For cancellation, please press star two, that is star and two on your phone. Now we shall commence the presentation on the fiscal year 2018 third quarter earnings results by Samsung Electronics.
Good morning. This is Robert Yi from Investor Relations. Thank you for joining our earnings call for the third quarter of 2018. With me representing each business units are Mr. Junwoong Cha, the Senior VP of Memory Marketing, Mr. Hur Gook, VP of System LSI Marketing, Lee Sang-hyun, VP of Foundry Marketing team, Choi Kwang-young is the VP of Samsung Display, Lee Kyoung-taek, VP of IT and Mobile Business, and Park Kyung-cheol, VP of Visual Display. We also have Mr. Kim Sang-hyo and 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. 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 we go over the results, I will 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. As was the case in the first and second quarter, the dividend payout for the third quarter is KRW 2.4 trillion, or one-fourth of the annual total of KRW 9.6 trillion. We have been focusing on ways to enhance shareholder value over the past few years, and dividends are a part of these efforts. We introduced a new shareholder return policy in October 2015, and our current policy, which was announced in October of 2017, features a significant increase in dividends. Annual dividends are currently KRW 9.6 trillion, up three times from KRW 3.1 trillion that was declared in 2015.
While return on equity, bolstered by earnings improvements and proactive shareholder returns, have also increased considerably, climbing from 11% in 2015 and reaching 20% range since 2017. Regarding the corporate governance, we enhanced the board's independence by separating the role of CEO and chairman. We also enhanced its diversity through the appointment of a female director and also the one with international C-suite experience. We will continue to build a foundation for long-term growth by strengthening our competitiveness and discovering new growth drivers, and also by focusing on the creation of shareholder value. With that, I would like to walk you through our third quarter results. In the third quarter, the total revenue increased 5% year-over-year and 12% quarter-over-quarter to KRW 65.5 trillion, on the back of strong sales of memory products and OLED panels.
Gross profit increased approximately KRW 1.2 trillion year-over-year to KRW 30.3 trillion, even though gross margin is down. Compared to last year, SG&A expenses declined KRW 1.8 trillion and four percentage points when expressed as a portion of sales, a result of more efficient execution of advertising with the set business focusing their global marketing efforts on key lineups. Operating profits at a new quarterly high, rising KRW 3 trillion year-over-year and KRW 2.7 trillion quarter-over-quarter to KRW 17.6 trillion, backed by a strong performance by the memory business, despite a weaker performance by IM division. Operating margin rose 3.4 percentage points year-over-year to 26.8%. A weak Korean won versus the U.S. dollar had a positive quarter-over-quarter effect of approximately KRW 800 billion, mainly for the component business.
Conversely, a strong won against major emerging currencies mildly weighted on results in the set business. I will now briefly review operating profits by business units. In the semiconductor business, earnings improved both sequentially and year-on-year. Amid solid business conditions, the memory unit reduced costs in the DRAM business on improved yields on advanced process, and fully ramped up production of new capacity in the upper level of the Pyeongtaek campus. For the display business, despite unfavorable supply and demand conditions in the LCD market, earnings improved year-on-year on growing sales of flexible OLED panels to large-scale customers. On a quarter-on-quarter basis, earnings improved significantly, resulting from an increase in the utilization of flexible OLED panel capacity. In the IM division, profit decreased year-on-year due to a decline in sales volume and higher bill of material cost amid intensifying competition.
For the consumer electronic division, earnings improved thanks to strong sales of premium TV products, such as QLED and ultra large models. Now I would like to share briefly on our business outlook. In the fourth quarter, we expect overall earnings to decline as we enter weak seasonality in the semiconductor market. For the component business, earnings are expected to decline in the memory business due to seasonality, but remain relatively strong for the OLED business, backed by demand from major customers. For the set business, we expect sales volume in the mobile business to increase on the back of our refreshed mid-to-low segment lineup, which include a new A series model featuring multi-camera modules. Profitability, however, is expected to weaken due to an increase in marketing expenses as we enter the peak season.
For network business, we plan to start supplying 5G equipment, shipping to clients in North America and Korea, and establishing our position at the forefront of the 5G era. In the consumer electronic business, we expect earnings to grow as strong year-end seasonality boosts demand for QLED TVs and premium home appliances. For 2019, earnings are forecast to be weak for the first quarter due to seasonality, but then strengthen as business conditions improve in the memory market, in particular. Meanwhile, we are focusing on new technologies such as 5G and artificial intelligence, and new developments in automotive electrification by strengthening our competitiveness, by leveraging our component technologies such as chipsets and OLED panels, delivering innovative form factors, and leading the development of the 5G technology. By doing so, we can sustain mid- to long-term growth based on our technological leadership as markets for these new areas expand.
Now I'll address the capital expenditures. The total capital expenditure for 2018 is expected to decrease to KRW 31.8 trillion, down from KRW 43.4 trillion we spent in 2017. Of KRW 31.8 trillion, we have allocated KRW 24.9 trillion to semiconductor and about KRW 3.7 trillion to display. In the memory business, again, we expect CapEx to increase slightly year-over-year due to expansion at the Pyeongtaek campus. The CapEx in the foundry business, however, is expected to decline year-over-year as the 10 nano line expansion was completed in 2017. In the OLED business, capital expenditure for flexible panels will be significantly lower than it was last year. The total capital expenditure in the third quarter was KRW 5.6 trillion, about KRW 4.5 trillion for semi and about half trillion for the display business. Which makes the year-to-date, at the end of third quarter, total CapEx was KRW 22.3 trillion.
