Samsung Elect Ltd

Good morning and good evening. Thank you all for joining this conference call. And now we will begin the conference out of fiscal year 2021, third quarter earnings exerted by Samsung Electronics. This conference will start with a presentation, followed by a divisional Q&A session. If you have a question, please press Start 1, that is, Start N1 on the phone during the Q&A. For cancellation, please press Start 2, that is, Start N2 on your phone. Now we shall commence the presentation on the fiscal year 2021 third quarter earnings results by Samsung Electronics.

Welcome, everyone. This is Ben Seo from Investor Relations. Thank you for joining our third quarter 2021 earnings call. For additional details regarding our quarterly results, please refer to our earnings presentation, which is available on our IR website, www.samsung.com slash global slash IR. On the call with me today, representing each of the business units are EVP Hanjin Man, representing memory, VP Cho Jang Ho for system LSI, SVP Han Seung Hun for foundry, SVP Choi Kwon Young for Samsung display, VP Kim Sung Goo for IT and mobile, and VP Song Won Joon for visual display. In addition, VP 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 present our quarterly results, let me first address the third quarter dividend. Today, the Board of Directors approved a quarterly dividend of 361.1 per share for both common and preferred stock. The total payout for the third quarter is the same as it was for the first and second quarters, which is 2.45 trillion won, or one-fourth of the 2021 annual total of 9.8 trillion won, in accordance with the shareholder return policy we announced in January. The dividend will be paid in mid-November. Now I would like to present the results for the third quarter. Despite numerous macro uncertainties in the third quarter, such as global supply chain issues and persistent effects of COVID-19, by actively leveraging our leading technology, outstanding product competitiveness, and differentiated global SCM capabilities, we once again delivered record results. Total revenue for the quarter was 74 trillion won, up 16.2% sequentially, with all of our major businesses seeing revenue growth, highlighted by solid sales of foldables and other smartphones, as well as increases in both memory shipments and OLED sales. We have set new records for total revenue in a respective quarter for three quarters in a row, and we expect that annual revenue will be well above the previous all-time mark set in 2018. Compared to last year's result, which was our previous all-time high for any quarter, revenue grew 10.5%, driven mainly by memory and OLED. Gross profit increased by $4.5 trillion sequentially to $31.1 trillion on the back of cost reductions in memory mainly from advanced process migrations. There was also a slight rise in gross margin. SG&A expenses came in at $15.3 trillion of $1.2 trillion quarter-on-quarter, primarily due to an increase in advertising and promotional costs. As a percentage of sales, however, they declined by 1.4 percentage points as sales significantly outgrew the SG&A increase. Operating profit increased by 3.3 trillion won quarter-on-quarter to 15.8 trillion won, our second highest total ever, as the component business improved significantly backed by continued favorable conditions in the memory market and robust sales in the foundry and DP businesses. Our finished product businesses also delivered solid results. Operating margin improved by 1.6 percentage points. On a year-on-year basis, both operating profit and operating margin increased substantially, propelled by our component businesses. I will now briefly review the results of each business unit. For memory, results improved significantly as we actively addressed customer demand, which led to record quarterly bid shipment as well as the second highest ever revenue for DRAM. Also, costs were reduced by expanding sales of 15 nanometer DRAM and 128 layer VNAND. In foundry, results improved backed by strong demand from our global customers. In display, mobile panel earnings improved sequentially on effects of product launches by major smartphone customers. However, the large panel business continued to post losses mainly due to declines in LCD For the mobile business, results improved sequentially thanks to expanded sales of our new foldable models and low to mid-range smartphones, along with sales growth of products in the device ecosystem lineup. For network, we expanded our business overseas, including in North America and Japan, as we continued to address 5G network demand in the domestic market as well. In the C division, Despite the strong expansion of our premium TV and bespoke lineups, profitability declined due to rising material and logistics costs. Regarding currency effects, strength in most major currencies against the Korean won, especially the U.S. dollar, had a positive effect on the component business, in particular, with a combined impact of approximately 800 billion won on our operating profit compared to the previous quarter. Next, I would like to share our business outlook. In the fourth quarter, we will focus on actively meeting demand for memory and system semiconductors, although component shortages at some customers may have an effect. We will also maintain solid profitability in our finished product businesses by strengthening our leadership and lineups in the premium segment. For memory, there may be increased demand risk due to longer than expected component supply issues, but we will actively address strong fundamental demand for servers resulting from increased investments by major IT companies. For system semiconductors, we expect to increase supply of SOCs and related products for mobile phones slated for launch in 2022. And for foundry, we expect results to improve considerably as we aggressively address demand for advanced processes. For display, we expect the mobile panel business to achieve solid results backed by steady demand for smartphones and expanded sales in new applications. In the large panel business, we are on track to begin mass production of QD display as planned, but we expect losses to continue due to price declines in LCD panels. In the mobile business, we aim to secure robust profitability by expanding sales of premium products such as foldables, actively targeting replacement demand with expanded sales of low- to mid-range 5G smartphones, and increasing sales of tablets and wearables. In the CE division, we will endeavor to expand sales with a focus on promotion of premium products amid seasonally strong year-end demand. Now let's move on to our outlook for 2022. Amid anticipation that global IT demand will recover, the component business will focus on expanding the advanced node portion of production and enhancing our leadership in next generation products and technology. In the finished product business, we will prioritize achieving solid profitability by continuing to strengthen our leadership and lineups in the premium segment. However, there are likely to be uncertainties related to component supply disruptions and the living with COVID-19 transition as more people are vaccinated. For the memory business, we will strive to boost cost competitiveness with volume production of 14 nanometer DRAM and seventh generation VNAND, and also enhance market leadership by expanding mass production of next-generation products based on our industry-leading EUV technology. SystemLSI will expand its business by reinforcing its lineup of SOCs, including for models in the volume zone. And we expect Foundry to continue to deliver strong improvement in results by addressing growing customer demand through active investments and by technology leadership, such as bringing to production the industry's first 3-nanometer gate all-around process. For display, in the mobile panel business, we expect OLED portion of the market to increase with a rising penetration of 5G amid a recovery of smartphone demand. And we will closely monitor the supply of some components, such as DDIs. The large panel business will strive to secure a position in the premium TV segment with QD display. The mobile business will pursue sales growth and profitability improvements by strengthening its presence in the premium market with expanded sales of our flagship lineup, including our increasingly popular foldables, as well as via an enhanced lineup of 5G smartphones for the mass market. At the same time, we'll keep fostering the tablet and wearable businesses while also continuing to develop industry-leading technologies. For network, we will continue to enhance our hardware with custom 5G chips and strengthen software-based virtualization solutions for future growth. And we will also pursue continued expansion overseas. For C, overall demand is likely to soften as the world transitions to living with COVID-19, but we will focus on proactively capturing growing demand from premium TVs, and increasing global sales of bespoke products. Let me now move on to capital expenditures. CapEx in the third quarter was 10.2 trillion won with 9.1 trillion won invested in semiconductor and 0.7 trillion won in display. The cumulative total as of the end of the third quarter is 33.5 trillion won with 30 trillion won in semiconductor and 2.1 trillion won in display. Looking at each business up to the end of the third quarter, memory concentrated its investments on expected 22 demand growth and readiness for next-gen products such as DDR5 with capacity expansions and process migrations at our fabs in Pyeongtaek and Xi'an. And it also invested in longer-term readiness such as infrastructure at P3. Our foundry investments focused on capacity expansion for advanced UV nodes in Pyeongtaek. Display investments centered on accelerating the transition to new technology through expanding capacity for QD display as well as mobile modules. We are maintaining our policy to invest flexibly in line with market conditions, and given growing uncertainties, including those over component supply, we are carefully reviewing fourth quarter capex, and as such, we will not be providing a forecast for annual capex for 2021 at this earnings call. Finally, I would like to share some of our key activities and achievements in sustainability management. On October 20th, the leading brand consultant, Interbrand, announced its list of the 100 best global brands, and our company ranked fifth for the second consecutive year. Our brand was valued at $74.6 billion, a 20% increase compared to last year. We ranked the highest and saw the biggest growth among non-U.S. companies, and we also far surpassed the list average growth rate. Our reorganization to a customer-centric management system, sustainability activities, and releases of innovative products were highly valued as we reaffirmed our position as a global top five brand. On October 12th, Forbes released its annual list of the world's best employers, and our company took the top position for a second consecutive year. We believe this achievement recognizes our numerous positives, including the company's prioritization of employees' health and safety in our COVID-19 response, outstanding performance, strengthened ESG activities, healthy corporate culture, and professional development opportunities. In August, we unveiled Galaxy for the Planet, the mobile business's sustainability vision for the Galaxy ecosystem. The vision outlines a set of initial goals that we aim to reach by 2025, including incorporating recycled materials into all of our new Galaxy products, and also achieving zero waste to landfill at our mobile work sites around the world. Galaxy for Planet is a continuation of our efforts to create a sustainable future across the lifespan of our products, from production to usage to disposal, as well as throughout our overall business operations to tackle climate change. Moreover, we aim to spearhead the transition to a circular economy through the reuse and recycling of resources. In August of 2021, the Ministry of Environment gave us, incorporating companies, final approval for a new process to be defined as recycling technology under domestic law. This new technology involves the reuse of wastewater sludge generated during the semiconductor manufacturing to produce supplementary material in the steelmaking process. Cooperative efforts between Samsung, Hyundai Steel, and Post Ceramics began in August 2020 with the signing of a technology agreement and resulted in the successful production of steel in April 2021 at Hyundai Steel's Dangjin site by using 30 tons of fluoride alternative products. This new technology was approved after it was reviewed by the National Institute of Environmental Research. And because the technology enables replacing a mineral that cannot be sourced domestically, it is recognized as the most exemplary case of ESG commitment towards resource circulation since the Ministry of Environment established its recycling environmental assessment system in 2016. In September, Samsung received product carbon footprint label certification for four of our new flagship system LSI products, joining previously certified memory chips from the UK's Carbon Trust. We now have certifications for 14 semiconductor products. Semiconductor manufacturing has a particularly challenging road to certification, due to its numerous complex processes and need for large quantities of various types of raw materials. However, we passed the strict international assessment standards backed by results of our various efforts to reduce carbon emissions. We will continue to strive to minimize carbon emissions with initiatives such as reducing the amount of gas required in our semiconductor manufacturing process enhancing the efficiency of greenhouse gas treatment equipment, and applying solutions to reduce energy consumption throughout the manufacturing process. I will now turn the conference call over to gentlemen from each business unit to present third quarter performances and outlooks for their corresponding business segment. We will start with the memory business. Thank you.

