For cancellation, please press star two, that is star and two on your phone. Now we shall commence the presentation on the fiscal year 2019 third quarter earnings results by Samsung Electronics.
Good morning. This is Robert Yi from Investor Relations. Thank you for joining our earnings call this morning. With me, representing each of the business units are Mr. Chun SeWon, Executive VP of Memory Marketing, Mr. Ben Hur , Senior VP of System LSI Marketing, Lee Sang Hyun, VP of Foundry Marketing, Choi Kwang-hyeong is a VP of Samsung Display, Lee Jeong-min, VP of IT and Mobile Business, and Kim Wong-hee, Vice President of Visual Display Business. Also, we have Mr. Ben Suh and Mr. Kang Tae-gyu, both from Investor Relations. I would like to remind you that some of the statements we'll 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.
Before going over the results, I would like to address the third-quarter dividend. The board of directors today approved a third-quarter dividend of KRW 354 per share to be paid in November for both common and preferred stocks. The total amount of payout is the same as it was in the first and the second quarter, which is KRW 2.4 trillion, or one fourth of the planned annual total of KRW 9.6 trillion. Let's move on to our results. Total revenue in the third quarter decreased about 5% year-on-year to KRW 62 trillion, despite strong sales of said products, including smartphones, as conditions for the memory business remained weak. Q-on-Q basis, the total revenue increased about 10%, mostly due to the mobile and OLED business.
Gross profit fell sharply year-on-year to KRW 22 trillion, with a corresponding decrease in gross margin, mainly due to soft conditions in the memory market. SG&A expenses were up year-on-year in both absolute terms and as a % of sales, primarily due to increased R&D expenses for the development of advanced semiconductor technologies, as well as strengthening our competitiveness in areas such as 5G and foldable technologies. Operating profit in the third quarter was KRW 7.8 trillion, and operating margin came in at 12.5%, both down significantly year-on-year due to relative weakness in the memory business, but up quarter-on-quarter from robust smartphone sales and increased OLED utilization. A strong US dollar and euro against the Korean won in the third quarter positively affected operating profit quarter-over-quarter by approximately KRW 0.4 trillion, mainly in the component business.
I'll now briefly review the performance of each business unit. In the memory business, earnings fell sharply year-on-year as prices continued to decline amid an industry-wide weakness that has persisted since the end of 2018. However, we did see higher than expected demand in this quarter due to customer inventory buildup. For System LSI, demand increased year-on-year for mainstream products such as image sensors and display drive ICs, but earnings came in lower due to large price decline for mobile application processors as a result of intensified competition. In the display business, mobile panel profit improved year-on-year due to cost reductions from increased utilization and productivity. However, the large panel business' loss increased quarter-on-quarter as ongoing capacity expansions in the industry continued to weigh on profitability.
For the IM division, mobile earnings grew due to strong sales performance by Galaxy Note10 and A series, as well as higher profitability in the mass market segment. In addition, we extended our technology leadership with the expansion of our 5G lineup and the launch of Galaxy Fold. In the network business, earnings improved year on year, boosted by the rapid commercialization of 5G in Korea. For the CE division, profits in the TV business dipped slightly year on year amid aggressive pricing competition, despite growing unit sales of premium models such as QLED and ultra-large TVs. For home appliances, earnings edged up year on year with the robust domestic sales coupled with improved profitability for refrigerators and washing machines. Next, I would like to share our business outlook.
For the fourth quarter in the Component Business, despite weak seasonality, memory demand is expected to increase slightly quarter-on-quarter as customers build up inventory in response to global uncertainties. In System LSI, 7nm EUV products will be mass-produced in earnest. Earnings are likely to feel greater effects from weak seasonality. For Display Business, Mobile Display earnings are expected to weaken due to lower than expected demand for certain premium products and rising costs from lower utilization of rigid lines. In the Large Display Business, we forecast that earnings will further decline as ASPs continue to fall amidst weak seasonality. In the Set Business, we expect Mobile earnings to decrease quarter-on-quarter due to an increase in marketing expenses and a small decline in shipments as a result of dissipating new product effects of flagship models.
The network business will work to expand its 5G business in overseas markets based on our success of 5G commercialization in Korea. Consumer Electronics earnings are expected to improve as there is a seasonally strong year-end demand in fourth quarter. Looking out to 2020, for the memory business, while demand is expected to recover, global macroeconomic issues pose a risk of continued uncertainty in the industry. To address increased CIS demand, we reviewed overall optimization of our semiconductor capacity and plan to increase CIS capacity starting in first quarter 2020. Due to such optimization efforts, we expect given inventory to normalize in the first half of 2020. We will continue to manage our Capital Expenditure plan flexibly in response to changing market conditions while remaining committed to investing in mid to long-term readiness.
In non-memory semiconductors, for System LSI, we will introduce differentiated products to the 5G SoC and high-resolution sensor markets. In foundry, we will expand mass production of 5 and 7 nano EUV chips while also diversifying our client portfolio. In the display business, amid a likely increase in competition in mobile display, we will work to increase our year-on-year utilization by enhancing price competitiveness and leveraging OLED's advantages in power consumption, thickness, and design to solidify our lead position in 5G and other premium devices. For large displays, we will continue to reorganize our business structure around QD displays. In the LCD business, we remain focused on differentiator products such as ultra-large TV, 8K models, and value-added monitors. In the IM business, the mobile business will keep extending the leadership in the premium segment by expanding our 5G and foldable product offerings.
At the same time, we will pursue improved profitability through enhancement of our mass market lineup. The network business will strive to expand its 5G business overseas, including in the U.S. and Japan, and continue to address additional 5G expansion in Korea. In the CE division, we will continue to lead the premium TV market by expanding adoption of QLED 8K and ultra-large models. Home appliances will see continued growth through the expanded launch of innovative products, such as our Bespoke refrigerators. Now I'll address the capital expenditures. The capital expenditure for 2019 is expected to be similar to that of the last year, reaching approximately 29 trillion KRW, with 23 point trillion KRW allocated to semiconductors and 2.9 trillion KRW to display. Third quarter CapEx was 6.1 trillion KRW.
The cumulative total for this year as of the end of the third quarter was KRW 16.8 trillion, with KRW 14 trillion to semi and KRW 1.3 trillion to display. The majority of the remaining 4Q capital expenditure is earmarked for building memory infrastructure to address mid- to long-term demand. Furthermore, we will invest to expand 7 nm EUV capacity to strengthen our foundry business, and we'll also push forward with our investment plan for QD display. As we previously announced, to secure future growth, we are fully committed to invest in the strengthening our competitiveness in the existing business and to securely position the company to grow in the new growth areas, including artificial intelligence, 5G, and automotive components. Before we move on to presentation from each business unit, I'd like to share several data points.
For the third quarter this year, DRAM, our bit growth came in low 30%, while ASP declined high teens. For Q4, we expect the market DRAM demand growth to be low single digit. We expect our bit growth to be in line with the market. This will bring the 2019 annual DRAM demand growth at about mid-teens. I believe that our bit growth will be higher than that. For NAND, third quarter, our bit growth came in at high teens, while ASP declined mid-single digit. For the Q4, we also expect to see NAND market demand growth to be low single digit. We will be in line with the market. For 2019, for the total year, it will bring the NAND market demand to be high 30%. We will be higher than that.
