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 2023, 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 star and 1 on your phone during the Q&A. For cancellation, please press start 2, that is star and 2 on your phone. Now we shall commence the presentation on the Fiscal Year 2023 First Quarter Earnings Research by Samsung Electronics.

Welcome, everyone. This is Ben Seo, Head of Investor Relations. Thank you for joining Samsung Electronics' First Quarter 2023 Earnings Call. For additional details regarding our quarterly results, please refer to our earnings presentation which has a new format and is available on our IR website at www.samsung.com slash global slash IR. Joining me on the call today are EVP Jaejun Kim, representing memory, VP Hyukman Kwon for system LSI, EVP Gibong Jung for foundry, EVP Casey Choi for Samsung Display Corp, which I will refer to as display during today's call, VP Daniel Araujo for mobile experience, VP Kale Rowe for visual display, and VP Sangyoon Kim for digital appliances. I want 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 are subject to certain risks and uncertainties that may cause our actual results to be materially different from those expressed in today's discussions. I will start with the results for the first quarter of 2023. The business environment in the first quarter continued to deteriorate with overall consumer sentiment weakening due to rising concerns over an economic slowdown amid persistent global macro uncertainties and geopolitical issues. As a result, our consolidated revenue for the quarter declined by 9.5% sequentially to 63.7 trillion won. Although revenue for the memory business and other component businesses declined considerably due to the repercussions of decreased demand, the DX division increased revenue on the back of strong sales of new flagship smartphone models. Our consolidated gross profit decreased by 4.1 trillion won, sequentially to 17.7 trillion won, mainly due to the continued price decline and inventory valuation loss in memory. Gross margin also decreased by 3.2 percentage points to 27.8%. SG&A expenses declined by 0.4 trillion won quarter-on-quarter to 17.1 trillion won, primarily due to reduced advertising and promotional spending. However, as a percentage of sales, they increased by 1.9 percentage points to 26.8% due to the decline in sales. R&D expenses exceeded last quarter's record amount and reached a new high as we continue to invest in the future. Operating profit in the DX division increased thanks to gains in the MX business, but operating profit declined significantly in our component businesses amidst sluggish demand, causing our consolidated operating profit to fall 3.7 trillion won sequentially to 0.6 trillion won. Operating margin also fell 5.1 percentage points to 1%. For the following results and outlook sections, I will provide brief overviews for DS, Display, and DX, and include specific business unit results only for those that are not covered in separate speeches. For the DS division in the first quarter, profits decreased considerably quarter-on-quarter due to an increased inventory valuation loss in memory, which newly included DRAM, a decline in utilization at Foundry, and continued overall impacts of weak demand and customer inventory adjustments. For display, while the mobile panel business recorded a decline in earnings amid a market contraction, the large panel business slightly narrowed its losses. The DX division delivered improved results thanks to strong sales of premium S23 models and enhanced sales mix focusing on premium TVs and improved operational efficiency. The network business saw its revenue decrease due to weakness in major overseas markets such as North America and Southwest Asia. The digital appliances business reported similar earnings sequentially amid still sluggish demand and continued cost burdens. Regarding currency effects in the first quarter, the Korean won strengthened against the U.S. dollar, euro, and most major emerging currencies. The relative weakness of the U.S. dollar had the effect of a company-wide quarter-on-quarter operating profit reduction of approximately 0.7 trillion won, centering on our component businesses, which are more sensitive to the U.S. dollar. Next, I would like to share our business outlooks. In the second quarter, under expectations of continued weakness in demand, DS will remain committed to boosting our technological competitiveness, including the two-nanometer gate all-around process, while meeting the demand for DDR5 and LPDDR5X and other high-end products. For display in the seasonally weak second quarter, the mobile panel business will focus on preparing for second-half demand and the large panel business is expected to increase its sales. DX will maintain solid profitability by expanding sales of A-series smartphones and new TV models while fully preparing for strong seasonality of digital appliances and improving cost efficiencies. The network will keep solidifying its business foundation, particularly in North America and Korea, as it explores new business opportunities. Digital appliances will focus on securing profitability by improving its sales structure and cost efficiency, while continuing the global expansion of bespoke products as we enter a seasonal upcycle. In the second half of 2023, there is a general expectation for market conditions to gradually recover amid projections for a rebound in global demand. ES will stay on top of the demand for high-capacity server and mobile products and continue to reinforce its leadership in differentiated technology, which includes preparing for next-generation flagship mobile SOCs and increasing orders for our leading GAA processes. Display's mobile panel business will maintain its unparalleled position in the high-end market based on its differentiated technology. and the large panel business will push to expand its presence in the premium market and improve profitability. EX will further solidify its leadership in the premium segment, which includes foldables and NAIL QLED. At the same time, it will increase its market share by cooperating with partners and enhance profitability by continuing to improve operational efficiency. Network will pursue revenue growth through its major overseas contracts by promptly addressing customer needs and winning new orders, all while reinforcing our technology leadership in 5G core chips and virtualized radio access networks. With digital appliances, we will boost our product competitiveness via smart things while pursuing growth by increasing sales of high-value products and further promoting package sales. Now moving on to capital expenditures. CapEx in the first quarter was 10.7 trillion won with 9.8 trillion won invested in the DS division and 0.3 trillion won in display. Memory CapEx concentrated on facilities in Pyeongtaek, which included completing P3 infrastructure and P4 framework progress for mid to long-term supply. and also on equipment to prepare for advanced node demand. In addition, we continued our R&D and back-end investments to further bolster future competitiveness. Foundry investments continued to focus on Taylor Texas and Pyeongtaek to address the demand for advanced nodes, while display investments focused on infrastructure and module production enhancements. Next, I would like to address the shareholder returns. Today, the Board of Directors approved a quarterly dividend of $361.1 per share for both common and preferred stocks. Based on the annual dividend payout under the current dividend policy, which applies until the end of this year, the total quarterly payout is $2.45 trillion and it will be paid in May. Finally, I would like to share some of our key activities in sustainability management. First, by applying innovative technologies, we have continued our efforts to ensure that using our products and services contributes to a low-carbon and sustainable future. As prime examples of our everyday sustainability, we increased the adoption of recycled materials in our products, especially in our latest Galaxy S23 phones. We have also enhanced the energy efficiency of the key components used in our large digital appliance models, which contributed to 75% of our new models in Korea, achieving top energy efficiency ratings. And we have further enabled energy savings through the AI energy mode in our SmartThings energy service. Finally, following a successful release in Europe last year, we introduced the microplastic reduction cycle in the Korean market, The bespoke Grande AI model, developed in collaboration with Patagonia, can reduce microplastic release by up to 60% compared to a regular cycle. On another front, we announced Samsung's Global Human Rights Principles, a policy based on international standards such as the UN Guiding Principles on Business and Human Rights in February. This announcement forms part of Samsung's ongoing efforts to respect and promote the labor and human rights of employees at Samsung Electronics and its partners in all aspects of our business. The principles comprehensively encompass all of Samsung's pre-existing policies related to human rights, such as our child labor prohibition policy, anti-discrimination and harassment policy, to name a few. Meanwhile, Samsung Electronics ranked seventh in the 2023 Digital Inclusion Benchmark, as measured by the World Benchmarking Alliance, a global alliance for sustainability management. We achieved the highest ranking among Asian companies, garnering this special recognition for our efforts to support open source, lead standardization in the industry, and foster an ecosystem for tech start-ups. Last but not least, the Alliance for Water Stewardship awarded our Hwaseong campus with certified platinum status, the organization's highest certification level for water resource management. This is the first such recognition in Korea, and the award recognizes the outstanding water management systems at our semiconductor sites. We will continue our efforts to enhance sustainability in all aspects of our business. I will now turn the conference call over to the representatives from each business unit to present first quarter performances and outlooks for their respective business segments in more detail. We will start with EVP Jaejun Kim of the memory business.

