Samsung Elect Ltd

Good morning and good evening. Thank you all for joining this conference call. And now we will begin the conference of the fiscal year 2021 first quarter earnings results 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 your 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 fourth quarter earnings results by Samsung Electronics.

Welcome, everyone. This is Ben Seo from Investor Relations. Thank you for joining our fourth quarter 2021 earnings call. For additional details regarding our quarterly results, please refer to our earnings presentation, which is available on our IR website at www.samsung.com. On the call with me today representing each of our business units are EVP representing memory, VP for system OSI, EVP for foundry, EVP for Samsung display, VP for mobile experience or MX, which is a previous mobile division, and VP for digital appliances. 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. Also, please note that last December, we merged the IM and CE divisions to form the DX division. However, as this was just announced in December, We have maintained the IM&C distinction in our earnings call materials as well as in portions of this presentation for consistency with our Q1 to Q3 results. With that, I would first like to present the results for the fourth quarter. I'm pleased to report that we once again delivered record results by leveraging our differentiated products and technology leadership despite the challenging macro environment. Total revenue in the fourth quarter grew 3.5% sequentially to $76.6 trillion, setting a consecutive all-time quarterly high driven mainly by our finished product businesses. We expanded sales of premium smartphones, including photoables, as well as TVs and home appliances amid year-end peak seasonality. We set records for total revenue in a respective quarter for each quarter in 2021, resulting in a record annual revenue of 280 trillion won. Gross profit increased by 0.5 trillion won sequentially to 31.6 trillion won, led by expanded sales of premium smartphones, but gross margin decreased slightly, primarily due to a decline in memory prices. SG&A expenses were up 2.5 trillion won quarter-on-quarter to 17.8 trillion won, mainly due to increased spending on R&D and advertising and promotional activities. As a percentage of sales, they increased by 2.6 percentage points. Operating profit was 13.9 trillion won down from the previous quarter due to a special bonus payment to employees a decline in memory prices, and a seasonal rise in marketing costs for smartphones. On a year-on-year basis, however, both operating profit and operating margin increased substantially, driven by our semiconductor businesses. I will now briefly review the results of each business unit. In memory, results declined versus the prior quarter as ASP edged lower. Bit gross for the quarter came in below guidance as, considering our low inventory levels and the market outlook, we refrain from excessive bit shipment efforts. Compared to last year, results improved significantly, driven by solid demand across overall applications, as well as increases in our advanced node portion and ASP. In Foundry, Even though increased overall supply resulted in a new high for revenue, profitability decreased slightly quarter-on-quarter due to a rise in costs associated with advanced processes. On a year-on-year basis, results improved due to the start of operations at the S5 fab in conjunction with price adjustments. In display, earnings continued to improve for the mobile panel business, driven by a continuation of solid demand from key customers' new smartphones and increased sales in new application areas. However, the large panel business saw its losses widen considerably due to declines in LCD ASPs and initial costs related to QD display. For the MX business, revenue increased slightly, led by expanded sales of premium products such as foldables, and solid sales of device ecosystem products. Profit decreased quarter-on-quarter due to an increase in year-end marketing costs, including for foldables, but increased year-on-year. For network, results improved sequentially as revenue grew both at home and abroad. In the CE business, composed of visual display and digital appliances, we delivered record high quarterly revenue on the back of strong sales of premium products during year-end seasonality, but profits declined slightly quarter-on-quarter amid rising costs, including for logistics. Regarding currency effects, negatives from overall weakness in major emerging currencies against the Korean won, mainly affecting the finished product businesses, were eclipsed by positives from a strong dollar, which mainly affects the DS divisions. The net result was a positive impact of approximately $300 billion won on operating profit compared to the previous quarter. Next, I would like to share our business outlook. In the first quarter for semiconductor businesses, memory will actively address a projected recovery of demand, and Foundry will push to stabilize yield and increase supply of key components for flagship products. Our finished product businesses will focus on maintaining solid profitability by strengthening leadership in premium segments with launches of new smartphones and TVs. In memory, although there are lingering uncertainties, we will concentrate on optimizing our business portfolio, including through increased sales of advanced node products to support the server and PC demand recovery. and also via sales growth of high-value ad products. For System LSI, we will focus on supplying essential SOCs and CISs for our key customers' flagship products. And for Foundry, we will continue to prioritize expanding supply by improving production and yield at advanced processes. In display, despite weak seasonality for smartphones, we expect the mobile panel business to deliver improved results year on year, driven by releases of new smartphones by major customers and an expansion of the foldable display customer base. In the large panel business, losses are likely to be partially mitigated with the mass production of QD display. In the MX business, despite supply constraints, we expect to deliver revenue and profit growth as well as solid margin led by releases of new flagship models, expanded sales of 5G smartphones for the mass market, and increased sales of tablets and wearables. For network, we target to win new opportunities from European and other global customers. For C businesses, amid weak seasonality for TVs and a projected dip in demand for home appliances, We will endeavor to improve profitability by focusing on sales of premium products, expanding our new category product lineup, and increasing the portion of online sales. Now let's move on to the outlook for 2022. Under expectations of a recovery in global IT demand, our component businesses will increase their advanced node portion of production and enhance leadership in next-generation products and technology. And in the finished product businesses, we will continue to strengthen our leadership and lineups in premium segments as we strive to create new user experiences by enhancing connectivity and synergies between our devices. However, challenges associated with supply issues and COVID-19 are likely to persist. During this year, We will also promote partnerships, secure technology, and execute investments to gain leadership in future growth areas such as 5G, AI, cloud, IoT, and the metaverse. For the memory business, we expect demand to increase as enterprises ramp up IT investments, though there are uncertainties such as the extent to which supply issues will ease. In accordance, we will continue to enhance our leadership by expanding supply of high-performance products and increasing application of our industry-leading EUV technology. System LSI will grow its business by reinforcing its lineup of SOCs, including models targeting the 5G volume zone. And Foundry aims to outpace market growth by extending our technology leadership with mass production of the first-generation GAA process, along with increasing supply to global customers. For display, in the mobile panel business, we expect demand for OLED to continue to increase based on rising penetration of 5G and growth of the foldable market. And we will further strengthen the foundation for stable growth by expanding OLED into new application areas as well. The large panel business will work to secure technology leadership in the premium segment with QD display while it closes the LCD lines as planned. The MX business targets increasing market share by concentrating on innovations in flagship products, further differentiating user experiences, and also expanding our mass market 5G smartphone lineup. Moreover, we will seek to grow sales of device ecosystem products by enhancing the value delivered to customers. For network, we will focus on capturing 5G network demand and winning new global customers. all as we continue to further strengthen our technologies, including custom development of core 5G chips. For CE businesses, we will further solidify our market leadership and pursue growth by continuing to expand sales of premium product lines, such as Neo QLED and Bespoke, and by diversifying the overall lineup with lifestyle and new home appliance products. Next, I would like to share some of our key activities and achievements in sustainability management. At the CES keynote address on January 4th, we outlined our eco-friendly initiatives for a sustainable future. We believe that consumers and companies together can contribute to a better future by embracing sustainable products. To this end, we unveiled a range of ambitious eco-friendly activities. For example, in manufacturing displays, including for TVs, we are using 30 times more recycled plastic this year than we did last year. And we are moving toward incorporating recycled materials in all mobile products and home appliances by 2025. In addition, our company ranked fourth in the digital inclusion benchmark as announced in December by the World Benchmarking Alliance, a global alliance dedicated to sustainability management. We earned this accolade thanks to our strong support for the technology innovation ecosystem