For our display panel business, the OLED mix within the sales was about mid 80% in the third quarter. For our wireless, our handset sales in the third quarter was 85 million units. Tablet came in about five million. The blended ASP for our handsets were about mid $230. The mix of the smartphone within the total handset was low 90%. In Q4, we expect the shipment of our handset sales to decline quarter-on-quarter, while tablet, we do expect to see some increase. The blended ASP is more likely to decline quarter-on-quarter, while the mix of the smartphone within total handset will be kept at low 90%. For our TV business, our sales and the Q3 shipment volume in Q3 came in about mid-teens. In Q4, we expect to see high 30%.
This will make up the decline in the first half, so that the annual increase of total shipment of TV will be high single digits increase. Now I'll turn the call over to gentlemen from each business unit, starting from the memory.
Good morning. This is Sewon Chun w from the memory marketing team. In the third quarter, demand in the memory market grew considerably with strong seasonality and inventory restocking as some customers after inventory adjustment at data centers. Front-end, customers becoming increasingly aware of a price bottom related to better than expected demand growth, backed not only by launches of new smartphones and a continuing trend toward high-density, but also by increasing SSD adoption in PCs and expanded high-density storage from server customers as price elasticity kicked in. We actively responded to increase the demand for high-density e-storage related to the release of new smartphones and for high-value-added, high-density SSD of over two terabytes from data centers, enabling us to achieve results above our previous guidance.
For DRAM, demand from all applications has greatly increased, thanks to strong seasonal effect, as well as from inventory restocking at customers in preparation for global macro issues such as tariffs and semiconductor material export regulations. As inventory levels normalize mainly at data centers, server demand increased mostly for high-density products due to effect of the expanding adoption of a new CPU. For PC, alongside rising demand from an increase in set build, mainly from large OEM due to seasonal effects, replacement demand from enterprise PC also increased because of the termination of Win7 service. For mobile, the launch of new models in the second half led to a quarter-on-quarter increase in set shipment and demand, thanks to an increasing portion of smartphones featuring at least eight gigabyte DRAM.
By actively addressing overall growth in demand from major applications and rising demand for inventory from customers, our sales far exceed our previous expectations. Now I will talk about the first quarter of 2019. In the first quarter, front-end, we believe price elasticity will result in solid demand for high-density storage and we expect the prices to rebound across all applications amid to stabilizing industry. For SSD, the adoption of high-density, high-performance SSD in data centers is expected to expand, and attach ratio for client SSDs is also likely to increase steadily.
For mobile, the high-density trend is likely to continue considering launches of a new high-end model by major manufacturers. We will actively address rising demand across all applications, including demand for new products based on PCIe in the server market, and demand for high-density e-storage for flagship smartphones, while we also remain focused on strengthening competitiveness in the premium market. In addition, we currently mass produce fifth generation FinFET for all applications, and we will enhance our technological competitiveness and strengthen profitability by transitioning toward the sixth generation FinFET within the year. For DRAM, although there may be some impact from recent inventory restocking at customers, overall demand is likely to remain solid and is likely to show some increased quarter-on-quarter.
For server, we expect the demand from data centers to remain solid, while that for 16 gigabit-based high-density products will keep rising, mainly from OEMs, with increased adoption of the new CPU. For PC, set demand is likely to be limited following a pre-purchase in the third quarter caused by the U.S.-China tariff issue, but overall demand seems to stay mostly flat quarter-over-quarter, thanks to remaining demand for the holiday season, and continuing pre-build enabled by a delay in the U.S.-China tariff issue. For mobile, we expect to see solid demand thanks to year-end orders from major customers, and pre-purchase effect for 2020 Chinese New Year, alongside a continuing high-density trend with the release of new 5G smartphones.
We will continue to strengthen our cost competitiveness by expanding migration to the 1Y nm, while also focusing on extending our technological leadership by increasing sales of high-capacity server product and actively responding to early demand for mobile LPDDR5. For the memory market in 2020, it is still challenging to offer a detailed forecast as various global macro issues keep clouding the outlook. Here's what we are seeing at this point. Data centers are suggesting they have a quite positive outlook for demand in 2020. The high-density trend in the mobile market is also likely to stay strong considering the spread of 5G smartphones. Even so, we think a more prudent approach toward demand is necessary, considering risk of stagnant sentiment under global macro uncertainties. In fact, following rising inventory demand from some customers, which occur in the second half of 2019.
Therefore, we plan to increase our focus on investing and managing capacity flexibly based on market conditions. Furthermore, we will concentrate on stably ramping up production and achieving high-quality output of 1Z nano and sixth generation FinFET products, and we will continue to do our best to enhance our technology leadership by expanding our series of differentiated products such as high-density server, mobile solutions and HBM2E. Thank you. Before we move on to the non-memory section, I just want to make one correction. I've been told that I said that our third quarter NAND bit growth was high teens. Actually, it was low teens. I apologize, and we'll continue with the System LSI.
Good morning. This is Ben Hur from the System LSI Business. In the third quarter of this year, System LSI earnings improved quarter-over-quarter thanks to rising demand for high-resolution image sensors in China and mobile APs, PMICs, OLED DDIs for flagship smartphones amid high seasonality. In particular, we strengthened our technology leadership in the high-resolution image sensor market by being the first to commercialize 108 megapixel sensors. In addition, we have laid the foundation to accelerate the growth in the 5G market through close cooperation with major customers in China and Korea, targeting expanded adoption of our differentiated 5G solutions for smartphone models to be launched in 2020.
In the fourth quarter, demand for high-resolution image sensors such as 64 megapixels and 108 megapixel products should continue to increase, but earnings are likely to remain flat quarter on quarter due to a relative decline in demand for mobile APs and DDIs on the leaving third quarter peak seasonality. This quarter, we expect our 5G business to keep growing as our 5G one chip solutions will be applied to new high-end smartphone models produced by Chinese and Korean clients. In particular, Samsung 5G one chip products, based on their price competitiveness, low power consumption, and reduced chip size compared to existing two-chip solutions, are expected to help popularize 5G in low to mid-priced smartphones. In 2020, 5G devices are forecasted to take an expanding share of the mobile market, and the demand for our differentiated image sensor products should also grow significantly.
In line with market demand for increasingly high-spec smartphones, we will expand our lineup of differentiated products, which includes 5G SoCs produced at EUV 5 and 7 nanometers, high-pixel products of 108 megapixels and above, and 3D and Time-of-Flight sensors. We will also expand our mid- to long-term business scope by diversifying our product offering by developing automotive and IoT use chips. Thank you.
Good morning. This is Sanghyun Ryan Lee from foundry business. In the third quarter, earnings increased quarter-over-quarter, thanks to increased demand for EUV 7-nanometer mobile APs, high-resolution image sensors, and HPC chips. Shipments of computing and 5G network chips to U.S. customers also contributed to our favorable results. In particular, we strengthened our advanced node technology leadership by completing the tape-out for the 5-nanometer process and securing new orders for 5-nanometer-based consumer products. As for the 10, 14, 28-nanometer mainstream processes, we expanded orders to mobile network and consumer applications, and we also diversified customers and applications in specialty 8-inch processes by securing orders for automotive PMICs and power discrete chips. In the fourth quarter, we expect to generate solid earnings backed by mass production of 7-nanometer products, including EUV 6-nanometer project. We expect to secure new orders in HPC, AI, and network applications.
Moreover, we will continue our efforts to achieve stable results by completing designs for additional five-nano products, and we will solidify our foundation for growth by setting up four-nano design infrastructures. In 2020, we project that demand for mobile APs, modems, RFs, and high-pixel image sensors will grow significantly amid an expanding 5G market. We expect to begin mass production of new computing network products next year as a result of winning additional orders from large-scale clients this year. We will accelerate the diversification of our customer base by expanding orders for 5G, AI, auto, IoT, power, and continue gaining momentum in these areas. Specifically, we will continue to widen our customer and product portfolios in EUV processes through mass production in five nanometer and the tape-out of four nanometer.
