5G to the mass tier segment of the smartphones. But then that being said, there is the uncertainties of whether the license will be issued as well as the market situation changing depending on that timing. And so we will continuously monitor and check the impact to the market and our demands.

Thank you for your answer.

Next question. Next question is from Do Yeon-ho of NH Zinc. The next question will be presented by Hyunwoo Do from NH Securities. Please go ahead with your question.

Hello, I'm Hyunwoo Do from NH Securities. I have two questions for you. The first is about semiconductors. Recently, as the supply of memory has decreased, I know that some of the new oil investments have been delayed. I'm curious about when the new investment will resume. I'm also curious about your plans for the next Kepa investment. The second question is about the family. The margin of the 3rd quarter TV business seems to be two-digit. Beyond expectations, I wonder if it is a one-off factor due to the expansion of the pent-up demand, or whether the 4th quarter can expect additional upside in terms of performance due to the annual maturity.

I have two questions. First question is about the memory capex. It seems that with memory demand being a bit weak, you have been postponing new capex investments into DRAM. When do you think you will be resuming new investments in capacity? And also, can you share with us the amount or the size of new capacity investments you're planning for next year? Second question is for the CE side. According to our numbers, it seems that your TV side recorded double-digit margins in the third quarter, which is much better than what the market has expected. Do you think that this is mainly explained as a one-off, the pent-up demand kicking in in third quarter, or do you think that actually there's additional upside for your profitability given that fourth quarter is the peak season for TVs?

Yes, you asked a question about investment. First of all, what I want to say is that we are doing a simulation for the best investment, not only for next year but also for the future. So, the investment plan is changing little by little.

To answer your first question about semiconductor-related investments, we are currently in the process of going through various simulations of what will be the optimal investment for not only next year, but from a mid- to long-term perspective. And so even our investment plans for next year is currently still slightly being revised.

We haven't confirmed the specific investment plans yet, but we are currently working on fundamental memory use. It is expected that the total amount of investment will increase in the next 20 years.

So because our next year investment plan is still being subjected to change, the exact investment size has not been finalized. But we start from the point that we're expecting in the mid to long term, memory demand will be fundamentally strong. And so we will be executing our infrastructure investments preemptively so that we will be ready to respond to changes in demand by application in a timely manner and so for next year we are expecting our memory investments to increase versus 2020. And also because the actual investments into the equipment will be adjusted accordingly, depending on what we see in the market. Even if our total investment amount increases next year, we think that the possibility of, for example, an oversupply being created is very limited.

Yes, I'll answer the TV question. Usually, the three-minute TV market is in the off-season. But unlike next year, this year, due to COVID-19, As a result, we were able to achieve a 3-minute high-performance.

Regarding your second question about our TV business, yes, as you mentioned, third quarter is usually a slow season for the TV market. But unlike previous years, this third quarter we had the unusual demand due to the pent-up demand created by COVID-19, we were able to successfully capture that opportunity by predicting this pent-up demand ahead of time and cooperating preemptively with the distribution channel and also leveraging our global supply chain management capabilities to increase sales, especially around the premium segments, which explains the strong performance in the third quarter.

The fourth quarter is a traditional period of the TV market, but as I said in the speech, the uncertainty will increase due to the influence of COVID-19, and the competition in the market will worsen, so I expect that the difficulty of the business will increase a little more. As the number of COVID-19 confirmed cases increases in the United States, Europe, and other developed countries, some countries will The lockdown is being resumed, and due to the risk of a long-term global economic downturn, the competition between companies is likely to worsen in order to target the maturity of the demand. Because of this strong demand, the risk of rising prices in the market is also growing. So, the party will strengthen its distribution and close cooperation, and through continuous non-revenue sales infrastructure strengthening, However, looking towards the fourth quarter, which is a traditional peak season for the TV market, we do think that despite this seasonality, there may be various challenges in terms of business,

One is the uncertainty that's still looming due to COVID-19, as well as probably the expected increase in market competition. For example, I think there's still a possibility that with the increase of COVID-19 cases in key markets such as U.S. and Europe, some of these countries may go back into lockdown. This may lead to economic contraction globally and a long-term basis. On the other hand, because this is the peak season, other companies will be entering the market, so there will be more competition in sales. On top of that, because of the strong demand, there are some cost increase factors and risks in the TV market. Despite these challenges, in the fourth quarter, we will be focusing on defending our strong performance by continuing our collaboration with the channels, and also strengthening our non-face-to-face infrastructure so that we are able to further improve our product mix around the premium products such as QLED, ultra-large-size TVs, as well as lifestyle TV, and also by continuing to optimize our operation.

Thank you. I'll take the next question.

The next question is from Yoo Jong-woo of Korea Investment. The next question will be presented by Jongwoo Yoo from Korea Investments and Securities. Please go ahead with your question.