Thank you. Good morning. This is Jaejun Kim from Memory Global Sales and Marketing at Samsung Electronics. In the memory market of the first quarter, while the macroeconomic continued to slow down and customer purchasing sentiment was weakened, overall demand decreased as many customers continued inventory adjustments to improve their financial health. As a result, our performance fell significantly compared to the previous quarter. If you look at each product in D-Lab, while customer inventory is still at a high level for servers, the demand for servers was sluggish with inventory adjustments by customers, mainly hyperscalers, affected by shrinking IT spending of many enterprises under economic uncertainties. For mobile and PC applications, although customer inventories of finished goods in distribution channels are relatively improved, the demand situation was sluggish with purchasing delays and set build reductions as consumer sentiment has not recovered yet. Under this market environment, we preemptively responded to demand for high density mobile products which was boosted by strong sales of new smartphones by major mobile customers. As for server applications, while customers continue to adjust their component inventories, we focus on capturing DDR5 server demand in line with the adoption of new CPUs. As a result, though price fell less than the market forecast, due to our focusing on selling high-value-added ISA products, but Big Growth couldn't meet this previous guidance. Next, I will talk about the ISA land market. The slowdown in demand for server and storage applications has been more clearly observed compared to the other applications. And as I previously mentioned for DLAC, our analysis revealed that the demand sluggishness is linked with reduced enterprise IT spending. Actually, in addition to this, server SSD demand showed further contraction due to customer inventory adjustment. For mobile and client SSD, the demand continued to remain sluggish as well. Because the sell-out recovery was not feasible, as overall consumer sentiment has not recovered yet, despite China's reopening. In spite of this weak demand, we actively responded to the trends toward high density across overall applications, such as e-storage of 512GB and above for major mobile customers, and client assets is over one terabyte and above for PC OEMs. As a result, our big growth exceeded each of the previous guidance. Moving on to the outlook for the second quarter. First of all, let me tell you about the market by applications. As major hyperscalers are conservatively investing in servers and customers are continuing to adjust inventories, Demand recovery is expected to be continuously limited following the first quarter. For mobile and PC, customer inventories for component and finished goods are expected to be healthy, but consumer sentiment trends seem to be important variables for set demand due to macroeconomic conditions. That includes China's reopening and the follow-up economic stimulus packages. On the other hand, the transition trend to high density products based on price elasticity is expected to continue. In DRAM case, in order to align with this market situation, we will timely respond to the increasing demand for DDR5 and high density modules. led by the launch of new CPUs for servers and increased demand for AI. And we will also actively respond to LPDDR5X demand for mobile high-end products, such as new compact smartphones. For NAND, based on cost competitiveness, we plan to actively address demand for high-density products across all applications, while responding to customers' need for high-density storages by creating its mobile QAC market and diversifying product portfolios. Moreover, as we announced in our preliminary first quarter result, we have already started lowering down our productions. Therefore, our inventory levels are expected to start to decline from the second quarter and such reduction is expected to expand in the second half. Now let me tell you about the outlook for the second half of the year. Demand is expected to gradually recover in the second half of this year as customer inventory levels will have declined due to inventory adjustments that have been occurring since last year. This demand recovery is expected to begin with consumer products such as mobile and PC, for which inventory adjustments by customer began earlier than they did for commercial applications such as software and storage. First of all, for mobile and PC, with finished good inventory level decreasing in comparison with the first half, SEP build demand is expected to improve with the launch of new smartphone and PC promotion in the second half of the year. In addition, the trends toward high density based on overall price elasticity is expected to continue. Thus, we are expecting to see a demand pattern of weak in the first half and strong in the second half. For server, the timing of demand recovery may be later than for PC and mobile, since customers' inventory adjustments started relatively late. However, the portion of DDR5 is expected to increase due to the expansion of new CPU adoption, and contents per box will continue to grow as the transition to high-core CPUs will accelerate. Demand will continue to recover in the second half of the year, but it is expected to grow mainly with new memory products due to factors such as CPU platform convergence scheduled for the second half of the year and the customer inventory adjustment trend. Therefore, we are lowering its production mainly for legacy nodes products for which demand is expected to be relatively sluggish, while responding to the market with an increased portion of cutting-edge nodes and high-value added products. From a product standpoint, for DRAM, we plan to accelerate the conversion of cutting-edge nodes for DDR5 and NPDDR5X, and actively respond to the strong market demand for HBM3, 8-high, and 12-high. For NAN, we are going to strengthen supply operations focusing on products that consumers need by creating a mobile QAC market and expanding the portion of cutting-edge nodes such as V7 and V8. Under these trends, we will maintain a similar level of CAPEX compared to last year and continue to expand infrastructure and R&D portion of investment to secure mid- to long-term competitiveness. Thank you.

Good morning. This is Hyeongbang Kwon from the system design business. In the first quarter, amid the off-weekly season, the demand for SOC sensor and DDI dropped sharply due to sluggish demand for the major applications such as mobile and TV, resulting in a sharp drop in sales. However, for mobile SOC, VolumeZone's sales increased with the launch of a new VolumeZone product, and in order to expand the new application, we launched a UWB-based short-range wireless communication semiconductor product called U100. In addition, we have solidified our technological leadership by supplying various 200 million pixel image sensors to major global customers at home and abroad. In the second quarter, even though the overall demand soar continues, customers' inventory reductions are showing for the products such as sensors and PDDIs. Inventory accumulation is expected in preparation for the peak season in Q3. As a result, earnings are expected to improve slightly QQ. In addition, to strengthen the GPU competitiveness of mobile resources, we will expand our switch partnership with AMD in the graphic IP field, and we are in the final stage of commercializing the NTN communication modem. Second half, systemized related customers' parts inventory is exhausted, and starting with the vitalization of the Chinese domestic market, overall mobile demand is expected to recover. As the market is expected to recover in the second half of the year, we will make sure that there is no problem with the supply of parts. In addition, we are planning to re-enter flagship segment to strengthen the product business, competitiveness of mobile SOC business. And we also expect to expand our business area as a customer is planning to commercialize a fingerprint authentication-based credit card with more enhanced security. Thank you.

