Earnings Call: Q4 2020

Jan 27, 2021

Morning. Thank you very much for joining our conference call. We will now start the 2020 4th Quarter Earnings Conference Call of Samsung Electronics. Now we will start the presentation by Samsung Electronics. Thank you for joining our earnings call for the Q4 of year 2020. Before we announce our 4th quarter results, I would like to invite President and CFO, Yuno Choi, to share details on our shareholder return policy regarding both the additional return for the period just ended last December as well as the new policy regarding the next term. Now I would like to turn it over to our CFO. Good morning. This is Eunho Choi, CFO of Samsung Electronics. It's a pleasure to talk to our shareholders and market professionals in this call today. As always, Thank you for your continued support for Samsung Electronics, and I wish you and your family good health. The Board of Directors and executives are committed to enhancing shareholder value. With that, I would like to provide an update on 2 resolutions regarding our shareholder return policy that were approved by the BOD today. To fulfill our commitment for our shareholder return policy for year 2018 to 2020, the Board of Directors today approved a onetime special cash dividend of KRW 10,700,000,000,000. This was calculated by deducting the regular dividend of KRW 28,900,000,000,000 from 50% of KRW 79,200,000,000,000, which is the total free cash flow for the previous 3 year policy term. As a result of the joint efforts of our employees and stakeholders, including our partner companies, Amid numerous difficulties, including COVID-nineteen, we are able to deliver results that enable this special dividend. The special cash dividend of KRW 10,700,000,000,000 or KRW 15.78 per share will be paid out to shareholders together with the year end regular dividend of KRW354 per common share and KRW 355 per preferred share. In April, shareholders of record as of end of 2020 will receive KRW1932 per common share and KRW1933 per preferred share after approval in March at the Annual General Meeting of Shareholders. Now I would move on to the shareholder return policy for the next term. When considering the direction for our new policy, Xi, the Board of Directors reviewed various factors in-depth, including ways to enhance shareholder value, the business Environment and our Investment Strategies and Financial Structure. As you are aware, the global business environment has been and is still mired in unprecedented macro uncertainties caused by global trade conflicts and the spread of COVID-nineteen significantly decreasing visibility for our outlook. Even under these circumstances, R and D investments as well as capital expenditures are expected to increase. This is due to intensifying especially in Foundry and increasing technology challenges. And Considering the dynamic changes in the industry landscape, we need to ensure we have the resources to execute on M and A activities to seize opportunities for growth. For the period covering 2018 to 20 20, we changed our shareholder return policy with a focus on dividend, significantly increasing the regular dividend amount to enhance stability on total shareholder return. For the next term, we will continue with this policy direction and have decided to increase the annual dividend to KRW 9,800,000,000,000. Regarding the shareholder return pool beyond the dividends, for the 2018 to 2020 Term uncertainty such as COVID-nineteen caused rapid changes in the external environment and kept us from executing on an early return. For this term, from 2021 to 2020 3, we kept the shareholder return pool at 50% of the free cash flow generated over the 3 year period. But that said, we will make a regular announcement each year sharing the annual free cash flow to enhance clarity on the amount of additional expected return. Also, if a significant amount of expected return has been generated, we will actively consider executing a portion of it at the close of each year's results. Our Board of Directors and executives are well aware of shareholder concerns over our increasing cash levels over the last 3 years. For the 2021 to 2023 periods, difficult business conditions and macro uncertainties are expected, but we believe there are opportunities as as well. Market growth is accelerating with increasing digitalization and technology advances. Their Display and Mobile Communication businesses will play crucial roles in such growth. We will further enhance our leadership in the market for our established businesses and at the same time, strengthen the foundation for continued growth in emerging Services. For this, we will leverage our resources to increase strategic capital expenditures and execute M and A opportunities. We ask for your support and understanding as we solidify our foundation for sustainable growth. The Board of Directors and executives firmly believe that the most And reliable way to enhance shareholder value is through continued growth of the company. Therefore, on top of increasing our business competitiveness, We will do our best to enhance shareholder value with global level achievements in ESG and compliance management that will enhance and grow our corporate value. As always, we deeply appreciate your trust and support, and we look forward to more engagement with our shareholders and active communication with the market. We hope that you and those close to you stay strong and in good health. Thank you. Yes. Thank you, Mr. Choi. We will now have a Q and A session about the shareholder return policy that was just announced. As you know, we also have our full 4th quarter earnings conference call left that needs to follow the Q and A session. So given the limited amount of time, we will only take Three questions and each person will be limited to one question. The Q and A session will be consecutively interpreted. The first question will be presented by Changwon Song from Nomura. Please go ahead with your question. Yes, my question is about the reason behind your decision to execute the remaining shareholder return in the form of a special cash dividend this time. To determine the form of the churn of the remaining portion, we considered multiple factors and market conditions at the time of execution. Given the current status of the stock market as well as uncertainties related with COVID-nineteen and low visibility in the industry environment, we determined that a cash dividend was the most effective way to return the capital. Moreover, the number of our individual shareholders soared last year, so we decided that dividends allows us to assume social responsibility when governments around the world, including the Korean Government are doing their best to support people and revitalize the economy. SAORE, Ricky Zhao, Mida. The next question will be presented by Ricky Zhao from HSBC Seoul. Please go ahead with your question. My question is about the M and A. There were no meaningful M and A activities During the previous 3 year period, is there a particular reason why the company expects that there will be meaningful M and A during the period that has just started given the overall environment as well as where the global stock market currently stands. For the last few years, we have been evaluating possible M and A opportunities very carefully and have made significant progress in terms of preparation. Sun. Although it is difficult to pinpoint a specific timing due to uncertainties in the internal and external business environment, Given the preparation, we are optimistic about meaningful M and A activities during this term. The last question will be