through C-Lab Outside, an initiative aimed at nurturing startups in Korea, as well as disclosing our AI ethics principles centering on equity, transparency, and responsibility. Furthermore, we participated in a pilot project organized by Korea's Ministry of Environment to reduce worksite waste. And on December 31st, our Jihun campus received top honors for its efforts, which included strengthening recycling programs and offices, establishing a standard for minimizing the packaging for raw and semi-processed materials, and expanding recycling of waste materials. Our work in this area demonstrates our commitment to creating environmental and social value in addition to achieving growth. And we will continue to strengthen our ESG management by fulfilling our social responsibility as a leading global company. Let me now move on to capital expenditures. The annual capex for 2021 was 48.2 trillion won. with $43.6 trillion invested in semiconductor and $2.6 trillion in display. By business, memory concentrated its investments on capacity expansions and process migrations at fabs in Pyeongtaek and Xi'an to address demand for advanced nodes, including EUV-based 15-nanometer DRAM and six-generation VNAND, as well as on infrastructure at P3. Investments in memory increased year on year as we are at the lead of an inflection point in technology and are thus preemptively investing in application of next-generation technologies such as EUV. We are executing the investments with a focus on technology leadership, and as a result, we can maintain an efficient investment level when considering our bid share from a mid- to long-term perspective. For Foundry, Investments concentrated on capacity expansions for advanced 5-nanometer EUV nodes in Pyeongtaek. Display investments centered on mobile modules and QD display. Finally, let me address the shareholder return. The Board of Directors today approved a quarterly dividend of $361 per share for common stock, and 362 won per share for preferred stock. The total payout for the fourth quarter is approximately 2.45 trillion won, which is in line with the totals in 2021's previous quarters. This represents one-fourth of the annual total of 9.8 trillion won in accordance with the current shareholder return policy. The dividend will be paid after final approval at the annual general meeting of shareholders. When we announced the current three-year shareholder return policy in January of last year, we said that we will disclose the annual free cash flow each year to enhance clarity on the shareholder return pool. And if 50 percent of the free cash flow significantly exceeds the annual dividend, we would consider an earlier return. The total free cash flow for 2021 was 19.6 trillion won, 50 percent of which is approximately 9.8 trillion won. Considering the annual projected annual dividend for 2021 is also 9.8 trillion won, there was no additional pull for an earlier return. While we achieved solid results in 2021, as I mentioned earlier, we required a considerable amount of capex to accelerate migration to next generation technologies in memory and to secure competitiveness in foundry. And there were also impacts of increased working capital, such as a need to secure additional inventory amid uncertainties of component supply. Although we did not generate a surplus in 2021, we believe our efforts will lead to significant future growth and contribute to increasing shareholder value. In 2022, we will once again step up our efforts to improve our performance by extending our product and technology leadership, increasing cost competitiveness, and improving profitability while also enhancing capital management efficiency. I will now turn the conference call over to the gentlemen from each business unit to present fourth 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 Memory Global Sales and Marketing Office. The fourth quarter, memory demand centered on server remained solid, but our performance declined somewhat compared to the previous quarter due to a continuation of global supply chain issues, a slight drop in ASP, and payment of a one-off special incentive. We came in below initial bid growth guidance as we refrained from making excessive bid shipments in consideration of our limited inventory conditions and also the market outlook. In DRAM, impacts on set bill from global supply chain issues differed by degree but were felt throughout all applications. The server, however, remained strong thanks to an increase in DRAM content per box and increased adoption of high-core CPUs amid a continuation of solid-end demand. For graphics, graphics card supply shortage remained as demand stayed robust backed by strong demand for gaming PCs along with rising demand for cryptomining. PC and mobile have felt relatively more effects of said build disruptions caused by component supply issues. For PC, consumers continue their tendency to adjust inventory. In mobile, major smartphone manufacturers released new 5G models, but concurrent risk, such as the spread of a COVID variant, impacted memory demand to some extent. Based on preemptive product mix adjustment, We actively address an increase in server and graphics demand. And to enhance competitiveness, we continue to increase our cutting-edge portion of processes. Even so, we are below big growth guidance as we try to optimize supply plan, considering our inventory condition and market outlook. Next, I will talk about the NAND market. For Server SSD, fundamental demand from major data center customers was robust. but there were some market effects related to disruptions in the IC component supply chain. Demand for client SSD was somewhat stagnant because of inventory adjustment by some customers and set bill disruptions caused by component supply issues. In the case of mobile, supply and demand of APs were disrupted, and memory demand fell slightly. But the high-density trend continued thanks to impacts of peak end-year seasonality. We focused on optimizing sales, such as reducing wafer shipments, as well as strengthening high-value solution businesses in consideration of our inventory situation, while identifying impacts on production caused by changes in line operation due to the lockdown in Xi'an. In addition, we continue to strengthen our competitiveness By increasing our cutting-edge portion of processes and by expanding the server business, we are actively addressing growth in high-end, high-capacity demand. Now let me share the outlook for the fourth quarter. In the case of DRAM, some uncertainties are likely to persist, but we expect issues related to component supply and demand to dissipate gradually. And we are seeing signs of improvements and set bills mainly by server and PC. For server, we expect demand to remain strong thanks to the high density trend alongside increasing investment centering on data centers, while the high core CPU portion continues to increase. As demand for PC improves, mainly for corporate-oriented high-end laptops, demand will increase for cutting-edge products such as DDR5, And as some customers complete inventory adjustment, we think impacts of flow seasonality will partially ease. For mobile, we expect the demand base to be reasonably solid as major manufacturers launch products based on new form factors and increase the portion of LPDDR5. However, risks such as operation restrictions at some production sites due to the spread of COVID variant, need to be carefully monitored. We will keep working to maximize the quality of our business portfolio by selling products of our cutting-edge node and expanding sales of high-value products while actively addressing customer demand from overall applications. In the end, for server SSD, we expect demand for server builds to be robust thanks to continuing investment in many data centers we should keep an eye on corporate demand along with the spread of COVID variants. In the PC market, we think build demand will recover mainly for laptops along with gradual improvements in component supply issues. And for mobile, despite being amid slow seasonality, we expect a high density trend for storage to persist as manufacturers launch new 5G models. We plan to minimize risk of supply disruptions by securing a diverse product portfolio centered on high-value products while returning to normal production operation after the lockdown in Xi'an being lifted. Now let's move on to the full-year outlook. Under the risk of demand fluctuations, such as ones related to the pace of mitigation of component supply constraints, as well as chances of prolonged effects of a COVID-19 variant, We ask for your understanding in that it is difficult to provide specific annual bid growth guidance. Therefore, I'd like to share a view of the market situation for each application. First, for server, DM content per box is projected to keep rising thanks to the adoption of new CPUs supporting DDR5 and the expansion of AI-oriented servers centered on data centers. In addition, Coupled with the expansion of investment by major companies, set-bill demand deferred by last year's component issues should lead to solid set-bill growth. On the other hand, for PCs, we need to monitor detailed impacts on demand as a delayed return to daily life triggered by a new variant would impact demand from contactless services such as education, gaming, and others. A median expected increase in replacement demand and content per box due to the spread of a new OS. For mobile, with the resumption of 5G infrastructure investment by countries and strengthening of 5G lineups by manufacturers, content per box is likely to keep rising, focusing on major manufacturers. And set shipments centering on low to mid-price models are also anticipated to rise amid growth in emerging markets. Based on preemptively managing our product mix to align with market conditions, we will proactively address market demand by expanding our supply portion of high-performance products such as HPVM for graphic and cutting-edge interfaces like DDR5 and LPDDR5. Based on high value solution-oriented portfolio management and our industry-leading EUV capabilities, we will focus on qualitative growth through stable, continual cost reductions and strengthened market leadership.

