【Samsung Electronics Q3 Earnings Call】

[OPERATOR]
Hello everyone, and welcome to the Samsung Electronics 2024 third 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 to those here in Korea and in Asia, and good evening to those in
the Americas and Europe. I am Daniel Oh, Head of Investor Relations. Welcome
to the Samsung Electronics earnings call for the third quarter of 2024.

Before getting into the details of our performance, I want to inform you that the
presentation deck and other supplementary information can be found on the
Samsung Electronics Investor Relations website at www.samsung.com/global/ir;
and a webcast of today’s call will also be available on the website.

Today’s discussion will include forward-looking statements based on the current

environment. These statements are subject to certain risks and uncertainties,
and actual outcomes may differ materially from the views expressed in today's
call. Please note that the information we are giving you on this call is as of today's
date.
I will start with an overview of our third-quarter performance and outlooks for
the fourth quarter and 2025. We’ll then discuss CAPEX, quarterly dividends,
sustainability management and other current topics. Afterwards, we will turn
the call over to executive team members who will comment on their respective
business areas before starting the Q&A session.

For today’s call, I am joined by the following executives:

EVP Jaejune Kim, representing Memory

VP Tommy Kwon, for System LSI
VP Taejoong Song, for Foundry
EVP Charles Hur, for Samsung Display Corp
EVP Jongmin Lee, from the CX∙MDE Center
VP Daniel Araujo, for the Mobile eXperience business
And finally, VP KL Roh, for Visual Display

We also have other executives attending today’s call for the Q&A session.

Let’s start with the consolidated financial performance.

During this call, we will refer to Device Solutions Division to DS and Device
eXperience to DX.

In the third quarter, company-wide revenue increased by 7% sequentially to 79.1

trillion won. The MX business recorded 13% growth led by the launching effects
of new smartphone models. DS revenue was up 3% thanks to increased sales of
High-end memory products; and Display booked a 5% increase, driven by major
customers' launching of new products.
Gross profit increased slightly quarter-on-quarter to 30 trillion won, mainly due
to the MX business’s improved sales performance centered on flagship products.
However, gross margin came in at 37.9%, down 2.2%p sequentially, due to the
effects of a significant decline in the value of inventory valuation reversals and
the impacts of depleting aging inventories.

SG&A expenses increased sequentially by 1.5 trillion won to 20.8 trillion won,
with R&D expenses rising to a new high once again as we continue to invest in
advancing our technological competitiveness. SG&A expenses as a percentage
of sales moved up to 26.3%.

Operating profit declined by 1.3 trillion won quarter-on-quarter to 9.2 trillion

won, mainly due to one-off costs, including the provisioning for incentives in the
DS Division. In perspective, the one-time costs in the DS Division were more
significant than the gap between the Company’s operating profit and consensus
estimates. Operating margin decreased by 2.5% pts to 11.6% compared to the
previous quarter.

In terms of currency effects, the Korean Won showed strength against the US
dollar and major emerging currencies, adversely impacting our operating profit
by approximately 0.5 trillion won. The impact was mainly felt in our component
businesses, where a significant portion of the transactions are in US dollars.

Now, I will share our business outlooks. Please note that our business
representatives will provide more detailed information in their presentations
during this call.
In the fourth quarter, we expect the semiconductor business to deliver improved
results, although relatively lackluster performances in finished goods may
constrain overall growth. Within this context, we are prioritizing sales of high-
value-added products and reinforcing the technological leadership of our
components businesses. We are also continuing to promote sales growth in
premium segments and advancing our AI strategy for finished products.

In the DS Division, growth in AI and the data it creates should keep memory
demand robust, while we expect to encounter softness in mobile and PC.
Considering these dynamics, we will concentrate on driving sales growth of HBM
and high-density products and fulfilling the demand for server SSD. In Foundry,
we are committed to increasing our order volume by enhancing and maximizing
the competitiveness of our advanced technologies, particularly our GAA 2nm
process.
For Display, we expect demand for major customers’ new smartphone models
to continue and IT and Auto sales to grow. However, due to rising competition,
we have a conservative outlook toward performance improvements.

In the DX Division, while our commitment to robust growth in premium

segments by delivering exceptional products is unchanged, we expect sales to
decline slightly compared to the previous quarter.

Now, looking ahead to 2025, although macroeconomic uncertainties are unlikely

to ease, we see potential for market demand to trend positively in the coming
year. We remain laser-focused on enhancing our competitiveness in advanced
technologies and consolidating leadership in premium segments and products
featuring AI. Aiming to keep delivering new experiences to our customers and
driving long-term value, we will continue to improve connectivity across
products, fuel the expansion of next-generation businesses, and identify
powerful new growth engines.

Getting into more specifics for 2025,

In the DS Division, shifting to a profitability-focused portfolio is central to our
strategy. We will achieve this goal by addressing the demand for differentiated
products based on advanced technologies and the strong interest in high-value-
added products, such as HBM and server SSD. Furthermore, we will leverage the
mass production of the 2nm GAA process to pursue opportunities with top-tier
clients.
For Display, we will maintain our leadership in high-end products and discover
new opportunities to broaden our portfolio.
In the DX Division, we will continue to deliver exceptional customer experiences
through innovations across our premium product lines, enhanced AI
engagements, and product connectivity.
Company-wide, we will ensure prompt and flexible responses to changing
conditions by closely tracking the global economic situation and growth trends
of real demand.