Good morning. This is Hanjin Man from the Memory Global Sales and Marketing Office. Third quarter, the price situation remained favorable, and demand, centering on server, stayed strong. We improved our performance significantly compared to the previous quarter by actively addressing customer demand and reducing costs by expanding the portion of production using cutting-edge processes. In the case of DRAM for server, demand continued to grow as adoption of a new high-core CPU that was released in the first half of the year expanded. Demand from set builds stayed solid, and content per box increased. For mobile, despite effects on set builds related to supply issues of some components, such as application processors, demand recovery has become more feasible thanks to releases of new products by major manufacturers, at the base effect of the second quarter, which was affected by somewhat weak demand. For PC, demand from end users has also been robust due to changes such as workplaces opting for hybrid work patterns alongside strong seasonal effects. However, that build growth has been limited by supply constraints and logistics issues for some components. In graphics, Memory demand expanded on the rise in demand for graphics cards due to a revitalization of crypto mining and the continuing strong demand from game console, which is in peak season. Despite a resurgence of COVID-19 in major production countries and component supply issues that led to disruptions in set bills, along with weakening demand from customer PCs, we actively responded to demand by flexibly operating our product mix. We set a new record for quarterly DRAM shipments, backed in particular by significant growth in server sales, and we met our original guidance, not to mention the enhancement we made to cost competitiveness by increasing the 15-nano portion of production. Next, I will talk about the net market. Our server SSDs, along with increased investments by major server customers, enterprise demand recovered. And based on the high-capacity trend spurred by new CPU adoptions, demand was strong from data centers for high-capacity products. In the case of mobile, demand has been solid due to the launch of new models and increases in content per box by major customers as we enter strong seasonality. The client's SSD and demand was strong due to a resumption of office work, but memory demand was weak due to a disruption in set bills caused by component supply issues and inventory adjustment by some customers. In response to growing demand for sub-SSDs, we expanded sales of high-capacity products of 8 terabytes and above and increased our production portion of 128-layer products which relate to another quarter of growth. Next, let me tell you about our fourth quarter outlook. In the case of DRAM, we expect fundamental demand for server to stay strong, thanks to the new CPU adoption and expansion of data center investment. However, we need to keep monitoring impacts of the longer than expected component supply issues on set bills. For mobile, Manufacturers are likely to continue to launch new 5G models, but there are chances that growth of purchasing demand could be limited due to inventory adjustment of some customers, along with impacts of supply chain issues. For PCs, we expect set bill growth to stay similar compared to the last quarter, given ongoing uncertainties over the supply of some components and impacts of weakening demand from consumer PCs. We will actively address fundamental demand from major server customers and aim for full-fledged sales to PCs adopting new CPUs and lead the formation of a market ecosystem that is based on mass production of DDR5 for high-end gaming. In addition, we will continue to strengthen our cost competitiveness by maximizing the portion of production using cutting-edge technologies, such as 50 nanoprocess. In case of NAND, for Server SSD, as business activities normalize alongside increasing vaccination rates and continued growth in enterprise IT budgets, we expect a high capacity trend for Server SSDs to continue and demand to be robust. However, we should keep an eye on the component supply issues. For mobile, demand is likely to be solid based on 5G market expansions and a high-capacity trend with the spread of new models. We also need to monitor impacts of supply chain disruptions on the set field. In the PC market, more and more companies are expected to resume office work in the second half, so we expect replacement demand for enterprise PCs to pick up. The demand for memory purchases may slow slightly due to the impact of inventory adjustment and some customers. We will secure a stable supply chain based on our strong SEM management system and maintain our differentiation strategy by continuously expanding our portion of high-value products while actively responding to overall server demand and also expanding our lineup of mobile products. Now let's move on to the outlook for next year. Considering macro uncertainties, such as the timing of mitigating component supply issues, influences of living with COVID policies amid increasing vaccination rates, and raw material pricing issues, we ask for your understanding in that it is difficult to provide specific prospect or guidance. Therefore, I'd like to provide a rough outline of the market based on our present forecast. Although the mentioned uncertainties may impact demand in the memory market next year, the pandemic led global consumers to experience more online-based social activities and lifestyles, which has been called the new normal. We think most of the demand in the new normal will persist as a part of our lives. For server and PC, under those social shifts, we expect fundamental demand to be robust with the trend toward high capacity following the expanding new CPU adoption and continued growth of enterprise IT investment. For mobile, we expect shipment growth and high capacity trend to continue with the increase in low to mid-priced 5G models and also as manufacturers launch products with new form factors. However, since almost all applications are feeling effects of the longer-than-expected component supply issue, the timing of resolving such issue is the key to increasing feasibility of fundamental demand in each application. Furthermore, we expect demand for consumer and graphic segment also to be robust, as the Beijing Winter Olympics have potential for increased penetration of premium TVs and the move to high capacity. while demand is likely to be strong for VGA in high-end PCs for AI accelerators in the HV market. As we continue to expand the portion of 15-nano DRAM and 128-layer VNAND based on preemptive product mix management that is aligned with market situation, we will proactively address the server market, where demand is likely to grow thanks to new adoptions of DDR5 with rising penetration of a high-quality CPU. and we will also preemptively secure demand for NAND solution products. Moreover, while expanding mass production of 14-nm D-ETM and 176-layer 3-NAND, we will continue to strengthen our market competitiveness based on stable cost reduction through next-generation processes and products. Thank you.

