Samsung Elect Ltd

Good morning and good evening. Thank you all for joining this conference call, and now we will begin the conference on the fiscal year 2023 second quarter earnings results by Samsung Electronics. This conference will start with a presentation, followed by a deep-standard Q&A session. If you have a question, please press star 1, star N1 during the Q&A. For cancellation, please press star 2 on your phone. Now we shall commence the presentation on the fiscal year 2023 second quarter earnings results by Samsung Electronics.

Welcome, everyone. This is Ben Seo, Head of Investor Relations. Thank you for joining Samsung Electronics' second quarter 2023 earnings call. Fairly different from those expressed in today's discussion. I will start with our results for the second quarter of 2023. Although we delivered a slight recovery in revenue for the DS division in the second quarter, consolidated revenue declined 5.9% sequentially to $60 trillion, mainly due to a decreased smartphone shipment number. Consolidated gross profit increased to $18.4 trillion, up $0.6 trillion quarter-on-quarter, increased sequentially, rising 2.8 percentage points to 30.6%. STNA expenses increased by $0.6 trillion quarter-on-quarter to $17.7 trillion for the future, even amid a very challenging business environment. Operating profit increased slightly quarter-on-quarter to $0.7 trillion despite a decline in smartphone shipments, mainly as DS narrowed it. We improved our results quarter-on-quarter as our preparations for robust demand for AI-centric products such as HBM and DDR5, led to higher-than-guided DRAM shipments. However, our system semiconductor business is to sluggish demand from main applications. For display, the mobile panel business reported similar profits sequentially, even in the seasonally weak second quarter, thanks to solid sales centering on expanding QD OLEDs' presence in the premium market. Despite continuing overall weak demand, the DX division achieved strong profitability, mainly due to increased sales of premium TVs and digital appliances business improved its profitability amid strong seasonality, mainly attributable to increased sales of premium products and lower costs, including shipping. Harman reported growth in both revenue and profits bolstered by consumer audio demand which centered on portable and TWS products, and via cost management throughout the businesses. Harman also continued to solidify its foundation for strong growth by winning the largest automotive order ever in its history. In terms of currency, the Korean won showed weakness against the U.S. dollar, the euro, and major emerging currencies in the second quarter. This resulted in an effective gain in operating profit compared to the previous quarter in both the component and the finished product businesses. Next, I would like to share our business outlooks for the second half of the year. We expect global IT demand, especially in our component businesses. However, challenges associated with a demand recovery are also likely to persist due to macro risks and other factors. FOR THE DS DIVISION, AMID EXPLEATENESS OF THE GATE ALL-AROUND PROCESS IN FOUNDRY. HOWEVER, WE DO NEED TO MONITOR THE POSSIBILITY OF CONTINUED CUSTOMER INVENTORY ADJUSTMENT PRODUCTS FEATURING ENERGY SAVINGS MODE UNDER SMART THINGS. WE EXPECT HARMON TO POST IMPROVED PROFITABILITY ON THE BACK OF EXPANDING SALES OF CONSUMER AUDIO PRODUCTS DURING STRONG SEASONALITY FOR MATERIALS AND SHIPPING. Moving on to capital expenditures, capex in the second quarter was 14.5 trillion won with 13.5 trillion won invested in the DS division and 2 trillion won invested in the DS division and 0.9 trillion won in display. Similar to the previous quarter, memory capex concentrated on facilities in Pyeongtaek, which included completing P 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. Boundary investments continue nodes, while display investments remain focused on infrastructure and module production enhancements. Next, I would like to address the second quarter dividend. 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, the total quarterly payout is $2.45 from our sustainability report 2023, which was released in June. Regarding the environment, the DX Division completed its transition to 100% renewable energy at all DX in Brazil. We also increased our use of plastic with recycled resins by three times to reinforce resource circularity. In the DS Division, we continually increased the number of gases. Through these efforts, we lowered our greenhouse gas emissions by 10.16 billion tons and on a corporate level reached a renewable energy transition rate of 31%, an assessment of human rights management at global companies as measured by the World Benchmarking Alliance, a global alliance for sustainability. For more details, please refer to the Sustainability Report 2023. I will now turn the conference call over to the representatives from each business unit to present second quarter performances and outlooks for their respective business segments in more detail.

We will start with EVP Jaejun Kim of the... The memory demand in the second quarter showed somewhat different aspect for each application. For servers, due to strong demand for generative AI, investment from data center area was concentrated on AI servers in limited . As a result, our demand for general servers and storage was relatively limited, and our supply growth for servers exceeded that of the industry. Thanks to our overall sales expansion and active response to rising demand for DDR5 and HVM for generative AI for cutting-edge nodes, we actively responded to the demand. especially for flagship smartphones with our competitiveness in UFS 4.0. In addition, considering increasing production costs in the industry, while inventory adjustments by customers are likely to wind down. Especially in mobile and PC applications, with the normalization of major customer set inventory levels, Set build demand is expected to improve due to the launch of a new smartphone and PC promotion in the second half of the year. In addition to this, for memory, we expect to see a continuation of the trend toward high density based on price elasticity. In server application, although customer inventory adjustment began relatively late compared to mobile and PC, inventories are likely to become increasingly depleted in the second half of the year. Therefore, we expect server demand to recover gradually, and byproduct demand for DDR4 product as well as DDR5 is also expected to gradually improve. compared to the first half of the year.