Now, moving on to capital expenditures.

CAPEX in the third quarter increased by 0.3 trillion won sequentially to

12.4 trillion won, of which 10.7 trillion won was invested in the DS division and
1 trillion won was invested in Display. Year-to-date CAPEX as of end-3Q declined
0.9 trillion won year-on-year to 35.8 trillion won, with 30.3 trillion won invested
in DS and 3.9 trillion won invested in Display.
We expect annual CAPEX to increase by approximately 3.6 trillion won to 56.7
trillion won, with DS investments down slightly to 47.9 trillion won while Display
investments increase to 5.6 trillion won.
As a reminder, the full-year numbers are projections, and the actual figures may
differ depending on future market conditions, the timing of equipment
deliveries, and other factors.

For Memory, while maintaining a flexible approach toward equipment

investments, we are prioritizing investments in advanced technology to meet
demand for high-value-added products such as HBM and DDR5. This, combined
with investments in the backend process and for R&D, should result in a similar
annual CAPEX to last year.
For Foundry, investments are centered on tech migration on existing lines,
considering market conditions and investment efficiency. Overall, we expect
Foundry’s annual CAPEX to decline.
In Display, we expect annual CAPEX to be higher than last year’s total due to our
proactive investment strategies. Specifically, we preemptively invested in new
fabs for mobile display and strategically invested in enhancing production lines
to maintain our competitive advantages.

Now, turning to the third-quarter dividend,

Today, the Board of Directors approved a quarterly dividend of 361 Korean won
per share for both common and preferred stocks.
Based on the current dividend policy, the total amount distributed for this year
will be 9.8 trillion won. Accordingly, the payout for the third quarter is 2.45
trillion won, which will be paid near the end of November.
I will now cover our sustainability management achievements and other current
topics.

I am pleased to say that Samsung Electronics has taken the number 5 position in
Interbrand’s Top 100 Best Global Brands for the fifth consecutive year and is still
the highest-ranked non-US company.
Over the past year, our brand value grew by 10% to reach 100.8 billion dollars,
breaking through the 100 billion dollar threshold for the first time.
Interbrand cited several factors behind this achievement, including our early
presence in the mobile AI market, expanded offerings of products featuring AI,
strengthened connectivity experiences that provide meaningful benefits, and
enhanced sustainability policies and actions in sustainable management.
Overall, our dedication to expanding and strengthening sustainability activities
throughout our business is stronger than ever.

Finally, our management recognizes the significant interest in the Value-up

program and its importance to our stakeholders. Given the highly uncertain
business environment, we are conducting a thorough review of all our options
as we speak and plan to share specific details when they become available.

Let's move forward and invite the executives from each business segment to
present more detailed information regarding each business's third-quarter
performance and outlook.

We will divide the following section into 2: the DS division, including Display, and
the DX division.
For the first section, we’ll start with EVP Jaejune Kim from Memory Business.

Good morning. This is Jaejune Kim from Memory Global Sales & Marketing.

In the memory market in the third quarter, for server, as major datacenter and
tech companies continued to invest, demand for AI and conventional servers was
strong. However, in the case of mobile segment, demand was relatively soft due
to inventory adjustments by some customers and the supply-demand situation
was impacted somewhat by the increasing supply of legacy products in China
market.

Thus, in the third quarter, as demand focusing on server application and cutting-
edge products was strong, the market decoupling by each application and
product seemed to be intensified. In this situation, we focused on adjusting the
business portfolio mainly toward cutting-edge and high value-added products
aiming to strengthen our business fundamentals.

To accomplish this, we focused on depleting aging inventories mainly consisting

of legacy products to further improve our inventory level and mix.
On the other hand, in the case of cutting-edge products, we actively responded
to the demand for high-profitable products for AI and servers.

Thus, compared to the previous quarter, we achieved sales revenue growth of

over 70% for HBM, the mid-teens for server DDR5, and the mid-30s for server
SSD. As a result, compared to the previous quarter, despite the impact of
depleting aging inventory, both DRAM and NAND ASPs increased by a high single
digit, and sales increased by a mid-single digit in dollar terms thanks to the sale
of high-profitable products.

However, our performance decreased due to reduced reversal of inventory

valuation loss compared to the previous quarter, one-time charge such as
incentive provisioning, and currency effects due to a weak dollar.

Now, let's move on to the outlook for the fourth quarter.

In the memory market, we expect the trends experienced in the third quarter to
continue in the fourth quarter. Specifically, while demand for AI is likely to remain
strong, we expect some mobile customers to continue adjusting inventory
following the previous quarter. On the other hand, we will continue to monitor
factors that influence demand, such as geopolitical issues, and interest rates and
stimulus packages in key countries.

In the fourth quarter, as this market decoupling trend remains, we plan to

continue improving our business portfolio focusing on profitability. On top of
that, we are flexibly lowering down production for some legacy DRAM and NAND
products in line with market demand in order to accelerate the conversion of
cutting-edge nodes in legacy lines. In addition, following the previous quarter,
we aim to strengthen our business fundamentals by completing the
normalization of the inventory level and mix by the end of the year.