Good morning. This is Eric Cho from the CSMLSI business. In the third quarter, earnings improved due to increased demand for SOCs and DDIs as major mobile customers launched new products. In particular, the strong demand of DDIs amid continued share supply contributed greatly to earnings improvements via efficient execution of pricing strategies. And we reaffirmed our leadership in mobile image sensor market by introducing ISOCELL ATP-1, the industry's first 200-megapixel image sensor, and 50-megapixel ISOCELL GN5, the industry's smallest dual-pixel image sensor, featuring more fast and accurate autofocus. Now let me talk about the outlook of fourth quarter. In the fourth quarter, we expect earnings to continue to increase, due to our higher mass production of mobile and related products for launches of new 5G smartphone products in 2022 by major smartphone companies. The company aims to achieve even higher double-digit annual sales growth by maximizing its chip supply capabilities. We are strengthening foundry cooperation and flexibly adjusting product mix. In 2022, we plan to improve our performance through meaningful gains in the associate business, such as by expanding supply of 5G associate products for the volume zone, as well as for the new flagship products that feature enhanced GPU performance. Thank you.

Good morning. This is Sean Han from the Foundry Business. In the third quarter, we improved our earnings sequentially and set a new record high for third quarter as we significantly increased supply of key products such as advanced process SOCs and GPUs to our global customers with the expansion of mass production at Pyeongtaek S5 line. In addition, we secured a stable sales base by winning new orders for advanced processes from global customers. And we continue our technological leadership by completing the development of the first generation of GAA gate all around process design infrastructure for early mass production of three nano in 2022. In the fourth quarter, the demand for advanced and mature processes are likely to stay strong, and we expect to set new record for resource by maximizing supply with revenue growing by more than 10%. On top of that, the company plans to continue its technological leadership by completing design of first-generation GAA 3-nano products and developing second-generation GAA process design infrastructure for 3-nano. In the foundry market in 2022, we expect supply to remain tight due to increased silicon consumption for 5G mobile, solid GPU-centered demand for HPCs, strong CPU demand due to intensifying competition, and solid demand for 8-inch legacy products and consumer applications. We aim to continue to grow by actively investing to expand supply for advanced processes of 5 nano and below, and we also plan to pursue qualitative growth by expanding global customer sales and normalizing prices for sustainable future investment. Thank you.

Kwon Young Choi Good morning. I'm Kwon Young Choi from the business planning team at Samsung Display. In the third quarter, the mobile display business recorded sequential growth in sales and profit, as smartphone sales remained brisk. on to launches of new flagship phones by major customers. In particular, profitability improved with the sales of expansion of high-end products such as affordable phones leading us to achieve our highest ever third quarter profit. Meanwhile, the large display business has been affected by LCD panel price declines and its loss increased to some extent. quarter on quarter. However, the loss narrowed year on year as we started facing out sales of LCD panels from this year in line with the transition of production lines to QD display. Next, let me share our outlook for the fourth quarter. For the mobile display business, we expect the demand for major customers' new products to stay solid And at the same time, sales of laptops and gaming devices will grow amid effects of peak seasonality. As a result, we expect the mobile business display business to achieve solid revenue and profits in the fourth quarter. For the large display business, given our plan to start mass production and supply of QD products, We will channel all our efforts to ensure the successful debut of our QD displays. Finally, I will share our outlook for the display market and the display business core strategies for 2022. For the mobile display business, we expect the environment for the OLED business to remain favorable, fueled by a recovery in smartphone demand thanks to an accelerating return to daily lives and wider availability of 5G networks. Moreover, we expect sales of OAD panels in applications other than smartphones, including laptops and tablets, to start in earnest in 2022. We at Samsung Display will do our best to capitalize on such trends as new growth engines. However, there are still concerns stemming from a supply crunch of components such as DDIs. So we'll thoroughly monitor supply chains and take preemptive measures against potential risks in order to provide products to our customers as scheduled. For the large display business, we'll complete the reorganization of our business from LCD to 2D display as planned. and focus on securing leadership in the premium TV segments with QD display. Thank you for listening.

Good morning. This is Sung-Guk Kim from the mobile communications business. I would like to discuss the IM division's Q3 results and the outlook for Q4 and 2022. In Q3 2021, market demand is expected to have increased quarter-on-quarter due to alleviating influences of COVID-19. For our mobile business, revenue increased compared to the previous quarter, despite supply constraints in the overall industry. Smartphone sales have increased quarter on quarter, led by strong sales of Z Fold 3 and Z Flip 3, which are being very well received in the market with their distinct experiences, including sophisticated designs on the display camera, S Pen, and water resistance, to name a few. Third of our enhanced mass market lineup also contributed to the performance. In addition, device ecosystem products, such as wearables, have contributed strong growth. We maintained a solid double digit operating profit margin, while increased marketing investments aimed at mainstreaming the affordable category had some effect on profitability. For the network business, we have enhanced our foundation for growth in 5G by expanding our business overseas, including in North America and Japan, and by actively responding to domestic demand for 5G network deployments. Now let me move on to the Q4 loop. We expect market demand to increase quarter-on-quarter as a result of year-end seasonality. although uncertainties over component supply constraints are likely to linger. In our mobile business, we will continue to strive to further expand premium smartphone sales with bespoke additions to focus customers' aspirations on our 4G series, while also maintaining sales momentum of Galaxy S series. At the same time, we will proactively target replacement demand and the growing 5G market with our competitive 5G lineup for the mass market. In addition, we will increase sales of device ecosystem products, including wearables, PCs, tablets, by promoting easier, more convenient connected experiences. By doing so, we expect to maintain double-digit operating margin. For the network business, we will push for business growth in global markets like North America and Southwest Asia. Now, let me share our outlook for the next year. Although risk of continuing COVID-19 is likely to persist, we expect the smartphone market to continue its growth and the market for the wearable devices, which provide consumers with new experiences and values to maintain growth in the double digits. For the mobile business, we will strive to strengthen our leadership in the premium market by further enhancing product attractiveness and differentiated experiences of our flagship products. As for our 4ZZ series, we will continue to further the distinct competitive advantage based on our unmatched innovative technologies and outstanding user experiences, and also provide Samsung's unique differentiation such as bespoke editions. We will drive mainstreaming of the foldable category and establish it as a very important category within premium market. Regarding our mass market smartphones, we will continue to extend convenient and unique premium experiences and also actively address diverse regional demands with optimized products such as mass market 5G smartphones. Furthermore, we will strive to maximize customer retention and enhance customer trust and aspiration on our products to solidify our position as a premium brand by providing Samsung's unique value with consistent and convenient connected experiences across our device ecosystem. With these efforts, we will try to achieve solid performance growth in 2022. Also for our foundation for growth in longer term, we will persistently work on not only developing advanced technologies, but also collaborating openly and inclusively with global leading companies. For the network business, we will continue to address expansion of the domestic 5G network and continue to seek opportunities to grow in overseas markets, including North America, Japan, Southwest Asia, and Europe. In addition, we will proactively prepare for the future by strengthening product competitiveness based on our own 5G chips and further advancing 5G virtualization solutions. Thank you.