In addition, we are expanding our applications in the security business to fingerprint authentication cards and in the power business to battery management system, all while almost rebounding demand for parts such as SOC and DDIs driven by peak IT seasonality and as inventory adjustments by customers are coming to an end. Also, for mobile resources, we are seeking to resume supplying major customers by securing other orders for projects in 2026 from OEMs in Europe. Thank you.

Good morning and good evening. and ongoing inventory adjustment made by our customers, which subsequently weakened the demand for major applications such as mobile and PC products among end users. Growth margin faced significant challenges, mainly reflecting lower capacity utilization due to Fed expansion and anticipated uncertainties in short-term demand. To manage profitability in 2023, we will prioritize cost improvement efforts while consistently highlighting the value of our products and services. Despite near-term inventory cycle, the current increase in AI-related demand is driving the greater intensity, primarily due to geopolitical risks, slower-than-expected demand recovery, and ongoing customer inventory adjustments. However, we anticipate a gradual improvement in demand and customers complete inventory adjustments at a healthier and more sustainable level. To establish a solid foundation for growth, we will focus on advancing the development of our GAA technology. We're committed to expanding our product portfolio by continually developing mature processes like 8 nanometer EM ramp, as well as 8-inch technologies tailored for or from the Foundry Business Unit. Thank you.

Good morning. I'm Casey Choi from the Cooperative Strategy Team at Samsung Display. I will now brief you on our results for the second quarter of 2023. Amid high inflation and economic downturn, market conditions in the second quarter remained unfavorable across the board. including for the display industry. For the mobile display business, despite a decline in market demand for smartphones, our strategic customers achieved stable results in the premium product segment. We maintained our market share and generated similar results quarter on quarter by supplying OLED panels equipped with differentiated performance and technology. For the large display business, we improved our business fundamentals by continuing to enhance yield and productivity. With a focus on high-value-added products, centering on those for ultra-large 77-inch TVs, we have been solidifying the premium status of our QD OED lineup. Next, I will share our outlook and strategy for the second half. for the smartphone market, with new product released from several customers' lineup, and we expect our earnings to improve compared to the first half. Notably, we'll use our accumulative technology and know-how in not only foldables, but also our other new functions, such as whole display and hybrid oxide polysilicon, and leverage our technical completeness to stay ahead of our competitors and seamlessly accommodate the mass production of our customers' new products in a timely manner. In the TV market, there is uncertainty over demand due to the sluggish economy and effects of the shift to the endemic. We'll collaborate with our customers to boost sales of ultra-large TVs, which are expected... Hi, everyone.

This is Daniel Araujo from the Mobile Experience Division. I'd like to share our results for 2023 Q2 and the outlook especially in the premium market. However, market research institutes have been lowering their forecast for market growth, and there is potential for additional cuts if they reflect risks of a further prolonged global economic downturn. Regarding tablets off-selling, we are striving to successfully launch the Z Flip 5 and Z Fold 5. which feature even more refined and differentiated user experiences that are specifically tailored to their form factors. With stable inventory management and close collaboration with our partners, we'll boost sales right from launch to further fortify our leadership in the global foldable smartphone market. For the S23 series, we will extend sales in the second half and improve customer retention by closely collaborating with our partners AND ACTIVELY IMPLEMENTING SALES PROGRAMS TAILORED TO CUSTOMERS IN EACH REGION. IN TABLETS AND WEARABLES, WHILE FOCUSING ON BOOSTING SALES CENTERING ON OUR NEW HIGH-END MODELS, WE'LL STRENGTHEN OUR PRODUCT COMPETITIVENESS AND THE PREMIUM ECOSYSTEM EXPERIENCE AND EXPAND SALES THROUGH EFFORTS SUCH AS THE JOINT UNPACKED EVENT, THUS ENHANCING OUR POSITION IN THE PREMIUM SEGMENT. We aim to grow annual revenue in 2023 as we strive to secure solid double-digit profitability by 2023.

EV market demand contracted quarter-on-quarter, mainly due to seasonality. On a year-on-year basis, the trend of demand decline has been lessened due to the base effect of several issues last year, including the Russia-Ukraine conflict outbreak. For Samsung, we improved our profitability year-on-year by focusing on sales of high-value-added products, our leadership in the premium market, and by reducing overall costs, including those involving material and logistics. Now, let me go over the outlook for the second half of 2023. In the second half, we expect seasonal strength to lessen the decrease in overall TV demand amid various business environment uncertainties and risks. And the premium, super-big TV market is likely to remain robust. Samsung will capture the upcoming peak season demand by strengthening sales programs, mainly focusing on screen, and continue to lead the premium market by leveraging innovative products, such as 98-inch SuperBig TV, micro-LED, and the world's first large-sized gaming monitor featuring OLEDs that are highly valued by our consumer, such as environment, security, and content. Thank you.