Good morning and good evening. This is Kibong Jung from the Foundry Business Unit. In the first quarter, demand has contracted due to the global economic downturn. caused by macro uncertainties. Impacts included high inventory levels in major fabless companies and set makers. The ensuing drop in orders resulted in revenue decline. Meanwhile, we are mass producing the first generation three nanometer process using GAA, gate all around technology. Leading semiconductor device technology currently in production. With yields remaining stable, into and throughout the quarter. And based on our experience with the first generation, we are making solid progress in the development of the second generation process to secure even greater mass production capabilities. In addition, we focused on securing new orders from major customers who need high-performance, low-power characteristics in mobile and HPC applications, aiming for mass production in year Moreover, by completing the development of the advanced package with 12 stacks of HPM memories, we have secured the foundation to support server products for generative AI segment. In the second quarter, we expect revenue to improve quarter-on-quarter basis as set makers inventories recover to normal levels and customer demand recovers. In the second half of this year, the market is expected to recover around the HPC sector and the automotive sector, which requires advanced process technologies. We expect our revenue to rebound following our investment strategy focusing on the advanced nodes. Based on the stable development of the second generation 3-nano GAA, we will expand our customer base through active communication with customers and strengthen our technical leadership by smoothly proceeding with the development of the next-generation two-nanometer technology. Lastly, we will lay the foundation for sustainable growth by evolving specialty and mature processes so that we can expand to various applications, such as mobile, HPC, automotive, and IoT. Thank you.

Good morning. I'm KC Choi from the corporate strategy team at Samsung Display. Even in the face of unfavorable market conditions, we continue to generate stable results in the high-end smartphone business based on our differentiated technology performance and IP superiority. I will now brief you on our results for the first quarter of 2023. For the mobile display business, even though market demands continue to contract, due to persistent inflation and high interest rates, we fortified our market leadership thanks to the robust sales of flagship products with differentiated features and the expansion of affordable model. For the large display business, we solidified our position in the premium market on the back of the full flagship launch of new QD OLED products by our major customers and a diversification of product size and other specifications. Next, let me share the outlook for the second quarter of 2023. We expect research to contract year on year due to the global economic slowdown excavating seasonal effects, but we will maintain our dominant position in the high-end market based on the stellar technology and the performance of our products. At the same time, building on our unrivaled product quality, we plan to maximize sales by delivering on our customers' needs and expanding the adoption of OAD panels in their mid-end lineups and by accommodating our mass production of new products in the second half. For the large display business, we expect to see a slow recovery in demand due to the economic slowdown and effects of the endemic. but sales should grow as new products for 2023 roll out in earnest. Finally, I'll share our outlook for the display market and our strategy for the second half. Concerns over market uncertainties and the economic downturn coexist with the hopes for the potential demand recovery based on anticipation of improving market condition China prompted by its potential stimulus program in the second half. We'll maintain our leading market position by leveraging our differentiated technology in our customers' new offerings and ramp up sales by enhancing the performance of foldable products in the relatively solid market for high-end smartphones. For large panels, demand is likely to be soft due to prolonged economic uncertainties. However, we'll further strengthen our presence in the premium market by offering a wide range of sites and supplying rollouts in an increasing number of countries and diversifying our customer base. Despite uncertainties surrounding future markets, we believe it's an optimal time to prepare for the future and will invest in 8.6 generation OLED. With this investment, Starting this year, we'll strive to scale up the OLED market by steadfastly increasing the share of OLED panels in the laptop, tablet, and automotive markets, and eventually recreate the success we have achieved in the smartphone market. Thank you.

Hi, everyone. This is Daniel Araujo from the Mobile Experience Division. I'd like to share our results for 2023 Q1. and outlook for Q2 and the second half. The macro environment remained uncertain throughout the first quarter of 2023 and in the smartphone market, overall demand weakened but the premium market grew in terms of both volume and value compared to one year ago. Despite the market contraction, our sales increased quarter on quarter and our profitability recovered reaching double digits. The S23 series launched in Q1 achieved strong sales backed by improved product competitiveness. Overall sales growth was driven by the large S23 Ultra portion of sales and marketing that centered on models with high storage capacity. Our efforts to enhance operational efficiencies throughout R&D, manufacturing, and logistics led to a major boost in operating profits from flagship devices, Series A, and tablets, which contributed to the strong first quarter performance. Next, let me share the Q2 outlook. For smartphones, we expect demand to recover in the low to mid segment, and the overall market should increase slightly in volume, but decline in value compared to Q1. In the MX business, we will continue to generate steady sales of the S23 series, which has been well received by the market, and reboost the marketing of foldables to continue sales of current models and drive awareness of the upcoming launches of new models in the second half. As for the A series, we will actively address recovering mass market demand by propelling the new A54 and A34 into global mega-hit models by delivering a stronger premium experience through upgrades to key specs and the application of the Galaxy design identity. In Q2, we will drive sales expansion with flagship devices and mid to high A series models with contributions also expected from our ongoing efforts regarding efficient management of region-specific product lineups, our upselling strategy, and a variety of sellout programs. Moreover, we aim to maintain double-digit profitability thanks to additional gains in operational efficiency. Next is the outlook for the second half of 2023. In the second half, we expect to see signs of a global economic recovery, including an easing of inflation. The smartphone market is forecast to witness increases in both volume and value, especially in the premium market alongside the recovery of purchasing power. We expect the tablet and wearable markets to stay mostly flat due to difficult compares following significant growth during the pandemic. The MS business will unveil new foldable models that offer even further differentiated and refined user experiences. Our close collaboration with partners is a strength, and we will use that strength to boost sales right from launch to further fortify our leadership in the global affordable smartphone market. For the F23 series, we will continue sales in the second half by sustaining our marketing campaigns and actively responding to regional seasonality. With the A series, we will expand our overall share of the smartphone market by collaborating closely with our partners and actively implementing sales programs tailored to our customers by region. It will strengthen the product competitiveness of our tablets and wearables and highlight our premium ecosystem experience via a joint unpacked event in order to continue to outpace the market. In sum, we aim to achieve annual revenue growth in 2023 and secure solid profitability by improving our product mix and enhancing operational efficiencies. Thank you.

Good morning. This is KLO from the sales and marketing team of Visual Display. First, I would like to review the market condition and our performance in the first quarter of 2023. TV market demand contracted both quarter-on-quarter and year-on-year as we excited end-year peak seasonality and felt continued effect of global economic downturn. For Samsung, we improved our profitability quarter on quarter and year on year by focusing on sales of differentiated high-value-added products to enhance our leadership in the premium market and by reducing overall cost. Now, let us look at the outlook for second quarter and second half of 2023. In the second quarter, we expect negative growth in the TV market to decelerate while demand for premium products such as QLED and ultra-large screen model is expected to keep growing. Samsung will focus on improving profitability by expanding sales of strategic products with a differentiated launch of new model of 2023, while also strengthening its area of operation management. Regarding the TV market in second half, Demand is expected to recover gradually with the arrival of peak seasonality, but we expect competition to intensify with continued uncertainties in the external environment. We will actively capture peak season demand by strengthening our differentiated promotional activities, centering on strategic products such as Neo QLED, OLED, and also targeting consumer needs utilizing our differentiated lifestyle screens. In addition, we will secure new growth engine by continuously diversifying sales channels and continue to lead the TV market by expanding the 98-inch super-large screen and micro-LED lineups. Thank you.