Good morning. This is Kenny Han from the System at SI business. In the fourth quarter last year, we reached a record high for quarterly revenue, driven by an increase in demand for SOCs, DDIs, and PMICs as major mobile customers launched it new flagship products. However, operating profits sold slightly due to the influence of spatial bonuses. To improve our performance even further in the coming quarter, we have started supply of our flagship 4 nanometer SoC, featuring an AMD GPU for the first time, as well as related products. In addition, our 108 megapixel image sensors have been increasingly selected by our customers for adoption in their upcoming major models. In the first quarter of this year, effects of year-end weak seasonality for the mobile industry and inventory adjustment by Chinese companies are likely to continue. But demand for OLED DDI, NFC, ESC, and PMIC products is expected to stay strong. As major customers launch flagship smartphones, we plan to focus on expanding supply of SoCs with significantly improved GPU, NPU capabilities, as well as ultra-high resolution image sensors. In 2022, by maximizing supply of volume-drawn 5G SoCs and technically leading 108 and 200 megapixel sensors, we expect revenue growth to accelerate year-on-year while profitability should rise on the back of price adjustment. Thank you.

Moon Soo Kang Good morning. This is Moon Soo Kang from the Foundry Business. In the fourth quarter, we outpaced industry growth and set a new high for Q4 revenue. In particular, we continue to increase sales to large-scale HPC customers and also establish the base for future growth by securing orders from new large customers in HPC applications. In addition, we work to improve our response to customer demand with efforts to stabilize the global supply chain, confirming new PEP investments in Taylor USA and in Korea. However, there were also headwinds as we are unable to fully satisfy customer demand amid the supply disruption, and profitability fell slightly due to delay in ramping our advanced nodes. In the first quarter of 2022, we expect the industry to remain in tight supply across all nodes, and our advanced node portion, which increased significantly from Q4, to keep rising. Given this, We will focus on improving yield in advanced process nodes to enhance our supply stability and profitability. To strengthen our technology leadership, we will complete the qualification of first-generation GAA process 3GAE for mass production in the first half of this year, and we will continue to develop the second-generation GAA process 3GAP as scheduled. For the Foundry market in 2022, we expect supply to remain tight due to rapid penetration of 5G technology, solid HPC demand, growing outsourcing by IDMs, and a need to build up safety inventory amid prolonged pandemic. We will continue our technology leadership through mass production of the 3GAE process in the first half And we aim to exceed market growth on a full year basis by expanding capacity of advanced nodes, normalizing prices to ensure future investment, and adding new customers to our global client base. Thank you.

Good morning. I'm from the business planning department at Samsung Display. In the fourth quarter, the mobile display business sustained upward trend in earnings following the previous quarter backed by robust sales of smartphones with the OLED displays, which are now mainstream in the premium segment, and also by the competitiveness and stability of Samsung Display's supply chain management. In addition to smartphones, sales and revenues of products for notebook PCs and gaming increased deeply, quarter on quarter, contributing to our earnings growth. Meanwhile, in the large display business, we have successfully mass produced and delivered our QD displays for TVs and monitors, which have garnered positive reviews from our customers. Next, let me share the outlook for the first quarter of 2022. For the mobile display business, we project that release of our new products by major customers and increasing adoption of flexible displays will mitigate with effects of weak seasonality. However, given persistent supply issues for some components, concerns linger over potential short supply of certain products, such as DDIs. For the large display business, were the QD display TVs And monitors, having made their official market debut, we expect losses to narrow gradually. Finally, I will share our outlook for the display market in Samsung Display's core strategies for 2022. For the mobile display business, despite projected macro risks such as ones related to fat tapering, as well as the Omicron variant of COVID-19, we expect adoption of OLED displays to keep expanding this year, driven by rising penetration of 5G smartphones and the growth of portable display markets. Such market trends should create a favorable business environment for Samsung displays. As for the IT market, we expect growth to slow compared to last year, and rising sales in the premium segment are likely to accelerate penetration of OLED displays. We plan to strike a balance in the mobile display business structure with both flexible and rigid OLED. To that end, we plan to expand adoption of flexible OAD to more than just high-end devices by providing its astounding technological capabilities to the mid-range segments as well. We'll also diversify application for rigid OAD ranging from IT to gaming to automotive based on our unrivaled production capacity, and cost competitiveness. For the large display business, we expect ultra-large displays and differentiated products to drive solid demand for premium TVs. And we'll focus on securing leadership in the premium TV and monitor segments through QD displays. Thank you.