presented by Jae Jae Park from JPMorgan. Please go ahead with your question. The question is about the free cash flow payout level, which is at 50% even for the new term. It seems that during the last term, cash levels at the company have been rising because The return was set at 50% of free cash flow. If the same 50% is kept, wouldn't cash continue to rise during this new period? To answer your question, the level of cash increase during the last period mainly because we could not execute meaningful M and A activities. And continued increase in cash is also a concern in managing the company. As I mentioned, in addition to the increased strategic investment levels, we believe that M and A activity of a meaningful size is likely in the next 3 years period, and we will do our best to reduce the risks associated with increasing cash. Thank you very much, shareholders and investors. This It completes our shareholder return policy Q and A and we will move on to the regular earnings conference call. Now we will begin the conference of the fiscal year 2020 4th Quarter Earnings Results by Samsung Electronics. This conference will start with a presentation followed by a dividend Now we shall Hello. This is Ben Soh again. Now let's begin our earnings call for the Q4 of 2020. With me representing each of the business units are Mr. Han Jin Man, Executive Vice President of the Memory Global Sales and Marketing Office Mr. Jo Jong Hoon, Vice President of the System LSI Marketing team Mr. Han Seung Hoon, Senior Vice President of the Sanbi Marketing team Mr. Choi Kyung Young, Senior Vice President of Samsung Display Mr. Kim Sung Gu, Vice President of the IT and Mobile Business and Mr. Song Won Joon, Vice President of the Visual Display Business. In addition, Mr. Kang Ki Yoo from Investor Relations is present on this call as well. Among the presenters today, Mr. Cho Jang Ho, Kim Seong Guo and Song Won Joon are newly joining the IR presentation. I would like to remind you that some of the statements we will be making today are forward looking based on the environment as we currently see it. And all such statements are subject to certain risks and uncertainties that may cause our actual results to be materially different from those expressed in today's discussion. I will start with the results for the Q4 of 2020. When I delivered my first earnings Paul is the new Head of IR last year. News flows on emerging health risk were starting to increase. As we all know, that risk transformed into a global crisis and created an incredibly challenging environment for business and individuals alike. 1 year later, despite all efforts, we remain vigilant as the crisis is not yet behind us. Throughout this, our management and employees have done their utmost to overcome all obstacles. And as a result, I am pleased to report that we once again achieved solid results in this difficult environment. Total revenue in the quarter declined 8.1% quarter on quarter to KRW 61.6 trillion, a solid growth in display revenue from strong OLED demand was outweighed by intensifying vision for our mobile business in CE division along with price declines for memory. Compared to last year, total revenue increased by 2.8% as component demand improved. Gross profit decreased KRW3.2 trillion sequentially to KRW 23.7 trillion mainly due to results in the semiconductor business and I'm division, and gross margin declined to 38.6%. Both gross profit and gross margin improved year on year led by the Display business. SG and A expenses increased slightly sequentially and also as a percentage of sales, mainly due to higher marketing expenses caused by intensifying competition. Despite the display business' improved performance, Operating profit was down KRW3.3 trillion quarter on quarter to KRW9 1,000,000,000,000 due to weak memory prices, A decline in sales and higher marketing costs for our finished products and negative currency effects. Operating margin for the quarter declined to 14.7%. I will now briefly review the results of each business unit. In the memory business, Despite solid shipments mainly for mobile and consumer products, our results weakened sequentially due to continued ASP declines, currency headwinds and initial costs associated with ramping up of new fabs. On a year on year basis, however, The results improved led by demand from mobile segment. For system semiconductor, orders from major global customers continue to rise, but profits declined sequentially as well as annually due to a weak U. S. Dollar. In display, earnings grew significantly quarter on quarter year on year as utilization rates increased sharply for mobile panels and conditions improved in the large panel market. The mobile business saw its profits decline quarter on quarter due to a decline in sales and an increase in marketing costs, but was able to keep its earnings near last year's level, thanks to a continued cost structure improvement. Network improved its performance by responding to domestic 5 gs expansion and Global 4 gs and 5 gs Expansions. For the CE division, despite another quarter of solid sales, mainly due to seasonality in developed countries, increased costs weighed on profitability. Regarding currency effects, significant weakness of the U. S. Dollar, euro and some emerging currencies against the Korean won had a negative impact equivalent to approximately KRW 1.4 trillion quarter on quarter. The effects were felt mostly in the component business, including semiconductor and display as they are highly affected by the strength of the U. S. Dollar. Next, I would like to share our business outlook. In the Q1, We expect overall profitability to decline due to relative weakness in the memory and display businesses despite strength in the mobile business with the early launch of the Galaxy S21 and the release of new volume models. For memory, while demand is expected to remain solid for mobile and recover for data centers, our results are likely to weaken due to currency effects and continued costs associated with new fab ramp ups. System LSI will increase supply of SoCs, CISs and DDIs for flagship smartphones and the foundry business will expand mass production of EUV 5 nanometer SoCs 8 nanometer high performance computing chips. For display, we expect mobile panel earnings to decline considerably quarter on quarter, but improved year on year due to increased demand for OLED. The large panel business will continue the work to shift its business base to QD Technology. The mobile business should improve due to strong sales of flagship devices, including the Galaxy S21 and the launch of mass market models. In CE, we expect our solid performance to continue with timely launches of new products and expansion of premium product lineups, even though sales are likely to decline amid weak seasonality. Now let's move on to our full year outlook. Global demand is forecast to recover, Although uncertainties such as new waves of COVID-nineteen infections are unlikely to ease, The component business will focus on accelerating the shift to next generation node processes, strengthening cost competitiveness and enhancing both product and technology leadership. For memory, we expect business conditions to improve in the first half based on continued demand for mobile and server. However, global macro uncertainties, including currency movements, are likely to continue to influence the business environment. We will enhance cost competitiveness and market leadership by accelerating migration to 1ZNano DRAM and 6th generation V NAND, while also expanding application of EUV technology. System LSI will actively address the markets for 5 gs