Thank you for the presentations. that sums up the first 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 continuing macro uncertainties, we will not be providing annual guidance at this time. Comparative figures are on a sequential basis for quarterly data. For DRAM, in the first quarter, our bid growth decreased by a percentage just into the double digits. and ASP declined by a percentage in the low to mid-teens. For the second quarter of this year, we expect market bid growth to increase by a low double-digit percentage, and our bid growth should be similar to the market. For NAND in the first quarter, our bid growth increased by a low single-digit percentage, while ASP fell by a percentage in the high-teens. For the second quarter, we expect market bid growth to be in the mid-single-digit range, and our bid growth should be similar. For display in the first quarter, the small panel portion of revenue was a percentage in the high 90% range, and a small panel sales volume decreased by a percentage in the mid-20s. For MX in the January quarter, sales volumes of smartphones and tablets were approximately 60 million units and 7 million units respectively, and smartphone ASP was 325 US dollars. In the second quarter, we expect to see declines in shipments of smartphones and tablets, as well as in smartphone ASP. For TVs in the first quarter, Sales volume of TVs decreased by a percentage in the low to mid-teens. And for the current quarter, we expect it to contract by a percentage in the high single digits. Now I will move on to the Q&A session. First, we will start taking questions from the conference call.

지금부터 질의응답을 시작하겠습니다. 질문을 하실 분은 전화기 버튼의 별표와 1번을 누르시기 바랍니다. 질문을 취소하시려면 별표와 2번을 누르시면 됩니다. Now Q&A session will begin. Please press Start 1. Please press Start N1 if you have any questions. Questions will be taken according to the order you have pressed, star and number 1. For cancellation, please press star 2, that is star and 2 on your phone. The first question will be presented by Sungkyu Kim from Daiwa Capital Market. Please go ahead with your question.

Yes, hello. Thank you for the first question. I have two questions. The first question is that the DS part of the first quarter recorded the lowest, and it seems that the memory business department has a large share of it. Regarding the background of the decline in the first quarter, I would like to ask for a detailed explanation of the content. The second is a question about the household business department. The first quarter's My first question is about the memory division.

In the first quarter, your DS division recorded an overall loss and it appears that the memory is accounting for a large share of this loss. In that context, can you give us some more details behind the poor performance of the memory business this quarter, in the first quarter? Second question is about the digital appliance business. Still in the first quarter, the digital appliance business performance relatively is still disappointing. Can you explain the reason why the poor performance is continuing? And can you give us some outlook on your second quarter bottom line?

To answer the question about the memory business first quarter results, in the first quarter, as you mentioned, our results of the memory business decreased significantly due to

although demand weakness, memory demand weakness continuing, and that also being coupled with additional fall in prices.

To explain in more detail, as macro game uncertainty increased, IT spending decreased along with conservative investment operations, and as a result, demand for servers and storage became even lower.

To give you a bit more detail, many companies facing macroeconomic uncertainties have been operating conservative investment stands, and this has resulted in a reduction in IT spending overall. So we have seen a slowdown of demand, especially around servers and storage. Also, customers have been continuing to adjust their inventory to improve their financial conditions. This has led to a decrease in purchasing demand, and this has driven to an additional price decline versus the previous quarter.

The price change is directly related to the amount of profit, and the company's profitability was directly affected by the price drop during the first quarter. Price changes are an item that has a direct impact on earnings, and so during the first quarter, the additional price decline had a direct impact on our profitability as well.

Another factor in our first quarter results is the inventory valuation loss. Actually, in Q4, the inventory valuation loss started to kick in from the NAN product, but with the additional price decline recently in DRAM, there was a larger inventory valuation loss recognized this quarter, and that had an additional impact on our performance.

Next, I'd like to answer your question. In the first quarter, due to the reduction in global market demand and inflation, sales decreased compared to the previous year. The fixed cost of logistics infrastructure, which was implemented in response to the logistics issue in 2022, has increased, and the cost of human resources and utilities has increased in the previous year due to the global inflation. The cost of materials has improved in the previous year, but the demand for raw materials, such as steel, resin, and emulsion, has not been as high as expected.

Your second question was about the details behind the performance of the digital appliance business. During the first quarter, the revenue of the digital appliance business decreased on a year-on-year basis as we saw a decrease in global digital appliance market demand and also impact of inflation. Also, on the cost side, there was an increase of fixed cost nature costs that were, for example, logistics infrastructure that had been executed in response to the supply chain issues we saw in 2022. Also, there was an impact of global inflation on our labor and utility expenses. So overall expenses increased also on a year-over-year basis. On the material cost side, while material cost did improve versus last year, the raw material markets of certain raw materials, such as steel, plates, or resin, or foaming agents, have actually been seeing strong demand. And so the amount of decrease, the degree of decrease in material cost has not been as large as we had expected.

Lee Boong Moon, Lee Boong Moon, Looking towards the second quarter, what we expect in terms of our bottom line is that we expect our revenue to be similar in second quarter to what we saw last year.

and that our profitability, our bottom line, would also improve in the second quarter. That said, we are still watching some downside factors. For example, there is still a risk of our performance being below what we expect if the market contracts or inflation continues. Also, we think that there's a risk of possible increase of material costs versus the first quarter, given the fact that the raw material market turnaround came faster than expected.

네, 답변 감사합니다. 다음 질문 받겠습니다.

다음으로 질문해 주실 분은 HSBC의 서주일 님입니다. The next question will be presented by Ricky Seo from HSBC. Please go ahead with your question.

네, 질문 기회 주셔서 감사합니다. 두 가지 질문인데요. 먼저... Regarding the Foundry, you mentioned that it is less than 3 nanosecond generation. I would appreciate it if you could explain the development process and the production roadmap. Next, I would like to ask you to explain how new companies are being recognized in terms of overall customer retention. Next, the second is about the recent U.S. law on semiconductor support. Thank you.

I'll ask two questions. The first question is about the foundry. During your presentation, you mentioned about plans of the second-generation development of the three-nano node. Can you give us a bit more detail of your plans of developing the cutting-edge nodes and also the roadmap for mass production? Also, can you give us an update on your customer order situation? Can you give us a bit more update on how new customers are being engaged? A second question is regarding the U.S. CHIPS Act that was announced. I think there is growing concern in the market of this bringing also increased risk given the detailed requirements such as upside sharing or the requirement to share technology information and the guardrail system. Given this, can you share the company's plans on how the company plans to respond to the CHIPS Act?

첫 번째 질문에 대해서 답변 드리겠습니다. 먼저 삼성 파운드리의 3nm 이하 선단 공정의 특징에 관해서 설명드리겠습니다.

I would like to answer your first question by starting with a description of the key features of our 3nm node.

삼성 파운드리는 작년에 세계 최초로 MBC FAT이라는 GAA 아키텍처를 도입했습니다.

Samsung Foundry was the first in the world last year to adopt the GAA architecture through the MBCFAT. MBCFAT stands for Multi-Bridge Channel.