Good morning. I'm from sales and marketing team of Visual Display. I'd like to review the market conditions and our performance of CE business in the third quarter of 2021. In Q3, ahead of peak seasonality, the TV market demand increased quarter-on-quarter but decreased compared to last year when affected by strong pent-up demand. With a focus of mixed improvements, Samsung expanded sales of premium products such as Neo QLED and lifestyle products. In particular, Newly launched Neo QLED has received good reviews from major magazines and consumers, and we are seeing strong sales amid the related such positive responses. Also, lifestyle products are being recognized for their differentiated value in the market, which have also helped boost sales. this backdrop, Samsung focused on profitability by actively improving product mix and cost efficiency. However, because of the increase in the cost due to material prices and global logistics issues, profit decreased both quarter and quarter and year on year. For digital appliances in the third quarter, Market demand increased slightly year-on-year thanks to the expansion of demand for new home appliances via changes in consumer lifestyles. However, market growth slowed down quarter-on-quarter as effects of pent-up demand declined with the increase in vaccine supply. External environment also deteriorated because material prices and large cost raised. We responded to various consumers' needs by expanding bespoke lineup and launching it in even more countries, while also introducing new home appliances. Through this, we improved sales both quarter-and-quarter and year-on-year, despite the slowdown of market growth. Even so, profitability inched down due to impacts of low material price and logistics costs. Now let us look at the outlook for fourth quarter and for 2022. We expect demand in Q4 to rise quarter-on-quarter thanks to effects of strong end-year seasonality. However, reduced effects of pent-up demand, along with an increase in out-of-home activities, are likely to cause TB demand to fall year-on-year. The market outlook for Q4 is very different from what it was pre-COVID-19. While sales in offline stores are expanding again, we have moved to a living with COVID policy, mainly in advanced markets. Demanding year and year, shopping season may be dispersed. throughout the quarter due to a reluctance by customers to gather in large numbers, and strengthening the online and non-contact sales trend is expected to continue. Based on close cooperation with channel partners, we are establishing a sales strategy that can preemptively respond to such changes in the market. We will optimize promotion periods to align with desperate demand and offline stores and will induce upselling with premium-focused promotion, thereby expanding sales of strategy products such as QLED and Lifestyle. Furthermore, by improving Samsung's online sales infrastructure, will provide consumers with a more convenient and easier-to-use online purchase platform and expand non-contact sales opportunities through online promotions tailored to each country. Moreover, based on Samsung's global SCM capabilities, we will minimize logistics risks and focus on securing profitability through optimized operation and efficient cost management. For digital appliances in the fourth quarter, we expect the increase in demand for home appliances to slow as more regions transited to a living with COVID policy, which has continued from the third quarter. Also, new material prices and logistics costs are likely to continue to rise. We plan to accelerate the global expansion of bespoke and continue its growth by blustering year-end promotion and online marketing. In addition, we will optimize supply efficiency by region by responding to risk in an external environment and pursue profitability improvements by expanding sales with a focus on premium products. Regarding demand for the TV market in 2022, The growth trend, which continues until the end of the first half of 2021, is expected to reverse. And social and economic uncertainties related to COVID-19, as well as supply and logistics issues, are likely to increase continually. However, we expect demand to premium products such as super big screen TVs and QLED products to keep growing in 2020. We will focus on improving our mix of high-value-added products by targeting the rising demand via technological innovation in premium products, including Neo QLED, AK, and MicroLED. Furthermore, we will continue to add to growth momentum by creating sales opportunities with differentiated lifestyle products. The activity address consumers growing interest in diverse lifestyle value that emerged during COVID-19. In a digital appliances market in 2022, the market is expected to continue to slow down in growth following the second half of 2021. As consumers spend less time at home, However, we expect that market demand stays at a similar level of 2021 because of an increase in penetration rate of new home appliances. We will solidify brand image of providing customized products that meet the needs of consumers by introducing a new lineup and expecting global sales of our differentiated bespoke products. In addition, we will enhance our supply competitiveness by improving productivity and strengthening our SCM competitiveness so that we can respond flexible to external changes such as an increase in logistics costs. Based on this, we will continue to grow and lead the home appliance industry. Thank you.

Thank you. That sums up the third quarter results presentation. Before we move on to the Q&A session, I would like to share several data points in key business areas. For DRAM in the third quarter, our bid growth was a percentage in the low single digits and ASP increased by a high single digit percentage. For the fourth quarter, we expect market bid growth to be flat and ours to be around the market level. For the full year, we maintain our forecast of market growth in the mid 20% range and that our bid growth should be similar. For NAND in the third quarter, our bid growth was a mid single digit and ASP increased by around 10%. For the fourth quarter, we expect market bid growth of a mid single digit percentage and our bid growth should be slightly higher than market. For 2021 as a whole, we still expect market bid growth percentage to be in the low 40s, but now believe our bid growth will slightly outperform the market. In the display panel business in the third quarter, our OLED portion of sales was in the mid-90% range, and OLED sales volume growth was a percentage in the low 20s. In the mobile business in the third quarter, sales volume was approximately 72 million units for handsets and 7 million units for tablets. The blended ASP, including tablets, was around $250. And the smartphone portion of handset shipments was in the mid-90% range. For the fourth quarter, on a sequential basis, we predict that handset shipments will decline and that tablet shipments and blended ASP will increase. The smartphone portion of handset shipments is likely to be in the mid to high 90% range. In the TV business, sales volume in the third quarter increased by a mid single digit percentage. For the fourth quarter, we expect growth to be in the low 20% range. For the full year, we forecast that sales volume will decline in the low 10% range. With that, I will now move on to the Q&A session. First, we will start by taking questions from the conference call.

Now Q&A session will begin. Please press Start 1, that is, Start N1, if you have any questions. Questions will be taken according to the order you have pressed, Start N1. For cancellation, please press Start 2, that is, Start N2, on the phone. The first question will be presented by Soonak Lee from Hanwha Investment & Securities. Please go ahead with your questions.

Yes, thank you for the question. I will ask each of you questions related to investment and display. If you look at the third quarter, it seems that the amount of accumulated service investment has increased compared to the previous year, so please give us some detailed information for each business sector. You said that you do not propose a capex outlook, but even if it is not specific, I would like you to tell us about the colors this year and next year. The second question is about LCD and QD display. The price drop due to the entry of the LCD down cycle is continuing, and I would appreciate it if you could suggest a specific type of production schedule and whether this can advance the output strategy of the LCD business. Also, please explain the status of the QD display, which is scheduled to be improved in the fourth quarter.

I have two questions. The first question is about your capex. I think YTD third quarter, your capex this year has increased versus last year. Can you give us a detailed breakdown of that capex by each of the business divisions? You said that you are not able to provide a full year guidance on your capex, but still, can you give us some color as to your capex this year and what you expect to see next year? Second question is about the display business. First of all, the LCD is going through a down cycle. ASPs are falling. Would that mean that you may actually stop your LCD production faster than originally scheduled? And if so, when do you plan to stop your LCD production? Fourth quarter will also be the start of your QD display mass production. Can you give us some updates on how that is going?

First of all, I would like to answer the investment-related question from the IR team.

Our investment in the third quarter of this year is 33.5 trillion won, which has increased in proportion to last year due to increased semiconductor investment, and all investment in memory and foundry has increased.

