Samsung Elect Ltd

Hello, everyone, and welcome to the Samsung Electronics 2025 Fourth Quarter Financial Results Conference Call. I will be your coordinator. All participants will be in a listen-only mode until we open the question-and-answer session following the presentation. As a reminder, this call is being recorded. I would now like to turn the conference over to the Investor Relations team. Please go ahead.

Good morning, everyone. Thank you for joining us this morning in Seoul time. I'm Daniel Woo, Head of Investor Relations at Samsung Electronics. I'm grateful to have you with us today for our earnings call for the fourth quarter of 2025. Before we proceed, allow me to address several key administrative and legal points. For your convenience, today's webcast and slide deck are accessible via our IR website at www.samsung.com backslash global backslash IR. I would like to note that this call is being recorded and it will remain available on our website for future reference. We appreciate your engagement and focus as we move through the results as today's session aims to deliver comprehensive insights into our financial performance and outlook. Please be aware that today's discussion may contain forward-looking statements reflecting our present expectations about future developments. Such statements should not be viewed as guarantees of future outcomes. Actual results may vary significantly from these projections due to numerous factors, including but not limited to market dynamics, regulatory changes, and operational environments. We respectfully seek your understanding of these important considerations as we seek to uphold transparency and accuracy. I will begin the discussion today with the highlights of our fourth quarter financial performance, followed by EVP Sunchul Park, our head of corporate management operations and chief financial officer, with details on our business outlook and shareholder returns. I will then share a brief update on capital expenditures and sustainability initiatives. At that point, our executives will provide in-depth comments on their respective business areas. Following their presentations, we open the call to analyst questions. This call is expected to last about one hour, and we appreciate your time and attention throughout. Several key executives have joined us on today's call. In addition to myself and our CFO, we have with us EVP Jaejun Kim representing memory, joining the call for the first time, EVP Jason Shin for system LSI, For Foundry, EVP Seok Chae Kang. And returning to the call, EVP Charles Her for Samsung Display Corporation. Also both joining the call for the first time, EVP Sung Hyuk Cho for mobile experience and EVP Han Lee for visual display. Now let's begin with our consolidated financial performance for the fourth quarter of 2025. we delivered our highest quarterly revenue ever at 93.8 trillion won, up by 9% quarter-on-quarter. In the DX division, revenue declined 8% sequentially due to the fading impact of new smartphone launches and softness in home appliances in the wake of U.S. tariffs. On the other hand, the DS division showed strength with a sales increase of 33% quarter-on-quarter driven by expanded sales of HBM and other high-value added products, thanks to stronger market prices. And memory recorded another new all-time high for quarterly revenue, surpassing the level set one quarter ago. SG&A expenses were $24.2 trillion up by $2.9 trillion quarter-on-quarter, and SG&A as a percentage of sales was up by one percentage point sequentially, to 25.8%. R&D investments totaled 10.9 trillion won, up by 2 trillion won quarter on quarter, and set a full year record of 37.7 trillion won, a testament to our commitment to investing for the future. Operating profit also set a new quarterly high of 20.1 trillion won, up 7.9 trillion won from the previous quarter. Operating margin also increased, rising 7.3 percentage points, eventually to 21.4%. While operating profit in the Dx division declined due to the slowdown in the MX and home appliance businesses, the Dx division more than compensated with its significantly stronger quarter-on-quarter performance driven by robust improvements in memory profitability. Currency movements, also worked in our favor. The sharp appreciation of the U.S. dollar and other currency had positive effect of adding approximately $1.6 trillion to company-wide operating profit centered on the component businesses. More detailed fourth quarter results of each business will be presented by executives shortly. Before that, I would like to pass the conference call over to our CFO, Sincheol Park, who will discuss our outlook and share the return.