Thank you. That sums up the second quarter results presentations 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. And as an added clarification, not the literally 13 to 19 range. For DRAM, in the second quarter, our bid growth increased by a percentage in the mid-teens, and ASP declined by a mid-to-high single percent. our bid growth in the second quarter increased by a mid-single-digit percentage, while ASP fell by a percentage in the mid-to-high single-digit range. For the third quarter, we expect market cent range, and small panel sales volume grew by a percentage in the low single digits. For MX in the April quarter, sales volumes of smartphones and tablets were approximately 53 million units, and 6 million units, respectively. And smartphone ASP was $269. In the third quarter, we expect shipments of smartphones and tablets to increase, and smartphone ASP sales volume decreased by a percentage just into the double digits. And for the third quarter, we expect it to grow 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.

Now Q&A session will begin. Please press star 1, 30 star, and 1 if you have any questions. Questions will be taken according to the order you are 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 Dongwon Kim from KB Securities. Please go ahead with your question.

Yes, thank you for the question. I will ask a question about memory and display. First, the demand for memory semiconductors in the second half of the year and outlook.

Second question is a display question. Currently, you are pursuing an ITC litigation in order to protect your display OLED-related technology IP and also enhance your competitiveness. Can you give us an update on that ITC case and whether there's a possibility of that expanding?

To answer your question, first of all, if you look back in the first half, there was definitely a price decline during the first half.

This was driven to the heightened macro uncertainty and also customers going through inventory adjustment in order to secure their financial health. That said, I think during first half, we definitely saw a leveling off of the price decline in terms of both pace and magnitude in second quarter versus first quarter as customers have made significant progress in their inventory adjustments.

In the first half, there was a general lack of new demand, but in the second half, the demand for new stock will improve. In the second half outlook, we think that in the second half, we think that there would be some market changes happening during the second half.

In the second half outlook, we think that in the second half, we think that there would be some market changes happening during the second half.

To give you a bit more detail, in the case of DRAM, we think that there will be an increase in demand for products that use special processes such as TSV or HKMG.

On the other hand, the capacity of these products are rather limited. And so these products could lead the market price rebound earlier than other products. Also, compared to DRAM, we think that the market change in NAN will probably come later.

We think that the market change in NAN will probably come later. We will do our best to protect our technology and to protect our own assets.

However, with the competition in the OLED market becoming more intense, there has been an increase in the unauthorized use as well as infringement of our IP, which is the fundamentals of our competitiveness. Such infringement activity has gone beyond what we could tolerate, and therefore the company has been looking into various ways, including legal measures. Patent infringement is not just an issue in terms of harming the competitiveness of an individual company. Patent infringement undermines the rules of competition and eventually the entire industry ecosystem, and therefore going forward we will continue to do our best as the leader of the OLED industry to not only develop technology, but also protect our technology and intellectual property, and also build a healthy and fair industry ecosystem. Now, regarding the ITC case that you've asked about, because that is a case that is still undergoing, we are not able to provide you with any specific comments.

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

The next question is from Sungkyu Kim from Daiwa Securities. Your next question will be presented by Sungkyu Kim from Daiwa Securities. Please go ahead with your question.

Yes, hello. Thank you for the question. I have two questions. I will give one to the memory side and one to the MX side. First of all, in the memory business, at the beginning of the last quarter, the memory production volume reduction adjustment, You said you're going to do a meaningful review. What's the status of the second quarter? What's the future of the second quarter? Please give us your opinion. As for MX, yesterday, at the Galaxy Unpacked event, you announced a new foldable product. This year's foldable smartphone market, market size, growth prospects, I have two questions.

The first question is a memory question. During the earlier part of last quarter, the company announced its plans to downward adjust its production and to go through a meaningful production downsizing process. Can you give us an update on your current situation as of second quarter and also your plans regarding production levels for the second half? Also, with this meaningful reduction in production, what would be the inventory implications for your memory business in the second half? Second question is an MX question. Yesterday, you unveiled the new foldable phones during the unpack event. With that in mind, can you give us a bit more detail of your market outlook for the foldables, as well as your growth projection, and also some specifics about the strategies of how you plan to increase sales of the foldable phones?

Yes, I'll start with the memory. Due to the lack of demand, the first half of the fiscal year ended at a high level, but the positive thing is that with the reduction in production, D-RAM land, 재고 모두 5월 피크를 기록한 이후 빠른 속도로 감소하고 있다는 것입니다.

To answer your first question about the memory, even though our inventory levels as of end of first half was rather high due to the sluggish demand, a positive note is that for both D-RAM and rapidly.

당사는 하반기에도 생산 하향 조정을 지속할 예정이며 이에 더해 재고 정상화를 가속하기 위해

Now, regarding our production plans for the second half, we are planning to maintain the downward adjusted production, even in the second half, and also on top of that... ...near the foldables category, and our products are receiving high praise from the market for their competitiveness.

We plan to continue developing foldable devices... as a new growth driver for our flagship devices. We expect the foldable's market to continue to grow in 2023 and also to keep expanding its portion in the premium market.

I will answer the second question. The company has developed a foldable category in advance, and its competitiveness is highly evaluated in the market. In addition, we plan to grow the foldable as a new driving force for flagship growth.

As we unveiled that unpack yesterday, the Flip 5 has a slimmer, more refined design with a larger cover screen and an enhanced user experience that's optimized to the form factor as a whole. For example, using the cover screen, users can take high-definition selfies using the rear camera from any angle they want. And they can use the Flex window to express their individuality, as well as to take care of a variety of tasks quickly and conveniently.