Yes, to answer your first question, our YTD third quarter capex is currently at 33.5 trillion won. This is mainly attributed to the increase in semiconductor-related investments. Both our memory as well as foundry investments have increased versus last year.

And in the case of memory, it is basically focused on medium-term demand response and There has been no change in the existing plan, but we will continue to invest in the four-year plan. Because of the change in the existing plan, we did not introduce a new year's agenda. However, the increase in investment this year has a positive effect on the increase in demand for 22 years. There is a significant impact on technology competitiveness, such as expanding technology competitiveness, such as expanding technology competitiveness, such as expanding technology competitiveness, such as expanding technology competitiveness, such as expanding technology competitiveness, such as expanding technology competitiveness, such as expanding technology competitiveness, such as expanding technology competitiveness,

To give you some details of the investments, in the case of memory, our investment or capex policy remains the same in that we do focus on being able to respond to mid- to long-term demand, but also in terms of executing equipment investments to make that flexible depending on the market situation. And so, yes, we will continue to maintain flexibility as we execute our investments during the fourth quarter, Given the remaining uncertainties, we're not able to provide you fuller guidance on our CAPEX. But overall, when we look at the investments for this year, there are several areas where these investments are being used. There are definitely investments that we're making in order to increase our capacity to respond to the expected increase in demand next year. But also, some of the investments are being made in order to offset some of the decrease in supply that happens as we move up to more advanced nodes and also the die size penalty that happens with next generation products such as DDR5. At the same time, another piece of that investment is being made to continue to maintain our technology competitiveness and as investments for the future in order to, for example, make successful process migrations to gain greater cost competitiveness. as well as, for example, the infrastructure investments we're making in P3 in order to have the capabilities to capture demand in the future.

And since the demand for the power plant is constantly increasing, we expanded the production size of the new Pyeongtaek S5 line to respond to this demand. And in addition to this, we are also preparing for a necessary clean room preparation for technology leadership enhancement and future response. And you also asked about the direction next year, but please understand that the current direction proposal is a bit difficult in the situation where our next year's business plan is not yet confirmed.

Some of the detailed investments that we made on the foundry side includes investments necessary to increase the production scale of our new Pyeongtaek S5 line, given the fact that we do see increased demand, especially for the advanced nodes. Also, we're making future investments to maintain our technology leadership, also the equipment investments to respond to future demand, as well as some preemptive preparations of essential clean room facilities. You've also asked for some color for next year, but we're still actually working on our business plan for next year, so we are not able to provide you with greater details about next year's capex expectations.

Yes, I'll answer the display part. You asked two questions. First, you mentioned the LCD exit strategy. I think it's probably the LCD line closing. As you know, as of now, We are continuing to produce with the request of the customer's LCD panel, and we think it will continue until the end of the year. We are currently reviewing the additional extension requirements after next year. As you may have asked, considering the demand from the customer, the LCD panel evaluation will be decided very quickly.

To answer your first question, yes, we are continuing to produce LCD panels. That is at the request of our customers. We are planning to at least continue production until end of this year. The question is whether to continue production even next year. Currently, we're reviewing that, and we will actually exercise quite a lot of flexibility as we make that decision Considering both the market situation, where as you mentioned the LCD panel ASPs is rapidly falling, but also the demand from our customers.

And the second question is about the QD display. As planned, we will start the QD display production in the fourth quarter of this year, and the product will be exported. And from next year, the set market will be released. The company's QG display has a lot of advantages compared to the existing products in terms of color rendering, viewing angle, and resolution, so we expect it to be a new standard in the premium TV market. The company is focusing on the impact of this QG display to be successfully announced in the market, and we will continue to work hard to change the future large-scale business to QG display-centered stability.

As you mentioned also, we are on track to mass production and shipment of our QD displays this fourth quarter. We are on track with our original schedules, and according to this, TVs featuring QD displays may be unveiled in the market next year. Our QD displays have many advantages versus existing displays, such as in terms of color reproduction, viewing angle, and brightness. And therefore, we're quite confident that it would set the new standard, especially in the premium TV market. Our current focus is on the successful unveiling of the QD display in the market and also to make this the start of a smooth transition of our large-size business towards the QD display.

Thank you for your answer. Next question, please.

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

Hello, I'm from Citigroup. I'd like to ask a question about memory and wireless. First, regarding memory, I'd like to ask about the background of 3D Land Big Growth's guidance. My first question is about your NAND.

NAND shipment was slightly below your original guidance. Can you give us some details of why? The second question is about the foldable. The successful launch of Galaxy Z Fold 3 and Z Flip 3 has shown the growth potential of the foldable form factors. In that context, can you give us some of your guidance for this year as well as next year of your foldable phone sales?

Yes, I'd like to answer about the NAND. The NAND of the 3rd quarter was fully approved by the guidance that we gave in the last quarter. There are a few reasons. First, as the client SSD said, the demand of the end customer itself was strong. As other parts were supplied, there was a gap in the set build, and as the stock of some of our customers was adjusted,

To answer your first question, yes, as you mentioned, our third quarter land shipments came in slightly lower than the guidance that we had provided last quarter, which is explained by several reasons. Number one, on the client SSD side, while the PC demand actually remained solid throughout third quarter. There were some supply chain issues with other components that disrupted set-build production. Also, some customers went through inventory adjustments. And so there was a soft demand for client SSDs, especially around the low-end PCs.

And in the case of mobile, it's a seasonal trend, and the demand has decreased because of the trend. However,

Also, on the mobile side, even though due to seasonality, the mobile demand itself was also solid, there were some AP-related component supply issues in the mid-end levels, and so there were also some impact due to delay of our MCP supply.

uh uh

Well, actually, so while this was happening in the market, we had actually ended the second quarter, came into the third quarter with extremely low inventories. And so we thought that the best way to manage the situation was to focus during third quarter on increasing, building in flexibility. for the future by using third quarter to normalize our inventory levels, especially around the high-end solution products such as servers and e-storage?

Yes, I will give you a free answer. We are promoting a foldable experience and a market-leading strategy. So, the new G-Series is receiving great response from customers with its sophisticated design and foldable optimization. As you know, our focus strategy for our foldable has been to enhance the user experience and also to lead the market in foldables.

Based on this strategy, by introducing eye-catching designs and also optimizing the foldable usage experience, we have been able to bring up a very positive response from the customers. We think that we have succeeded in actually starting and leading this mainstreaming of foldables in the markets. On top of that, with the bespoke edition, the Z Flip 3's innovative user experience is combined with a wide range of customizing and personalization options, and this has generated quite strong responses from the younger customer segments, for example, Generation MZ.

Our 21-year foldable sales will grow by several times compared to last year, in 2022. We will continue to continue technology and user experience innovation through foldable products, and we will continue to expand our active partnership and ecosystem to make the foldable market a very important category in the flagship market and lead it to grow further.

You've asked about our sales this year and next year. This year, our foldable sales is expected to increase by several times versus what we had last year, and we expect to continue significant growth of our foldable sales even next year. So while we continue to focus on further enhancing our technology and user experience, we will also work on creating stronger partnerships and ecosystem so that the foldable becomes a very important category within the flagship.

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

Yes, thank you for the question. I'll ask you a question about memory and network support. Recently, the price of memory is falling sharply than expected. The short-term market of D-Land that Samsung sees and the demand related to next year, as you explained earlier, what do you think about it? upside potential and downside risk, please explain in more detail. And regarding the network business, you said earlier that it is showing very good results in North America and Japan. If you have any business progress and prospects related to the new 5G frequency in India, please explain.