For DRAM, we plan to expand sales in line with the increase in HBM capacity,
accelerate the transition to 1b nano for server DDR5, and actively expand the
sales portion of high-density modules based on 32Gb DDR5. In addition, we will
secure leadership on high value-added products with mass volume business of
10.7Gbps LPDDR5x and GDDR7, which are developed for the first time in the
industry.
For NAND, while server SSD demand continues to stay strong, we will actively
respond to the demand for TLC SSDs, which account for the main portion of the
market, and further expand sales of V8-based PCIe Gen5. Especially for QLC
market that has high growth potential, we plan to mass-produce the 64TB
product and sample the 128TB product in this quarter. Therefore, by the first half
of next year, we expect to mass-produce up to 128TB in QLC SSD line-up.

Now let's move on to the outlook for 2025.

For server, data center and enterprise investments are likely to remain strong in
association with AI, and build demand for conventional servers as well as AI
servers is expected to be strong and stable. In particular, we are anticipating that
the size of generative AI data will dramatically increase, and the trends towards
high-density in HBM, DDR5 and server SSDs will be consequently accelerated.

For mobile, as major customers launch more and more on-device AI

smartphones and the higher specs are required mainly in the flagship segment,
we expect memory content-per-box to increase. And also for PC, we expect a
growth momentum in demand due to the discontinuation of Windows 10 service
and the arrival of the replacement cycle for PCs that were sold during the early
period of the pandemic.

But, we will continue to monitor some uncertainties such as the macro economy
recovery trend and potential for the launch of killer apps for on-device AI.
Likewise, although demand in 2025 is forecast to be robust overall, we expect
the demand increase to be driven primarily by high-density and high-end
products based on cutting-edge nodes, rather than legacy products. Therefore,
in the next year, we plan to accelerate the process conversion of our existing
lines to reduce the portion of legacy products and to expand the portion of
cutting-edge nodes.

Considering the bit loss during the conversion process, we expect production bit
growth to be limited for both DRAM and NAND, but we will focus on the portion
of differentiated products based on advanced nodes rather than short-term bit
shares, preparing for a competitive business portfolio focused on profitability.

For DRAM we plan to further expand the sales of HBM3E,

and we are scheduled to develop and mass produce HBM4 in the second half of
the year. In addition, by accelerating the transition to 1b nano in the legacy lines,
we plan to reduce the portion of DDR4 and LPDDR4, products based on legacy
process that are seeing intensifying competition, and to expand the portion of
high-end products such as 128GB or higher DDR5 server modules and
LPDDR5x for mobile, PC, server and so on.

For NAND, while expanding server SSD sales, we will proactively respond to the
high-density trend based on QLC products including 64TB and 128TB SSDs.
Also, we will solidify our leadership in the PCIe Gen5 market by accelerating the
tech migration from V6 to V8.
Focusing on improving our portfolio towards cutting-edge products and
strengthening our business structure, we will secure sustainable business
competitiveness.

Thank you.
Good morning. This is Tommy Kwon from the System LSI Business.

Smartphone shipments are expected to grow by around 2.5% this year, with a
roughly 5% increase in the first half but slowing growth in the second half,
leading to increased set inventory levels and weaker purchasing demand.

In anticipation of weaker purchasing demand in the second half and fourth

quarter, we have increased third quarter sales through efforts to reduce
inventory, but earnings have declined due to increased one-time costs such as
incentives. SoC sales rose as flagship products were designed in a new project,
sensors are being adjusted due to customer’s inventory accumulation in the first
half, and DDI sales expanded due to the launch of new projects.

Throughout the fourth quarter, SoC will continue to increase supply of Exynos
2400 and Sensors will reinforce new product development verification and
reduce work-in-progress inventories amid weak market demand. DDI is focusing
on growth areas in a stagnant display market through the commercialization of
Mobile OLED TDDI products and support for the expansion of OLED for IT.

Although there is little chance of recession in 2025, the smartphone market is

expected to grow by less than 1% next year compared to 2.5% this year. However,
the momentum of on-device AI is expected to be strong. The impact of China's
economic stimulus could be an upside opportunity in the smartphone market.

In our business division, we plan to focus on supplying our SoC to major

customer flagship products while preparing for next-generation 2nm products.
Image sensors are expected to expand camera function differentiation as
smartphone component prices stabilize. We aim to strengthen our leadership
with HDR capabilities, low power consumption, and zoom functionality. Fab-lite
strategy to improve yield and secure cost competitiveness in the logic die remain
valid. DDI plans to develop advanced low-power products and integrate PDDI
and T-CON.

Thank you.
Hello everyone, this is Taejoong Song from the Foundry Business.

In the third quarter, the overall market showed continued growth in advanced
technology nodes, largely driven by the rising demand for AI and HPC
applications. However, recovery in mobile and PC applications was slower than
anticipated. As a result, our overall earnings declined compared to the previous
quarter, due to the impact of one-off costs related to employee incentives and
inventory provisions of engineering run wafers.

Despite these short term challenges to our business, we successfully met our
order targets, particularly in sub-5nm technologies. To be specific, we have
released our 2nm GAA PDK, enabling our customers to proceed with their
product designs. Our mature technology portfolio has been diversified with
improvements in RF and eMRAM technology and design infrastructure.

Looking ahead to the fourth quarter, a delayed rebound is expected in the mobile
and PC market, leading to potential customer demand weakness. However, the
HPC and AI-related market will continue to show robust growth. Although
inventory adjustments among our customers may continue beyond this quarter,
we are committed to improving our business performance by focusing on
streamlining operations, targeting high growth products of key customers. In this
quarter, we will also strive to acquire customers by improving the process
maturity of 2nm GAA technology. Furthermore, we will continue to develop
competitive technology and design infrastructure for additional business
opportunities.
For 2025, the foundry market is expected to show double-digit growth, driven
by HPC and AI applications in advanced technology nodes. Samsung Foundry
aims to expand revenue through ongoing yield improvements in advanced
technology, while securing major customer demand through successful 2nm
mass production.