As announced at the UNPACK yesterday, the Flip 5 increased the design completeness with a larger cover screen and slim thickness, and also enhanced the experience of the form factor. For example, users can take high-quality selfies at various angles using the rear camera, As for the Z Fold 5, we made it thinner and lighter than its predecessor with the application of the Flex Hinge.

We also equipped it with a high-performance AP along with better heat dissipation and optimized software to further enhance the gaming experience. And in addition, we improved the multitasking functionality that many of our Fold users take advantage of, and also productivity functions via the slimmer S Pen.

In the case of Fold 5, the flex hinge was applied to make it thinner and lighter than the previous one, and the high-performance AP was installed to optimize heat generation and software optimization to improve individual experience. In addition, we improved the multitasking function that Fold customers use a lot,

As we continue to refine these products, we're also enhancing our marketing and sales strategies to firm up our leadership in the global foldable market. Yesterday's impact was held for the first time in Seoul, a city that's not only rich in history and tradition, but also at the forefront of global trends and innovations. And so through this event, we intend to keep creating buzz by providing more in-depth product information and experiences to global media and tech influencers. We're also strengthening our market collaborations with partners, one of our strengths, to help boost sales right from the launch. And by branding our differentiated Galaxy foldable experience as Flex, we aim to improve our position as an aspirational brand.

As we improve the completeness of the product, we will further enhance the marketing and sales strategy to promote global foldable market leadership. For the first time, Unpack will provide traditional and future-oriented information and experiences to continue to create buzz. Also, we will strengthen the marketing cooperation with the market, which is the strength of the company, and lead a clear sales future from the beginning of launch. Lastly, we will brand the Galaxy Foldable's unique experience as FLEX, and we will improve the flexibility of the Foldable. Thank you for your answer.

Next question, please.

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

Hello, this is Lee Se-cheol of Citigroup. I'm very interested in the market these days. The first question is, due to the expansion of the AI market related to memory, it seems that the HBM market will continue to have a positive impact. What is the response of the HBM market and Samsung Electronics?

Yes, I will answer the question related to HBM in memory first. As you said, according to the growth of the generative AI market,

I think your first question about HBM, as you mentioned with the growth of the generative AI market, we are expecting there to be a rapid increase in demand for high-performance memory that can support large-scale data processing, especially HBM.

HBM's demand is expected to rise by 30% in the second half of the next five years. On the other hand, there is a lot of demand for customers due to the deep competition in the generative AI services of hyper-scaler companies. In particular, this year and next year, a lot of demand has begun to come from cloud companies.

Now, the next generation will be HBM3, and in HBM3, we're currently undergoing customer qualifications with the industry top performance and density or capacity, and we have already started shipment of eight-layer 16-gigabyte and 12-layer 24-gigabyte products to key AI-associated companies and cloud companies.

The next generation, the HBM-3T, is scheduled to be released in the second half of the year based on 24GB. This is also a plan to meet the requirements of the AI market, which is preparing for the highest level of performance and capacity in the industry.

The subsequent generation will be HBM-3T, and we're planning to launch that product in the second half based on 24GB. We are preparing this to be once again industry's best performance and capacity in order to actively capture the increasing AI market demand.

Next, I would like to talk about the HBM supply capacity. As a major supply company in the HBM market, we are maintaining the highest HBM production capacity based on continuous investment. Based on this, this year, we will be able to produce

To give you a bit more detail about our HBM supply capabilities, as a major supplier within the HBM market, we have been continuously investing in our production capabilities and have been maintaining one of the top industry HBM production capabilities Based on that, we have already booked around a billion or mid-billion gigabit level of customer demand, which is around double what we had last year. And to prepare for additional order bookings happening throughout the second half, we are in the process of further increasing our supply capabilities through productivity enhancements.

Not only that, we are planning to continuously expand our supply capabilities

We are the leader in HBM, and we will continue to maintain the industry leadership. by maintaining not only the industry's top-level technology, but also securing timely supply of HBM products in line with the upcoming surge of HBM demand.

Foundry, I will answer your question. Due to the generative AI boom, not only HBM memory, but also AI chips such as CPU, GPU, and AI accelerators at least for the next five years.

To answer your question about the Foundry side, with the rapid emergence of generative AI, we're expecting their 2PU, GPU, and AI accelerators at least for the next five years.

These AI chips, especially the parallel processing chip, are very important for high performance and high energy efficiency. These AI chips, especially the parallel processing chips that you mentioned,

The critical in these parallel processing chips is high performance and energy efficiency. Actually, the GAA process where we were able to go into mass production for the first in the world last year is the optimized advanced node for delivering the high performance and energy efficiency needed for an AI chip. And we plan to maintain the leadership in AI chip markets through technology leadership by achieving two-nano GAA process mass production in 2025.

AI chip is also being packaged as an HBM memory and HANA chip. The advanced packaging technology and capacity that makes this possible are becoming more and more important. Customers want to entrust a series of processes such as foundry, memory, and packaging to HANA. The strength of the company is that

Also, another implication of the AI chip is that usually AI chips are combined, integrated into a single package together with the HBM memory, and hence advanced packaging technology and capacity is becoming more and more important. And from the customer's perspective, they want to have everything done in one place, the foundry, memory, and packaging. Our strength is that we all, we have the technology for GAA.