My first question is about the memory. It seems that the prices are falling faster than what the market is expecting. Can you share with us, therefore, the short-term market outlook for DRAM and NAND, as well as what you expect to see next year in terms of demand? There are some upside potentials next year as well as downside risk. Can you give us some details of how you perceive these upsides and downsides for next year? Second question is about the network business. During the presentation, you mentioned some of the achievements you're making in North America and Japanese network markets. I'm wondering if there are any updates on Indian market where there are LTE and 5G auctions going on or being discussed. Can you share with us some details about what you are planning or doing in India?

Yes, I will answer your question about memory. To answer your question, I agree that there is quite a lot of uncertainty, especially around various macro issues.

such as how the back-to-normal will pan out, also the component and supply chain issues, and the raw material prices increasing.

The upside factor is as important as the risk factor. This should also be reflected in the next year's outlook. First of all, we have to consider the long-term In the case of the set production quality of the overall application, we are more concerned about whether the overall production of parts is a problem or not, and whether it is a mismatch problem due to the supply chain management issue. So, rather than a lack of absolute CAPA, However, even though there are these headwind factors, we also need to think about some of the upside potentials that can come next year as we prepare for next year's business.

Currently, one of the key issues is the supply chain, the component shortage issue, which has disrupted various applications, set bills. But when we look at the current component shortage or the supply chain issues, we think that it's not an issue of just absolute shortage of production output of all components, but rather more of a mismatch of the supply chain. And so, Compared to a case where the problem is caused by an absolute shortage of capacity, things could actually start to improve earlier than expected. Even though it's difficult to say definitively, we're carefully hoping that perhaps the situation may start to somewhat ease from second half of next year.

Yes, and to talk about the demand, since the vaccine supply continues to increase, COVID-19 COVID-19, COVID-19, COVID-19, COVID-19, COVID-19, COVID-19, COVID-19. digital-based new normal society, we have experienced convenience and efficiency. I think this experience is not going to disappear as the pandemic ends, but it will coexist in our lives and continue to develop into a digital transformation at a new level. And with this overall social trend, I think we can create new CPUs,

Another factor that may impact demand would be how the post COVID-19 or with COVID situation will unfold in various countries. With more vaccinations happening, many countries are now moving on to what can be referred to as back to normal or living with COVID-19 policies. This would probably increase the amount of activities that people do face-to-face or in person, but probably we will not be able to go back to the way we did business or lived before the pandemic because during the past two years, consumers have experienced the convenience and efficiency that comes with a digital-based new normal society and lifestyle change. And I think that even after the pandemic ends, this will be part of our everyday lives and actually move up to the next level of digital transformation. So given this social trend and also increased investments in new CPUs and major data centers, it is expected that the fundamental demand, especially around servers, will continue to remain solid.

In terms of price, there is uncertainty in the market. There is also a difference in perspective between the market and the customers. So it is true that the difficulty of pricing is increasing. But compared to the past, the cycle of memory has become smaller, and our stock is very low.

You've mentioned the software pricing, and there is definitely various uncertainties in the market. And when we talk to customers, we do notice that there is a gap between how we expect the market to unfold versus what the customers are expecting, which also makes our pricing negotiations that much more difficult. than before, but given the fact that the memory industry cycle is actually getting weaker in terms of magnitude and also shorter in terms of cycle duration, and also the fact that we're currently running at relatively low inventory levels, we do not think that the current price situation calls for concern.

I'd like to ask you about the network business. Regarding 4G in the Indian market, To answer your question about our network business, we have definitely been working in India.

The Indian market just went through an auction of 4G frequencies. Seven bands of 4G frequencies were auctioned off during the first half of this year. And so in India, in order to increase the 4G network capacity, there are new projects coming up. And so we are creating business opportunities by proposing new base station equipment and network optimization solutions to Indian carriers.

And in terms of 5G business plans, we are working to expand the business to 5G based on 4G large-scale commercial network building experience. We also have in mind the 5G opportunities in India.

So leveraging the 4G large-scale commercial network track record that we would have We are aiming to also expand this to a continuous expansion of our 5G business in India. So with that in mind, we are building very strong partnerships with local carriers. The Indian 5G frequency auction is scheduled for first half of next year. And so once that is done, there will be demand, specific demand for 5G networks. And so currently we're doing the groundwork of our 5G business so that we would be able to supply the necessary products in a timely manner.

The next question will be presented by SK Kim from Taiwa Capital Market. Please go ahead with your question.

Thank you for the question. I have a question for the Foundry side, and I have a question for the IM side. Regarding the Foundry, the company recently announced that it will mass-produce the 3nm GA process for competitors in early and early next year. There was a report that it was mass-producing. Please share your company's opinion on this and the future Foundry technology roadmap. In addition, I would like to share with you the opinions and plans for the expansion of the mid-term CAPA, the Foundry CAPA, which is being talked about recently. Regarding IMO, I think the part supply issue that has been going on this year has had an impact on the third quarter. Please tell me how much of an impact this has had and whether this situation will continue in the fourth quarter. My first question is about the recent media report that the company is planning to mass produce its 3-nano GAA process earlier than competitors.

According to the report, You're planning to go mass production in the first half of next year. Does the company have any comments, or can you offer some details about the technology roadmap for your foundry business? Also, in that context, can you share with us some comments or plans regarding your mid- to long-term capacity expansion for the foundries? Second question is about the IM side. It seems that the supply chain, the component supply issues, did have an impact on your third quarter business. Can you quantify that impact? And also, do you think that this will continue in your fourth quarter? When do you think the situation would ease? And how is the company coping with the component shortage?

Yes, I will answer the founder's question first. The 3nm first generation or 3nm process that you asked about is currently in progress with the goal of mass production in the first half of 2022. To answer your first question, we are currently on track with target of mass production

of our 3-nano GAA process during the first half of next year. And also by further enhancing and innovating not only our process development but also manufacturing and infrastructure capabilities, we want to prove once again Samsung's leadership in GAA process technology by further enhancing our power performance area in the GAA process as we prepare for the second generation 3-nano.

Uh, capacity. Okay. Okay. Okay. Okay. Okay. In terms of our capacity plans, currently we are going through unprecedented investments in both infrastructure and equipment.

with the aim of securing a sufficient mass production capacity to satisfy the customer's needs as much as possible in the EUV process by expanding our Pyeongtaek capacity but also studying the construction of a new fab in the U.S. If you compare some of our capacity numbers, our capacity as of 2021 has increased by around 1.8 times versus the capacity in 2017. Going forward, we're planning even steeper capacity increases by around three times of our capacity by year 2026. And so we are focused on securing as much as maximum mass production capacity to satisfy customer needs.

I'll answer the scary part. There was a significant impact on the sales of the third quarter due to the supply and supply issues. And it seems that it will be difficult to resolve in the short term, so it is expected that the fourth quarter will also be affected. It's hard to predict when the supply and supply issues will be resolved, but through strategic cooperation with our partners, we will optimize supply and lead time for supply, import, and product production, and trade line delivery. In addition, by effectively rebalancing the supply and supply,

Regarding the impact of the component chip shortage on the IM production in third quarter, there was definitely considerable impact on our third quarter sales volume. The situation does not appear to be easing, so it seems that even the fourth quarter will also have to bear with the part or component supply issues. It's difficult at this point to predict when the situation would improve, but we have optimized our supply lead time by strategic partnerships with our partners so that we are able to at least optimize the part of the lead time or supply chain that comes within our control, such as receiving the components, using that to produce the product, and also shipping the finished products to the channels. At the same time, we're also focusing on minimizing the impact by diversifying our sources and also going through rebalancing of our component supply.