SoCs and high resolution sensors with differentiated products And foundry will accelerate growth by expanding mass production of the 5 nanometer EUV process and diversifying application areas. For display, the mobile panel business will continue to further differentiate our technologies and enhance cost competitiveness. While the large panel business will focus on laying a foundation for the new business via timely development of 2 d display products. For our finished products, we will continue to work to improve profitability by further strengthening premium lineups and operational efficiency. The mobile business will continue to focus on enhancing profitability by expanding smartphone sales and by improving cost structure. Sales will be boosted by a strengthened flagship lineup, which includes the Galaxy S21 and foldable phones as well as our 5 gs models for the mass market. The network business will continue to strengthen its global 5 gs business by exploring new business opportunities. CE will strive to keep growing by expanding its premium lineup, which includes Neo QLED, MicroLED and Bespoke products, while also executing marketing expenses efficiently in strengthening online sales. Now I will address capital expenditures. CapEx in 2020 was approximately KRW 38.5 trillion with KRW 32.9 trillion allocated to Semiconductor and KRW3.9 trillion to display. For the semiconductor business, CapEx increased significantly year on year for both memory and foundry. Memory investments concentrated on capacity expansions and advanced process migrations to address growing demand. Foundry CapEx focused on capacity expansion in 5 nanometer EUV, for which orders are continuously rising. Display investments also increased compared to last year, mainly for QD display capacity and new processes for mobile panels. Along with enhancing our business competitiveness, we are committed to creating environmental and social value. And I would like to share some of the efforts we made last year to strengthen governance of our sustainability management. First of all, the Corporate Sustainability Management Office, formerly under the Corporate Management office has been elevated and renamed the Corporate Sustainability Center. It is now overseen directly by our CEO, reflecting the goal to strengthen its role as a control center for the company's sustainability management. In addition, we established sustainability offices in each division to ensure that sustainability is reflected throughout the life cycle of all of our products and services from the planning stage right through to the after service care. Furthermore, the Sustainability Council, in which key executives formulate the company's overall sustainability management strategies, was elevated and is now led by the CFO increasing the priority of sustainability in the decision making of our top executives. Meanwhile, we believe that product innovation is the bedrock of sustainable growth and our C Swiss efforts to innovate were recognized at CES 2021 as 44 of the 173 awards we received at the event for CES Innovation Awards. We will keep adding to our foundation of sustainability management by continuing to strengthen our response regarding ESG issues, while also enhancing our financial performance. I will now turn the conference call over to gentlemen from each business unit to present 4th quarter performances and outlooks for their corresponding business segment. Thank you. Good morning. This is Han Jin Mang from the Memory Global Sales and Marketing Office. In the 4th quarter, Mobile demand grew considerably, building on an upward trend starting in the Q3. And overall demand was strong, backed by demand from data centers and PC. However, our earnings declined due to effects of weakening dollar and initial costs associated with ramping up new lines. In the case of DRAM, For mobile, demand was strong because smartphone sales recovered to the level they were 1 year ago, thanks to launches of new models by major customers and continued upticks in consumer confidence. For server, Purchasing demand increased based on growing investment in data centers by cloud companies and the trend for demand was solid as Customers were finishing up inventory adjustments. Although demand for PCs remained strong, Mainly for Chromebooks and gaming notebooks, there were partial disruptions in set builds due to short supply of some components. For graphics, demand for graphic cards increased due to the release of new GPUs, while demand for game consoles has also been solid. On top of that, graphics demand was bolstered for mining applications due to a rise in cryptocurrency prices. We achieved solid shipments because we actively address Continued growth in mobile demand with proactive product mix adjustments and sales of consumer products such as TVs increased due to growth in home entertainment culture. Next, I will talk about the NAND market. For mobile, demand has been solid due to an increase in demand centering on Chinese customers since the Huawei sanctions as well as with growth in content per box. For server, inventory adjustment at major OEMs in the 4th quarter, Alongside lingering effects of increased purchase by data centers in the first half contributed to somewhat weak demand in the quarter. For client SSD, sales of low to mid priced laptops remained strong due to contactless activities such as telecommuting and online education. And demand for new game console has also been solid. We achieved a decent result for shipments by actively responding to strong mobile demand and solid client SSD demand. Next, let me tell you about the outlook for the Q1 of 2021. We expect our profits to weaken compared to the previous quarter due to continued weakness in the dollar and ongoing initial costs associated with ramping up new lines. For DRAM in mobile, based on the release of numerous new smartphones In penetration of 5 gs through low end and mid range devices, we expect the market to expand in earnest. However, various risks such as currency effects and additional waves of COVID-nineteen require monitoring. As for servers, the demand seems to be improving with increased purchasing following inventory adjustment, mainly at data centers and expanded CapEx. For PCs, We expect demand to be solid as demand for laptops is likely to persist amid the ongoing need for contact list activities and demand for desktop, which had been shrinking, is also projected to recover in certain markets. In the midst of continued market uncertainties, we will optimize our product mix to actively address demand across all applications, including strong demand for mobile and solid demand from PCN competitiveness and market leadership by expanding our sales portion of 1Z NAND D WAN and ensuring timely supply of the product to our customers. In the case of NAND in the Q4, for mobile, despite the traditionally weak seasonality, demand is likely to be solid, Thanks to increasing demand from Chinese customers in particular and growing sales of 5 gs smartphones due to an expansion of 5 gs infrastructure, mainly Major Markets. For service SSDs, we think customers' inventory adjustment will continue and data centers will show gradual growth in demand due to the base effect of weak demand in the 4th quarter. For client SSDs, we expect demand to stay robust amid continuing demand for low end to mid range laptops and rising content per box. We will actively respond to increasing demand from mobile and from client SSD and strengthen our technology leadership and cost competitiveness by increasing production of 6th generation V NAND, which has already been on track. Next, let's