In addition, we are enhancing the competitiveness of our 4nm technology and

design infrastructure to address the growing demand for mobile and HPC. Finally,
I’d like to highlight Samsung Foundry’s close collaboration with the memory
division. Integrating advanced technology and packaging solutions to develop
the HBM Buffer Die will help us acquire new customers in the AI and HPC sectors.
Our mature technologies continue to evolve, focusing on specialty technology
such as RF and Automotive, further diversifying our business portfolio.

This concludes the key messages from the Foundry Business.

Thank you.
Good morning. This is Charles Hur from the Corporate Strategy Team at Samsung
Display.

I will now brief you on our results for the third quarter of 2024.

For the mobile display business,

We performed sequential improvements in both sales and profits thanks to the
launches of major customers’ flagship products. The sales contribution of the
mobile display business stayed over 90%, which is similar to the previous quarter.
In addition, the smartphone segment achieved double-digits sales growth.

For the large display business,

Sales volume has increased compared to the previous quarter, driven by the
stable demand of both TV and monitor, however, earnings has underperformed
compared to previous quarter.

Next, I will share our outlooks and strategies for the fourth quarter.

For the mobile display business,

Flagship demand for smartphone is expected to continue into the fourth quarter,
along with sales growth in IT and automotive business.
However, our performance outlook is quite conservative, considering the rising
competition among panel makers.

For the large display business,

We will continue to address the demand from major customers by improving
production efficiency and keep striving to expand sales compared to the
previous quarter. Also, we will respond to the demand for 2025 new products
with a timely supply.

Next, I will share our outlooks and strategies for the mobile display business in
2025.

We expect the overall growth in the smartphone market will be limited.

However, OLED penetration rate is predicted to keep rising as more smartphones
with OLED panels are projected to be released. As high performance display is
required with the spread of AI devices, OLED adoption trend will continue to
increase.
We will maintain our leadership in foldable and high-end smartphones with our
innovative OLED technologies, such as low power consumption and high
resolution, which is optimized for AI devices. Additionally, we will accelerate the
expansion of IT and automotive sectors to diversify our business portfolio further.

Finally, for the large display business,

We continue to leverage the performance advantage of OLED panels to
strengthen our position in the premium TV market. And for monitors, we will
broaden our lineup by adding new high-resolution product and diverse refresh
rate options. Consequently, we will not only solidify competitive edge in gaming
monitor market but also actively enter the B2C market in 2025.

Thank you.
Many thanks to our DS Division representatives. We will now move on to the
second section, which will cover the DX division.

First, EVP Jongmin Lee from the CX∙MDE center will discuss the company’s
overall AI strategies, followed by other DX business representatives.

Hi everyone, before we move on to performance of DX business, I’d like to

discuss our multi-device AI strategy, driven by Samsung’s extensive product lines
and cutting-edge technologies.

Every year, Samsung delivers over 500 million diverse products to our consumers
around the globe, with the tailored application of AI in each product helping
secure our position as a market leader. Samsung devices are becoming more and
more connected each day, and we are striving to deliver AI functionalities that
bring practical benefits to daily life, making it safer, more convenient, and more
efficient, so you can reclaim your time and effort while saving energy in the
process.

At the base of this is SmartThings—our platform with 360 million users. Using
the capabilities that we have developed so far, which include product
intelligence, spatial intelligence, and personalization, we will establish our
presence in the future home where AI is the norm.

First, we believe Security is the key priority in the AI era;

And Knox and Samsung account are its core.
We have expanded and applied our proven Knox Vault technology across our
product lines, from mobile to TVs and home appliances. In fact, our home
appliances recently received a Diamond level rating, the highest level of security
in the industry. Increasing device connectivity also carries increased risks. To
further protect against such threats, we have applied Knox Matrix, our trust-
chain-based solution that creates a safer AI Home.

Second, I’d like to address convenience—devices in your home will not only
automatically connect to SmartThings, they will also evolve to understand your
lifestyle. When you power on a newly purchased Samsung product, it will
automatically connect to SmartThings, allowing you and your family to easily use
it along with other previously connected devices. This is made possible through
our AI-based Calm Onboarding technology, a stepping stone to a convenient life.
Samsung’s TVs and home appliances come equipped with hub functionality right
out of the box, enabling seamless connections with various products from
partner companies without having to buy a separate hub device.
In addition, our technology can automatically create a map of your floorplan,
allowing you to arrange devices and furniture in 3D. This provides a visual for
you to ensure that air quality and power consumption are maintained at optimal
levels throughout your home.
Furthermore, Samsung’s voice assistant, Bixby, can recognize different users and
offer tailored experiences to each individual.

Third, our intelligent saving technology makes our customers wiser. It helps them
reduce energy costs, reduce time spent on household chores, and even supports
environmental protection. For example, our technology can detect when no one
is home and power down unnecessary appliances, which saves energy and helps
protect the environment.
Last, our technology can help you take care of your health and the well-being of
loved ones. We will expand the AI connectivity experience from the home to
health with the ability to monitor sleep quality, health metrics, and your diet
through diet coaching, providing multiple ways to help you take care of yourself
and your family.
In June, we introduced Family Care, a service that analyzes device usage patterns
of elderly parents or those under your care, helping you ensure their well-being
even when you are apart. With Kids Care, we are currently in the process of
extending this service to include children.