Not just as a temporary response, even after the situation stabilizes, we will continue

actually strengthen our proactive response system to market changes through strategic partnerships and collaboration with the key vendors on an ongoing basis.

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

Yes, thank you for the question. I will ask a question about memory and home appliances. First, it is related to the memory cycle. You said that this down cycle will shorten the increase and cycle compared to the past. I would like to ask for your opinion on the reasons and reasons you expect. The second is related to TV demand. After the Corona pent-up demand, Thank you for watching.

My first question is about the memory business. You mentioned that the memory down cycle is expected to be less in terms of magnitude and also shorter than before. Can you give us some of the reasons why you expect that? A second question is about the TV business. Even though there was this pent-up demand after COVID-19, at the tail of that, it seems that there is a softness in consumer durable demand And overall, TV demand outlooks are being downward adjusted. Of course, despite that overall TV market trend, the premium segment continues to do very well. So given that market situation, can you share with us your strategy for the VD business?

Yes, in terms of memory cycle, we see three reasons for the weekly decrease. The first is the diversification of applications. In the past, most of the memory was limited to the PC, and the portion was large. Now, the applications that use our memory have become very diverse. So, in general, if the portfolio is diversified, the range of change and the cycle will decrease. I think this similar phenomenon is also appearing in the memory market.

The reason why we think that the down cycle will be less in magnitude and shorter is threefold. One is the fact that the applications have become much more diverse than before. Previously, the main source of memory demand was the PC, but now memory is being used in a far wider range of applications. It's similar to how a portfolio volatility decreases if it's well diversified. I think a similar situation is happening in the memory markets.

And our memory process has to be fine. That's another reason why the difficulty is rising rapidly. If the process difficulty rises, it's not easy for us to maintain the same bitgloss as in the past. So, even in a situation where the shortage is expected, it is limited to rapidly increasing the production ramp-up. We think that the current situation is also an example of that influence. As I mentioned earlier, our stock Another reason for the change in the down cycle is because we're now working with cutting edge, very difficult memory processes.

Because of the difficulty of the technology, it's not as easy to maintain the same level of bit growth as before, and there are restrictions and limitations in rapidly increasing memory output. I think we are currently experiencing a part of that impact. For example, our inventory continues to remain at very lean levels past quarter as well as this quarter. So I think the difficulty of the memory process technology will also be a reason why the possibility of an extreme down cycle as what we saw in 2008 is low.

The last reason is that in the past, suppliers such as Samsung and customers experienced extreme shortage and extreme oversupply. In the industry, there was a need to secure the overall competitiveness of the market. It was a lesson learned. Through this, the ability of supply chain management and risk management has improved a lot compared to the past. I would like to say that this is also one of the reasons.

And the third reason is that basically both the vendors and the customers have learned their lesson during the past extreme shortage and also oversupply, that it's best for the entire market to maintain a level of rationality and soundness. And that has also improved the SEM and crisis management capabilities of participants in the memory market. And I think that would also contribute to improving the down cycle.

Yes, I will answer the TV question. As you said, as the demand for TV market pent-up, which continued until the first half of this year, has decreased, the demand for TV in the fourth quarter is expected to decrease compared to the previous year. As you know, as the COVID-19 vaccination rate rises, the With-Corona policy is being implemented, focusing on the advanced market. As a result, the trend of increased home and outdoor activities will also have an impact on TV demand. To answer your question about the TV market outlook, as you mentioned, yes, there was that pent-up demand

in the TV market that continued until around the first half of this year. Some of that is leveling off, and we expect that TV demand in Q4 will decrease slightly on a year-over-year basis. Another factor we have to expect is the impact the living with corona policies may have on the TV demand with higher vaccination rates, especially around developed markets There are easing of social distancing, people will spend more time outside, and this may have an impact on TV demand. But also looking towards next year, there are some positive factors. For example, there is the global sports events happening in the second half of next year, which will drive the consumer needs for large size and high quality TVs that gives that immersive experience. And this will be a great opportunity for us to expand our sales, especially in key markets such as Europe and Latin America.

Also, the demand for premium TVs is expected to continue to increase next year, and the company plans to overcome the market policy by using high-end products such as Neo QLED 8K and other strategic products to overcome the market policy. Also, in the case of Neo QLED, which is showing a sales trend, it is expected that it will continue to increase the demand for premium TVs Despite the

stagnation of the TV market. The premium TV demand is expected to continue to grow even next year and so therefore our strategy is to focus on Neo QLED 8K and the strategic products to target the high-end segment of the market to overcome the software market demand. Also our Neo QLED is already showing very positive sales performance but we think that that will continue on next year because Neo QLED is a product that offers the market's best picture quality and design and does provide a differentiated in-home activity value to consumers who are now doing various activities at home in addition to gaming, they're working, and also doing home fitness at home. And Neo QLED has been providing that value, especially to consumers in the premium segment. In addition to this, The lifestyle TV product groups would also be a major focus for us next year. It provides various values that are not provided by existing TVs, and so the lifestyle product group would be another way we plan to create new demand among a stagnated TV market and deliver continued growth.

Thank you for your answer. Next question, please.

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

Good morning. Thanks for taking my question. So, without considering the recent trend in memory pricing, are you at this stage reconsidering your investment plans for 2022 for both DRAM and NAND flash? in terms of number one, the amount of new capacity you plan to roll out, and number two, the timing of the equipment delivery. Thank you.

Yes, this is a question about investment plans related to memory. Considering the current situation of memory prices, in 2022, I'm curious if you're reviewing the size and timing of the new KEPA and whether you're making adjustments to the investment plan for DRAM and LAND.

I'll briefly talk about memory investment. There are quite a few uncertainties. So we're still discussing investment plans internally.

To answer your question, given the large number of uncertainties that remain at this point, we are currently continuing to discuss our detailed investment plans These are discussions for both in terms of the size of our investment as well as the detailed direction. And so we are practicing particularly high level of care and caution as we try to work out next year's investment plans.

And this is what I've been saying all along. Infra-investments continue to be made in order to respond to medium-term demand. However, cost-benefit investments continue to be made And so our basic approach to investments remain the same.

You have heard before that our focus is to continue to maintain the investments and infrastructure at right levels so that we are prepared to meet due to long-term demand, but in terms of equipment investment execution to do that flexibly, tied with the market situation, that approach still applies. And our basic goal is to increase the foundation that we have for sustainable profit generation. And so our investments, as well as capacity operation, will be adjusted according to that goal.

The last question will be presented by Wonsik Lee from Korea Investment and Securities.

Please go ahead with your question. On the D-LAN side, there seems to be a lot of market errors in our current 14nm process. Please tell us about the current 14nm production time. The display part is currently aware that the operation rate of our rigid, flexible OLED production lines is fully operating. Please tell us about the future expansion plan for medium-sized OLED CAPA and the expansion strategy plan for OLED applications. Thank you.

My first question is about the concern of the 1A nano, the 14 nano production yields that is in the market. Can you give us some updates of where your yield currently stands? Second question is about the display, the oil EDs. It seems that your rigid and flexible oil ED is running at almost full capacity. Can you give us some details about your capacity expansion plans for the mid to small size and also how you plan to expand to new applications?

Yes, to tell you about 14nm, you said that there is a concern about the yield of our 14nm product. Recently, our 14nm process, the ramp-up speed, compared to the 15nm process, it's really fast inside of us. It's very fast, so it's surprisingly fast, so you don't have to worry.

You've mentioned that the market is very worried about our 14nano production yield, but actually, internally, we're pleasantly being surprised by the fast speed of ramp-up that we're seeing on our 14nano, at least versus the previous generation. So I don't think there is any reason to be concerned.