Furthermore, we will continue to innovate to achieve rapid growth in the mid to long term by striving to complete the development of the GAA three-nanometer process. Thank you.
Good morning. I'm Gunyoung Choi from the business planning department of Samsung Display. First of all, as we announced earlier this month, we'll invest KRW 13 trillion in next generation technology, QD display, to strengthen our business competitiveness in the fiercely competitive large display market. Amid a combination of a global economic slowdown and rising uncertainties, we'll do our utmost to commercialize QD display in a timely manner. Now, let me turn to our third quarter results. Overall display earnings improved quarter-on-quarter, thanks to increased sales of small to medium-size OLED panels, despite weakness in the large display business. To add some detail, mobile display earnings improved sequentially as it entered the high season on higher OLED utilization rates and increased panel shipments, thanks to newly released products from major customers.
Meanwhile, earnings in the large display panel business remained weak amid stagnant demand and declining prices, with the latter as a result of oversupply caused by a 10.5G capacity expansion at competitors. Looking ahead to the fourth quarter, earnings in the mobile display business are expected to be similar year-on-year. Profitability may weak quarter-on-quarter under intensified competition due to a sales mix change, as well as a cost increase caused by a lower utilization of a few lines. In response, we'll work to shore up margin by lifting production efficiency and by expanding adoption of our differentiated technologies. With the large display sector under low seasonality, a sustained drop in ASP and demand for TV panels has heightened concerns over profitability. Accordingly, we strive to secure profitability by focusing more on supplying panels for items such as monitor and public display, among others.
Let me brief you on our outlook and core strategies for 2020. For the mobile display business, we expect orders for OLED panels to expand as users increasingly look to replace their current smartphone with a 5G model. We also expect competition to intensify as industry capacity keeps expanding. To address this, we'll continue to focus on boosting utilization and shipments by strengthening cost competitiveness and leveraging our differentiated technologies and designs to broaden our customer base. We'll focus on minimizing seasonal impacts by striving to add more end applications like tablet, node PC, and automotive, and actively addressing the needs of our foldable display customers.
Regarding the larger display business, we are reorganizing business structure to center on QD display, and we'll emphasize profitability by increasing the sales portion of value-added products such as ultra-large and high-resolution panels, including those for 8K TVs, and also by expanding shipments of premium panels for use in monitors, like curved and gaming ones. Thank you.
Good morning. I'm Jeongmin Lee from the mobile communications business. I'd like to share our third quarter results and our outlook for the IM division. In the third quarter for the mobile business, market demand for smartphones increased quarter on quarter as we entered a period of relatively strong seasonality. Our smartphone shipment and revenue grew thanks to solid sales of the Galaxy Note10 and A series. The Galaxy Note10 has been very well received by the market since its August release, being highly praised for its sophisticated design and next-level technology. As a result, the sales of Note10 in the quarter exceeded its previous model by over double digits while recording a stronger product mix as well.
Our profit also increased significantly as the A series lineup transition, which we had pushed in the first half, started paying off through cost reduction of inventory adjustments of older models. We strive to not only improve our business performance, but also strengthen our technological leadership with the launch of Galaxy Fold and more 5G smartphones. For the network business, we kept widening 5G coverage in South Korea and supplying equipment for LTE expansion in overseas markets. Let's move to the outlook of the fourth quarter. Although the mobile market in general will soon enter a period of strong year-end seasonality, demand is expected to keep trending down year-on-year due to persistent uncertainties in the global macro environment. For our mobile business, we expect our mass-market smartphones, including new A series models, to maintain their solid sales performance.
The overall sales mix is likely to weaken because of fading new model effects of the Note10. We also expect our profit to decrease quarter-on-quarter as marketing costs will increase under strong seasonality. For the network business, we plan to leverage our leadership in commercializing 5G to keep solidifying the foundation of our global 5G business. Finally, let me share the outlook for 2020. For the mobile market, demand for 5G smartphone is expected to increase as commercialization of 5G accelerates. Already fierce competition is likely to keep rising, especially within the trend of offering high-end specs. Based on our experience with launching 5G smartphones, we will actively respond to the needs of the market and our customers by widening our 5G lineup.
Furthermore, we will increase sales by enhancing competitiveness throughout our entire lineup, from flagship to mass-market models, and at the foundation of growth with foldable products that have witnessed their potential in the market this year. Alongside our efforts to expand the sales of premium smartphones. We will enhance the mix of mass market smartphones by focusing on mid-end to high-end models within the segment. From our low-end models, we will keep optimizing operations to improve profitability. For the network business, we will remain active in the nationwide expansion of 5G coverage and foster growth of our 5G business overseas, including in the U.S. and Japan. Thank you.
Good morning. I am Kim Won-hee from Visual Display Sales and Marketing. Let me start with current market conditions and our result for the third quarter. The overall TV market stayed similar year-on-year due to weakened consumption in the market. For Samsung, the TV profits were slightly down year-on-year, related to rising price competition in the market. However, the profitability was solid, and we generated year-on-year revenue growth by increasing sales of strategic products such as QLED and super large screen TVs. In particular, QLED TVs, with their superb picture quality and wide range of models, are leading the premium market with significant sales growth, improving the product mix, and securing profitability. In addition, in the 75 inch and above, we've been able to maintain our strong advantage in the market share while leading growth by meeting consumer needs for larger screens.
For the digital appliances market in the third quarter, developed markets have been stagnant, but global demand has increased thanks to growth in emerging markets like India. For Samsung, we are continuing to focus on boosting sales of premium products, and our growth has been solid in developed markets, backed by rising sales of new and innovative products like Bespoke. In emerging markets, we achieved double-digit sales growth and improved our earnings on a year-on-year basis. Now, I will share market prospects for the fourth quarter in 2020. The TV market in the fourth quarter is projected to slightly weaken due to negatives such as slow global economy and unfavorable exchange rates resulting from an increase in trade protection. To minimize effects of such negatives and maximize growth and profitability, we will actively address year-end peak season demand through close collaboration with our partners.
In particular, we will extend our leadership in the premium market by creating growth and generating profit by expanding QLED TV sales, which is positioned as a premium standard, and offering our strong lineup of super large screen TVs. For the digital appliance business, we will strengthen peak season promotions by co-operating with key partners and continue to expand sales of new line products such as dryers and air dressers. In addition, Samsung will continue to promote qualitative growth by increasing sales of premium products and further reinforcing our B2B business. For 2020, the TV market is projected to grow year-on-year thanks to global sporting events like a major European soccer competition and the Summer Olympic Games, despite risk factors such as economic instability in emerging markets.
Samsung will continue to expand sales of strategic products such as QLED and super large screen TVs while securing a new growth engine and solidifying leadership with 8K TVs, which are pioneering the ultra-high picture quality market, with MICRO LED, which have no bezel, no limits in size, resolution, or shape, and with lifestyle TVs, which add value to life of each consumer. For the digital appliance business, despite economic uncertainties, market demand is expected to grow in emerging markets, and Samsung will strengthen its premium lineup such as Bespoke, and promote continuous growth by expanding sales of new eye products and reinforcing our B2B business. Thank you.
Thank you. This completes our part of the management's presentations, and we'll move on to Q&A.