MBCFAT stands for Multi-Bridge Channel.

And we did this because of the tradition of Samsung Foundry of emphasizing customer satisfaction and technology leadership.

고객사 수주 현황에 대해서 말씀드리겠습니다.

You've also asked about the customer order updates and engagements.

헌단 노드의 고객들은 모바일과 HPC 고객을 중심으로 이루어지고 있습니다.

Our orders for the cutting-edge advanced nodes are mainly being consisted of mobile as well as HPC customers.

현재 GAA를 적용한 유일한 제품이기 때문입니다.

And that is because we are the company that offers the only 3nano product with GAA.

삼성 파운드리는 3nano 프로모션을 진행하고 있고 고객들은 이를 평가하고 있으며 테스트 칩을 제작하는 곳도 있습니다.

We are currently running the 3NANO promotion, and some of the customers have been creating test chips. We are also developing the 2NANO with mass production targeted 2025.

We are also developing the 2NANO with mass production targeted 2025.

And our goal is to stay ahead of the competition and to maintain our technology leadership in 2025.

Thank you.

Your second question about the U.S. CHIPS Act actually covers several business units and therefore will be addressed by the IR team.

First, CHIPS Act was announced as a U.S. presidential decree in August last year. Since then, it has been announced in February that it will be implemented in detail, and it includes a number of mandatory provisions, including incentives, until the Godreil Act is passed in March.

The CHIPS Act took effect with the signature of President Biden last August. Since then, there was a following announcement of detail rules in February and also the detail guardrail rules announced in March. And they include several obligation clauses tied to the incentives offered under the CHIPS Act.

And now, the question is, according to the incentive-related support, You've asked about the market being concerned of these requirements and obligations being tied to the incentives offered.

The U.S. government regarding that has expressed that It will collect opinions and feedback from the industry and also carry out negotiations with individual companies to iron out the details of such obligation clauses. And we, Samsung, also plan to participate in such procedures.

We are reviewing various possibilities and scenarios, and we will continue to work to minimize any potential risks.

Also, the company currently is studying various possibilities and scenarios and will continue to work on minimizing the geopolitical risk on our business.

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

Good morning, and thanks for taking my questions. The first one relates to memory. Could you provide more color and context on the memory production cuts you have announced earlier this month? How sizable is the production cut that you ultimately plan to do and for which products? And secondly, it is well understood that this year your flagship smartphone models, including the Galaxy S23, are solely using Qualcomm system solutions. Should we expect the Exynos to come back in 2024, starting with the Galaxy S24? And also, could you please elaborate more broadly on the overall Exynos strategy going forward? Thank you.

There are two questions. The first is about the memory evaluation that you announced. I wonder if you can explain the context and background in more detail. What is your ultimate goal? I wonder what products you are going to evaluate. The second question is about Exynos. Samsung's flagship smartphone S23, which was announced this year, is well known to use Qualcomm solutions. Next year, in 2024, do you expect Exynos to re-enter the flagship? Also, please tell us about the overall Exynos strategy. First, I will give you a memory-related answer.

Rather than a short-term perspective, we will focus on ensuring stable supply of products that customers want in the medium-term perspective,

First, to answer your question about the memory production cut, as you know, in terms of operating our memory production, our focus has been on maintaining stable supply capabilities of the products that the customers want from a mid- to long-term perspective rather than a near-term perspective. and we have been operating our production in order to secure sufficient inventory availability to respond to future demand.

The reason is that AI, machine learning, and the expansion of data-driven computing and the growth of the automotive application market will lead to a strong demand for medium-term use. On the other hand, in terms of production, new interface product changes

Now, the rationale behind our production approach has been because while on the demand side, mid- to long-term demand is expected to be solid given the growth of several markets such as automotive applications and also the expected growth of the data-driven computing such as AI or ML. On the production side, we do see bid growth restrictions, given the fact that there is a die-size penalty as part of the switch towards the new interface products. Also, there is growing difficulty with the advanced nodes in terms of technology and also increased production lead times. That said, we were looking into our production by product lineup and determined that in certain products, we have already secured sufficient volume to supply and meet customer demand changes, and therefore decided to lower production in these products.

Therefore, this production adjustment is based on legacy products with sufficient capacity for medium-term demand response, and line optimization, which began in the first quarter, has been added, Therefore, the lowering of production that has been announced is being carried out mainly

around the legacy products that we have already secured sufficient volume to meet mid to long-term demand. And this comes on top of the line optimization that already started in Q1. And so we expect the size of the reduction to be far more meaningful. And we expect our inventory levels to start to decrease from Q2. Also going forward in the second half, we will continue to monitor the market demand, and operate our production flexibly. And so we expect our inventory normalization speed to accelerate in the second half.

However, one thing I would like to say is that, as many foreign institutions look forward to, the demand will gradually recover in the second half of the year as the stock adjustment of customers in the first half of the year is carried out, and it seems that the company will lead the demand growth

To be clear, many outside research firms are forecasting that as customers complete their inventory adjustments during the first half, demand will gradually start to recover from the second half. Based on such outlook, we will maintain our advanced node production without any adjustments given that the advanced node products will be leading the demand growth. And going forward, we will continue to flexibly adjust our business strategy based on mid- to long-term demand and also continuous sensing of mid- to long-term demand and also our supply ability.

Your second question was about the System LSI Exynos business.

As you know, the MX business is a major customer of the System LSI, and our goal is to... develop our business with a full lineup that can be applied in all of the Galaxy Series segments, and we are currently pursuing re-entry to the flagship segment.

Now that said, growth rate of the mobile market as a whole is on a

And we do see the need for us to be prepared for that. And so while in the short term, while we focus on building the SOC competitiveness for mobile SOCs, at the same time, we are focusing on expanding our non-mobile business, including automotive SOC.

And to respond quickly to the changing market from a medium-term point of view, we are also continuously conducting market research and business integration tests to discover new businesses.

And also to enhance our ability to rapidly respond to the market changes from a mid- to long-term perspective, we are also continuing to focus our efforts on market research and business feasibility studies in order to develop new business areas.

Thank you for your answer.

Next question. Next question is from Lee Se-chul of Citigroup. The next question will be presented by Peter Lee from Citigroup. Please go ahead with your question.

Yes, hello. This is Citigroup Lee. I would like to ask two questions. The first is related to memory. As you said earlier, you have decided to reduce production this year. As for this year's capex scale, as mentioned earlier, it is similar to the previous year. My first question is about the memory business.

You have announced plans of reducing your production. but also you've announced that you plan to maintain your capex to a similar scale as previous years. Can you give us a bit more detail behind why your capex would still remain similar even though your production would be reduced? Our second question is about the MX division. Actually, you have come in with better profit results than the market expected in the first quarter. Can you give us a bit more detail behind that and also your plans of how to expand your profitability in the second quarter?

Yes, I will answer the first question. In conclusion, the company will continue to invest in a similar scale.

To answer your question, this year we plan to maintain investment similar to the previous year.