And as I've said, our 14nano is... As we've mentioned during previous conference call, the rationale behind our 14nano process is that it leverages our EUV know-how

but also uses the ecosystem that we have developed in order to give us stronger cost competitiveness. And as we've just mentioned, we are ramping up quite fast. We are there. And so we are confident that with our 14 nanotechnology, we will be able to maintain our technology leadership.

Yes, I will answer the second question from the display. The first question is about Kepa, the Chinese Kepa. As you asked, the current operating rate of OLED is very good. We believe that the customer demand will be sufficient next year. It is expected that the operating rate will remain at a high level. However, in the flexible OLED line, new technologies, such as hole display and touch, such high-performance functions are continuously added, To answer your question about our OLED displays, as you mentioned, our OLED utilization is very good.

but also given the fact that the customer demand is expected to remain strong next year, probably this high level of utilization will go on until next year. However, we have seen some areas for improvement in terms of our efficiency, especially around the flexible OLED. For example, we're not able to use some of the capacity when we have to add in high performances such as hold displays or touch features. And so in order to improve that, we have continued to make supplemental investments to optimize our lines. And if necessary, we're considering the use of some of our idle LCD lines.

In addition to this, we are considering the use of some of our idle LCD lines. In addition to this, we are considering the use of some of our idle LCD lines. Another area where we want to make capacity investments would be in the module lines to capture the foldable demand.

Our foldable demand is rapidly growing. It is expected to continue to grow. So we are planning to make investments to expand our module line in a timely manner. This will enable us to supply to not only existing customers, but also diversify our customers globally.

The second question is about the expansion of new applications other than smartphones. . . . . In addition, we are going to promote the leadership of OLED in high-growth applications such as smartphones. Through this, we are going to actively improve the high-quality seasonality of our small and medium-sized businesses. In addition, this year, our company has made a lot of meaningful achievements in the fast-growing automotive market, including electric cars and autonomous driving. You've also asked about how we're diversifying the OLED applications.

And fortunately, as you mentioned, the OLED panels have recently been used not only in smartphones, but in other devices such as laptops and game devices. We're currently trying to work out our output for each of these applications. We're still planning that. But roughly we think that our OLED displays for laptops or tablet products would probably increase around two-fold, two times in terms of sales versus this year. And so we are going to focus on capturing and maintaining OLED leadership in other areas. high growth applications in addition to smartphones. And this diversification of the product mix will also help us better cope with the repeated seasonality that we have gone through in the mid to small size panel business. Also, I think it's meaningful to share the fact that this year we've also had some wins in the auto market, which is also rapidly growing with the adoption of EVs and autonomous driving. So going forward, our OLED business will focus on supplying to various applications, including smartphones, and also to winning the leadership in the auto market.

Yes, thank you. Lastly, we will answer the questions that were asked in advance online.

Since the last performance announcement, we have been able to ask questions in advance through the homepage to strengthen communication with individual investors. Finally, we will answer questions that were submitted online in advance.

As you know, starting from last earnings conference call, we've accepted questions via our webpage in advance. and this was part of our efforts to strengthen communication, especially with our retail investors, and enhance the understanding of the company. A variety of questions were submitted this quarter as well. I believe the majority of the submitted questions were sufficiently answered during the Q&A session, so we will answer two more questions on topics that actually received a high level of interest from our shareholders but were not addressed during the Q&A. So the first question is, recently, global big tech companies have jumped into the... Yes, I will read the question.

The first question is, in the recent development of global big tech companies' semiconductor development, what is superior to the leading competitors in terms of Samsung's current production? So the first question goes to the foundry business.

The question is, recently global big tech companies have jumped into the development of their own semiconductors. Against this backdrop, I would like to know, In which areas Samsung has an advantage over the leading competitors and whether it has a separate vision to gain long-term technology leadership? This will be answered by Mr. Seunghun Han of the Foundry Business.

Yes, as you said, as the fourth industrial revolution came to an end, the idea that came from family companies was actually implemented as a semiconductor chip, The role of the Foundry is becoming more and more important. In particular, in order to respond to the demand for advanced semiconductors such as AI, autonomous driving, 5G, and mobile SOC, it is essential to acquire advanced process technology through fierce and focused R&D.

Yes, as you mentioned, in this age of the fourth industrial revolution, the importance of foundries has actually increased because it is the foundry that implements the ideas from the founders' companies into silicon. So in order to meet the demand for especially the cutting-edge chips, such as AI, autonomous driving, 5G, and mobile SoCs, it's critical for foundries to gain the cutting-edge leading process technology through intensive R&D.

For the growth of the Foundry business, the first is to secure a high-tech process, the second is to provide a design solution for each application, and the third is to provide sufficient capacity management at the same time. For families and customers, In order to provide a optimized process solution, the company will apply the first new architecture, GAA, to the top process, 3nm, and will mass-produce it next year. At the same time as securing the core IP for each application, we will use the enhanced packaging technology based on heterogeneous integration

In order to grow the Foundry business, we think that there's three critical elements that need to be addressed. One is, as I just mentioned, to have that advanced cutting-edge process technology. Number two would also be providing the design solutions for different applications. Number three is, of course, to support that with sufficient capacity. And in order to provide the optimized process solutions for our fabulous customers, we, for example, are planning to apply, first in the industry, a new architecture GAA in the cutting-edge process of 3-nano, starting mass production next year. Also, we have been providing the design platform to support the customers' design efforts. And our design platform is supported by not only GAA, core IP for each of the applications, but also a packaging technology that strengthens or strengthens packaging technology based on a heterogeneous integration.

Also, we are doing our best to optimize large-scale investment and line operation as mentioned earlier, and we expect this effort to appear more and more visibly. Of course, to satisfy the third, the sufficient capacity, we have been making large-scale investments and also optimizing our line operation.

And we think that the results of these endeavors will become visible gradually by continuing to focus on these three key success factors, we will deliver stronger competitiveness of Samsung foundries.

Yes, thank you. Today's last question is an investor's question.

There was a special dividend in the fourth quarter last year. Is there a plan to implement a special dividend in the fourth quarter this year, and is there a possibility of implementing it as a self-serve purchase rather than a dividend?

I will answer this question.

And the second question that we got from online was about the dividends. The question is, Samsung gave a special dividend in the fourth quarter of last year. Are you planning to give out a special dividend this fourth quarter as well? And is there a possibility of using that for a buyback rather than a payout?

Yes, as I said in the three-year stock market policy from January 20 to 2023, In January, we announced our three-year shareholder policy covering the period of 2021 through 2023, and we remain unchanged.

Starting with this year's fourth quarter results, we will announce our annual free cash flow and seriously consider a partial payout if there is a sufficient surplus beyond the annual dividend.

Therefore, we will share the amount of free cash flow and the early return after the end of 2021 as planned. However, this is not a specific method in terms of payment or self-sufficiency purchase and withdrawal. So therefore, we will share our free cash flow and whether we will execute such early payout once the 2021 results are confirmed.

However, we have not finalized the method of early returns, whether it will be through dividends or buyback or cancellation, but we plan to fulfill the policy in a way that provides the most benefit to our shareholders, stakeholders, and the company, considering overall environments, including the market condition and outlook by business, macro factors, and the stock market trend.

Thank you for your time.

Due to the limited time, we're unfortunately unable to answer every question that was submitted, but I would like to thank everybody who shared their opinion, providing us with valuable information to refer to in our decision-making process. And that completes our conference call for this quarter. We wish all of you and those close to you stay strong and in good health. Thank you.