Given our customer-first approach, we will keep working to build a warm,

welcoming home AI environment centered on the well-being of everyone in its
space. In addition, we are continually advancing dedicated solutions for the B2B
sphere, such as SmartThings Pro, aiming to expand in commercial spaces like
public housing, hotels, stores, and offices and contribute to growth in our B2B
businesses.

Now, let’s discuss the performance and fraction of each business unit.

Thank you.
Hi everyone, this is Daniel Araujo from the MX division.

I'd like to share our results for Q3 and the outlook for Q4 and next year.

The smartphone market in Q3 was affected by lingering global inflation, which

delayed a recovery in consumption. Despite major vendors releasing new
products, demand only increased slightly. The MX division recorded shipments
of 58 million smartphones and 7 million tablets in Q3, with a smartphone ASP of
$295.
We achieved growth in both revenue and operating profit compared to the
previous quarter due to the release of new smartphone, tablet, and wearable
products. Although material costs rose as product specifications improved to
enhance their competitiveness, our expanded sales, focused around flagship
models, drove profitability close to double digits.

Now let me move on to our outlook for Q4.

The smartphone market in Q4 is forecast to grow quarter-on-quarter due to

seasonality, but competition in the mass-market segment is to intensify amid an
increase in demand, especially in emerging markets. The MX division expects
shipments of smartphones and tablets to decrease and ASP to decline compared
to Q3, when many new models were released.

With the holiday season in mind, we will implement various sales programs to
continue the solid sales of AI smartphones such as the Fold6, Flip6 and S24 series,
aiming for double-digit growth in annual flagship sales.
For tablets and wearables, we aim to expand sales linked to year-end seasonality,
with a particular focus on new premium products featuring significantly
enhanced performance, in order to contribute to MX’s sales and profits.

Next, I'll share our outlook for 2025.

We expect the macroeconomic environment to stabilize somewhat in 2025 due

to the impact of interest rate cuts, and the smartphone market should grow
slightly.
In particular, we expect the mass-market segment to grow, given the expansion
of AI functionality from primarily premium products in 2024 to mid-range
products, along with overall improvements in hardware performance.

Market demand for ecosystem products is also likely to increase. The tablet and
Note PC markets will grow due to demand from the product replacement cycle
and increasing AI functionality. The smartwatch and TWS markets will also see
applications of AI functionality and expansion of premium demand, and as for
the smart ring, rising demand for new wellness experiences, such as sleep
management, should lead to continued market growth.

In the MX Business, we plan to drive sales growth centered on flagship products,

based on further advancements of Galaxy AI. The S25 series, scheduled to be
released in the 1st half of next year, will offer an even more complete Galaxy AI
experience, driving innovation around real use cases in everyday life. We also
aim to expand sales through strengthened marketing and hands-on experiential
programs aimed at spreading Galaxy AI.
For foldable phones, we will strengthen product competitiveness with design
innovations and AI specialized for foldables, further solidifying our leadership in
AI phones from 2024 onwards.
Galaxy Tab and Book will offer more advanced Galaxy AI features, and we will
focus on expanding sales of premium products.
In wearables, we aim to increase sales by further differentiating products by
refining them and improving usability. We will expand the Galaxy Watch’s
position in the premium market by focusing on AI functionality, and for the
Galaxy Buds, we will bolster premium sales by establishing an AI-specialized
lineup while also enriching sound quality. The Galaxy Ring, which launched this
year, will contribute to expanding the Samsung Health ecosystem by enhancing
our sleep management experience, and we will improve the connectivity
between our products, including upcoming XR devices, to further elevate user
experiences in the Galaxy ecosystem.

Lastly, in 2025, we anticipate seeing an increase in the prices of major

components due to improved product specifications as we strengthen product
competitiveness. However, we aim to improve profitability by further enhancing
Galaxy AI as well as expanding sales centered on flagship products.

Thank you.
Hello, everyone. I'm KL RHO from the Sales and Marketing Team of Visual Display.

Let me brief you on the market conditions and our results in the third quarter of
2024.

TV market demand increased quarter-on-quarter thanks to seasonal effects, but

it declined slightly year-on-year mainly due to global sporting events pulling
demand into the first half. For Samsung, we improved profitability both YoY and
QoQ by focusing on sales of strategic products such as Neo QLED, OLED, and Big
TVs. At the same time, we expanded sales in the service business and optimized
resource management.

Now, let me go over the outlook for the fourth quarter and for 2025.
In the fourth quarter, TV market demand is expected to recover thanks to year-
end peak seasonality, although competition is likely to intensify. To preemptively
capture peak season demand, we will enhance our sales programs focusing on
premium models, Big TVs, and Lifestyle screens through strategic collaborations
with major retailers. Also, we will focus on expanding sales and securing
profitability by emphasizing the non-price competitiveness of our TVs related to
security, design, and contents, which have recently emerged as important
consumer values.

The TV market in 2025 is projected to grow slightly with strategic products such
as QLED, OLED, and Big TVs continuing to gain share. We will continue to
differentiate AI functionalities and innovate our products centering on premium
and Lifestyle screens to solidify our position as the No.1 player in the global
market.
In particular, we will actively employ AI technology to not only advance core TV
performance, such as picture and sound quality, but also enhance the overall
customer experience with the SmartThings ecosystem, thus expanding the role
of TVs to become the hub of the AI home in the era of hyper-connectivity.