Good morning. This is Sung-Guk Kim from the MX business. I would like to discuss the Q4 2021 results and outlook for the MX and network business. In Q4 2021, the market grew compared to the previous quarter due to year-end seasonality. As for the MX business, despite the component supply shortage, revenue increased slightly QOQ. In particular, in the new market that we created with an innovative form factor, our foldable G-Series models, G-Fold 3 and G-Flip 3, have garnered positive feedback for their enhanced design, durability, and user experience that are tailored to foldable. This contributed to increased sales, and we believe foldables are smoothly entering the mainstream. Also, the Galaxy S series maintained sales momentum thanks to active marketing and even further enhanced user experience with the new One UI 4.0. Accordingly, our premium smartphone sales increased QoQ. Solid sales of our device ecosystem products, including PCs, tablets, and wearable devices with their enhanced and seamless connected experience also contributed to the performance. In the meantime, investments in active marketing to mainstream foldables and preparations to launch new models in Q1 2022 affected profitability to some degree. The network business improved its performance compared to the previous quarter, driven by the growth of domestic and overseas business. Now let me give you the outlook for Q1 2022. Demand for smartphone and tablets is expected to decrease due to seasonality as well as uncertainty surrounding component supply. In our MX business, we will strive to expand the customer base for our flagship products by fulfilling customer needs with the Galaxy S21 FE, which preserves core user experience of Galaxy S21 and comes in a diverse range of color options or at an affordable price. Also, a new Galaxy S series model featuring the best Galaxy performance and experience will enhance customer retention of our premium products. In turn, this will lift the standard for flagship products even higher and contribute to increased sales of our flagship smartphones as well as an increase in overall smartphone ASP. Also, our competitive 5G lineup for the mass market will act as a volume driver by addressing replacement demand and thus actively seize growth opportunities in the market. In addition, we will continue to focus on increasing sales of our device ecosystem products, such as wearables, PCs, and tablets, by actively promoting the enhanced competitiveness and seamless connected experience across the product line. With these efforts, We will strive to secure solid profitability in Q1 2022 amid an unstable component supply situation. The network business aims to secure additional new contracts in the global markets, including from Europe. Next, let me provide an outlook for 2022. Despite current uncertainties, including prolonged pandemic and component supply issues, We expect the smartphone market to continue to grow in 2022, following substantial growth in 2021, while the wearable market is projected to see strong double-digit growth. In our MX business, we will continue to pursue user experience-driven innovation to solidify leadership in the flagship market. We will also strengthen the tailored experience of each product, including the ultimate flagship experience with the Galaxy S series and optimized Galaxy G series experience to cater to various lifestyles and needs of our customers. In the mass market, we will not only strengthen our 5G lineup, but also expand the application of our convenient and differentiated experience and enhance product completeness. With these efforts, we aim to increase our smartphone market share. Also, We will keep enhancing customer value by continually adding to our differentiated user experience, which includes consistent and convenient connected experience across devices in our device ecosystem, and by further strengthening product competitiveness. Furthermore, we will expand such convenient connected experience beyond MX products to TVs and home appliances to enrich the value that our customer experience in daily lives. By doing so, we will strive to achieve material growth in 2022 and bolster profitability with an improved product mix and enhanced operational efficiency. The network business will focus on actively expanding its overseas business while also responding to extension of the 5G network in the domestic market. Also, we will thoroughly prepare for the future with continual efforts to strengthen our technology and competitiveness, including our own 5G chipset. Thank you for your attention.

Good morning. I'm SD Chung from the SageM marketing team of Digital Appliances, and I will address business conditions of three businesses. First, I would like to review the market condition and our performance in the first quarter of 2021. The TV market grew Coro on Coro amid fixed minority, but decreased compared to the previous year when it was affected by its strong pent-up demand. By working closely with the channel partner in advance, Samsung preemptively targets seasonal demand starting at end of October. and expanded sales mainly of high-value products, such as Neo QLED models and lifestyle screens. However, operating profit decreased slightly, due to cost pressures such as global logistics issues. For digital appliance in the fourth quarter, market growth slowed due to diminishing impact of the pent-up demand, and material and logistic costs stayed on an uptrend seen in the previous quarter. Samsung actively addressed various consumer needs, and we improved our mix via increasing sales with a focus on premium products, such as bespoke and new category products. In addition, through improving our operation efficiency and reducing costs, we achieved better results compared to the previous quarter despite numerous risks in the external environment. Now, let us look at the outlook for the first quarter of 2022 and 2022 as a whole. We expect the overall TV market in Q1 to decrease quarter-on-quarter following the year-end peak season and also coming lower compared to the same period last year. when it was affected by a continuation of a strong effect of pent-up demand, mainly advanced markets. We plan to push the expand phase by capturing demand, mainly for premium products, by actively leveraging a number of promotional opportunities, such as those associated with major sporting events. Furthermore, we will lead the market by strengthening sales in the life-size queen category, including the freestyle, which was released in CES this year and improved our results. For this time of price in the first quarter, we expect demand for home appliances to decline slightly year-on-year. Also, we expect to continue to feel the effect of increases in logistics and material costs We will target the premium market more aggressively by expanding the Bitstoco lineup mainly in advanced markets such as North America and Europe. Also, we plan to expand SAGE by providing our customers with a differentiated experience, offering significantly expanded consumer contact points both online and offline. In addition, we will secure profitability by continuing to improve our cost efficiency throughout our operations. Regarding the TV market in 2022, we expect market uncertainties to consist, including those triggered by COVID-19 and external issues involving supply and logistics. However, We also expect demands to keep rising for premium and super-big TVs. Samsung will focus on targeting demand for an increasing stage of innovative, premium products, including our next-gen micro-LED and Neo QLED models. At the same time, we will strengthen our sales of lifestyle screens, our own differentiated product line, and expand the TV accessory ecosystem while also providing differentiated user experience and creating new demand through various services and startups, which is optimized for in-home activities like media and gaming. In the digital appliance market in 2022, market growth of home appliances will probably be sluggish year on year, but we expect to see demand edge up for the new category products that reflect changing lifestyle trends and also slight demand growth in emerging markets. We will continue to grow by strengthening global sales via expanding the areas we offer with differentiated bespoke products, also by expanding lineups by region. And to reach the market, we will keep launching new category products that reflect the change in consumer needs. Furthermore, by expanding use of modular products and thus increasing productivity, we will enhance operational efficiency and also secure supply continuity to preemptively manage future external risks. Thank you.

That sums up the fourth quarter results presentations. Before we move on to the Q&A session, I would like to share several data points in key business areas. Considering the heightened macro uncertainties, we will not be providing annual guidance at this time. In the fourth quarter for DRAM, our bid growth decreased by a percentage in the mid single digits, and ASP declined by a similar magnitude. In the first quarter of 2022, we expect market bid growth to fall by low single-digit percentage, and we should be similar to the market. For NAND, in the fourth quarter, both our bid growth and ASP declined in the low single-digit percentage range. For the first quarter of 2022, we expect market bid growth to decrease by a low single digit, and our bid growth should slightly outperform the market. In the display business, in the fourth quarter, Our OLED portion of sales was in the high 90% range, and OLED sales volume grew by a low single-digit percentage. Turning to wireless, sales volume in the fourth quarter was approximately 72 million units for handsets and 7 million units for tablets, with a blended ASP of 253 US dollars. The smartphone portion of handset sales volume was in the mid-90% range. For the first quarter of 2022, we expect to see sequential increases in handset and tablet sales volume, as well as in blended ASP. The smartphone portion of handset sales should stay similar in the mid-90s. In the TV business in the fourth quarter of 2021, sales volume grew by a percentage approaching the mid-teens And in this quarter, we expect sales volume to decline by a low single-digit percentage. With that, I will now move on to the Q&A session. First, we will start taking questions from the conference call.