As I mentioned in the previous answer, the company's main goal is to maintain market leadership by strengthening future competitiveness rather than running a short-term strategy. In that respect, despite our decision to adjust the production volume, the reason why we are investing at the previous year level is because

The reason why we have decided to maintain CAPEX at similar levels as previous years is because our key goal of the business is to maintain sustainable market leadership by strengthening our future competitiveness rather than operating based on a near-term strategy. And therefore, based on that business goal, despite our decision to lower our production, we are going to maintain capex at levels similar to last year because we believe it is necessary for us to concentrate our investment capabilities preemptively from now in order to secure future competitiveness.

Yes, semiconductor business needs continuous large-scale FAP investment as well as After the investment is announced, it will take a very long time for the FAB to be mass-produced. Therefore, while it is expected that the medium-term demand will intensify, in order to have a stable supply power that can respond to it in the future, we need to implement relatively long-term infrastructure investment in the medium-term in advance. Therefore, the party is planning to continue its infrastructure investment on the 3rd and 4th lines of Pyeongtaek and acquire a necessary clean room and respond to the growth of medium-term demand.

The semiconductor business by nature requires consistent large-scale FAB investment. Also, it takes quite a long time for the FAB to go into mass production since the start of the investment itself. Therefore, given the fact that mid- to long-term demand is expected to be solid, In the future, in order to have the supply ability, stable supply ability to capture that solid demand in the mid to long term, we need to make the infrastructure investments that have longer lead times ahead of that from a mid to long term perspective. That's why we plan to continue our infrastructure investments for the Pyeongtaek Phase 3 and 4 lines in order to secure the necessary essential clean rooms that will give us the ability to timely respond to the growth of the mid- to long-term demand.

Recently, the memory process is becoming more and more fine-tuned, and the development difficulty is rapidly increasing as it goes to the cutting-edge process. In this situation, the company will be responsible for the future supply of Also, in addition to that, we are planning to increase the share of R&D investments.

As the memory nodes become further scaling, as we approach the cutting-edge nodes, the difficulty of development is increasing rapidly, and given the situation, we believe that we need to increase the investments preemptively from the R&D phase in order to strengthen our quality and also develop our cutting-edge products timely. And this will be another way to enhance our competitive edge in responding to mid- to long-term supply.

Like this, the company adjusted its short-term production plan, but 필수 클린룸 확보를 위한 인프라 투자를 지속하고 기술 리더십 강화를 위한 R&D 투자 비중도 확대해 나가며 중장기 수요에 대한 준비를 철저히 해나갈 것입니다. 다만, 매크로 경기와 지정학적 이슈 등 외부 요인에 따른 수요 영향성은 당분간 상존할 것으로 예상되기 때문에 업황을 면밀히 확인하면서 단기적으로 조정이 가능한 설비 투자는 탄력적으로 실행할 계획입니다.

So in sum, while we have lowered our production in the short term, we will continue to thoroughly prepare for mid to long-term demand by continuing to make infrastructure investments to secure the necessary essential clean rooms, and also we will be increasing the share of R&D investment that will strengthen our technology leadership. Now, that said, we do recognize that there will be some impact of geopolitical issues and the macroeconomy on demand for some time, and therefore, in terms of equipment investments, we will execute that flexibly by carefully watching the industry situation.

I'll take the question on MX. So in Q1, year-on-year declines in market demand mainly concentrated in the mass market segment, were attributable to rising global interest rates and worsening economic indicators. But demand in the premium segment remained solid with slight growth. Our total smartphone shipments in Q1 decreased YOY but grew quarter on quarter, and our revenue held up well compared to the market decline, thanks to a higher proportion of premium products and increased ASP, going to flagship-oriented sales, especially the S23 series.

I will answer the MX question. In the case of the first quarter, the demand for the mobile market decreased from the previous year to the mass market due to the global financial situation and the deterioration of economic indicators, but the demand for premiums continued to grow. The total output of the first quarter smartphones decreased from the previous year to the same period, The S23 series achieved higher sales in Q1 compared to its predecessor series, with favorable reviews from the market for the improved netography camera, gaming performance, and sustainability factors.

all boosted by our Share the Epic campaign. And within the S23 series, the S23 Ultra portion of sales increased, and we continue to upsell by strengthening communication around our high-storage models.

Especially, the S23 series has improved lithography, camera, gaming performance, and sustainability in the market, Regarding profitability, we secured a double-digit operating profit margin through continued efforts on increasing operational efficiencies throughout the whole R&D manufacturing and logistics processes.

Tablets and wearables also contributed to the improved overall profitability in Q1 with continued solid sales and operations streamlining, even though no new product was launched. In Q2, we'll continue to proactively address the premium and mass market segments with efficient product lineup operations in each geography and our upselling strategy, which together with continued optimization and efficiencies, we're aiming to maintain double-digit profitability.

In addition, we improved profitability by securing a two-digit profit margin throughout the entire development, manufacturing, logistics, and process. Despite the non-release of new products, tablets and wearables continued to sell stably and contributed to the overall profitability improvement in the first quarter with efficiency in operation. In the second quarter, we also improved the efficiency of regional model operation and improved the efficiency of regional model operation premium, mass, segment 모두에 적극 대응하고 또 지속적인 운용 효율화를 통해 두 자릿수 수익률 유지를 위한 노력을 하겠습니다. 네, 답변 감사합니다. 다음 질문 받겠습니다.

다음으로 질문해 주실 분은 JP Morgan의 박정준 님입니다. The next question will be presented by J.J. Park from JP Morgan. Please go ahead with your question.

Yes, I also have two questions. I would like to ask you to share about the demand for DDR5 on the memory side. I wonder if the demand has increased significantly since the release of Sapphire Rapids. Secondly, you mentioned the 8.6 FAP investment in the presentation earlier in the DS division. I wonder when this FAB will be mass-produced. How much is the caper, and I think it will be overlapped with the existing Q1 line, but I would like to ask you to explain whether the product produced by this 8.6 FAB is IT or TV, or if it is only IT.

I have two questions. The first question is about the DDR5 demand. Can you give us a bit more update on the DDR5 especially? Have you seen an uptick on demand since the release of Sapphire Rapids? Second question is about the OLED 8.6G line. You've mentioned the investment into this during your presentation. When would be mass production from this line, and how much capacity are you planning? Also, I think that I'm wondering whether there will be some overlap in terms of product coverage by this line and your existing lines for TV. So this new 8.6G investment that you're planning, would it only be addressing IT applications, or would it also cover TV's?

The first question is for you. The customer experience plan for the new CPU platform that supports DDR5 is still flexible, so there is uncertainty about the demand, but currently, the demand for PC server-type DRAM is increasing to the early 20% of the 2nd quarter of DDR5, which is very similar to the original outlook.

Regarding your question about DDR5 demand, there is a bit of uncertainty still around DDR5 demand given that customers' plans of adopting the new CPU platform that supports DDR5 is still fluid. As of now, we are seeing low 20% growth. We are seeing growth of DDR5 demand. So as of now, of the entire demand for DRAMs, that's for PCs as well as server DRAMs, DDR5 share has come up to around low 20% as of second quarter, which is in line with original expectations.