By product, for Neo QLED, the backbone of our premium TV line-up, we will
sustain our key differentiators and related communication. And for OLED, we will
improve the picture quality of our main models and reinforce regional line-ups
to drive dual premium sales of Neo QLED and OLED.
Furthermore, we will strengthen our line-up in 90inch above Super Big TVs to
target growing demand in this segment.
As for Lifestyle screens, we plan to make full use of our competitive edges over
latecomers' products to solidify our position at the forefront in this category.
Lastly, by leveraging our extensive installed base secured with our leadership in
hardware, we will keep expanding our service platform business driven by
advertisement and media such as TV Plus.

Thank you.
Thank you everyone. With that, we have concluded our prepared statements.
Let’s open the line for questions.

(Q&A Session)

※ Jeff Kim, KB Securities

[Q]
Thank you for the opportunity to ask some questions about Memory and MX.
What is your outlook in terms of Bit Growth for DRAM and NAND in the fourth
quarter? And also, what do you intend in terms of innovating or reinforcing your
foldable lineup for 2025 as well?

[A]
- Let me take the first question regarding fourth quarter bit growth first.

First for DRAM, we will be expanding HBM production and sales and so we
expect that DDR5 and LPDDR5x products will likely see limited production
growth. Meanwhile, amid inventory adjustments by Chinese mobile clients,
mostly for legacy products, plus the base effect from sales of aging inventory in
the third quarter, we expect our DRAM bit growth to decline to mid single-digit
level in the fourth quarter.

For NAND, as we see continued solid demand for server SSDs and boosted by an
upside in QLC SSD sales, we expect server SSD sales to increase by an additional
10% Q-on-Q on a bit basis. However, amid weaker mobile demand, we expect
demand growth to be constrained and this when combined with the base effect
from low bit shipments in the third quarter, overall NAND bit shipment is
expected to see limited growth at around the low single-digit.

- On the foldables, we aim to offer a differentiated foldable experience that

actually transforms our user’s mobile lifestyles. We try to create these new
mobile experiences by improving the product itself on the one hand, while at
the same time incorporating AI functionality tailored to the form factor. We will
continue to further differentiate our premium products as we make the fold
slimmer and
lighter with a powerful camera experience and enhance the flip's unique design
and cover screen experience.

Since customers of our foldable devices have high levels of product satisfaction,
we're also considering ways to ease the purchase barriers so that more people
can experience foldable products firsthand. We are preparing a new form factor
for consumers seeking an even more powerful and innovative mobile experience,
aiming to introduce it when we can ensure that the quality and the real life
experience meets our user’s expectations.

Thank you.
※ Sungkyu Kim, Daiwa Securities

[Q]
Good morning. I have two questions on semiconductors. First is on the memory
side. Third quarter performance was actually below market expectations. So can
you explain more on the memory business results in terms of both sales and
profit? And second, regarding your flagship SoCs, could you provide a status
update on the development of the Exynos flagship SoC and comment on possible
application on next-gen flagship models?

[A]
- Let me take the question on the performance for DS.

In the third quarter, we boosted the share of sales from high value-add products
as we focus on improving profitability. Also to normalize inventory in volume and
quality, we also expanded sales of aging inventory.

Third quarter bit growth was flat Q-on-Q for DRAM and down to single-digit
growth for NAND. The increase in ASP was also slightly more constrained versus
our own plan from the impact of aging inventory. Still, overall DRAM and NAND
ASP both saw high single-digit growth compared to the second quarter.

Also, total revenue for the memory business in dollar terms posted mid single-
digit growth quarter-on-quarter.

For DRAM, we saw HBM sales growth by more than 70% Q-on-Q as we ramped
HBM3E mass production. Meanwhile, as production was focused around HBM,
there was limited supply capacity for DDR5 products based on advanced nodes.
Nonetheless, server ASP increased by more than DRAM ASP while DDR5 sales
accounted for more than 80% of total server DRAM sales. Notably, as AI models
become bigger in size, we have been seeing an increase in demand for high
capacity DDR5. Our 128-gigabyte product, which is the first time in the industry
based on 1b-nano 32-gigabit technology has increased as a percentage of the
sales mix, now accounting for a high single digit percentage of total server DDR5
sales.

NAND also continues to see a rise in server SSD sales and we reported a record
high in the third quarter, and now accounts for more than 50% of total NAND
sales. Amid inventory adjustments by some mobile customers, however, there
was a slight decrease in purchasing demand and coupled with our operational
focus on profitability, NAND sales volume came in below our bit guidance.

For earnings, despite the Q-on-Q increase in sales, third quarter operating profit
was down on a quarter-on-quarter basis as write-back provisions for inventory
valuation loss was lower versus the second quarter also impacted by one-off
costs such as incentive provisioning and weakening USD.

- Let me take your question on System LSI.

While I cannot comment on details concerning customer projects, we are in

close collaboration with the foundry side to secure sufficient supply capacity for
next-gen flagship SoCs as we look to start application on flagship series models
next year.
We're also looking to expand adoption of current generation SoCs in our current
upcoming flagship models for next year. So as AI spreads further building on our
experience and capabilities in the flagship SoC space, we're working to move
beyond smartphones to expand into on-device related business opportunities.
We're focusing on acquiring relevant technologies including on-device AI
software, XPU linked technologies, also telecommunications, Sensor Display,
Security Power to identify further business opportunities in the solutions space.