talk about the outlook for 2021. Last year, the onset of the pandemic caused numerous unexpected changes in applications. The smartphone market was hit hardest, but several showed better than expected growth in demand in the first half. PCs led by laptops were in strong demand throughout the year, influenced by the stay at home economy all around the world. This year, business activities that were delayed by COVID-nineteen are expected to start gathering moment. We expect mobile demand to be robust As demand for the set field from Chinese customers increases and the content per box rises as 5 gs model expand their presence in low end and mid range lineups. We expect server demand to pick up from weakness shown in the second half of last year, Thanks to impacts of resumed investment of data centers and effects of new CPUs launched in August. In addition, we expect content per box for PCs to continue to rise and demand for TVs to benefit from sporting events that will postponed until 2021. Considering the demand from overall applications, we expect dealer market to turn around in the first half of this year. Still the pace of worldwide vaccination efforts and of an economic recovery are unclear at this point Amid other uncertainties such as geopolitical risk and weak dollar, Hence, we will keep monitoring demand for related fluctuations and maintaining flexibility in our product mix. Moreover, we will continue to strengthen both cost and product competitiveness with 1 gs NANDO DRAM and 6th generation VNAND. We will also continue cooperating with major global customers and to actively introduce next generation lineups to the IT industry That includes products such as the world's first 1a nano DRAM with multistep EUV and SSD implementing 7th generation V NAND, which we will fully introduce to the solution based market in the second half of this year. Samsung will solidify our position as a trusted partner by continuing to focus on excellence in quality, cost competitiveness and customer relationships. I wish you a year full of health and happiness. Thank you. Good morning. This is Harry Cho from SysML SI Business Unit. In the Q4 of last year, demand for mobile KPI and image sensor products increased According to the launch year of smartphones by major customers and active expansion strategies of Chinese customers. Earnings, however, declined due to the weak dollar. Yet through the release of our First 5 nanometer SSD product, the Exynos 1080, we solidified our foothold to continue leading the market and to expand our customer base. Let me share our business outlook. In the Q1, we expect demand to keep rising mainly for mobile associates and related products as major Smartphone makers continue to expand their active sales strategy and launch new 5 gs smartphones differentiating with higher resolution cameras and high frame rate displays. We plan to and our supply of 5 gs mobile processors, ultra high pixel image sensors and high frame rate TDIs, in line with launches of new models of flagship and high end smartphones in Korea and China. In 2021, although there are external uncertainties caused by the factors including prolonging pandemic, We expect the market to recover, backed by increased demand following aggressive expansion strategies and major smartphone manufacturers. Accordingly, we will expand shipments centered on products with solid demand such as 5 gs Associates, high resolution image sensors and TDIs to achieve double digit search growth for the year. Thank you. Good morning. This is Shan An from the Foundry region. In the Q4, we achieved a new high For quarterly sales once again, led by rising demand for 5 gs chips and image sensors from major mobile customers and by increased demand for HPC chips. However, earnings declined due to currency effect caused by weak dollar. Positively, we proved our leading edge process competitiveness with the timely design completion of 2nd generation of 5 nano and 1st generation 4 nano mobile products. In addition, we continue to strengthen our ecosystem by maximizing outcomes of collaborations with partners, Evidenced by our successful hosting of the 1st online SAFE, Safe 2020 forum in October last year. Turning to our outlook. In the Q1, demand is likely to stay strong for all processes From legacy to advanced and we expect supply shortages to persist for the time being. In response to strong demand for EUV 7 nano and below, We will continue to operate our lines flexibly, such as by increasing the portion of the advanced processes. In addition, we are continuing to strive to add to leadership in advanced processes by focusing on the development of 1st and second generation of 3 nanoprocesses. On top of that, these processes will result in A significantly decreased carbon footprint, thanks to their improved power efficiency. In 2021, we expect the overall foundry market to continue growing due to increases in silicon content, Driven mainly by acceleration of 5 gs expansion and strong HPC market growth related to continuation of Telecommunicating and online learning trends. We plan to add to our foundation for growth By expanding our portion of global customers and by diversifying applications in HPC, network and auto through the capacity expansion centered on advanced processes to respond to our customer demand in a timely manner. Thank you. Good morning. I'm Koon Young Choi from the Business Planning Department at Samsung Display. In the Q4, the display business recorded its highest earnings, thanks to an ongoing recovery in demand for major products such as smartphone and TV amid an economic rebound in the second half of 2020. To be more specific, earnings to the in the mobile display business grew Software quarter on quarter, I missed a gradual recovery of smartphone demand driven by an increase in utilization to meet Surging demand from our major customers. In the large display business, losses narrowed quarter on quarter supported by steady demand and rising ASPs of TVs and monitor panels led by the expansion of Contact List Services. Next, let me share the outlook for the 1st quarter of 2021. For the mobile display business, we expect earnings to decline quarter on quarter due to a decrease in demand from major customers and seasonal variation in demand. However, utilization is projected to improve year on year as the major customers widened the adoption of OLED display within their product lineups to align with the pace of 5 gs commercialization. Meanwhile, the Launch Display business is preparing to launch QD Display products as scheduled, while also continuing to fulfill FDA orders for some customers as planned. Finally, I will share our outlook for the display market and the display business scores release for 2021. For the mobile display business, we expect demand to rise for all OLED panels for high end models and OLED penetration to increase in mid range segments, driven by expansion of 5 gs smartphone market alongside recovery of smartphone demand. We will further solidify our leadership in OLED market by taking full advantage of our such market conditions. Moreover, we will further differentiate our proprietary technologies for features such as adaptive refresh rates and lower power consumptions took place for uncertainties caused by demand fluctuation under prolonged In contact with communication and the services, we will endeavor to diversify Applications within areas such as Note pieces, tablets and Automotives by employing advantages of OLED including ultra thin and narrow bezel. Also, we'll promote market expansion for foldable displays. In the meantime, we'll also fortify our presence in the