Yes, I'm Jongwoo Yoo from Korea Investments and Securities. I also have two questions. First, it's a question related to land. Recently, a business company decided to take over Intel's land business. I would like you to explain the impact of this deal on the land industry and the strategic changes in our land business. The second question is about smartphones. Next year, the number of smartphones around the world is expected to increase by more than 500 million to almost 600 million. It can be seen as entering a universal stage, but from the user's point of view, what is the biggest difference between LTE smartphones and current 5G smartphones? Please tell us what you think is the point of change in the company, and I would appreciate it if you could tell us one or two of the overall characteristics of 5G smartphones next year.

I have two questions. The first question is about the NAND business. You may have heard, but a competitor recently announced that it will be acquiring the NAND business from Intel. Do you think that there will be any impact to the industry because of this deal? And would there be any changes to your NAND strategy? Second question is about the mobile business. Some research is saying that next year the global 5G smartphone shipments would be about 500 million, close to 600 million, which means that 5G smartphones would become the mainstream. I do wonder what will be the difference from the user's perspective for using a 5G smartphone versus, for example, an LTE phone. From the company's perspective, what do you think is the key difference that users would experience And also, can you give us some key features of the 5G smartphone market you're expecting to see next year?

To answer your first question about the NAND, it's difficult for us to give specific answers regarding matters of other suppliers. I think a way of me answering that question is to describe in detail our NAND strategy

Based on our experience, NAND is a very price-elastic, price-sensitive product, and so in order to actively respond and capture the opportunities in the NAND market despite various challenges, a company needs to have as a precondition the cost competitiveness and also the stable supply capacity.

Yes, so based on the cost competitiveness of this differentiated CTF technology,

And so our NAN strategy is to continue stable supply of NAN products that meet the customer's requirement based on our cost competitiveness that comes from our differentiated technology including the CTF technology. Also, our strategy is to continue to strengthen our relationship with our existing customers and also to maintain our market leadership by launching new growth area products in a timely manner.

The second question is about 5G. From the user's point of view, 5G is more efficient than 4G due to its fast speed and slow response. . . . . .

To answer your question about the 5G, first of all, in terms of the user experience, 5G allows the users to experience and enjoy ultra-high quality services that were difficult to implement in a 4G environment because 5G has faster speed and also ultra-low latency. For example, users of 5G smartphones are able to enjoy cloud gaming. Basically, this is playing a PC game on a smartphone, and they can also enjoy, on a real-time basis, video streaming of very high picture quality.

In terms of market demand, as you said, it seems that next year's 5G smartphone appearance will exceed 500 million. In particular, 5G, which was focused on premium and high-end, will spread to the entry level, and 5G will be available in almost all segs.

In terms of market for 5G next year, as you mentioned, we also think that the 5G smartphone shipment next year will go above $500 million. I think a key change would be the rollout of the 5G option to beyond the high-end segment so that next year there will be 5G handsets available even at the entry level.

So our approach for 5G next year

is to expand our 5g offering from premium down to entry level by leveraging the 5g optimized capabilities that we have developed up till now also we will be operating a 5g lineup that addresses different regional needs so that we offer a wider range of choice to our customers In addition to the expanded 5G product portfolio, we will be providing various 5G specialized services through strategic partnerships with the global top-tier companies in order to provide a differentiated customer experience and to drive greater sales.

Yes, thank you. Since a lot of time has passed, I will ask two more questions.

We will be taking questions from two more participants. Next question is from SK GIM of Daiwa. The next question will be presented by SK GIM from Daiwa Capital Market. Please go ahead with your question.

Thank you for the question. I have one question for DRAM and one question for the network business. Regarding DRAM, it is expected that the conversion of DDR5 will start next year. I'm curious about Samsung's product development strategy regarding DDR5. I'm especially curious about the status of the server chip. If possible, please explain the status of the server chip. Regarding the network business, after the release of Verizon's telecommunications equipment in September, the market expectations for Samsung's 5G equipment business are increasing. I have two questions.

First question is about the DDR5, which is expected that the switch to DDR5 is expected to start from next year. Can you share with us the Samsung product strategy regarding DDR5, especially around servers? Can you give us an update on your activities for DDR5 on the server side? Especially can you give us some details about the connections with the new CPU or, for example, a node migration? Second question is about the network equipment business. Since Samsung announced the order from Verizon in September for the 5G equipment, I think the market is starting to have high expectations about Samsung's 5G equipment business in the future. Can you give us some details about what you're expecting in your 5G equipment business next year around not only the U.S., but other key overseas markets?

To answer your question about DDR5, DDR5 is the next generation DRAM solution that enables a faster and more stable server environment. We are working with Intel, the major chipset company, to prepare for the DDR5 marketing activities. We are looking forward to the DDR5 being used in the best possible environment through this collaboration, and it will also be an incentive for future product demand.