Now Q&A session will begin. Please press star one, that is star and one if you have any questions. Questions will be taken according to the order you have pressed the number star one. For cancellation, please press star two, that is star and two on your phone. The first questions will be presented by Mr. SK Kim from Daiwa Capital Markets. Please go ahead, sir.
이게 실질적으로 end demand 강세에 따른 것으로 보시는지, 아니면 일부 거래선들의 부품 조달 우려 측면에서 일시적으로 재고 축적을 한 것에 따른 것으로 보시는지 설명 부탁드리겠습니다. 그리고 만약에 이런 배경이 4분기 수요에 어떤 영향을 줄 수 있을 것인지 설명해 주시면 감사하겠습니다. IM 관련해서는 Galaxy Fold 출시하신 것 관련해서 이 foldable 시장 반응과 그다음에 향후 내년을 포함해서 확산 계획에 대해서 말씀해 주시면 감사하겠습니다. 좀 구체적인 설명 부탁드립니다.
Yes, I have two questions. The first question is for the memory side, your DRAM. It's a question about your expectations for next year DRAM demand. Your third quarter DRAM shipment was actually higher than the guidance that you had provided, which mainly seems to be driven by the Chinese mobile demand. Do you think that this increase in Chinese mobile demand is mainly explained by stronger end demand, or is it some of the customers just trying to build up inventory in case of their supply chain issues? What do you think will be the impact of this in the fourth quarter? Second question is about the Galaxy Fold that was launched. Can you give us some details of what the market response was from your perspective, and your plans next year of the foldable phone factor?
For example, do you have any additional plans of launching phones next year? Some more details would be appreciated.
네, 먼저 메모리 부분 답변드리겠습니다. 3분기에는 계절적 성수기 효과가 나타나면서 전반적으로 모든 응용에서 수요가 증가했는데, 특히 모바일 주요 거래선은 신제품 출시용이 컸고, 데이터센터의 경우에도 재고 조정 이후 구매가 재개되면서 수요가 크게 증가했습니다. 다만, 수요나 출하량이 기존 저희 전망을 크게 상회했는데, 이는 대부분 무역 분쟁에 따른 관세 이슈라든가 DRAM 공급 안정성 우려에 따른 중화권 모바일 업체들이나 일부 OEM 고객사들의 재고 확보용 수요에 기인한 부분이 큰 것으로 보고 있습니다.
To answer your first question, in the third quarter for memory, there was a positive seasonality. Overall, we saw an increase of demand in all applications, but especially the demand was large in the mobile major customers because they were launching new products. Also in the case of data centers, the data centers started to resume purchases after they went through their inventory adjustment. It is also true that both demand as well as shipments was higher than what we had expected by a large amount. It is true that Chinese mobile customers and also some OEM customers were buying and had demand for inventory due to concerns of potential customs duty issues due to the trade dispute and concerns about future DRAM supply stability.
4분기에는 고용량 스마트폰 신제품 출시 효과가 이어지고 서버의 경우에도 신규 플랫폼 확산에 따른 수요 견조세가 지속될 것으로 보이는데, 이와 함께 앞서 언급드린 바와 같이 대외환경 불확실성에 따른 고객사들의 재고 확보용 수요도 당분간 지속될 가능성이 크다고 보고 있습니다. 당사는 이러한 상황이 향후 시장에 줄 수 있는 영향성과 이에 따른 수요 변동 상황에 대해서 주의 깊게 살펴보고 있고, 이를 감안한 탄력적인 투자나 공급 운영에 주력해서 안정적인 수익성을 유지할 수 있도록 노력하겠습니다.
Looking towards the fourth quarter, we believe that with the effects of new smartphones, the high density new smartphones being launched will be positive. Also in the case of servers, with a new platform being rolled out wider, there will be solid demand even in the fourth quarter. Also, we think that it is likely that this demand of customers for inventory build-up would continue for the time being because of the continuing uncertainties in the external environment. We are carefully monitoring the impact that this would have on future markets and are carefully monitoring any changes in demand, and will focus on maintaining stable profitability through flexible operations of our investments and supply.
foldable 폰 관련해서 IM 답변드리겠습니다. 올해 출시한 첫 번째 foldable 폰인 Galaxy Fold는 사전 예약 및 초기 판매분이 빠른 시간 내 완판되고 언론과 실사용자로부터 호평이 이어지는 등 foldable 시장에 대한 가능성을 확인할 수 있었습니다. 올해 Galaxy Fold를 상용화했던 경험을 바탕으로 새로운 foldable 라인업을 지속 선보이며 시장을 리드해 나가고자 합니다.
To answer your question about the foldable, as you know, the Galaxy Fold, which was the first foldable phone launched this year, quickly sold out the pre-order and the first release quantities and received very positive reviews from both the press and end users. We were able to once again confirm the potential of the foldable market. We are planning to leverage the experience of having commercialized the Galaxy Fold to continue to introduce new products into the foldable lineup to maintain our leadership.
당사는 제품 출시뿐만 아니라 Fold만의 차별화된 경험을 극대화하기 위해서 멀티미디어, 게임 등 다양한 분야의 앱 최적화 및 콘텐츠 발굴과 협력에도 많은 노력을 기울이고 있습니다. 이번 Samsung Developer Conference에서 가로로 접힌 새로운 형태의 compact한 form factor를 공개했으며, foldable 카테고리의 새로운 form factor에 대한 개발을 지속해서 에코를 확대하고 새롭고 창의적인 모바일 경험을 선도하도록 하겠습니다.
In terms of our foldable approach, we are focused not only in introducing new products, but also focusing on optimizing the app for various areas such as multimedia and games, and to engage in active collaboration to identify new content optimized for the foldable form factor to maximize a differentiated experience that users can gain from the fold. We recently disclosed a compact foldable form factor that's a flip type at the Samsung Developer Conference. We will continue to focus on developing new form factors in the foldable category to expand our ecosystem and also provide a new and creative mobile experience.
네, 감사합니다. 다음 질문 받겠습니다.
다음으로 질문해 주실 분은 UBS의 Nicolas Gaudois 님입니다. The next question will be presented by Mr. Nicolas Gaudois from UBS. Please go ahead, sir.
Yes. Good morning. Thanks for taking my questions. The first one is drilling down a little bit on server DRAM. As you said, we saw some upside in procurement in Q3, which we believe came from a couple of large cloud customers. Do you expect this trend to continue into the next two to three quarters? Do you actually expect customers to somewhat pause until Intel Ice Lake 10nm server processors refresh finally kick in? Conversely, if Ice Lake was to be delayed beyond the current target that Intel has of an H2 2020 ramp, how would that, in your view, affect the server DRAM market in 2020 versus your current forecast?
Secondly, now that you've made public your plans to move to QD display over the next few years, would you, in that process, convert the whole of your Gen 8.5 capacity for LCD to QD display over time, and in which time frame? What will be the associated CapEx spending? Do you expect QD display to gain both technology and cost advantage over incumbent White OLED technology, and why? Thank you.
두 가지 질문이 있습니다. 첫 번째 질문은 서버 DRAM에 대해서 조금 깊게 들어가는 질문이 되겠는데요. 3분기 서버 DRAM의 구매가 상승한 것이 사실입니다. 보면 주로 몇 곳의 클라우드 고객사들의 수요 증가가 있었던 것으로 보이는데 이게 앞으로 한 2, 3분기, 3, 4분기 계속될 것으로 예상을 하시는지요? 아니면 이제 고객들이 Intel의 Ice Lake 10나노 서버 CPU 리프레시가 끝날 때까지 수요가 조금 대기할 것으로 예상을 하시는지. 그리고 만약에 Intel의 Ice Lake가 지금 목표는 2020년 하반기 램프업이지만 그 계획이 지연이 되면서 예상하는 대로 램프업이, Ice Lake가 이루어지지 않으면 그게 삼성의 서버 DRAM에는 어떻게, DRAM 예상과 또 전체적인 서버 DRAM 시장에는 어떤 영향을 미칠 것으로 예상을 하시는지 궁금합니다. 두 번째 질문은 QD Display 관련 질문입니다.