The next question will be presented by Jeong-Joon Park from J.P. Morgan. Please go ahead with your question.

Yes, thank you for the question. I also have a question related to HBM. Regarding HBM backend technology, Samsung is currently applying NCF technology to the TC banding. Please explain this in detail. The competitor is called MRMURP. Please explain what are the differences and advantages of NCF. Secondly, when you mentioned the presentation data earlier, you said that you acquired Imagine. Please tell us what strategy you have in mind for the future use of micro-displays.

Micro-pump is used to connect the TSV of the... It is effective in reducing this threshold. Based on this, we are implementing the world's first 7-micro technology, which reduces the chip threshold of HBM-3 12-stack products and improves thermal characteristics.

NOW, IN TERMS OF PERFORMANCE, BECAUSE THE HBM OPERATES AT HIGH SPEED, IT IS IMPORTANT TO REDUCE THE GAP BETWEEN CHIPS SO THAT HEAT DISSIPATION PERFORMANCE CAN BE IMPROVED DURING OPERATION. AND NTF, BECAUSE IT IS A VOIDLESS PROCESSING TECHNOLOGY, IS VERY EFFECTIVE IN REDUCING THAT INTERCHIP GAP. AND SO BASED ON THIS TECHNOLOGY, IN THE CASE OF OUR HBM 312 STACK PRODUCT, WE HAVE BEEN APPLYING First in the world, a 7-micro technology that has advantages in terms of reducing chip gap and also improving the thermal characteristics.

In terms of productivity, the NCF process does not require additional processes such as cleaning and heating, which are used for the removal of solder on the solder surface. Also, the NCF process has advantages in terms of productivity because the NCF process actually inherently includes a process and function of removing the oxidation layer on the

the surface of the solder, which is the bonding material. And therefore, we do not need to go through an additional separate process such as cleaning or heating that will be required to separately remove an oxidation layer from the solder that is created during bonding. Also, we have designed an optimized process from the soldering and bonding process, and that's why we're able to achieve competitive productivity even with an eight-stack product.

In the case of 12-stage HBM products, which are expected to increase in size from 2024, due to the reduction in chip thickness due to the increase in the number of stacks, there may be technical problems caused by chip wear. However, since the NCF technology of the company is a method of bonding by heat and weighting the front and back of the chip, it can relatively easily control the chip wear,

Even going forward, the NCF technology we expect will give us a competitive advantage, even in the 12-stack HBM product, which will probably be adopted wider as we go into 2024. When the number of stacks increase, each chip becomes thinner, which makes it more susceptible to chip bending. which may lead to various technical issues. However, in the case of our NCF technology, because the heat and pressure is applied on the entire surface of the chip during the bonding process, we are able to relatively more easily control the chip bending. And we think that, therefore, the NCF technology that we'll have, the competitiveness of it will become even more noticeable as we move up to the 12-stack product.

In addition, the company is preparing a new technology to meet the needs of the future market by completely eliminating the gap between chips and developing a new process that directly integrates chips and chips. The company is going to strengthen its leadership as a leading company through continuous new technology. Thank you.

To go further down our HBM product roadmap, there would be the HBM416 stack, ultra-high density product. In that case, the thickness barrier has to be overcome. And in that case, we're currently in the process of developing a new process that would actually directly bond chip to chip and would actually remove any gaps between chips in order to address this height restriction. By developing such core and fundamental technology, we are preparing to capture future market demand, and we will continue to strengthen our leadership as the HBM leader by continuously adding on such new technology.

Yes, I will answer the display part. As you asked, the company invested about 2,900 billion won in May, . . . . . . . .

So I think the second question was, which was about our Imagine acquisition. As you mentioned, it was last May that we signed the contract to acquire Imagine, which is a U.S. micro-display company at around 290 billion Korean won. Currently, we're in the follow-up process, for example, going through the merger approvals with various country authorities, and we expect to completely close the deal and acquisition process by around October this year. The key purpose of this acquisition is to enhance our technology preparedness for the XR device market. The XR device ecosystem has picked up activity, especially most recently. Some are saying that once the XR devices become widely penetrated, it would bring fundamental change to the way people live beyond what had happened by the smartphones.

Yes, and to explain more about Imagine, Imagine has been a company that has been developing micro-displays, which are the core parts of XR devices since 2001. In particular, it has the necessary source patent and public technology for ultra-high-definition OLED-on-silicon, that is, OLEDOS manufacturing. And to explain more about Dangsa, Dangsa has also formed a dedicated development team since last year. And OLEDOS, We are focusing on developing 4th generation micro-displays such as Redos. Through this IMAGINE INSURANCE, we hope to increase XR business competitiveness and provide innovative micro-display solutions to various customers. We will continue to continue technology sensing in various areas to secure and market future technology. We plan to expand investment and cooperation.