display For the large display business, we'll develop 2 d display with its leading technology as scheduled and build a stable customer portfolio to create a foundation for 2 d display to cement in place within Premium Product segments. Thank you. Good morning. This is Sung Woo Kim from the Mobile Communications Business. I would like to discuss the 4th quarter results and the outlook for the I'm division. In the Q1 of 2020, market demand increased quarter on quarter amid year end seasonality and a gradual economic recovery. For our mobile business, revenue decreased Q oQ due to intensified competition in the year end season. Even though profits decreased Q o Q due to an increase in marketing expenses, we maintained the double digit operating profit margin, thanks to improvements to our cost structure, including component standardization. For the network business, we improved our performance QoQ as a result of 5 gs expansion in South Korea and 4 gs and 5 gs business expansion overseas, including North America. Now let me move on to the outlook for the Q1 of 2021. As Q1 is a seasonally weak period for mobile, We expect market demand to decrease Q o Q for both smartphones and tablets. As for our mobile business, We expect to increase both revenue and profit as the early launch of the Galaxy S21 drives sales growth of flagship models and increase in overall ASP. The release of new mass market models We also contribute to the performance. In particular, the Galaxy S21 series announced on January 15 We'll provide a more innovative mobile experience with its superior performance and professional quality camera that leverages AI technology along with a unique control cut design and addition of the S Pen experience to the Galaxy S21 Ultra. Along with the Galaxy S21, we are strengthening the Galaxy ecosystem even further With Galaxy Buds Pro, a true wireless earbuds that provide the best audio experience and Galaxy Smart Tech, which provides convenient and rich usability by expanding connected experience. For the network business, we will continue with network rollouts, focusing on overseas markets such as North America and Japan. Now let me move on to the 2021 annual outlook. We expect market demand to recover to a pre COVID-nineteen level amid a gradual economic recovery and full fledged expansion of the 5G market. As for our mobile business, we will strengthen our leadership in the premium segment by maximizing sales of the Galaxy S21 and by popularizing the foldable category, which includes Z Fold and Z Flip. At the same time, we will work to increase overall smartphone sales by actively addressing replacement demand for 5 gs with our expanded lineup of competitive 5 gs devices for the mass market. We will also continue to strengthen our tablet and wearable business to add to our foundation for growth. In addition, we will further extend the Galaxy ecosystem by collaborating with leading global partners, providing users with a more valuable experience to enrich their daily lives. We will also continue our efforts to enhance our cost structure and operational efficiency to secure solid profitability. For the network business, we will actively respond to 5 gs commercialization globally and continue to explore new business opportunities. Thank you. Good morning, everyone. I'm Won Joon sung from sales and marketing team of Visual Display. First, I would like to review the market conditions and our performance in Q4 in 2020. The market TV market in Q4 expanded quarter on quarter, thanks to a strong release of pent up demand in advanced market during year end peak season. Even with unexpected risk factors such as an increase of COVID-nineteen cases and lockdowns, We have continued to strengthen our competitiveness in contactless sales and preemptively address seasonal demand. In particular, we try to spread over peak season demand with earlier promotions given the potential for additional lockdown in the 2nd waves of pandemic. Also, we expanded online sales and O2O services as social distancing policies caused the offline consumption to shrink. As a result, we improved our sales mix with expanded sales of higher value products like QLED TVs, large super large screen TVs and gaming monitors. However, TV earnings decreased slightly year on year because of rising cost and intensifying competition During peak seasonality, for digital appliances, although market conditions were quite unstable Due to additional waves of COVID-nineteen, demand decreased slightly, thanks to a recovery of economic activities in emerging markets. Securities. As the government stimulus package around the world took off effect as well as an effect of the stay at home trend, We achieved revenue growth in advanced markets as well as in emerging markets such as in India and Latin America. Profitability improved year on year as we implemented a flexible peak season promotions tailored to each region focusing on premium products. Now let us look at our outlook for Q1 and 2021. As the Q1 is considered off season in the TV industry, demand is likely to fall quarter on quarter, but it should rise compared to last year. We will strengthen cooperation with our channel partners and kick off promotion tailored by region to maximize sales opportunities. Also, we will successfully launch NEO QLED, offering a quantum leap in picture, design and sound quality. And we will improve our sales structure by prioritizing high value products such as Super Large Screen TV, Lifestyle TVs to secure profitability and drive growth. For digital appliances in the Q1, we expect the market to grow compared to last year. We will keep adding growth momentum based on launching our innovative new premium lineups and enhancing online marketing activities. Although the TV market in 2021 may fluctuate heavily due to the pandemic, It will probably stay around the same level year on year. With the business experiences we gained in 2020, Along with our global SCM competitiveness, we will continue to grow by implementing a sales strategy to respond flexible to any changes in the market. Also, we will continue to lead the market with our product innovations and tech leadership as the industry leader. Along with Neo QLED. We will offer consumers a great viewing experience through microLED, which is opening a new era of breathtaking picture quality. And we will also deliver new screen value by expanding sales of life TVs that reflect various styles and the taste of consumers. Moreover, As we presented at the 1st loop event in January, along with our product innovation, We will continue our activities to protect the environment while also working on the ways to improve accessibility of more consumers. In 2021, the digital appliances market is projected to grow year on year, backed by a continued release of pent up demand in advanced markets. We will continue efforts to increase sales of premium products, especially by expanding our bespoke platform to other product categories and by launching them globally based on our SM capabilities. Also, we will achieve sustainable growth by strengthening our online and B2B businesses and executing efficient marketing strategies that are tailored to conditions in each region. Thank you. Thank you for the presentations. That sums up the 4th quarter results presentations. Before we move on to the Q and A session, I would like to share several data points in key business areas. Considering the heightened macro uncertainties, we will not be providing annual guidance at this time. For DRAM in the 4th quarter, our bit growth was about 10% and ASP declined in the upper single digit range. In the Q1 of 2021, we