QD Display로의 기술 전환을 공식적으로 발표를 하셨기 때문에 이런 QD Display 기술 전환과 관련해서 그럼 지금 갖고 계신 Gen 8 Capa가 전부 그러면 LCD에서 QD Display로 전환이 된다는 것인지, 그렇다면 전환이 되는 일정에 대해서는 어떻게 되고, 관련이 된 CapEx에 대해서 말씀을 해주시면 좋겠고요. 그리고 그러면 QD Display가 기술이나 원가 측면에서 White OLED에 비해 경쟁력이 있다고 생각을 하시는지 궁금합니다.
네, 메모리 부분 답변 드리겠습니다. 서버 DRAM의 경우에는 기존에 저희가 예상한 대로 데이터센터 업체들의 재고 조정 이후 구매가 재개된 부분도 있었고, Cascade Lake 도입 및 확산에 따른 수요 증가도 견조했었습니다. 타사의 신제품 출시 계획에 대해서 당사가 언급할 수 있는 부분은 없을 것 같습니다. 다만 말씀하신 Ice Lake의 출시 연기로 채널 수 증가가 지연되어 결국 수요에 부정적인 영향이 발생하는 것을 염려하고 계신다면, A 채널을 지원하는 14나노 기반의 Cooper Lake 출시가 예정대로 진행될 것으로 예상됨에 따라서 채널 수 관련한 수요 영향성은 제한적일 것으로 보입니다.
To answer your first question about the server DRAM, as you mentioned, the server DRAM demand was quite solid as we expected. This is mainly explained by how data center customers have resumed their purchasing after finishing their inventory adjustments. Also there was a positive impact from the adoption of Cascade. Even though we can't mention or offer comments about the other company's plans of their new product launches.
If the premise of your question is the potential concern of Ice Lake delaying also the increase of number of channels, which may potentially have a negative impact on server DRAM demand, actually we would like to point out that it seems Cooper Lake, the 14 nano Cooper Lake is going to be launched, it seems on schedule that also supports eight channels. Therefore we think that even if Ice Lake is delayed, the impact negative on demand due to the number of channels will be limited.
특히 현재 고객사들 역시 20년 수요에 대해 긍정적인 전망이며 상당히 구체적인 연간 물량에 대해서 논의를 본격화하고 있는 상황으로 이러한 점들을 고려하면 전반적으로 서버 수요는 견조한 모습을 보일 것으로 판단하고 있습니다. 다만 앞서 말씀드린 대로 최근의 대외 환경 이슈들이 상존함에 따라 서버 시장에 어느 정도 영향이 있을지에 대해서는 지속적인 감시가 필요할 것으로 판단합니다.
Looking towards next year's server DRAM, the customers that we have been talking to have been presenting positive outlook for their 2020 demand, and they're talking in quite a detailed level about the full year quantity. These are giving a positive outlook on server demand for next year. However, there are continuing external environmental concerns lingering, and therefore, we will continue to sense and monitor the impact that these factors would have in the server market next year. To answer your second question about the QD display, as you mentioned, through the event that we had earlier this month, we announced our plans of investing a total of KRW 13 trillion to the QD display technology, until year 2025. This involves converting the LCD capacity, the 8.5G LCD capacity that we have in Asan to QD display.
The scope is most of our LCD capacity in Korea will be converted, in the long term, to QD display. If I break down the KRW 13 trillion, around KRW 10 trillion is investment for equipment and facilities, and KRW 3.1 trillion will be R&D related investments. Initially, we're thinking of starting out with a monthly capacity of around 30,000 pieces, and focus on building up our technology. After that gradually expand our supply, while monitoring the market situation as well as the product competitiveness. You've also asked about the competitiveness of QD display versus other technologies. QD display is based on Samsung proprietary QD technology, and we believe that technology-wise, compared to other competing technologies, the QD display technology has advantages in terms of color reproduction, viewing angle, and resolution. Actually can be expanded to not only TVs, but monitors and other display applications. That's another advantage.
Given the fact that Samsung has always had excellence in manufacturing, we believe that with our manufacturing excellence, QD display will be a very competitive offering, especially in the premium TV segment. Based on our mass production experience, we will achieve quick and efficient cost efficiencies.
The next questions will be presented by Mr. Yu Jong-woo from Hankook Investment & Securities. Please go ahead, sir.
I have two questions. The first question is about the inventory, the semiconductor inventory. You said that you expect the inventory to reach normal levels in first half of next year. Can you first of all, give us an update on your by product, by each product, the inventory situation as of second half this year? Regarding the inventory next year, can you give us a bit more detail of, for example, your production plans and your expectations in terms of supply and demand that support your view of inventory normalization next year? Second question is about the NAND. You've mentioned that you're expecting the NAND prices to rebound in all applications in fourth quarter, but I'm wondering how this ties in with your views before that the decrease in NAND prices are increasing demand, given the elasticity of demand to price.
If, as you mentioned, prices started to rebound from the fourth quarter, with that, what would be the impact of higher prices to demand, given the price elasticity of demand?
먼저 재고부터 답변드리겠습니다. 먼저 NAND는 기존 전망대로 3분기에 정상화되었고, DRAM의 경우는 3분기 당사의 출하량이 기존 당사 예상치를 크게 상회하면서 DRAM 재고는 전분기 대비 큰 폭으로 감소했습니다. DRAM 재고 정상화 시점과 관련해서 좀 더 설명드리면, 아까 스피치에서 말씀드린 바와 같이 저희는 중장기적으로 CMOS Image Sensor 수요 강세를 전망하고 있습니다. 이러한 수요 강세에 대응하기 위한 Capa가 계속 필요하고요. 이를 전 반도체 라인 최적화 등과 함께 종합적으로 검토해서 2020년 1분기부터 CIS Capa를 확대해 나갈 예정입니다. 이에 따른 영향과 함께 내년에도 DRAM 채용량 증가 중심으로 수요 견조세가 이어질 것을 감안해 본다면 20년 상반기 중에는 당사 DRAM 재고가 정상화될 것으로 기대하고 있습니다.
To answer your first question of our inventory. NAND already reached normal inventory levels during the third quarter as we had expected. In the case of DRAM, especially with our shipments going beyond what we had originally expected during the third quarter by a large margin, the DRAM inventory as of where we stand decreased significantly versus the previous quarter. Regarding the timing of DRAM inventory reaching a normal level, as we mentioned during the speech, in the mid to long term, one of the things we are expecting is that CMOS image sensor demand will remain strong for quite some time, we do need additional capacity to respond to this CIS or CMOS Image Sensor demand. Based on our review of our overall semiconductor line optimization, we are planning to increase our CIS capacity starting from first quarter of next year.
That will be one factor in terms of our DRAM inventory. On top of that, next year, the DRAM demand will remain solid according to our expectations, especially around increasing content. With these factors considered, we are anticipating that our DRAM inventory will reach normal levels during first half of next year.