To give you a bit more information about the company Imagine, Imagine is a U.S. company that has been developing micro-displays from around 2001. As you know, micro-display is one of the key components in an XR device. Also, Imagine has the basic and core technology patents and processing technologies that are necessary for manufacturing ultra-high-resolution OLED on silicon or OLEDOS. ACTUALLY, THE COMPANY HAS BROUGHT ORGANIZED A DEDICATED DEVELOPMENT TEAM SINCE LAST YEAR. WE HAVE BEEN ORGANIZED A DEVELOPMENT TEAM SINCE LAST YEAR TO LOOK INTO THE DEVELOPMENT OF VARIOUS MICRO DISPLAY TECHNOLOGY SUCH AS OLEDOS OR LEDOS. AND THE IMAGINE ACQUISITION HAS BEEN ACHIEVED AS A PART OF THAT ACTIVITY. think that the Imagine acquisition will help enhance our XR business competitiveness and provide micro-display solutions, innovative solutions to a wider range of customers. Going forward, we will continue to sense out various technologies that were necessary to secure our leadership in future technology and give us a differentiating competitive edge, and we'll continue to make as well as partnerships as necessary.

Your next question will be presented by Minsuk Choi from Korea Investment and Securities. Please go ahead with your question.

Hello. Thank you for your question. My question is about automotive memory.

I think within the larger memory market, The automotive application had accounted for a small quantity. Also, however, it required very high quality. And therefore, compared to other applications within the memory market, it had received less importance up till now. But with especially the emergence of autonomous driving, I think even from the memory industry's perspective, automotive is becoming a more and more important application. With that background, can you give us your outlook on the automotive memory market and how you are preparing to capture that?

Yes, I will answer your question about the automotive memory market. As the era of electric cars and autonomous vehicles is approaching, vehicle memory demand is also increasing. The automotive memory market is expected to grow by an average of 30% in the next five years.

To answer your question about automotive memory, yes, as you mentioned, with the advent of EV and autonomous driving, the demand for automobile memory has been very strong. I think there are projections that say that the automotive memory market, in terms of value, would grow in, on average, a mid to high 30% range for the next five years.

The demand for automotive memory is increasing rapidly. In fact, automotive memory demand is expected to grow quite rapidly at this pace.

It would actually be larger as a business opportunity than the PC application by early 2030s. And therefore, we're also strengthening our business competitiveness related with automotive memory demand.

We are focusing on the reliability and stability of automotive products. As a result, we received the A-SPICE CL2 process and product certification as the first domestic company to receive the A-SPICE CL2 process and product certification from the German major tier 1 customer service in April 2013. But then the vehicle has a direct impact implication on human lives.

And that's why when it comes to automotive application products, reliability and stability is most important. UNDER THAT POLICY, WE WERE THE FIRST AMONG KOREAN COMPANIES TO RECEIVE THE ASPICE CL2 PROCESS AND PRODUCT CERTIFICATION FROM A MAJOR GERMAN TIER 1 CUSTOMER IN APRIL 2020 THROUGH 23, USING OUR AUTOMOTIVE UFS 3.1 PRODUCT. ALSO IN LATE JUNE, WE ACTUALLY RECEIVED CERTIFICATION using a product that we're actually supplying to a customer from CNBIS Corporation, which is a globally recognized automotive certification body.

이는 당사 오토모티브 UF 3.1 제품이 고객사와 인증기관 둘 다에서 풀피처에 대한 인증을 확보한 것입니다. To sum the two up, our automotive UFS 3.1 product

has received full feature certification from not only the customer, but also from a third party certification body. AESPICE is a development standard that assesses the reliability and capability of automotive software development process. And our automotive memory product has received a CL2 certification under AESPICE. And that shows that we have been internationally

tested and recognized for the high level of stability and quality that is required by the automotive semiconductor market uh automotive memory

Another focus of our automotive memory technology development is power efficiency. For example, the infotainment application focused UFS 3.1, which we started mass production earlier this month, has one of the lowest power consumption in the industry. That would help enhance the power operation efficiency of the EV's battery, and we think that this can be used to create the optimal memory solution for EVs or autonomous vehicles.

Like this, the company has built a full line-up based on products that are differentiated from the automotive market, such as product stability and consumer power. In addition, over the past eight years since the start of the automotive business,

In addition to preparing one of the industry's best full automotive lineup that supports the differentiated needs of the automotive market, such as product stability, reliability, and power consumption, We also have a very strong relationship with key automotive customers that have been built up during the past eight years, which was when we first started our automotive business. And during that period, we have not had a single supply issue. So we have a very strong relationship with the customers in terms of trust. Also, as you know, we are present in all of the major OEMs in Tier 1 companies.

In the future, the company will continue to develop Thank you.

Our future direction in terms of our automotive memory business is to continue to maintain a very competitive product lineup and continue to work together with our customers to maintain our leadership.

Thank you. Next question.

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

Good morning, and thanks for taking my question. So coming back to AI memory, so as AI and cloud demand grows, there will be effectively more needs for comprehensive technical requirements in memory products beyond just HBM. We already talked about quite a bit. So on your side, what are the efforts you're currently making to actually prepare for this long-term industry trend in the future? And what are the key technology avenues you'll basically seek to get ready to effectively monetize this significant opportunity?

Thank you. As mentioned earlier, the growth of cloud and AI In addition to HBM, I think that the technology requirements related to memory will be more complicated and new requirements will appear in various aspects. Since the memory opportunity related to AI is a very big opportunity, I wonder what technology field you are focusing on and preparing for in the long term in order to monetize it.