expect market bit growth to decline a mid single digit percentage, and we expect to perform slightly better than the market. For NAND, in the 4th quarter, Our bit growth was in the upper single digit percentage range, while ASP declined by just over 10%. In the Q1, market bit growth is likely to be around 10%, and our bit growth should be around that level as well. For the display panel business in the Q4, the OLED portion of sales was in the mid-eighty percent range And OLED sales volume growth was in the lower 50% range. In the mobile business in the 4th quarter, Sales volume was around 67,000,000 units for handsets and 10,000,000 units for tablets. The blended ASP, including tablets, was US205 dollars and the smartphone portion of handset sales volume was in the low 90% range. For the Q1, we expect quarter on quarter shipments to increase for handsets, but declined for tablets. And we expect blended ASP to rise compared to the previous quarter. The smartphone portion of handset sales should stay in the low 90%. In the TV business, sales volume increased in the low single digit percentage range in the 4th quarter, and we expect 1st quarter shipments to decline in the high 20% range. With that, I will now move on to the Q and A session. The first question will be presented by Peter Lee from Citigroup. Please go ahead with your question. I have two questions on the memory side. First is about the DRAM. I think competitors have also been providing positive guidance for the DRAM market condition this year. And recently, the spot prices have been rebounding, raising the expectation that perhaps the DRAM prices will be able to rebound during the Q1. Within that context, can you share with us your outlook on DRAM supply as well as price for Q1 as well as this year on a full year basis. In particular, I think many people are expecting that compared to the strong demand recovery, The increase in supply would be limited. This is even indicating some expectations of maybe of another big cycle coming on similar to what we saw in 2017 to 2018. Can you share us your views about such expectations? Second question continues with the memory side. When we look at what the competitors have been announcing in terms of Their earnings and the market, the investors' responses to this, I think there is some concern building in the market of a possible double booking on the mobile side and maybe an inventory adjustment coming towards the second half of this year. When I talk to the mobile Besides, there seems to be some inventory that's already built up. I recall that the company did a very good job in responding to the demand volatility that happened in the 2014 or 2018 timing when there was some trade related tensions. Given that experience, how is the company planning or preparing to respond to the concerns about mobile high inventory and adjustments. To answer your question about the DRAM outlook, I think it's best to address that by location. First of all, regarding the server, we think that there will be solid demand as it seems customers have completed their inventory adjustments and some of the investments that were postponed from last year are being resumed. Also from the Q2 in the case of servers, There will be demand related with a new server CPU that is being introduced. So that will be another driver of server related DRAM demand. And so overall, the server side demand outlook looks bright. For the mobile applications, we expect that the demand will increase given the fact that consumer sentiment is improving And there is a rollout of 5 gs infrastructure, especially around the key countries. And also 5 gs is being adopted on a wider range of mass tier models. So given that solid demand outlook for the key applications, we are expecting that the DRAM ASP would turn around to an increasing trend during the first half of this year. But that said, there is still a lot of risks and uncertainties, including possible resurgence of COVID-nineteen and on resolved geopolitical risks. So this would be risks and possibilities for demand fluctuation going forward. And so We advise caution to those who are anticipating, for example, a big cycle similar to what happened in 2017 2018. To answer your second question about mobile demand, about the possibility of mobile customers having double booked, That is also a possibility that we are carefully monitoring. That said, our basic assessment of the current mobile market is that even though, yes, there is some demand increases From the Chinese OEMs, especially after the sanction against Huawei, we do still C, demand growth from the base effect against last year when the mobile market contracted quite significantly due to COVID-nineteen. And also, we do see strong build demand in the market as 5 gs is going to be rolled out in a larger scale this year. And so given these factors, we do see that there is sufficient momentum behind mobile demand overall. Given that one variable that we are carefully watching and monitoring is the issue of the supply issue Q2 of other semiconductor products that's being caused by overall foundry supply shortages. This is a global issue. There is a possibility that the shortage of other semiconductor parts may impact mobile demand, and so we're carefully watching how that plays out. The next question will be presented by Nicolas Goudoir from UBS. Please go ahead with your question. Good morning and thanks for taking my questions. The first one related to the foundry business. There has been first of all quite a bit of question around Intel Outsourcing, including last week from Intel itself. Could you please update us on what it means as an opportunity for Samsung Foundry. In addition, there was also recently a media report On Samsung considering foundry investment in the United States and one of the backdrop of that is the likeliness of the CHIPS Act coming through. I'm wondering if you're actually reviewing those plans right now and if you could elaborate on Anything more specific in terms of options there? Secondly, regarding the smartphone business, the Galaxy S21 came out with reduced pricing compared to Galaxy S20 in spite of going 5 gs across the board. This may clearly supports volumes, but how should we think about this from a profitability perspective for the high end smartphone segment in 2021 compared to 2020? Thank you. And even though we're not able to comment details of specific customers, we do think that Intel's decision to Arcelor from the entire foundry market perspective will lead to increasing the overall foundry market size. And our position is to actively respond and capture the increasing HPC demand by continuing to to gain leadership in the cutting edge nodes and also providing differentiated solutions. Regarding investments, including building a fab in the U. S, new decisions have been reached yet. One of the requirements of a foundry business is to meet customer demand in a timely and efficient manner when demands are placed. And so Actually studying ways of gaining and securing the production capacity by nature of the foundry business is something that we go through on a routine basis. And so as part of that routine review, we continuously study ways of operating our sites in the most optimized manner, including the sites in Gyeong, Hwasong and Pyeongtaek as well as the site in Austin. To answer your second question about the Galaxy S21, while developing and preparing the Galaxy S21, one of our focuses was on improving the cost structure by finding the optimum product specification and also increasing standardized in common parts, which has been one of the consistent policies