NAND 관련해서는 조금 전 말씀드린 바와 같이 당사 재고가 3분기 정상 수준으로 안정화되는 등 전반적으로 업계 내 공급사의 재고가 빠르게 안정화되어 가고 있고, 이에 따라 4분기에는 가격의 반등이 예상되고 있는 상황입니다. 올 상반기까지 있었던 NAND 시장의 공급 과잉 현상은 시장 전반의 수요 감소와 공급 확대의 영향 속에서 발생한 것이라고 말할 수 있겠습니다.
To answer your second question about the NAND price outlook. As we mentioned, our NAND inventory have already reached normal levels by third quarter. Overall in the industry, the supplier inventory is quickly reaching stable levels as well. That is why NAND prices are expected to rebound during the fourth quarter. The oversupply of NAND that we saw until the first half of this year was the result of decreased demand overall in the market and increased supply.
보다 구체적으로 살펴보면, 수요 측면에서는 데이터센터 고객 중심으로 재고 수준이 높아지며 구매 수요가 일순간 급격히 감소했고, 공급 측면에서는 업계 전반의 4세대 3D NAND qualification이 확대되며 서버향 SSD를 포함한 주요 솔루션 제품에 있어서 공급사들의 램프업이 완료되어 공급이 빠르게 증가했었습니다.
To look back at how this oversupply happened during the first half, first of all, on the demand side, especially inventory levels climbed around data center customers, which suddenly decreased purchasing demand. On the other hand, from the supply side, what happened in the first half was that overall in the industry, there was an increase of fourth generation 3D NAND qualifications, and there was a ramp-up being completed by suppliers overall for major solutions, including server SSDs, that resulted in a very rapid increase in supply.
근본의 공급 과잉 상황에서 NAND 가격이 크게 하락하여 공급사들의 이익률이 악화된 측면은 있지만, IT 업계 전반의 측면에서 보면 이를 통해 모바일과 SSD 고용량화가 가속화될 수 있었고, 기존 제한적인 규모의 시장들이 성장하는 데에도 일정 부분 도움이 되는 등 시장 전반의 수요 진작에는 긍정적인 영향을 주었다고 생각합니다.
Looking back at that oversupply situation, even though the drop in NAND prices did hurt the profit margins of the suppliers, if we look at the impact from the perspective of the overall IT industry, thanks to decreased NAND prices, the acceleration of mobile and SSD high density adoptions happened. Also, we were able to increase markets that used to be a very limited market for NAND. So if we look at the overall market demand perspective, the decrease in NAND prices actually had a positive effect.
이러한 경험을 통해 당사는 특히 가격 탄력성이 상대적으로 강하게 나타나는 NAND 시장에서 가격이 급격하게 상승할 경우, 채용량 증가 둔화 등 건전한 업계 수요 증가에 부정적인 영향이 있을 수 있음을 다시 한번 생각해 볼 수 있었고, 이에 당사는 시장 수요의 변화를 조기 선행할 수 있도록 당사의 역량을 집중하여 중장기적으로 시황 변화에 탄력적으로 투자 공급을 운영하고 이를 통해 안정적인 수익성을 유지할 수 있도록 노력하겠습니다.
Through this experience, we learned that the NAND market has particularly a relatively strong price elasticity for demand. This gave us the thought that if the prices rebound quite rapidly going forward, this may have a negative impact on promoting the sound demand growth in the industry, for example, by decreasing the adoption rate and content increase rates. That is why we will focus on sensing the changes, fluctuations in market demand for NAND, and managing our investments and supply flexibly in line with the market situation and market changes in the mid to long term, so that we are able to maintain a stable profitability in our business. The next question will be presented by Mr. Kim Dong-won from KB Securities. Please go ahead, sir. I have a question that ties the IM and the System LSI, regarding the low-end handsets.
Can you share with us your mid to low-end handset profitability currently, and whether you have plans of increasing the quantities that you produce through ODM and JDM for cost competitiveness purposes? If the IM does increase its JDM volume, the question that I would like to pose to the System LSI side is: Do you think that this will potentially decrease your share of IM division's business, especially at the low-end side? To answer your question about our mass models, as you know, this year, we went through a mass model lineup transition combining the J and the A series, and we've also focused on quickly introducing innovative technologies that consumers want onto our mass smartphones, and thereby enhancing the competitiveness of our mass offerings.
Based on the stronger product competitiveness, we were able to increase our mass model sales versus last year, and also with the transition between our old and new models being wrapped up during the first half. In third quarter, our mass sales volume and also profitability improved.
Okay.
You've also asked us whether we have plans of increasing our JDM volume. As you know, we have been using JDM as a method for some limited models in order to respond timely to the rapidly changing market environment, and also to actively satisfy the demands of our customers and the market by operating our lineup more efficiently and using our internal resources more efficiently. Regarding whether to increase our JDM quantity, we have not reached any decision as of yet. We will decide the future direction by closely analyzing next year's market situation, the product competitiveness, and actually the feedback from real end consumers, customers. We will, even if we decide to expand, minimize the impact that this would have in our suppliers.
To answer that question from the System LSI side, already our products have quite a satisfying price performance, and of course we will continue to enhance our cost competitiveness so that we are able to actively defend our market share by delivering the price performance that our customers want. We also plan to increase our market share in the low-end segment by starting supply to not only ODMs, but other local Chinese customers. The next questions will be presented by Mr. Peter Lee from Citigroup Global Markets Securities. Please go ahead, sir.
안녕하세요. Citigroup 이세철입니다. 저는 메모리 관련해서 투자 쪽, 그리고 DRAM 공정에 대해서 질문드리겠는데요. 먼저 투자 관련해서 최근 언론 보도가 좀 많은데요. 신규 팹 투자 관련에 대해서 설명 부탁드리겠고요. 특히 평택 E라인 관련 루머가 많은데, 이 부분에 대해서 설명 부탁드리겠습니다. 그리고 두 번째로는 공정인데요. DRAM 1Z nm 공정이 진행되고 있는 거로 알고 있는데, 램프업 계획은 어떻게 되고 있는지 말씀 부탁드리겠고요. 그리고 EUV 도입 계획에 대해서도 말씀 부탁드리겠습니다.
I have two questions. The first question is about your investments on DRAM side. There were talks of new fab investments and some rumor in the market regarding Pyeongtaek line two. Can you give us an update on your investment plans? Second question is about a process question. How is your ramp-up plans for the 1Z nm and can you also give us an update on your EUV?
우선 투자 관련해서 말씀드리겠습니다. 여러 차례 말씀드린 바와 같이 당사는 변화 없이 중장기적으로 견조한 시장 전망을 갖고 있는 가운데, 외형적인 market share 확대가 아닌 지속 가능한 이익 기반 강화를 위해 투자 CapEx 운영 전략을 지속 추진한다는 기조에는 변함이 없습니다.
As we have mentioned several times, we still maintain a very solid market outlook in the mid to long term, and our basic approach towards our investments remain the same that we will pursue our investments and capacity management in order to strengthen our sustainable profit base, rather than focus on increasing the size of market share.
2020년 투자 계획은 지속 검토 중이지만, 미래 수요 대응 및 미래 기술 확보를 위한 투자는 적극 진행하는 가운데, 시황에 따른 탄력적 투자 운영에 더욱 주력할 계획입니다. 이러한 기조 아래 중장기 수요 증가에 대응하기 위해 Xi'an Phase 2는 기존 계획대로 올해 말 완공하여 2020년 초부터 가동을 시작할 예정이고, 증설 규모는 수요 상황 등을 고려하여 탄력적으로 설정할 예정입니다. 평택 2기 역시 2020년 가동 개시 예정으로 시험 생산 등을 위한 설비 투자는 일부 있을 수 있겠으나, 본격적인 양산 시점 및 구체적인 규모는 미정인 상태로 수요 변동 상황을 지켜보면서 탄력적 운영하고자 합니다.