As you mentioned, with the recent growth in cloud and AI,

We are actually seeing a rapid shift and change in the market demand, what they require from memory, from various applications, including servers and graphic applications. As the memory industry leader, we are actually securing various future technologies on multiple avenues to meet market demand.

First, to respond to the demand for high-capacity modules required by data centers and AI, 32-gigabit DDR5 products. The high-core CPU used for AI high-performance computing requires a larger memory capacity and bandwidth compared to existing CPUs. In order to reach the maximum speed in this process, it is most effective to use a high-capacity module rather than using multiple DRAM modules on one channel. Therefore, the market needs for recently large-capacity modules are growing. To give you a bit more detail, I think the first one we can introduce is the 32 gigabit DDR5 product that we're planning to launch.

This will address the high density module demand that's necessary for data center AI The high-core CPUs that are used for the high-performance computing for AI actually needs larger memory capacity and bandwidth versus existing CPUs. In this process, for the sake of optimizing the speed, rather than using multiple DRAM modules on one channel, it's much more advantageous and effective to use a single large density module per channel. And that's why recently there's been an upsurge in market need for high-density modules. We are planning currently to launch the 32-gigabit DDR5 product within this year based on our advanced node process. And this can be incorporated into a high-density module to address the rapidly increasing high-performance computing demands.

Next, Dangsan is continuing to secure the product at the highest level in GDDR and graphic DDR. Dangsan recently developed the GDDR7 with the highest performance of 32Gbps. The GDDR7 is 1.4 times faster than the previous generation GDDR6, and the power efficiency is 20% improved. Based on this performance, we expect GDDR7 to be widely used not only for PC and gaming applications, but also for high-performance computing and AI.

The next to highlight is our graphic DDR, the GDDR. We are continuing to maintain the industry leadership in GDDR as well. Recently, we developed the GDDR7, with 32 gigabits, which is the industry's top performance versus the previous generation, which is a GDDR6. The GDDR7 offers 1.4 times faster data speed with 20% improved power performance. So based on these improved performance, we believe that the GDDR7 can be used not only for PC or gaming applications, but widely in high-performance computing and AI.

On-device AI can be used not only for PC or gaming applications, but widely in high-performance computing and AI. On-device AI can be used not only for PC or gaming applications, but widely in high-performance computing and AI. On-device AI can be used not only for PC or gaming applications, but widely in high-performance computing and AI.

Another product to introduce would be the LLW, which is low latency wide IOD RAM, which would be specialized for the on-device AI. Currently, even though generative AI is mainly designed around the server infrastructure, for efficiency as well as security reasons, there is also a movement to develop on-device AI technology that would implement AI on the device itself.

LLW is a low-distance, low-power feature, and it has a high high-speed ratio compared to the existing LPDDR, so it can process the data generated by the machine in real time. In addition, the company is aiming to mass-produce in the next 24 years, cooperating with major partners in the industry in connection with the growth of the on-device AI market.

LLW not only has low latency and low power characteristics, but also has a significantly wider bandwidth versus the existing LPDDR and is capable of real-time processing the data that is generated on device. And so we're currently working with the on-device AI market, working together with various key partners in developing our product with the target mass production of late 2024.

In addition, we are preparing to develop DRAM products that can be directly combined with logic with advanced package technology specialized for AI at the data center. This allows us to implement a larger capacity, not only economically, but also effectively process data that increases with the size of the AI model. We're also currently developing advanced packaging technology, which will be specialized for data center AI.

Using this advanced packaging technology, we're developing a DRAM product that can be directly integrated with the logic. This would be more economical versus an SRAM solution and also can be used to implement higher densities, which will be effective in processing the data, which is rapidly increasing with the introduction of larger AI models. We have already talked with a major CPU customer, and so the detailed product specifications have already been defined for the DRAM product. And based on that, we are preparing to provide a differentiated solution.

In addition, LP-DDR based modules such as LP-CAM have also been developed. In the meantime, low-power LP-DDR products have been mainly used as a single mobile device. Recently, there is a need to reduce power consumption by adopting LP-DDR modules, not existing DDR modules, centered on the main client PC and server customers. Therefore, we have developed LP-DDR modules called LP-CAM for the first time, We've also developed the LPCAM, which is an LPDDR-based module.

As you know, up till now, the low-power LPDDR product was mainly used standalone on a mobile device. But recently, major client PC customers, as well as some server customers, are showing strong interest in using a LPDDR based module instead of the existing DDR module in order to further reduce power consumption. And based on that need, we were the industry's first to develop the LPDDR module, which is called LPCAM. We are currently planning to start pilot mass production of LPCAM first half of next year to actively capture the low power demand that is happening in the client PC and server markets.

In addition, the company continues to develop solutions for memory semiconductors such as HVM PIM, CXL-based PNM, and Processing Near Memory, which are suitable for processing ultra-large AI models. These technologies will be used to develop

In addition to that, we're also working on developing new memory semiconductor solutions, including the HBMPIM processing in memory, as well as a CLXL compute express link-based and M are processing near memory that are more optimized for processing large AI models. Basically, these concepts, the technology concepts, is to position the processing either within memory or near the memory to minimize any data bottlenecking between the CPU and memory.

