Samsung Elect Ltd

Hello everyone and welcome to the Samsung Electronics 2026 Second 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.

Welcome everyone and thank you so much for the taking time. Out of your busy schedules today to join our 2026 second quarter earnings call. We truly appreciate your continued interest in the company. I'm Daniel Oh, Head of Investor Relations at Samsung Electronics, and it is my pleasure to guide you through today's earnings call. For those joining us today, we kindly invite you to visit samsung.com backslash global backslash IR, where all materials from today's call, including the sliding deck, and webcast are available and will remain accessible after call concludes. First, I would like to briefly mention our important legal disclaimer before we begin the session, as is our standard practice. We kindly ask you to be aware that today's discussion may include forward-looking statements that could differ materially from the actual results. For your reference, our full disclaimer is provided on the associated slide. During today's call, EVP Soon-Cheol Park, our chief financial officer and head of corporate management operations, will review our second quarter 2026 financial results, share the returns, and business outlook. I will then follow up with updates on capital expenditures and our sustainability initiatives before handing the call to the business executive officers for details on their respective business performance and outlook. We'll then wrap up the call with a Q&A session. We expect today's conference call to last approximately one hour. The executive officers joining us today include EVP Soon-Cheol Park, our chief financial officer and head of corporate management operations, EVP Chae-Joon Kim, head of global sales and marketing office representing memory, EVP Jason Shin, head of the sales team for system LSI, EVP Seok-Jae Kang, Head of Sales and Marketing Office for Foundry EVP Charles Ho, Head of the Corporate Strategy Team for Samsung Display Corporation EVP Daniel Araujo, Head of Strategic Planning Group for Mobile Experience EVP Heon Lee, Head of Sales and Marketing Team for Visual Display Now I would like to turn the call over to our CFOs Soon-Cheol Park for his comments on our second quarter financial performance.

Thank you, Daniel. Good morning. And thank you, our shareholders, investors, and analysts for joining today's earnings call. I am Soon-Cheol Park, CFO of Samsung Electronics. Building on our record first quarter performance, we delivered new high in the second quarter for both revenue and operating profit driven by our continued technology leadership in AI and ability to navigate changing market conditions. We achieved these results despite the ongoing macro and geopolitical uncertainty demonstrating the differentiated technology we have built and many more across our core businesses. Looking ahead, we'll keep strengthening our future growth engines through sustained technology innovation, further expanding our leadership in the global market. Let me now review our financial results for the second quarter. Our total revenue reached 171.5 trillion won of 28% quarter-on-quarter, while operating profit increased 56% to 89.5 trillion won, and the operating margin improved to 52% of around 43% in the previous quarter. We also continued to actively Invest in future technology leadership with R&D expenses reaching a new quarterly high of $16.1 trillion or from $11.1 trillion in the previous quarter. On a quarter-on-quarter basis, net profit increased 52% to $71.6 trillion and earnings per share for both common and preferred shares increased by 52% to 10,849 Korean won, which is, I believe, among the highest level across global tech companies. The DS division added to last quarter's record performance at the shipment of both DRAM and NAND send me all-time highs driven by robust market demand and the strength of our products. System LSI faced a hand hinge from the mobile market. On the other hand, foundry gained from higher utilization rates and growing demand for all advanced nodes while continuing to expand orders from major customers for 2nHPC. The DX division achieved year-on-year revenue growth supported by strong sales of premium and AI products. However, operating profit declined as rising component cost lowered profitability. To minimize the decline in product profits, will strengthen our portfolio with more high-value-added products and continue to improve our cost structure, optimize our process, and enhance operational efficiency. On currency effects, the stronger U.S. dollar against the Korean won had a positive quarter-on-quarter impact of around 3.1 trillion won On operating profit, mainly in our component businesses. The executives with us today will share more detailed business updates shortly. Now, I would like to discuss shareholder returns. The board of directors today approved a second quarter dividend of 374 Korean won for Both common and preferred shares. Under our three-year shareholder return policy for 2024 to 2026, we have committed to an annual regular dividend of 9.8 trillion won distributed through quarterly payments of 2.45 trillion won. The second quarter dividend is scheduled to be paid in August. Our current shareholder return policy continues to be of great interest to our shareholders. Consistent with what we communicated in the previous earnings call, we remain fully committed to delivering on the program as promised and will provide further updates very soon. Let me now turn to our outlook for the second half of the year. We expect our growth momentum to continue building in the second half, supported by sustained strength in semiconductor demand. For the DF division, despite the launches of new finished products, Macron Certainties rising component and material cost pressures are likely to continue and the division will remain focused on defending profitability. The DX Division will strive to overcome profitability challenges by strengthening its businesses and fundamentals. We are targeting leadership In the Asian AI market by delivering hyper-personalized AI experiences with an open platform and self-expansion of premium products across our businesses. At the same time, we improve our business fundamentals through AI-driven innovation and better resource efficiency while building a foundation to respond to market changes. For the DS division, we anticipate the division will continue delivering growth driven by strong demand stemming from the rapid spread of agentic AI. In memory, we'll further strengthen our technology leadership and lead the market with expanded sales of high-performance products such as HBM4, including HBM4e, DDR5, SOCAM2, and ESSD. System LSI will grow its high-value-added business by advancing its new custom SOC business while broadening applications for sensors, and Power Isis. Foundry will improve earnings through increased orders for products from advanced nodes as well as those tied to high-growth AI and HPC. In the display business, sales volume may decline due to higher step prices arising from memory supply constraints. Yet, we aim to grow revenue through expanded sales of premium products and full-scale mass production as our Gen 8.6 slide. Finally, the DS division will continue to strengthen its core technology through both optimized capex and proactive R&D investments. The DX Division will also continue to bolster our new growth businesses including robotics, HVAC, automotive electronics, and medical technology to lay the groundwork for mid to long-term growth. Thank you.