※ Nicolas Gaudois , UBS Securities

[Q]
Good morning. Thanks for taking my question. In your recent statements
alongside the Q3'24 prelims, you mentioned experiencing delay with one of your
major customers for HBM3E commercialization. What's the business status and
plan for HBM overall and specifically HBM3E from here?

[A]
- Let me take you through the status of our HBM business.

In the third quarter, total HBM sales grew by more than 70% Q-on-Q with both
HBM3E 8 and 12 stack layer products in mass production and generating sales.
The share of HBM3E increased to low to mid-10% of total HBM sales. But, of
course, there were some commercialization delays and so the figure will likely
be below guidance that we provided in Q2. But still, we expect HBM3E to
account for about 50% of HBM sales in the fourth quarter.

As explained together with our preliminary results, while we did experience

some delays in the supply of HBM3E for major account, we have nonetheless
made a meaningful advance as we have now completed an important phase in
the qualification process. We expect to start expanding sales in the fourth
quarter.

Additionally, we are working to increase and expand into more number of

projects as we seek to expand supply of both HBM3E 8 and 12 stack products for
multiple customers to broaden our revenue base. Additionally, we are preparing
an improved HBM3E offering for several of our key customers optimized for their
next-gen GPU projects. Mass production of these enhanced products is planned
for some time in the first half of next year. We're currently in talks with our clients
on scheduling. So we're looking to expand supply of existing HBM3E products to
ongoing projects while driving additional sales of enhanced HBM3E products to
supply for new projects to expand the addressable demand pool.

For HBM4, development is underway according to plan as we target starting

mass production in the second half of 2025. We're working on custom HBM
business development for multiple clients and for custom because meeting
customer requirements is key when choosing a foundry partner for production
of the base die, customer requirements will be the priority and will be flexible in
our approach regardless of whether it involves an internal or external partner.
※ Peter Lee, Citi

[Q]
I have questions for memory and also foundry.
First, regarding memory, I would like to hear more about your outlook for
memory in 2025. You did mention some, but could you elaborate more on
decoupling and other developments that you expect? And in a related question,
could you share more on your CAPEX plans for next year as well?
The next question has to do with your foundry business, so I'd like to ask about
the current status of your advanced process node development for foundry, and
I would like to hear an update on development of your 2-nano process nodes
which we've heard will enter mass production next year.

[A]

- We will start with the memory question first.

Next year, in terms of overall industry wide supply conditions, we expect Chinese
memory makers to increase supply of their legacy products, while conversion to
more advanced process nodes is likely to accelerate among existing players,
mostly around DRAM. Amid continued supply constraints for clean rooms across
the industry, increasing the share of advanced nodes will likely be achieved not
so much through capacity expansion, but by conversion of existing lines to more
advanced nodes. Considering the bit loss that can occur during this kind of line
conversion, I think supply of bit growth will likely be constrained to a certain
extent for next year.
In addition for DRAM, as production is concentrated on HBM, the existing
outlook for production growth for conventional products would be constrained.
Well, I believe this outlook still holds valid today. For NAND, when CAPEX was
constrained across the board for the industry during the downturn, we did see
supply still increase in 2025 from higher utilization rates. However, as we do not
see further scope for further utilization upside next year, we expect supply
growth to slow down to a certain extent in terms of the pace or extent.

On the demand side, market decoupling is expected to continue at least up to

the first half of 2025. For server applications, solid demand is expected to
continue for AI related HBM, server DRAM and server SSD. We expect enterprise
demand to also see some growth momentum as Windows 10 services are
discontinued for PCs, and PCs sold during the pandemic reach their replacement
cycle. On the other hand, for mobile applications due to inventory adjustments
from some clients, we expect limited demand conditions to continue for the time
being. But potentially, we may see some recovery in purchasing demand in the
first half of next year once the inventory adjustments wind down, and as on
device AI deployed on flagship models around that time as well.

As demand is expected to vary between different use cases, there may be

bipolarization of demand between different end use applications. And as
production bit growth for advanced node products continue to be constrained,
we believe the decoupling of supply demand dynamics between advanced
process nodes versus legacy products are likely to continue for some time.
Based on this outlook, we are setting CAPEX at levels similar to this year. Our
priorities will include building next-gen semiconductor R&D complex, investing
into HBM packaging, making advanced investments to secure clean rooms for
the mid to longer term, as we focus on strengthening our future competence.
For facility investments, our focus will be on investing in conversion to advanced
process nodes rather than capacity expansions. We plan to accelerate
conversion of existing lines to 1b nano DRAM and V8/V9 NAND processors, so
that we can focus on the high value-add markets enabled by advanced process
nodes to benefit from strong demand momentum.

For DRAM and NAND rather than simply targeting bit share, we'll focus on
tapping the high margin market, strengthening the competitiveness of the
market demand. We'll manage production and CAPEX in a flexible manner as a
baseline position.

- Now let me address foundry.

Our 2-nano process is under development designed to be an enabling

technology platform that's optimized for mobile and HPC applications. Based on
improved process maturity and expansion of our IP portfolio, development is
currently underway targeting mass production in 2025.