질문을 하실 분은 전화기 버튼의 별표와 1번을 눌러주시기 바랍니다. 질문을 취소하시려면 별표와 2번을 눌러주시면 됩니다. Now Q&A session will begin. Please press Start 1, that is Start 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 your phone. The first question will be presented by J.J. Park from J.P. Morgan. Please go ahead with your question.

Yes, thank you for the opportunity to ask a question. There are two questions. You said that memory capex has increased last year. I would appreciate it if you could tell us how DRAM and NAND portions have changed. I would like to ask for the overall memory and semiconductor capex guidance. The second is related to the shareholder return. Last year, I paid about half of the free cash flow dividend, so I don't think there was any remittance, but the net income is now over 100 trillion won, so I wonder if the shareholder return is a little upside. It's not last year, but when I saw this year, I have two questions.

The first question is about the memory capex. You said that the memory capex last year increased. Can you give us that divided into the NAND versus the DRAM related capex spending last year? Also, can you give us some guidance for capex memory this year? Second question is about the shareholder return. During the presentation, you mentioned that 50% of the free cash flow for last year is roughly the same as the distributable profits for this year, and therefore there would not be any additional pool of funds available for shareholder return. But I also noticed that the company does have on hand more than 100 trillion won of net cash. And so maybe not last year, but perhaps this year, can we expect any upside on the shareholder return? Is the company considering its net cash size when it decides shareholder return for this year?

Yes, I will answer the investment-related question. Our 21-year memory investment amount has been closed due to an increase of 20 years. The specific breakdown is difficult, but the overall investment of D-Land and NAND was a bit high.

To answer your first question about the memory capex, I guess as we mentioned, the overall memory capex in 2021 did increase year over year. It's difficult to give you the breakdown between DRAM and NAN. But overall, there was an increase in the facility equipment-related capex spending.

The increase in the investment in the facility equipment-related capex spending. It was the main reason why we were forced to invest in next-generation technologies such as EUV. And this is in line with our existing plan, which we said we would connect with Sihwang and invest in resilient facilities.

To explain the reasons why there was an increase in capex, mainly it's explained by how we have expanded our advanced node-related equipment and also invested more in the node migration in order to respond to the increasing demand that was above what was expected during the start of last year. Also, another main reason for our CapEx is our preemptive investments that we're making in next-generation technologies such as EUV as we go through a technology inflection point. But this all is consistent with our CapEx policy of executing CapEx equipment investments flexibly in line with the market situation.

The supply of big growth is in line with the market demand. We pursue big growth based on technology that leads the industry, but from a medium-term point of view, our investment is maintained at a low level even when considering the size of the debt.

And so we believe that the supply BIT growth that we are achieving is in line with the market demand levels because we execute flexibly our equipment-related investments. We do pursue BIT growth around the leading technology nodes, and I think that is why compared to at least the BIT share that we have, our investment size in a mid- to long-term perspective is not high.

In terms of investment in 2022, there are still various uncertainties, so we are still considering specific investment plans. However, we will continue to maintain existing investment standards and proceed through the optimization of investment and productivity. And there is an issue with the part supply network, and there is a trend that our equipment half-life is longer than the previous schedule, You've also asked for some guidance for CapEx this year.

Actually, given the various uncertainties, we are still actually discussing specific investment plans for this year. But our basic approach is that we will tap both investments and productivity improvements in order to generate the bid growth this year. Also, as we prepare the planning and execution of our investment plans, we are aware that there is a tendency of equipment delivery lead times getting longer due to the supply chain issue.

The second question is from IR.

Last year, when we announced the three-year policy from 2021 to 2023,

global uncertainty and the prospect of an increase in cash demand have been taken into account to establish a policy. And now, a year has passed since then, and when we look at the situation, the global uncertainty has been increased even more than we thought, and the cash demand has increased as expected, and although there was an improvement in performance last year,

To answer your second question, when the three-year shareholder return policy that was announced early last year covering periods of 2021 to 2023 actually took into account the global uncertainties and the expected increase of cash needs for the companies, Now, looking back at the past one year, the global uncertainty actually was more aggravated than we had anticipated, and cash needs increased as expected. And so even though last year the business results improved, our net cash position has stayed almost the same.

And because we are operating the highest level of global production network in the IT industry,

On the other hand, as you know, we operate the largest and the highest level of global

production network in the IT industry, which requires a large scale of operating capital. Last year, we also went through some unexpected production disruptions in Austin and the Xi'an fabs. Also, we always need to keep the capabilities to execute inorganic growth opportunities in order to maintain consistent growth.

So when you consider all of these issues,

So considering all of those factors, a company believes it is not appropriate at this point to bring any major changes to its shareholder return policy

given the fact that conservative cash operation is necessary. Now, that said, raising the efficiency of its capital management is something that the company continues to focus on.

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

Yes, hello. Thank you for the question. I have one question for the memory side and the home appliances side. First of all, memory is an issue related to the restriction of clean rooms. This year, it is expected that there will be a space restriction on the D-RAM side, especially on the clean room space. Considering the current low stock level, then the output of D-RAM? In terms of the output, There is a possibility that the growth rate of the market and competitors this year will be lowered. There was a change in the management at the end of the year, but if you have any opinions about this part of the company and a response strategy, please share it. In terms of home appliances, it is an issue related to price increase. Recently, there seems to be a lot of pressure on the price side due to the issue of raw materials and logistics costs. My first question is about the DRAM cleanroom space.

Looking at the information, you may actually have a limited cleanroom space for your DRAM this year. Also, your inventory levels are relatively low. This may imply that you may actually, in terms of this growth, underperform the market or your competitors on the DRAM side. There was a change of management at the end of last year. Considering all of that, can you share your opinion regarding the clean room space limitations and how you plan to respond to that? Second question is about the CE business. There is overall cost-increasing factors, including raw material prices and logistics costs increasing. First of all, can you share from the company's perspective until when do you think the situation will continue? What will be the implications to your CE business, and how do you plan to respond?

Yes, I'll give you an answer related to Climloom. This is one of the important investment strategies of our memory business. Clean room is one of the important investment strategies of our memory business. Clean room is one of the important investment strategies of our memory business. Clean room is one of the important investment strategies of our memory business. Clean room is one of the important investment strategies of our memory business. Clean room is one of the important investment strategies of our memory business. Clean room is one of the important investment strategies of our memory business. I think there won't be a big problem.

Thank you. To answer your first question about the clean room, of course securing enough clean room in order to meet the demand growth in the market is one of the key critical investment strategies for the memory division. Clean rooms, it's actually a quite large investment and many factors need to be considered. So deciding a clean room investment is a decision that should be made based on a midterm, at least a three to four year horizon perspective. Looking towards this year, at the current levels, we do not expect any major problems in meeting the demand that's expected in the market this year.