Depending on the change in DDR5, there is no possibility of a decrease in non-production due to chip size penalty. DDR5 is a new product, so it is expected to increase in demand in the second half of the year because the initial market supply level of the customer group is still low.

Now, this switch to DDR5 does come with inherent production reduction because of the chip size penalty. But on the demand side, because it's a new product, there is still a low initial market inventory, and we expect there to be an additional increase in demand in the second half. And in line with this expected growth of DDR5 demand, we are planning to accelerate the node migration for DDR5 products to further enhance our product competitiveness.

Yes, I will answer the display part. You asked a question about the 8.6G IT OLED line investment. First of all, I will briefly explain the background of investment. And I will explain the management of the QD OLED TV line that we currently have. First of all, let me explain the background. In the case of OLED IT products, The work required for high-definition screens and the time spent consuming content are increasing. In order to respond to these demands, the number of consumers who want to use OLEDs to differentiate between products is increasing. In particular, users who are already used to using OLEDs on smartphones are often required to use the same level of IT products. This is why the company has been working for years to respond to these IT products. Your second question was about the 8.6G oil ED investment.

I would like to give you a bit more background to why we decided this investment before answering any questions about specific schedule, mass production schedules, or how this will work with our existing QD OLED TV capacity. In the case of OLED for IT products, as people spend more time consuming content on IT products and also as they do more work that requires higher picture quality, there is a rapid demand growth. and even the OEMs are continuing to adopt OLEDs more on their IT products as a differentiating feature. Also, it's that users are demanding for similar picture quality as they are used to on their smartphone. They want to see the same picture quality on their IT products. Given this expected demand growth, we have been developing for several years mass production technology that has caused competitiveness We have been working for several years on developing, for example, the large-size substrate technology, low-cost technology, eco-friendly technology, and oxide technology to do this. And we have decided to make this investment, believing that we have reached a certain level of mature technology.

And to answer your question about the schedule, Since this is the first technology in the world to try, we can't say that it has been decided, but considering the current development speed and technology maturity, we expect it to work in earnest after 2 to 3 years. And regarding the Kepa you asked about, the current size itself is the same as the existing 6G glass, we expect to be able to produce IT products such as laptops, tablets, and monitors of about 10 million units a year. So, in comparison with the existing line based on the 6th generation, we expect it to be advantageous in terms of cost-efficiency. Through these electronic investments, as we experienced with smartphones, we first selected the core SCM, and material development know-how can be achieved through competitive competition. Through these investments, we will continue to make successful changes in OLED in various fields, including IT, following the success of smart phones. Thank you.

You've also asked about details of timeline, and given that we are the first to try this technology, first time in the world, rather than setting fixed milestones in terms of future timeline, we are estimating, considering the level of technology we have developed, that we will be able to operate this line on a full-fledged scale within two- to three-year timeline from investment. In terms of capacity, the product that we will be producing in terms of size is roughly around two times the size of a 6G glass. So in terms of capacity, we are expecting that we will be able to produce volume that would be corresponding to around 10 million notebooks or tablet PCs, laptops or tablet PC OLEDs a year. We also are planning to make our production cost competitive on the 8.6G line versus our existing 6G production line. We have learned from our smartphone experience that such preemptive investments give us the advantage over competitors' by allowing us to get the head start in terms of completing the core supply chain management and also gaining the know-how of materials and development. And so in addition to the smartphones, by making this bold investment, we will focus on successfully expanding the OLED to other applications, including IT products.

Thank you for your answer. 시간이 많이 지나서 컨퍼런스 질문은 하나만 더 받도록 하겠습니다.

마지막으로 질문해 주실 분은 KB증권의 김동원님입니다. The last question will be presented by Dongwon Kim from KB Securities. Please go ahead with your question.

네, 질문 중에 감사드립니다. 저는 메모리와 디스플레이 질문드리겠습니다. 먼저 삼성전자가 생각하시는 차세대 주요 메모리 기술은 어떤 것이 있으며 이를 위해 준비하고 계신 분야가 있는지 말씀 부탁드립니다. 다음은 최근 삼성디스플레이가 유럽 자동차 OEM 업체와의 협력 소식이 있었는데요. 오토모티브 OLED 사업의 현재 진행 상황과 향후 전망에 대해 의견 부탁드립니다. 감사합니다.

My first question is about the memory business. In terms of technology competitiveness, what kind of preparations are you making? Where are you focusing on in terms of technology competitiveness? And what are you preparing for the next generation memory technology? Second question is about the display business. Recently, Samsung announced an MOU with a European auto OEM. and there is growing interest into the display's automotive business. Can you give us some update and future outlook on your automotive display business?

The first question is from the point of view of technology competitiveness. The company continues to strengthen its high-tech competitiveness, and in the case of D-LAMP, we are working hard to develop the D-1B product based on the accumulated EUV know-how

To answer your question about our technology competitiveness, as you know, we have continued to strengthen our competitiveness around the cutting-edge nodes. And in the case of DRAM, the focus has been on preparing for the mass production of D1B products based on our EUV know-how, and that preparation for mass production is almost at the completion phase. And so we are planning this year to go to mass production within the year with the D1B-based 32-gigabit DDR5 product to lead the industry.

In NAND, not only 1TB products, but also On the NAND side, our schedule is to complete

preparations for mass production for the 8th generation V8 node for not only 1 terabit but also the 512 gigabit within the second quarter. And that will give us the condition to – we will be prepared, therefore, to address not only the performance but also the value markets within second quarter. Also, on the solution side, we have prepared the full lineup for the enterprise as well as the data center server, PCIe Gen 5, and we were the first in the industry to do so.

In the future market, the company continues to make the necessary technical preparations. Recently, generative AI has become a hot topic in the IT industry. 이와 연관된 고성능 고용량 DRAM 위주 수요가 증가하고 있습니다. 이에 당사는 AI 시장의 니즈와 기술 트렌드에 맞춘 최고 성능, 최고 역량 제품을 적게 제공하기 위해 이미 주요 고객사들에게 HBM2 및 HBM2E 제품을 공급해왔고 업계 최고 6.4Gbps의 성능과 초저전력의 HBM3 8단 16GB와

Now, regarding future markets, we're all continuing to make the necessary technological preparations to capture future markets. As you know, recently, the generative AI has become the very hot topic in the IT industry. And as a part of this, we are seeing an increased demand, especially around the high-performance and high-density DRAMs. And so given this trend, in order to provide the best performance and highest-density products on time in line with the AI market needs and technology trends, We have already supplied the HBM2 and HBM2e products to customers, and we're currently delivering samples for the ultra-low power HBM3 8-layer and 16 gigabytes and the 12-layer 24 gigabytes and have already completed mass production. And the HBM-3 will be followed in the second half with the HBM-3P product, which is the next generation, that offers higher performance and density that the market is demanding.

Now, there's also, with the generative AI server, there is a need for the high-density TSV modules, and regarding the TSV modules,

By using our high-density products that uses the cutting-edge node technology, we are planning to strengthen our competitiveness of high-density products for servers that's 128 gigabytes and above.