We're doing PPA analysis for performance, power consumption and area,
mindful that our 2-nano GAA, Gate-All-Around, PDK and design infrastructure
will be used to customize different products for our key accounts. Other
evaluation work is also underway for certain customers to assess IP content and
to characterize silicon through MPW. To acquire additional sources of
competitiveness for our 2-nano GAA process, we've been developing several
fabrication processes and design technologies like BSPDN and automotive
technologies.

Customers are not just looking at the competitiveness of process nodes, but
seeking a total solution that includes advanced packaging technologies. So based
on our 2-nano GAA process with competitive PPA, we're aligning with customers
on differentiated packaging, aligning with them on roadmap for differentiated
2.5D, 2.3D and 3D packaging technologies and seeking strategic partnerships to
secure more diverse customers not only for mobile but also HPC AI automotive.

※ Giuni Lee, Goldman Sachs

[Q]
I have questions for Foundry and for VD as well.
So could you provide more color in terms of CAPEX investments for Foundry this
year and next year, what will be your main areas of investment for Foundry as
well?
For VD, it seems that competition is getting more intense, mostly in the mid to
low-end market. So how does the company intend to respond?

[A]
- Let me answer your question on Foundry.
In Foundry, our Foundry investments were mostly focused on customer demand
for mobile and HPC. However, in light of market conditions and investment
efficiency, conversion of our existing lines for reutilization was our biggest
priority and we expect the amount of CAPEX executed this year to decrease.

For 2025, we will maximize utilization of our existing production infrastructure

to provide a timely response to customer orders for advanced process and legacy
products. And apart from R&D for cutting-edge process nodes, any investments
into capacity expansion will be considered thoughtfully and efficiently
considering utilization and profitability.

- Here's the answer for VD.

Demand for strategic products like QLED and large TVs continues to grow while
entry level demand is also rising within each category. This expands the mid to
low-range market and intensifies competition. In response, we will strengthen
our leadership in the premium segment while expanding entry level lineups
across key product categories and focusing on cost efficiency and manufacturing
competitiveness to capture mid to low-range demand.
Also, we will emphasize unique customer experiences related to SmartThings
Security ESG content.
We will expand sales in the volume zone and secure profitability at the same
time by promoting customer value through differentiated products and services
like Knox security solution with high stability and slim high resolution design
achieved through advanced technology.

Thank you.
※ Simon Woo, Bank of America

[Q]
Thank you for the opportunity. My first question is for MX regarding the
enhancement of AI functionality in AI phones, and how will they evolve in the
future?
And the second question will be on SDC. Could you provide the timeline for the
8.6 generation fab utilization and revenue outlooks and any plans for capacity
expansion?

[A]
- Let me answer your question for MX.

As our AI phones rapidly evolve, product hardware specs and AI functionality are
expected to further develop. So we aim to provide our customers with first rate
AI features. So we're analyzing adopting APs and memory that can meet these
requirements. To run a generative AI model on device requires high performance
APs and memory, which is also expected to increase heat generation and battery
consumption. So we're also considering various technologies and solutions to
address these issues.

Regarding Bixby, Samsung introduced the upgraded Bixby AI voice assistant to

home appliances and televisions beginning at the end of August. And in the
future, we also plan to release a smartphone version capable of performing
more complex functionality.
- I'll take your second question for display.

In April 2023, to support rising demand in notebooks and tablets, we announced

investments in our 8.6 generation IT OLED line which is on track for mass
production in 2026. The facility has completed receiving its main equipment and
we are now setting up the fab, fine-tuning specifications and boosting overall
technical maturity.

In IT markets like notebooks and tablets, demand for high resolution, high
performance display is driving OLED adoption. With our extensive technology
and early investments, we will achieve economies of scale ahead of our
competitors, enabling us capture the IT market, maximize utilization and drive
sales growth as well.

For capacity expansion, we will focus on the previously invested 8.6 generation
IT line, ensuring stable technology and supply. Expansion timing and scale will
be evaluated based on the market conditions and customer demand in the
future.

[Q]
Thank you for your answer. Finally, we will answer questions that were submitted
online in advance.

We received a wide variety of questions for this quarter as well, and I believe the
majority of the submitted questions were sufficiently answered during the Q&A
session.
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.
The question is, "Do you anticipate a rebound in consumer demand for home
appliances in 2025? If so, what is Samsung's plan to expand sales of major home
appliances accordingly?"

VP, Sang-Yoon Kim, representing Digital Appliances, will answer the question.

[A]
Here is the answer for your question.
In 2025, demand is expected to return to growth due to easing inflation,
increased investments in emerging markets, and rising international trade.
Consumer sentiment in North America and Korea, which are our primary
markets, is expected to improve, slightly easing the pace of negative growth. The
demand in Southeast Asia, Southwest Asia and Latin America is likely to grow,
thanks to recovery in production and exports and expansion in infrastructure.

With rising interest in AI technology for its convenience, demand for premium
products, especially AI powered home appliances, is expected to increase. In
2025, with our reliable security service, we will offer voice ID recognition for
tailored experiences and appliances equipped with screens for home monitoring.
We'll also enable easy AI controls to simplify household tasks and keep upgrading
the AI connectivity experience.

Furthermore, we will boost global sales with innovative AI products like hybrid
refrigerators and the bespoke AI combo, focusing on premium segments. And to
expand our B2B business, we will strengthen product lineups and sales
capabilities, driving revenue growth with a focus on profitability.

Thank you very much. I would like to thank everybody 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 all of you and those close
to you stay strong and in good health.

We thank everyone for joining us today. Thank you.