In terms of raw materials, we will answer the question in terms of the current process. The current increase in raw materials is due to the high demand for raw materials, and due to the changes such as obiturons, there is a lack of cutting-edge production. Well, to answer your question about the heightened cost base for the consumer electronics business, of course, there are many reasons that are driving the elevated level of raw material and logistic prices.

large demand for logistics, but there is a shortage of workers to man the ships and the ports, and there is overall inflation driving an upward trend of raw material prices. As we mentioned during the presentation, the company does expect this heightened level of raw material and logistics cost risk to continue throughout this year.

We are closely monitoring the productivity of each production point. Through this, we will increase the efficiency of local production, improve operation, etc., and promote overall supply productivity. In addition, we will expand the sales of premium products including bespoke in the sales team, and continue to introduce new models such as new appliances, leading the market change,

In response to this assumption of heightened risk, first of all, we are thoroughly analyzing the situation of each of our key manufacturing hubs in order to improve the overall supply competitiveness by increasing the production efficiency for each region and also executing overall operational improvements. Also, we are preparing to respond to this on the sales side by accelerating revenue growth through the increased sales of premium products such as Bespoke and continuously launching new models.

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

Hello, I'm Lee Se-cheol from Citigroup. I'd like to ask a question about memory and mobile. First, I'd like to ask a question about memory. Despite the high demand for memory, the output of Samsung Electronics' memory in the fourth quarter was lower than that of Guidance and D-Land. I'm curious about the background of this. Considering the situation in the second quarter last year, it seems to be very unusual. Do you have any opinions on the possibility of a strategic change in the company with the replacement of the end-of-year management team? The second is the mobile side. In the recent market, we have a lot of interest in the future of the smartphone market in 2022. I'm curious about the future of Samsung Electronics' smartphone demand this year. And this year, Samsung Electronics' smartphone sales My first question is about the memory side.

Even though overall memory demand was quite solid last year, fourth quarter we noticed that both your DRAM and NAND shipments actually performed under the guidance and competitors. Can you give us some explanation as to why this happened, which appears to be quite unusual, especially given the Given where the market and you were in the second quarter of last year, we do notice that the company's management was changed at the end of the year. Is this an implication of any strategy change on the part of the company? Second question is about the mobile side. From the market, we're all wondering what the exact demand would look like for smartphones in year 22. Can you share with us your demand outlook for smartphones this year? And do you expect to increase your market share by outgrowing the market again?

In the fourth quarter, we will talk about the loss of memory and guidance. In the fourth quarter, the server-centered demand has continued. However, the global supply chain issue is longer than expected, and there is a difference in the number of customers, but there was a difference in the production of the set. To answer your question of why our bid growth was below market in fourth quarter, as you mentioned, yes, in fourth quarter,

Demand was solid, but especially around the servers. On the other side, there were some downstream production disruptions due to the global supply chain issue, even though the degree of the disruption varies depending on the customer. And this did have an impact on memory demand in the fourth quarter. Seeing that, we also considered that our inventory levels were not at high levels. We also wanted to prepare against any production impact due to the Xi'an lockdowns. And so we actually refrained from any aggressive sales in the fourth quarter, and this was the main reason why our bid growth was below guidance in the fourth quarter.

Yes, our strategy is based on understanding the changes in market quality rather than other reasons. The memory market is becoming more and more uncertain, and as variables survive, The product line-up is also changing. We decided that the ability to supply products that customers need based on the best product mix in this market is the most important. From a long-term perspective, I think you should understand that we made a strategic choice to provide stable supply to customers.

Now, the reason why we made that decision was because of our insight into a change in the nature of the market that has been happening recently. We do notice that the memory market actually is becoming more diversified. The product lineup is much more diversified before. And given the wide diversity of product lineup, we thought that most critical capability was the ability to supply the products that the customer needs based on having an optimized product mix. And so I think the reason, I think the best way of understanding what happened in fourth quarter was that it was our strategic choice in order for us to be able to supply the products that the customer needs stably from a long-term perspective.

Yes, I'll tell you about MX. Following the 21st year of the smartphone market, the foldable trend and and will continue to grow with 5G. Our flagship is the foldable G series, which strengthens the experience and differentiation of each party. It will capture the hearts of not only super premium users, but also the MZ generation, women, and competitors, maximizing user base, retaining existing customers through the new S series model, and using S21 FE to expand the premium customer base

To answer your question about the smartphones, first, our outlook for the smartphone market this year is that it will continue the growing trend continuing from last year, main drivers being the mainstreaming of foldable phones and also the wider penetration of 5G mobile phones. Our strategy at the flagship level is to continue to expand the sales of flagships and to improve our product mix by, first of all, maximizing the user base through our foldable Z series, which has been attracting not only the premium, super premium users, but the MZ generation of females, as well as the customers of the competitors. Also, a part of our flagship strategy would be the S series, the new model of the S series, which will contribute to retention of existing customers and also to further widen the premium customer base through the S21FE.

And the MES model builds a 5G full line-up to actively absorb the global MES 5G replacement demand and continue to strengthen the user's valuable core experience to create a global mega-hit model and create a firm foundation for a firm foundation for a firm foundation

Our strategy on the mass tier will be to actively absorb the mass tier 5G replacement demand globally by preparing a wider 5G full lineup and also to continue to produce global mega-hit models in the mass tier that provide core user experiences that the users appreciate. Therefore, we will use the mass tier models to become clear volume drivers that can respond preemptively to mass tier brands. By these two strategies, we plan to not only increase our entire market share in the smartphone market this year, but also further increase the leadership we have in the premium markets.

Thank you for your answer.

I'll take the next question. The next question will be presented by Do Hyun Choi from Shinhan Investment. Please go ahead with your question.

Yes, hello. I'm Choi Do Hyun. Thank you so much for the opportunity to ask me a question. I'll ask you a question about MX. Last year, the market reaction of the foldable products that were released I have a question for the mobile, the MX division.

Last year, you successfully mainstreamed the foldable form factor, received strong response from the market. but you also have the Galaxy series. And so combining the two, can you share with us your overall strategy in the flagship this year?

In order to increase the value of flagship products based on customer value, we plan to focus more on user experience enhancement through software, service, and ecosystem enhancement as well as the highest-level hardware. In addition, in order to satisfy the lifestyle and needs of various consumers, The S-series is the best flagship experience. The foldable G-series is the foldable optimization experience. We want to strengthen the experience of differentiating products, and provide a differentiating and innovative experience that suits the actual value of consumers. And we will reorganize the marketing strategy based on customer experience and strengthen long-term marketing activities to increase brand visibility and increase flagship sales by raising the premium brand position.