Regarding our investment plans for next year, 2020, it is still being studied and reviewed. We are going to continue our investments in order to secure our future technology leadership and also to respond to future demand on a forward-looking basis. Also we will be focusing or putting more emphasis on flexible operation and management of our investments, depending on the market situation next year. Under that basic direction, in order to respond to the mid to long-term demand increases, Xi'an Phase 2 will be completing construction as planned within late this year and is planning to start operation from early next year. The actual size of that capacity increase will be determined flexibly considering the market demand situation.
Regarding Pyeongtaek Phase 2, it's also planning to start operation next year in 2020, and there may be some facility investments for test production purposes, but we have not yet decided regarding exactly when to start full mass production or the size of that mass production capacity, which will be decided once again flexibly, depending on changes in demand.
1Z nm의 경우 현재 계획대로 양산 중이고, 이를 포함한 10나노급 제품 비중은 기존 예상대로 올해 연말 70% 후반에서 80% 수준을 예상하고 있습니다. 내년에도 주요 응용처별로 1Y와 1Z 공정 전환을 지속 확대해 나갈 예정으로 내년 상반기부터 1Y 공정이 메인 공정으로 자리 잡을 것으로 전망하고, 1Z 공정의 경우 주요 고객사들의 qual 진행 현황을 살피며 안정적으로 ramp-up을 진행할 계획입니다.
To answer your second question about our process migration update, 1Z nm is currently in mass production as we've planned, and including 1Z, we believe that according to our expectations as of end of this year, the share of the 10nm-class products will be around high 70s or 80%. Next year, we plan to continue our migration for 1Y and 1Z for the major applications. Starting from first half of next year, 1Y processes will take position as our main process and even 1Z, we will observe the qualifications status with our major customers as we continue stable ramp-up.
EUV의 경우 기존에 말씀드린 바와 같이 1Z 공정 등 10나노급 기술을 대상으로 평가를 진행하고 있으며, 향후 경제성이 확보되는 시점에 도입할 계획입니다. 당사는 이미 파운드리 비즈니스에서 EUV를 도입하여 현재 안정적으로 양산 가동 중으로, 이 과정에서 쌓인 노하우를 적극 활용하는 등 최첨단 기술 도입의 다양한 방법을 바탕으로 공정 난이도 증가와 같은 어려움을 극복하며 지속 원가 우위를 확보할 예정입니다.
Regarding the EUV, as we mentioned before, we are currently evaluating EUV for especially the 10nm-class technology, including the 1Z nm technology or the process. We will be introducing or adopting EUV when we see the economics justifying it. Given the fact that the foundry business has already been working with EUV and is in stable mass production, we hope to leverage that experience and know-how, so that once we do adopt EUV, we will be able to overcome effectively difficulties such as process difficulties by using the cutting edge latest technology, so that we are able to continue to maintain our advantage in terms of cost.
네, 감사합니다. 다음 질문 받겠습니다.
다음으로 질문해 주실 분은 JPMorgan의 JJ Park 님입니다.
예, 두 가지 질문이 있는데요. DRAM 쪽에서 내년도에 DRAM Capa 증가 없이 Tech Migration으로만 비크로스 어느 정도 달성할 수 있는지 궁금하고요. 이럴 경우에 혹시 Cost Reduction이 올해와 내년 어느 정도 될 건지 말씀해 주시면 감사드리겠습니다. 두 번째는 지금 전체 Demand에 5G Smartphone 관련돼서 말씀을 많이 하셨는데 내년도 시장 전망과 삼성이 전체 5G Smartphone 중에서 어느 정도 마켓 셰어를 할 계획인지 말씀해 주시면 감사드리겠습니다.
메모리 부분 답변드리겠습니다. 현재 당사는 내년도 시장 전망 및 판매 계획을 수립 중에 있어서 구체적인 데이터를 말씀드리기는 좀 어렵습니다. 한편으로 앞서 말씀드린 대로 데이터 센터 고객들을 중심으로 다수의 고객사들이 긍정적으로 내년 수요 전망을 제시하면서 상당히 구체적인 물량을 가지고 분기 이상의 기간을 대상으로 한 구매 논의가 이루어지고 있는 긍정적인 측면이 있고, 또 다른 한편으로는 대외 환경 이슈에 따른 수요 불확실성 상존 및 최근 수요 증가의 주요 원인 중에 하나로 보여지는 일부 고객사들의 재고 확충 모습이 20년 후에 영향을 줄 수 있는 측면 역시 있어 이러한 상황이 어떻게 전개되는지 조금 더 시간을 갖고 세밀하게 살펴볼 필요가 있습니다.
To answer your question about the DRAM. We are regarding next year DRAM market outlook and sales plans are currently still working on them. It's a bit too early to share with you the detailed data. Looking towards next year, there's on one factor that the upside to the positive factors, which is that the data center customers that we've been talking to especially are giving some positive demand outlook for next year. They're talking about quite detailed quantities for horizons for more than several quarters are talking about purchasing. That's a positive factor for next year DRAM. On the other hand, there is still demand uncertainties that linger due to various external factors. There was this buildup of inventory that happened recently, and we need to wait and see the impact that would have in next year's demand.
이런 상황 안에서 당사는 기본적으로 공정 전환에서의 비성장 등을 활용해서 시장 수요 성장 수준으로 공급을 계획 중에 있습니다. 원가 절감의 경우, 기본적으로 당사는 매 공정 전환 시 20에서 30% 수준의 Net Die Gain을 목표로 개발 진행합니다. 다만 기술 난이도 증가 및 공정 스텝수의 증가에 따라 실제 비크로스는 이를 소폭 하회하는 수준으로 이해하시면 될 것 같습니다.
Based on that basic demand outlook for next year, our plan is to supply in line with market demand growth through incremental increase in bit through process migration. In terms of cost advantages or cost saving, basically with each node migration, we target Net Die gain of around 20%-30%. Given the fact that with each migration step, we're dealing with more difficult technology and increase of process steps, the actual bit growth that we get through node migration is a bit lower than the 20%-30% target that we have.
다만 이전과 다르게 응용처가 다변화되고 요구하는 제품의 품질이 높아지면서 Qual 과정에 드는 시간도 전반적으로 길어지는 추세입니다. 특히 과거와 다르게 전 응용처를 대상으로 동시에 공정 전환이 진행되기보다는 응용별, 고객사별 상황을 고려하여 서로 다른 전환 일정에 따라 공정 전환이 진행되기 때문에 공정 전환에 따른 실질적인 비크로스 및 원가 절감 정도는 신규 공정의 전환 스피드 등 다양한 요인들이 고려되어야 하므로 매 상황에 따라 달라진다고 말씀드릴 수밖에 없을 것 같습니다.
That will be the high level expectation. When we actually look at the actual process migration and the relationship it has to bit growth and cost saving, one change that we have been noticing is that especially as our applications become more diverse and the level of quality that the customers demand become higher, more time is taking in the qualification process overall. Also, while in the past the process migrations happened with all applications before, we're now seeing that process migration is happening by application and by customer according to different timelines and schedules. Therefore, the amount of bit growth or cost savings we expect in practice through process migration is now being affected by a large number of factors, including the speed of how a new node is migrated.
Therefore, actually that connection between process or node migration and bit growth and cost saving depends. It's on more of a case-by-case situation.