On the other hand, while it is expected that data processing will increase rapidly in the future, with the introduction of the industry's disaggregated computing architecture, we will continue to develop and develop Another area that we are looking at with quite a lot of interest is the CXL memory.

With the data processing volume expected to rapidly increase going forward, there is a growing need for CXL memory that has higher density and larger bandwidth as the industry starts to adopt disaggregated computing architectures. In fact, starting from this year, we are seeing increasing sample inquiries from customers for CXL products and overall growing interest in the market.

당사는 이미 작년 업계 최초로 512GB CXL DRAM을 개발하였으며, As market interest in CXL increased, we have already completed development of the

512 gigabytes CXL DRAM last year, first in the industry, and also are currently preparing a lineup of CXL products based on CXL 2.0 across different densities. We're also currently developing an SSD based on CXL. And so this is an example of how we continue to diversify our memory solutions according to customer demand. and we will continue to focus on enhancing our technology competitiveness to respond to future market opportunities.

Yes, I will answer the next question. You asked about the SDC's automotive business strategy. Recently, with the addition of electric vehicles, the use of OLEDs for cars is increasing rapidly. With the addition of electric vehicles, we see that vehicles can be used It is changing into a smart space where you can enjoy entertainment. Especially, the interior of the car has recently been designed as a front display, and the display occupies the middle part of the interior of the car. In addition, we plan to expand the technology acquired from smartphones into auto business to promote discrimination. We are actively communicating with global car companies such as Japan, Europe, the United States, China, and Japan. Your second question was about the automotive OLED, the display business.

As you know, recently with the increase of electric vehicles, EVs, there is a rapidly increasing adoption of OLED panels on the vehicle itself. Also, with the increased penetration of EVs, the vehicle itself is changing from a means of mobility to a smart space where the passengers can enjoy entertainment. Also, the most recent vehicle designs are adopting end-to-end full-size displays, And the display itself is becoming a more important part of the vehicle interior. Regarding our plans of developing the automotive display business, we are planning to pursue that by leveraging the technology we have already secured by our smartphone display business. We're currently in active communication with key global automotive OEMs, including those in Europe, U.S., China, and Japan. And we are planning to actively promote the technologies that we have already developed and have been proven in the smartphones on auto applications. For example, this will be whole displays or under-panel cameras and other technologies that have been adopted in the foldable displays.

And above all, I think it is most important for vehicle parts to be able to provide long-term business characteristics stably. Therefore, the company is The company has the largest OED cap in the world, and I think it has a stable financial capacity. From this perspective, we believe that it has the strength of a competitive company in terms of sustainable business. We will use the strength of this company as much as possible to increase the use of OED for automobiles and secure a firm leadership in the auto sector.

The automotive industry, we believe, emphasizes stable supply given that an auto project is a very long-term business. And in terms of such stable supply capabilities and sustainable business ability, we believe that we have an advantage compared to competitors. For example, we have the largest OLAB capacity in the world and have very stable financial strength, and this is an advantage compared to competitors. And by leveraging the advantages and strengths that we have that I've just described, we plan on securing firm market leadership in automotive area by increasing the adoption of OLEDs in automobiles.

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

Since last year, we have made it possible for you to ask questions in advance through the homepage for communication and understanding with individual investors, and many people have left various questions in this quarter. Most of them seem to have been fully explained in the previous Q&A process, and I will answer and finish one additional question that is of great interest to the shareholders among the unquestioned questions. The question is, in a situation where the smartphone mid-priced market competition is intensifying, hardware spec 상향 등 주요 경쟁력 강화 방안과 수요 진작을 위한 마케팅 등 전략은 무엇입니까? 이며 MX의 다니엘 아라우 상무가 답변해 주시겠습니다.

Finally, we will answer questions that were submitted online in advance. We have been accepting questions via our web page in advance of an earnings release as part of our efforts to strengthen communication with individual investors and enhance understanding of the company. And we have received a wide variety of questions for this quarter. I believe the majority of the submitted questions were sufficiently answered during the Q&A session. So we will answer one more question on a topic that garnered a high level of interest from our shareholders but was not addressed during the Q&A session. And that question is the following. What are the major ways to strengthen competitiveness, such as raising the company's hardware specifications, to cope with the mid to low price market. Please explain a major strategy such as price and marketing to boost demand. And this will be answered by VP Daniel Araujo representing the mobile experience.

Sure. So we're strengthening our product competitiveness in several ways that consumers will really be able to feel, including raising the hardware specifications of the A-series and expanding our premium software experience and design. We're upgrading the AP in all models, which is core to the smartphone experience. We are also upgrading the camera and display by model, especially for the A54 5G, which has a big pixel camera sensor that's usually deployed in our flagships, which enables a high-quality and low-light camera experience. We're strengthening the Galaxy's core software experience, which is based on One UI 5.0. And the Galaxy design identity is being applied to all models of the 2023 A-Series.

And the Galaxy design identity is being applied to all models of the 2023 A-Series. and upgraded the cameras and displays for each model. In particular, in the case of A54 5G, it was possible to shoot high-quality low-resolution videos by using a big-pixel camera sensor, which is commonly used in flagships. In addition, we strengthened the core software experience of the Galaxy based on One UI 5.0, and adopted the Galaxy Design Identity for all A series models in 2013.

In Q2 in particular, we'll respond to the market contraction by focusing on the new A54 and A34, which can become with their improved product experience, and in upselling strategies centered on high-capacity storage. We'll also collaborate more closely with local mobile carriers to highlight the fast 5G connectivity of the A series for our customers, focused in areas where the 5G conversion rate is high. like Europe, Southeast Asia, Southwest Asia, and Latin America.

In the second quarter, we will focus on A54 and A34, which are new products that have strengthened the sense of competitiveness. We will promote their mega-hit, and we will actively respond to market shrinkage by promoting an upselling strategy centered on high-capacity storage. Also, we will focus on areas with high demand for 5G, such as Europe,

In terms of marketing, we're running our awesome campaign to communicate in a fun and intuitive way to MZ consumers about core experiences like our large displays, high-end cameras, high-capacity batteries, waterproofing and dustproofing, security, and and OS upgrade support. We'll continue to reduce the purchase burden on consumers while also boosting demand by setting competitive retail prices and operating purchase support programs like Samsung Trade-In and Student Offers tailored to each model and region and considering exchange rate effects and the local situation.

Also, large display, high-capacity camera, and high-capacity battery 방수, 방진 및 보완 또 OS 업그레이드 지원 등 핵심 경험을 MG 소비자에게 펀하고 직관적인 톤으로 커뮤니케이션하는 저희의 오썸 캠페인을 지속 전개할 계획입니다. 또한 환율 영향 등 현지의 상황을 감안한 경쟁력 있는 판매가 책정 및 지역과 모델별 트레이딩이나 스튜던트 오퍼 등 구매 지원 프로그램을 운영하여

I would like to thank everyone who shared their valuable opinion, and we will be sure to refer to them in our decision-making process.

That completes our conference call for this quarter. We wish you and those close to you stay strong and in good health. Thank you.