To answer your question, actually the key point of our flagship tier, premium tier strategy would be to further concentrate on strengthening our user experience. This will enhance the value of the flagship product by providing not only the best hardware but also software services and ecosystem. Also, therefore, we will further enhance the differentiated experience for each of our premium products. For example, S-Series providing the best flagship experience, Z-Series providing the optimized foldable experience in order to satisfy the diverse lifestyles and needs of the consumers. Also, we will be refocusing our marketing strategy around customer experience and also continue a full-year brand marketing campaign to make the brand more aspired and strengthen the premium brand position to maximize our flagship sales volume.

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 on memory and display. First of all, it is related to the price of DRAM. After the rebound of the first quarter last year, the price of DRAM seems to be expecting a big rebound in the future as it falls within three quarters. On the other hand, it seems that there is a view that the possibility of a rebound in the price of DRAM in the second half of the year is low. From the point of view of Samsung Electronics, which is the leading company in this regard, I would like to ask if you think that the opinion on the price of DRAM and the recent shortening of the DRAM cycle cycle will continue in the future. Next is related to the QD display. As you said in the speech, I am curious about the reactions of QD display customers who are preparing to launch. I would like to know the current technical level My first question is about the DRAM prices.

After DRAM price being increased in first quarter, it's now back to a downward trend in three quarters time. There are different views as to where it will go further. Some are expecting that DRAM prices will upturn again shortly. Others are saying it's not likely the prices to improve in the second half of this year. As a leader in this segment, what is your outlook on DRAM movement going forward? Also, it appears that the cycle itself is getting shorter. Do you think the cycle will stay this way in the future? My second question is about the QD display. I'm hearing that the customers have received the QD display supply. Can you share with us your customers' response to the QD display? And also, can you share with us some details about where you think your technology level is and how you compare in terms of cost competitiveness?

Yes, I'd like to talk about the market outlook. First of all, this year, the speed of slowdown in parts collection issues and the price of raw materials is rising, and there is a high risk factor. However, the size of high-core CPUs is expanding, and new CPUs that support DDR5 are being released, and due to the increase in investment in major IT companies, the fundamental demand for servers is expected to continue to increase. Also, since 5G is continuously expanding,

To answer your question about the market outlook, of course there are still various variables that could impact supply and demand this year, including at what pace the parts supply issue will be eased, the possibility of additional increase in raw materials, and various geopolitical risks. But looking at the market, there are many factors that support a strong demand side. For example, there will be increased adoption of high-core CPUs, launch of new CPU that supports DDR5, and also expected increase of IT investment by major companies. So this supports the view that there will be fundamental strong demand, especially around servers. Also, if we look at the mobile side, demand is expected to remain solid given the likely penetration of 5G and also the adoption of new form factors by the major mobile OEMs.

And if you look at the supply side, the lead time of the equipment in the entire industry is getting longer. There is a degree of difficulty in changing the process and maintaining investment efficiency. So, because the difficulty of product mix availability is increasing,

Now on the supply side, there is definitely the lead time for the equipment overall in the industry is getting longer. Also, it's becoming more and more challenging to maintain the node migration and investment efficiency. And so given that, I think it is much more important ever than before to maintain the ability to respond to customer demand

in a timely manner by maintaining the right product mix. Regarding price, of course, it's difficult for us to also predict price at this point.

But we also noticed, as you mentioned, a clear tendency of the memory market cycle height and also the length getting shorter than before. Also, considering that our inventory remains to be at fair levels, these are all signs that indicate a possible stabilizing of the market. Also, recently, a third-party agency did announce its view that the market may actually change direction during the first half, and so we are adding this as one of the possible scenarios.

Yes, I will answer your question. As you asked, I know that there are expectations and concerns about the QD display in the market. However, as it has already been published in the media, STC has begun to develop the QD display in the fourth quarter of this year and has successfully delivered it to customers, and we expect that the number of orders will continue to increase according to the operating rate. As you asked, first of all, the reaction of customers is that uh uh uh uh uh uh uh uh We'll see you next time.

To answer your question about the QD display, yes, we have heard that the market has high expectations, but also some concerns about the QD display. We started mass production of the QD display fourth quarter last year and have made deliveries to the customers. The customer response is that the QD display has definitely advantages compared to competing products. We are currently working with customers to have TVs and monitors using the QD display be positioned in the higher end of the premium product lineup. We believe that as our utilization improves, we would also be able to increase the shipments of our QD display. We believe that the QD display definitely will take position as a premium display. And we believe that as we are able to increase our shipments with improving utilization towards the end of this year, we will be able to see an increase in demand, especially around the premium products. by offering QD as a way of differentiating the performance in the ultra-large size TV and monitor market.

The next question will be presented by Won-sik Lee from Korea Investment and Securities. Please go ahead with your question.

Thank you for the opportunity to ask a question. I will ask a question on the Foundry side and the display side. First of all, the Foundry part is constantly raising the demand for our 4nm and 5nm pre-installed processes. Please tell us about the current demand for these processes and future demand improvement plans. The next display part is the competition between our medium-sized plastic OLED market companies. In the midst of this competition between companies, My first question is about the foundry.

There is continuous noise regarding your foundry low yield in the advanced nodes. Can you give us an update of the yield and how you plan to address this? Second question is about the flexible oil ED market in the small and mid-sized flexible oil ED market competition is becoming more intense, how do you plan to respond to this?

Yes, I will answer the first question from the Foundry. The company is maintaining technology leadership by conducting unprecedented investment and development to meet the global demand for cutting-edge processes. However, it is also true that the difficulty of obtaining early stable demand by narrowing the process and increasing complexity has increased.

To answer your first question, yes, as you know, in response to global demand for the advanced nodes, we have been going through unprecedented scales of investments and development and is maintaining the technology leadership in the advanced nodes. As we move on to the advanced nodes, the challenge of maintaining and securing initial stable yield has increased.

Currently, there is a delay in the initial ramp-up plan, but it is expected to improve and stabilize gradually. In the future, we are pushing forward the construction of a multi-pass in Yangsan through the optimization of investment points for securing infrastructure space and ramp-up, and we are promoting the procurement of early demand improvement methods by gathering the capabilities of the research and business department.

Now, in terms of response, even though there has been somewhat of a delay in our initial advanced node ramp-up versus our plan, we do expect this to improve and stabilize gradually. And in order to address this, we are considering looking into, for example, establishing the multi-path faster than originally scheduled by securing the infrastructure space and making the optimized timing of investments for ramp-up, and also working with the research center, dividing roles, in order to establish plans of better achieving a yield early on in the advanced nodes.

is recognized as a premium value in the OLED market, and we are working hard to maintain this status. In fact, OLED was the first company to succeed in mass production, and it has accumulated numerous patents and know-hows through our decades of investment, research development, and mass production. The company has been working hard to maintain this unique technology and increase its value, We are actively promoting the branding of OLED technology, which is hard to be copied by others, such as Diamond Pixel and Eco2 Display OLED technology in the market. In addition, we are working on ways to recognize and compensate for the intellectual property rights that have been built up with the efforts of former employees. It is a situation where we are actively promoting it in a multidimensional and deep way. So, using this fair technology and protecting its value is our duty and responsibility to our customers and consumers, and SDC will do its best to ensure that such a company's level of management can be established in such an important ESG environment.