that we have been implementing. Also, at the same Time, we have been raising the efficiency in the overall process, starting from the development, manufacturing and logistics. And so in terms of sales, Given the fact that we have launched the model earlier in the year than before and also we're offering it at a very competitive price, we do That there to be increase in volume, which will give us additional economies of scale. And at the same time, we are expecting that the higher Price models within the S21 series will be accounting for a larger share of the entire volume so that We will have a more attractive product mix and delivering us solid profitability. The next question will be presented by Do Won Kim from KB Securities. Please go ahead with your question. I have two questions. First question is about the NAND. As people are expecting the DRAM prices to rebound during the first half, I think that is leading also to expectations of the NAND market It also stabilizing and possible price rebound happening in the second half of this year. So in that context, can you share with us the company's outlook for NAND both on the demand and supply side for 2021? 2nd question is about the mobile business. About the foldable form factor, I think there are more people expecting the company to launch new foldable models. Can you Share with us some more details about your foldable lineup and your mid- to long term strategy regarding this form factor. So answering your first question about the NAND outlook, and I think same as DRAM, even the NAND market, Overall demand seems to be very solid this year for all applications. First of all, with servers and mobile demand continuing to or expected to Continued growth overall this year, we're seeing increase in content, NAND content on PC. And also we're We are expecting that even enterprise PC demand would gradually increase as the economy recovers. So overall, the demand side 6 Now as the demand expectations are solid, depending on the supply side, Production side of the industry, there is some possibility of some imbalances happening during the year. If such imbalances happen in the market, as we mentioned during the presentation, our priority is to be is to maintain our relationship with customers as a trusted supplier by sufficiently responding to changes in the demand. To answer your question about the foldable model lineup, in 2021, we will continue to strengthen our Z Fold and Z Flip lineup with the aim of popularizing the foldable form factor. In the case of the Z Fold, it will solidify positioning in the super premium segment, especially highlighting the usability it offers with a large Green, for example, for entertainment or productivity cases. For the Z Flip, that will aim to satisfy and target the needs of the millennials as well as female users with its differentiated stylish design and also competitive prices. Also, in addition to these product launches, we will focus on expanding the foldable ecosystem by actively reflecting the feedback of users previous foldable models and also increasing the strategic cooperation with strategic partners so that we're able to provide a higher level of completeness of the product and also better consumer experience. In terms of the mid- to long term product line of strategy, even though I cannot disclose the details of our future product road map. We do have several form factors designed currently that we're working on in the pipeline, and we will be unveiling them to the market once We have a sufficient level of product completeness and also are able to provide a satisfying level of usability and quality. The next question will be presented by Hyun Woo Do from NAC Securities. Please go ahead with your question. I have two questions. First question is about the MEM about the semiconductor, about the investment and the approach that the company has for both DRAM and NAND as memory supply situation seems to be improving. I think There are some in the market that are expecting the company to invest more. Others are saying, no, the company will focus more on profitability. Can you share with us your basic approach to investments in memory business this year? Second question is about the display business. I think we're noticing some new applications emerging, for example, foldable and other IT applications. Can you share with us details about the company's plan on how to capture these new application opportunities? To answer your question about our investment Approach. As you know, it has always been our consistent approach to investment to first carefully study and monitor the supply and demand situation in the market and to align our investments with what we see in the market. And so when we look at the demand side The memory market, even though there are still factors that may have short term volatility on the demand, we have always thought that on the mid- to long term, there is drivers for solid growth in the memory market on the demand side. And so based on this mid- to long term outlook, as we have emphasized, In order to prepare for the positive mid- to long term fundamental demand, we have continued on preemptively investing on the infrastructure while executing the equipment investments flexibly depending on the market situation. Approach, our target profitability is profitability that is sufficient enough for us to continue our investment to prepare for future demand. Having gone through rapid demand and supply fluctuations and also Rapid price fluctuations, we have reached the position that rapid increase in memory prices overall has a more negative impact on the IT ecosystem. And so our mid- to long term investments as well as supply will be kept in line or aligned to the demand growth. You've asked your second question was about the display Business and the foldable in IT and other application, how we plan to capture this. If I answer Your question, first, from some of a macro perspective, I think especially as we went through COVID-nineteen and more people started to work from home and study from home, there has In an increase in the overall digital experience and digital demand, I think during the past year, the users of these digital devices have become more diverse. We have children and the older people using it. Also, this digital transformation is expected to pick up pace As the 5 gs communication technology is rolled out further, so as we are expecting to see a rapid increase in IT related needs that we have not seen before. And also these diverse IT devices will be used in very different use cases. And so as more people are communicating on on non contact or online basis, and there's more services being used. We will Our goal in terms of our foldable and OLED display offering is to provide differentiating experiences for these different use cases. And so to go into the specifics, currently, we have 2 types of foldable offerings, the flip and the fold or the book type. We will be adopting new technologies into the foldable offering so that we're able to further solidify our positioning in the premium segment. And also this year, we'll be focusing on expanding our customer base as well as the end applications or products that The foldable displays are adopted into. Also, in addition to the foldable, there has been laptops that are adopting OLED displays. OLED displays have an advantage in terms of response speed and also the ability to express real black. And so compared to other display technologies for Computers and Laptops. It is especially being found attractive by people who are using, for example, gaming for video applications on their laptops. And