We're currently preparing a major DDR5 marketing campaign in collaboration with major industry leaders, such as Intel, to build excitement and energize the demand in the pipeline.

Like this, we will do our best to develop and produce products according to the planned plan. As I said before, we will actively carry out this collaboration,

So our DDR5 product strategy is number one, to focus on developing and mass producing the products on schedule in time, and also to focus on collaboration with other partners so that the excellence of our DDR5 product is widely known in the market, which will help us build competitiveness.

I'll answer you regarding the network. The party will expand the market share within the country based on Verizon's large-scale supply chain and continue to explore additional business opportunities. It will continue to approach 5G business expansion in major overseas markets such as India, Japan, and Europe to strengthen the global business base.

To answer your second question about the 5G equipment business, the recent large order from Verizon has given us the position to further expand our market share in the North American market and also to develop additional business opportunities. And so we will build on this momentum to expand our 5G business in other key overseas markets such as India, Japan, and Europe.

Also, the 5G core equipment, Massive MIMO Radio, And so while we expand our global 5G equipment business, we will be focusing on providing differentiated technology and products versus other

For example, we have our massive MIMO radio or radio and baseband, which are key pieces of 5G infrastructure. We also have a very differentiated software-based solution. So this will be one of the advantages that we will be leveraging to increase our supply. At the same time, we will be continuing to invest in our 5G equipment and infrastructure R&D. and also strengthen the cooperation with partners that have global technology leadership so that we are able to further increase our technology differentiation and a stable supply system.

Thank you. I'll take the last question.

The last question will be presented by Ricky Seo from HSBC. Please go ahead with your question.

Yes, thank you for the question. I have two questions. First, I would like to thank the Foundry for making the market view a little longer next year. This year, the company's large customer base, Shinji Suju, has been announced in the media several times. The market share is expected to go up a lot this year. I wonder if this trend will continue next year. And recently, there have been a lot of COTG news about 8G. As the 8G movement goes up rapidly next year, I would appreciate it if you could explain whether it will have a meaningful impact on the margin of the entire Foundry industry. And in terms of smartphones, It is estimated that the output will be between 15% and 20%. I wonder if this will be expanded in 2021. If it is expanded, it is only applied to the very low-end segment, but I would appreciate it if you could explain to us to which product segment the output can be expanded.

I have two questions. The first question is about the foundry. Can you elaborate on your foundry market outlook for next year? Also, this year, your foundry business won significant orders from major large customers, and we're assuming that your foundry business will be increasing in market share this year. Do you think that this trend of increase of your foundry business market share will continue next year? Also, we're hearing a lot of news about eight-inch shortages. Would this be able to have a positive or meaningful impact on foundry margins next year if this leads to higher utilization of the foundry next year? Second question is about the mobile business side. It seems that about 15 to 20% of your production is ODM production. Do you have any plans of increasing the smartphone ODM production next year? And if so, How high in the product segment, for example, would it come up? Because right now, it's probably the low-end handsets that are being produced through OEM. If ODM share does increase next year, how high up the product segment do you plan to expand ODM?

Yes, I'll give you an answer related to the founders. To answer your first question about next year founding market outlook,

We do think that next year the foundry market itself will be growing at around high single digit levels, mainly driven by the further penetration of 5G and also the growth of HPC applications. However, because of the possibility that inventory adjustments may continue until the first half of next year, we think that the amount of growth or the degree of growth next year would be probably less than what we saw this year.

The second question is that the current demand for high-performance microcomputing processes from customers is increasing rapidly, so we expect that the market growth rate will rise in 2021 and the market share price will rise significantly.

Regarding whether we're expecting our market share to continue to increase, we are currently continuously receiving demands from our customers for higher performance and also the advanced node processes. And so looking at our current situation, we do expect to have a meaningful increase in our market share by outgrowing the market next year.

I'll answer the second question. The company is running ODM limited to some models to respond to the changing market environment and meet customer needs with efficient operation of product line-up and internal resources.

Regarding your second question about the mobile and the ODM production, we do have ODM manufacturing on a limited basis for certain models. The purpose of this is to better respond to customer needs and to respond to the rapidly changing market environment. And also, ODM does enable us to efficiently operate our internal resources and the product lineup. It is difficult, though, to share with you the detailed share of ODM or whether we are planning to expand that because this is an area that would continuously change depending on market environments and also our internal situation. And so our basic approach to ODM is that we will continue to operate ODM in a flexible manner by analyzing and comprehensively considering, on one part, the actual feedback that comes from ODM users, and also the market competitiveness. That being said, we will minimize impact to our suppliers.

With that, we will end our conference call here.

Thank you very much for attending.

Thank you.