Thank you, Daniel. And good morning, everyone. I am Sunchul Park, CFO of Samsung Electronics. I am pleased to continue our update. We entered 2025 under difficult conditions, both at home and abroad, and the first half of the year posed many challenges. Yet, thanks to the trust and the support of our shareholders, the second half unfolded as we promised and marked a clear turnaround for the company. We achieved the highest annual revenue in our history. Profit in the first quarter also set an all-time high, and our stock price increased sharply I am deeply grateful to our shareholders for standing with us through the challenges and this turnaround. The DS division introduced globally competitive products, including HBM4 and GDDR7, and some customers summed up our achievements with the idea Samsung is back, sending a clear signal of the strength behind our differentiated performance. The foundry business is primed for a major leap forward supported by each technology and the trust it has earned through recent deals with leading global clients. The DX division added to our technology leadership with a trifold smartphone and micro rgb tvs while delivering distinct customer experiences powered by advanced ai technology across the galaxy ecosystem we also secured new growth drivers through strategy acquisitions including flat group in HVAC, ZF in ADAS, ZELS in digital healthcare, and Meshmo's audio business. Looking ahead to 2026, we expect several risks to persist, including continued global trade barriers and geopolitical uncertainties. To address this, we remain proactive and stay ahead of external shifts. The DS division will continually secure leadership in the AI semiconductor market by drawing on our unique position as the one semiconductor company in the world capable to delivering a true one-stop solution, including logic, memory, foundry, and advanced packaging. In memory, we will regain our core technology leadership, and in Foundry, we will turn our expanded order opportunities secured through advanced process maturity into tangible results. For System LSI, we aim to transform the business by reinforcing our core strengths. We also drive innovation by applying AI solutions optimized for semiconductors and capture new opportunities with enhanced customer-centric products. The DX Division will expand AI-driven products and constantly integrate our AI technologies across all of the DX Division's device features and the service ecosystem, while providing the best AI experience to our customers. Through this, we aim to become the leader in the era of AI transformation. To maintain our competitive advantage, we will secure our position by leveraging our distinctive products, diversifying our supply chain, and optimizing global operations to address the issues such as compound costs and global tariff risks. Furthermore, we will continue to invest in future growth engines, including HVAC, automotive electronics, medical technology, and robotics to secure technology leadership in the years ahead. Company-wide, we'll strengthen our processes and improve cost efficiency by promoting AI-driven innovation and adopting digital twin technologies. Also, we'll strive to make this a year in which we deliver tangible progress in our humanoid robotics business as part of our preparations for the future. Next, our hour for the first quarter of 2026. In the semiconductor industry, we expect structural growth opportunities to increase, driven by AI and server demand. In response, we will maintain our focus on profitability while monitoring macro uncertainties, including tariff impacts. For the DS division, in memory, we believe market conditions will remain favorable, driven by AI demand and industry-wide supply constraints. And we expect to sustain our strong performance by focusing sales on server DRAM, ESSD, and other high-value-added products supported by our technology leadership. In Foundry, although research may decline somewhat due to seasonal effects, we'll preserve our growth momentum by advancing process maturity and securing new orders from major customers. In System LSI, While there are concerns regarding customers' cost burdens, we will seek to maximize sales of new and highly-valued products. For the DX division, the MX business will reinforce its leadership in the AI smartphone market by delivering AI experiences that enhance everyday life supported by the launch of a new model. While headwinds from rising component costs are expected to persist across the industry, we aim to secure profitability through improved supply stability and resource efficiency initiatives. In the VD and home appliance businesses, Amid like continued challenges such as intensifying competition and tariffs, we expand our presence in the high-value-added product market by delivering hyper-personalized customer experiences powered by enhanced AI technology. Moving on to the shareholder returns. The Board of Directors today approved a year-end per share dividend of 566 Korea won for common stock and 567 Korea won for preferred stock. Under our shareholder return policy for 2024 to 2026, we committed to regular quarterly dividends of 2.45 trillion won for an annual payout of 9.8 trillion won. Last year, the government introduced a separate taxation scheme for dividend income from high dividend companies aiming to increase dividends and vitalize the capital markets. To meet the requirement for 2025, the Board resolved to declare an additional dividend of $1.331. The fourth quarter distribution is scheduled for payment in April, following final approval at the AGM in March. Thank you.