so we will continue to focus on supplying our OLED displays for high end laptops. Last year, we there were 4 models that were launched with our OLED displays. This year, we're expecting that to increase by more than twofold. And we will also be increasing the customer base for our OLED IT displays so that we will be able to, this year, achieve increase in sales volume as well as continue to grow. The next question will be presented by Sungkyu Kim from Daiwa Capital Market. Please go ahead with your question. I have Two questions. The first question is for the semiconductor, the memory side. It's about your road map. You would have heard that recently some competitors, for example, one competitor adopted the 1 alpha node on the DRAM side. And also A Korean competitor had announced 167 layer V NAND. Can you share with us the meaning of these announcements by competitors? The reason I'm asking about Your road map is because despite the positive outlook for the market environment for the Q1, I think your stance today has been more of a conservative stance, for example, mentioning the possibility of continued impact from the new line ramp up. And so is there a possibility of reading that this may hint the gap the technology gap between you and the competitors narrowing them than before. So in that context, can you share with us your detail So about the DRAM and NAND roadmap going forward. 2nd question is about the Mobile, the 5 gs equipment business. Last year, there was the contract with Verizon on the 5 gs equipment side. This year, Overall, the 5 gs rollout is expected to continue. Can you, first of all, share with us your outlook on 5 gs network businesses and markets? And are there specific regions where you are expecting to win additional orders for your 5 gs network business? To answer your first question about our technology competitiveness, in the case of DRAM, as we mentioned during the last conference call, the DDR5 is Currently preparing for mass production without any issues, and we're currently going through marketing activities by cooperating with key chipset company. Also, as we have continuously emphasized, we have successfully Applied multistep EUV for the first time in the world on 1A, which is the 4th generation DRAM in the early 14 nano ranges based on our differentiated EUV know how and ecosystem. And so this year, we're planning to produce the 1a node with EUV starting from this year, which will give us continued strength in terms of cost competitiveness, quality and performance. Also, I would like to mention the high k metal gate process. We have already developed the high k metal gate process from 2017 for the DRAM operation. We've actually have experience of applying the high k metal gate technology and the high end graphic products and supplying to customers. So based on our experience of having applied high k metal gate processes, we have already built the know how, And we are planning to maintain our technology advantage by applying the technology not only in graphic products but other key products. To give you an update on our NAND, our single stack 6th generation V NAND has already completed ramp up and this year we will be scaling up production. Also in the next generation, that's the 7th generation V NAND, we are planning to adopt double Stack for the first time. This will give us the advantage of having the smallest stack height in the industry. And on top of that, By using the know how we've accumulated working with single step, we are expecting that we will maintain outstanding cost competitiveness even with Multistaff on 7th generation V NAND. Also, regarding applications, I think on the server side, there is continuous expansion on the high capacity, high density TLC SSD market. And so We will be actively supplying the high density, high reliability products with 8 terabytes or more in order to capture this market demand. On the mobile application side, we are noticing that the high density MTP products of 128 gigabytes and more are being adopted not only on the flagship but also towards the high and mid ranges. And so we will be offering our 5 12 gigabit 6th generation V NAND product that has the cost competitiveness the best cost competitiveness in the industry in order to expand our positioning in the value market. Regarding your second question about the 5 gs Network As you know, in 2020, due to COVID-nineteen, a lot of the 5 gs and 4 gs network projects were postponed in key countries. But The U. S. Went through or started its C band auction last December. And also this year, during the Q4 of this year, We are hearing that there will be resumption of frequency auctions, for example, in countries like India. And so we do see business opportunities appearing throughout this year. And so we are currently in 5 gs trials with major carriers around the world using our 5 Technology. And also, we're continuing to explore new business opportunities in areas such as Latin America and Europe. The last question will be presented by Claire Gin from Hana Financial Investment. Please go ahead with your question. I have two questions. First question is about the NAND market. It seems that the Weak price the soft price in the NAND market will continue for some time being. In that context, does Samsung have any plans of pursuing consolidation in the industry? 2nd question is for the TV side. This year, we're hearing not only Samsung but also other competitors are planning to launch mini LED TVs. Can you share with us the competitive the differentiating advantage and also the strategy of Samsung's NIO QLED product, which I understand would be the Mini LED TV. To answer your first question, we do not have any plans of pursuing an artificial consolidation as part of our NAND strategy. Also, I think we believe that, that is not something that will happen just because we push forward either. And to once I can clarify our position towards the NAM business, it is basically to leverage our technology leadership to continuously gain and strengthen our undisputed cost competitiveness and to actively meet and satisfy customer demand. You've asked about as your second question, you're asked about our NIO QLED. And the new QLED is the next generation display that embodies our innovative technology capabilities that are at Totally different dimension from the existing QLED. For example, it embodies the quantum mini LED, which has a smaller cell size and is able to therefore control the light in a more precise manner. Also, the Neo QLED adopts The quantum matrix technology, which can actually deliver the highest level of contrast in the industry and also is able to express flat details with this ultra precision control technology. In addition, the NIO QLED uses the NIO Quantum Processor that consists of 16 neural networks and has better AI upscaling performance so that the content or excuse me, the picture quality and the sound is optimized depending I mean home training, home office, In addition to these cutting edge technologies, we have adopted the Infinity 1 design that makes the New York reality is slim, but also to be in harmony with its surrounding environment. Also, we have noticed that many people are now using the TV for home training and home office and other in home activities. So we have adopted and have included various smart functions into the NIO QLED TV. And so the NIO QLED actually enables the perfect premium TV experience in terms of all dimensions, picture quality, sound, design as well as the smart functions, and we will be highlighting these differentiating strengths of the NIO QLED As we promote the product to consumer,