네, IM 답변드리겠습니다. 5G 관련해서는 중국의 5G 상용화와 다른 제조사들의 5G 모델 출시 확대 등으로 5G 시장 수요는 20년부터 급격히 증가될 것으로 전망되고, 이와 함께 시장 경쟁도 본격화될 것으로 예상됩니다. 당사는 올해 4월 세계 최초의 5G 스마트폰인 Galaxy S10 5G 출시를 시작으로 Galaxy Note10, Galaxy Fold, Galaxy A90 등 5G 모델을 다수 선보인 바 있습니다. 한국과 미국, 유럽 등 5G 선진 시장에서의 상용화 경험을 바탕으로 내년에는 하이엔드뿐만 아니라 다양한 가격대에 5G를 도입하고 5G 라인업을 폭넓게 운영할 계획이며, 이를 통해서 각 국가별 상용화 일정에 적기 대응하고 사업자 협력 강화와 5G 차별화 서비스 발굴 노력도 지속하도록 하겠습니다.
Your second question was about the 5G market outlook and our plans. Next year from 2020, 5G market demand is expected to increase quite rapidly because of the 5G commercialization in China and also the launch of 5G handsets by other manufacturers. With this increase in demand, we're also expecting there to be more competition in the market as well. Last April, we were able to launch the world's first 5G smartphone, the S10 5G. Also we followed up with additional 5G models, including the Note10, the Fold, and A90.
Based on this experience of having commercialized 5G in especially the leading markets such as Korea, U.S., and Europe, we plan next year to introduce 5G models in not only the high-end segment but in wider price segments so that we will have a wider 5G lineup, which will help us respond timely to the 5G commercialization schedules by each country. At the same time, we will strengthen our collaboration with carriers and also focus on identifying services that will differentiate the 5G experience.
네, 시간이 많이 가서 마지막 질문 하나만 받고 컨퍼런스콜 끝내겠습니다.
We will take one last question before ending today's call.
[Foreign language] The last questions will be presented by Mr. Do Hyun-woo from NH Investment & Securities. Please go ahead, sir.
안녕하세요. 질문 두 가지 드리겠습니다. 메모리랑 파운드리 쪽 질문이 있는데요. 메모리 향후에 5G 스마트폰 관련돼서 내년에 시장을 어떻게 보고 계시고, 메모리 수요는 관련돼서 영향이 어떻게 되는지 설명 좀 부탁드립니다. 파운드리 같은 경우는 최근에 해외 언론 중심으로 삼성 파운드리 EUV 7나노 수율이 조금 낮다, 그래서 5G 칩 공급 차질 가능성에 대한 노이즈들이 조금 있는 것 같습니다. 그래서 최근의 수율 현황과 5G 공급 전망에 관한 내용 좀 부탁드립니다.
I have two questions tied with the 5G smartphone demand related with memory. For memory, from the memory perspective, what is your outlook of the 5G smartphone market next year? Connected with 5G, what do you expect the memory demand to be? Second question is towards the foundry business. There's been some press reports, especially from the overseas media, that your EUV 7 nano yield is not as high as expected, and that this may result in some disruptions in your 5G chipset supply. Can you give us an update on your EUV 7 nano yield and the supply situation for the 5G chips next year?
메모리 부분 답변드리겠습니다. 5G 스마트폰의 경우 고용량 제품 위주로 2019년부터 본격적 판매가 시작되었고, 주요 제조사들이 5G 스마트폰 출시를 서두르고 있는 상황입니다. 이러한 상황 아래에서 2020년에도 보조금 확대 영향 등으로 인해 새 출하량 전망이 지속 상향 조정되고 있는 가운데, 중국 시장을 중심으로 급격한 성장이 예상됩니다.
To answer your first question, from the memory's perspective, looking at the 5G smartphone market, actually the high density product started to be adopted on the 5G smartphone already from 2019, and we do see many OEMs are preparing to launch their 5G smartphones next year, especially with more subsidies being provided from next year. Actually, the 5G handset shipment outlook is being upward adjusted continuously, and we're expecting especially rapid growth around the Chinese market.
외부 조사기관들의 전망을 살펴보아도 20년 5G 스마트폰의 새 출하 수량을 적게는 1억 초중반에서 많게는 2억 중후반까지 언급하고 있는 상황으로, 이러한 전망의 편차가 줄어들면서 시장의 컨센서스가 이루어지기까지는 시간이 더 필요할 것으로 보이나, 19년 대비 매우 큰 폭의 성장이라는 부분에 대해서는 별다른 이견이 없는 것으로 생각됩니다.
If we look at some external sources that are providing data on outlook for next year 5G smartphone, 5G smartphone shipment quantities are ranging from some agencies saying that it will be around mid to low 100 million, and some others are expecting 5G smartphone shipments to be around the mid to high 200 million. It's a very wide range, and it will probably take some time for that range to narrow down and the market to reach a consensus regarding next year's 5G handset shipments. I think there will be no disagreement, especially compared to 2019, there will be a very significant growth in 5G handset shipments.
이에 더해 기본적으로 5G 스마트폰이 flagship segment부터 적용되면서 고용량 메모리가 탑재되는 가운데, 향후 5G 고사양 어플리케이션 보급이 더욱 확산됨에 따라 고용량화에 대한 모멘텀도 충분하기에 5G 스마트폰향 메모리 수요는 지속 견조할 것으로 생각됩니다. 따라서 앞서 말씀드린 서버의 견조한 수요세에 더해 메모리 수요는 응용 전반으로 견조한 모습을 보일 것으로 판단하고 있습니다. 다만 앞서 말씀드린 대로 최근 재고 축적용 수요가 크게 증가한 점과 최근의 글로벌 매크로 이슈들에 따른 영향성에 대해서는 지속적인 주시가 필요할 것으로 보입니다.
On top of that strong outlook for 5G handset demand and shipments next year, as the 5G smartphones were adopted from the flagship segment, they started out with high-density memory and with more high-spec applications for 5G being rolled out. We think that there is still a quite strong momentum behind higher density adoption on the 5G smartphones. We expect the memory demand, especially for the high 5G smartphones to remain quite solid for some time. On top of that, if we look towards other applications such as servers, server demand will probably remain solid. Overall, we are expecting the memory demand to remain solid next year. However, we are carefully watching the impact that the recent macro factors would have and the possible impact that the inventory buildup that happened recently may have on next year's demand.
다음으로 EUV 7나노 관련해서 Foundry가 답변드리겠습니다. EUV 7나노는 1분기에서 양산 시작한 이후로 안정적인 수요를 기록하고 있으며, 예정대로 4분기에 고객을 또 신규 추가해서 공급을 확대할 예정으로 있습니다. 당사는 EUV 7나노에서 생산되는 5G 관련 칩의 수요가 큰 폭으로 증가하고 있고, 이에 따라서 당사 매출 증가에 크게 기여할 것으로 지금 기대하고 있습니다. 그래서 안정적인 공급 확대에 주력하는 것이 가장 중요한 일입니다.
Regarding your second question about our EUV 7 nano. Since starting our mass production in first quarter this year, we have been maintaining a stable yield and with adding the new customer, we are planning to increase our EUV 7 nano supply from the fourth quarter. We expect the 5G chip demand to increase quite rapidly, and we're expecting the 5G chips to contribute significantly to our revenue. Currently our focus is continuing to maintain stable supply of this product.
감사합니다. 이것으로서 3분기 earnings call을 마치겠습니다.
Thank you very much. This ends our third quarter earnings conference call.