As a result of calculating the performance improvement effect by applying HBM PIM, We have been conducting some performance benchmark tests.

For example, if we use the HBM PIM, there is a performance improvement. So compared to the existing GPU accelerator, the AI model's performance under HBM PIM improved by around 3.4 times.

Also, when CLX-based PIMs approach,

We are planning to launch a 64TB server SSD. This will be the highest density, highest performance TLC-based product. We're planning to launch that early next year. This will be the first in the industry in order to address the increasing demand for high-density storage.

We have shared our future technology preparation situation. As a leading company in the memory market, So that was a brief introduction to some of the key future technologies that we are preparing

As the leader of the memory market, we will continue to remain focused on not only strengthening our technology competitiveness, but also leading the development of the memory ecosystem by presenting new technology standards. So going forward, we will continue to actively send out future market needs and develop technology to back this to strengthen our market leadership.

Thank you for your detailed answer.

The last question will be presented by Soobin Lee from CGS CIMB Securities. Please go ahead with your question.

Hello, I'm Lee Soobin from CGS CIMB Securities. Thank you for your question. I have a question for the VDE Department. My question is to the VD business.

There was a media report on adoption of WLED. With that in mind, can you give us your strategy in the premium OLED TV product lineup and your second half outlook for TVs.

Yes, I will answer the visual display. Even in the current situation where the global TV market is somewhat stagnant, the demand for premium products such as QLED, OLED, and ultra-wide-angle will continue to grow. Therefore, the company is planning to diversify the premium lineup and provide various options to consumers.

To answer your question, even though, yes, the overall global TV market is somewhat sluggish, we think that within that overall market, the demand for premium products such as QLED, OLED, and the super big TVs will remain solid. And so our strategy and approach is to diversify our premium lineup to give consumers a wider range of choice.

For this reason, in the second half of the year, we will further strengthen the communication of the product competitiveness of Neo QLED, which is the backbone of the premium line-up of the company, and since OLED was evaluated well by selling to major regions in the center of 65-inch and 55-inch last year, we will continue to introduce an additional 83-inch and 77-inch ultra-large line-up this year and continue to make a distinction only for Samsung OLED.

Now, to give you a bit more detail about our second half product lineup, the NEO QLED, which is the backbone of our premium lineup, in the second half, we will focus on strengthening the communication about the product competitiveness of NEO QLED. And in the case of Oiled, which actually received very good responses in sales of key areas, especially around the 65 and 55 inch last year, For OLED, this year, we will additionally add the super big lineup, that's 83 and 77 inches, and continue to appeal the differentiating factors of Samsung OLED.

또한 98인치는 기존 네오 QLED 제품에 더하여 8K와 QLED 라인업을 추가 도입하고 마이크로 LED는 110인치 외에 89인치를 보강하여 Thank you.

In the case of even larger screen size segments, in the case of the 98-inch, in addition to the existing Neo QLED offering, we will be additionally adding the 8K and the QLED lineup in the 98-inch segment. For the micro LED, in addition to the existing 110-inch, we will be supporting that with an 89-inch offering to continuously create markets in the super large, super high-end premium TV market. At the same time, we offer the lifestyle screen products, which is a differentiating product group, and therefore we will use also this to satisfy the wide variety of consumer needs.

Thank you for your answer.

Lastly, we will answer the questions that were asked in advance online. We have made it possible for you to ask questions in advance through the homepage to strengthen communication with individual investors since last year, and many people have left various questions this quarter. Most of them seem to have been fully explained in the previous Q&A process, and I will finish by answering one additional question that is of high interest among the unanswered questions. Finally, we will answer questions that were submitted online in advance.

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 also to enhance understanding of the company. We received a wide variety of questions for this quarter. I believe that a majority of those 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 so the question is the following. Recent launches of MR devices suggest the industry believes this area is poised for growth. So does Samsung have any plans to launch related products or create an ecosystem? This question will be answered by VP Daniel Araujo, representing the mobile experience.

Immersive content has already expanded beyond virtual gaming into media and work and we expect it to become a mainstream technology. We see the XR market as a large new growth opportunity, and we're working systematically to lay groundwork for an ecosystem that includes core hardware, software technology R&D, and content.

Immersive experience is already being applied to the media and business fields beyond virtual games, and we expect it to be popularized in earnest. We're actively investing to create a high-quality, innovative device and a differentiated user experience that is unique to Galaxy.

And to do so, we set up a dedicated organization for immersive product planning and R&D, and we're also collaborating closely with affiliate companies and other partners. In particular, this includes a mid- to long-term collaboration with leading partners like Google and Qualcomm.

We've already set up a dedicated organization for the planning and development of immersive products, and we're working closely with various stakeholders and partners We're well aware that many companies have recently released VR-based devices, and we will offer an XR device in MX's Galaxy ecosystem.

to provide a new and differentiated form factor experience where consumers can spend more time communicating, working, or enjoying their leisure time. And we're working to create a fully developed product and XR ecosystem. And so we're preparing to release a product when it's at the point where it'll fulfill consumer expectations.

Thank you. Recently, many companies are releasing VR-based devices. Thank you for your answer.

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

And on that note, our conference call for this quarter comes to an end. We wish all of you and those close to you stay strong and in good health. Thank you.