To answer your second question, as you mentioned, the competition in the flexible oil leading market is getting more intense. And we have been recognized the premium value in the oil leading market with our continuous technology differentiation and performance improvements. And we are continuing to focus from various angles to maintain that leadership. We were the first company to succeed in mass production. We pioneered the oil leading markets. And during the past several decades of investments in R&D, we have accumulated a huge body of patents and know-how. Also, in order to protect our differentiated technology and further enhance the value, we have actually branded our proprietary OLED technology, such as Diamond Pixel or the Echo 2 Display OLED for low-power technology, in order to establish our position and also to actively communicate to the market. We also believe that receiving the recognition for our IP and receiving the fair compensation for it is an important part of our obligations and responsibility, and currently we're looking into various ways in order to get that guaranteed. Under today's ESG environment, it's important that proper business practices are honored, and we will do our best to have that happen.

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

Yes, good morning. Thanks for taking my question. On NAND Flash, there's been several announcements from your peers on 7th generation 3D NAND technology as well as QLC 4-bit cells for products recently. In that context, could you update us on Samsung's strategy and roadmap for both, please? Thank you.

Recently, several companies have made announcements about the 7th generation V-NAND QLC on the NAND side. Regarding this, I would appreciate it if you could tell us about Samsung's strategy and the road map of each product.

Yes, I will answer. We are already exporting such products that use CTF-based QLC from 5th generation V-NAND to server and consumer.

Yes, to answer your question, actually, we have been delivering for server and consumer applications starting from the fifth generation of VNANs that actually adopt the CTF QLC technology. And also, we have actually maintained the technology leadership in the market, especially for the enterprise QLC SSDs.

And from the 7th generation of Green End, we are trying to acquire technical leadership that satisfies almost all requirements such as SSD and e-storage. In order to prepare for the QLC era in earnest,

Now, for the seventh generation VNAND, our focus is on establishing a technology leadership that satisfies the demands of all applications, including SSD and eStorage. And another focus is actually creating an ecosystem through cooperation with partners in preparation of a wider adoption of QLC.

You've also asked about our roadmap and for the 7th generation V-NAND QLC,

The launching timing will be decided based on customer schedules, priorities, and also the market situation. For reference, we're expecting at the PC application level, the demands of customers for QLC products will become more visible and tangible after this year.

Yes, thank you. Lastly, we will answer the questions that have been submitted online.

Since the last performance announcement, we have asked you to ask questions in advance through the homepage to strengthen communication and improve understanding with individual investors, and many of you have left various questions in this quarter.

Most of them seem to have been fully explained in the previous Q&A process, and we will continue to answer two additional questions that are of high interest to the shareholders among the unquestioned questions.

Finally, we will answer questions that were submitted online in advance. Starting from the last earnings call, we have been accepting questions via our webpage in advance of an earnings release as part of our efforts to strengthen communication with individual investors and to enhance understanding of the company. A variety of questions were submitted this quarter as well. I believe the majority of the submitted questions have already been sufficiently answered during the Q&A session, so we will answer two more questions on topics that garnered a high level of interest from shareholders but were not addressed during the Q&A session.

The first question is, the company is growing Foundry as a new growth business, and we know that the market competition is fierce. The first question is the following.

The company has been treating the foundry like a new business to nurture, but the market is fiercely competitive. I would like to hear your opinion on what distinctive advantage Samsung has over its competitors to accelerate growth. This will be answered by EVP Moon Suk-hang on behalf of the Foundry Division.

As mentioned in the question, the company is committed to the development of unprecedented investment and advanced technology for the growth of the Foundry business. In particular, the company focuses on securing technical leadership while expanding the ecosystem through the strengthening of partnership within the Foundry industry, solving the market concerns about Foundry source selection,

To answer your question, as you mentioned, yes, in order to develop our foundry business, we have been executing unprecedented scale of investments and also focused on developing technology. And in addition to securing the technology leadership through these efforts, another focus of our foundry business is to further expand the ecosystem by building strong partnerships with other companies within the foundry industry. We believe this will help alleviate customers' concerns about foundry stores' concentration, and also will be able to provide meaningful solutions for the entire foundry industry.

In addition, the company will use advanced packaging technology such as 2.5D and 3D to maximize the directness and performance of semiconductor chips.

Also, our focus is on developing a total system-level solution using, for example, advanced packaging technologies such as 2.5D and 3D, which can maximize both the density and performance. Also, we're leveraging our collaborative relationship with the memory division in order to provide solutions that are differentiated from other companies.

Yes, thank you.

Today's last question is, It is expected that the demand for the global 5G smartphone market in 2022 will be large, and we would like to ask you to explain the lineup and sales expansion strategy of Samsung Electronics. The last question is the following.

The global market demand for 5G smartphones is expected to grow significantly this year. Against this backdrop, what are Samsung Electronics' strategy on the lineup and sales expansion? This will be answered by VP Sung-Guk Kim of the MX Division.

Yes, as you said, the 5G smartphone market is growing very fast, and this year, it is expected that more than half of the smartphone sales will be 5G phones. So, we are planning to build a 5G full line-up from the S family, the foldable G series, and the flagship model to the mass entry level at all prices to actively reduce the mass 5G replacement demand.

Yes, as you mentioned, the 5G smartphone market has been growing very rapidly. It is expected to continue this growth. A market outlook is that this year, 5G smartphones would account for more than half of the smartphone shipments in the entire market. Now, in order to actively absorb this mass of 5G replacement demand, we have prepared a full 5G lineup across the entire price range, starting from the flagship models of the S family and the foldable Z series, as well as the mass entry level.

In particular, the S series' excellent experience will be spread to the mass model, so that all Galaxy users can enjoy the Galaxy Premium experience, we will respond to the escalating mass market competition situation. And in terms of sales, we will suggest a mass 5G terminal for the entire trade line, and through the 5G terminal, we will promote the expansion and cooperation of the business with ALF.

Our focus in terms of strategy as we respond to the intense competition in the mass segment is to leverage the Galaxy experience that we have. We have the excellent S series experience, which we will roll out even to the mass tier model so that all Galaxy users will be able to share and enjoy the premium Galaxy experience. Also on the sales side, we will be proposing 5G handsets, mass 5G handsets to all of our channels and also look into collaboration with the carriers in order to increase 5G handset sales which will also benefit the carriers in terms of further upside and their ARPU. Through these initiatives, we will focus on continuing the high growth momentum versus market this year.

Thank you for your valuable comments and I will refer to the main business decision. Due to time constraints, we are unfortunately unable to answer every question that was submitted.

However, I would like to thank everyone who shared their opinion, providing us with valuable information to refer in our decision-making process. And that completes our conference call this quarter. We wish all of you and those close to you stay strong and in good health. Thank you. Thank you.