Before we move on to presentation from each business unit, I would like to share several data points in key business areas. Excuse me. For DRAM, our third quarter bit growth came in mid-teens increase, and the ASP for the quarter was flat Q on Q. For the fourth quarter, we expect DRAM market bit growth to be mid-single digit. We expect our bit growth to be similar to the market growth. That will make the 2018 total market DRAM bit growth at about 20%. We will grow in line with the market. For NAND flash, in the third quarter, our bit growth came in low 20%, while we saw ASP decline of mid-teens. In Q4, NAND market bit growth is expected to grow high single digit. We will grow in line with the market.
Again, that will make the NAND annual bit growth at about low 40%, which also is our NAND bit growth expectation. For display business, in terms of sales or the revenue, OLED mix was about 80%. For mobile business, our total shipment of handsets in third quarter was about 81 million units, and tablet was about 5 million. The blended ASP of our total mobile products was about $220. Within the total handset shipment, the smartphone mix was high 80%. For the fourth quarter, we expect our handset shipment to increase as well as the tablet will also increase. We expect our blended ASP in the fourth quarter to decline Q on Q, and the mix of the smartphone within the total handset shipment will remain similar at a high 80% range. For our TV sales, the Q3, we saw about mid-single digit increase.
In Q4, however, we expect to see about 40% increase of sales of our LCD TV. Annualized basis, that number will probably come down to a low single digit decrease.
Sales. I'll turn the conference call over to gentlemen from each business units. Good morning. This is Sewon Jeon from the Memory Marketing Team. In the third quarter, in line with the normal seasonal effect, demand increased mainly from server and mobile. We improved our earnings by expanding the portion of fine process products and concentrating on sales of premium products. NAND, with the high-density trend for mobile being continued due to cloud companies' infrastructure expansion and growing portion of All-Flash Array, solid server SSD demand continued. As the subsequent pricing stimulated demand growth was higher than expected. For the supply side, due to the industry supply of 64-layer 3D NAND for OEM solutions, the portion of 64-layer continuously increased in the market. In this process, supply for QLC also increased similarly to the previous quarter.
We have honored solid earning growth by actively responding to the high-density trend for mobile and trend of 8 and 16 terabyte high-density SSD expansion with stable supply of 64-layer 3D NAND at Pyeongtaek campus. For DRAM, due to peak seasonality, demand from all applications increased compared to the previous quarter. Demand for server increased, thanks to OEM peak season and expansion of a new CPU adoption by data center companies. For mobile, all set demand increases due to the effects of large companies' new model launches, as well as the continuing high-density trend, such as 8 gigabyte high-density eMMC adoption for high-end Chinese sets. Mobile demand growth was more solid than the previous quarter. Thanks to increased set build under peak seasonality, solid PC demand continue mainly from large OEMs. Although graphics had an adjustment from mining and VGA demand, positive seasonality from gaming console compensated this demand decline.
Consumer demand also remained strong, led by seasonal growth in demand mainly from UHD TV. We continue to achieve solid earning growth following the previous quarter by focusing on strengthening cost competitiveness through expanding 1x nano product transition and actively respond to each application's customer demand. In the fourth quarter, with external uncertainty like macroeconomic changes, set build may have some impact caused by supply shortage of major IT components. We will try our best to react to market demand throughout our technology leadership and flexible product mix, as well as focus on securing good profitability.
Due to disconnection from the organizer side, we're going to proceed our conference as soon as possible. Thank you for waiting.
It has the UFS. At the same time, we will focus on strengthening competitiveness in the premium market by preempting high-density demand through UMCP. For fifth-generation V-NAND, we are currently mass-producing it mainly for branded SSD. By expediting this transition in server and mobile applications, we will continue to enhance product competitiveness and strengthen market leadership. For DRAM, although price may soften because of supply shortage issues of major component and short-term inventory adjustment for some customers, memory demand fundamentals are expected to stay solid. By application, for server, the high-density trend is expected to remain, including expanded adoption of a high-density product over 64 GB, mainly from OEMs. Solid demand for PC will also continue, thanks to events like Black Friday and holiday season.
For mobile, although the Chinese domestic market may show some weakness, demand is expected to increase from the second half, mainly from large customer flagship models. Moreover, as the set companies need to upgrade the specs for their differentiation, memory content is expected to increase in entry-level model as well. We believe that memory demand fundamentals will stay very solid. We will focus on achieving solid earnings by maximizing sales through flexible product mix according to each application's market condition. At the same time, we will focus on strengthening product competitiveness via expanding the 1x-nanometer product portion, and strengthen design-in activity to establish a solid sales base for 1y-nm products. Next, I am going to talk about 2019 memory market outlook. In the first quarter, due to the seasonal effect, the memory market may slow down a little.
However, demand and supply situation will stabilize from the second quarter, thanks to increase in demand, mainly from server and mobile. Front-end, the public cloud market is pending in line with the trend to store and manage data more stably and effectively, while All-Flash Array replacement will be accelerated to operate high-performance server optimized for each company. Demand will be diversified with more use case-optimized SSD solutions. For mobile, due to the lengthening of the smartphone replacement cycle, the trend for preferring models with bigger storage, which not only back up existing data, but also store high-resolution and high-density contents stably in the long term, will expand continuously. As for the supply side, although suppliers' production of 64-layer may expand, supply growth will be limited due to the decrease in existing process capacity for fifth-generation V-NAND ramp-up.
From the second half, as the demand increase will exceed the increase in supply, the supply and demand situation will be improved. We will actively respond to expanding demand of all applications caused by price stabilizations. At the same time, we will focus on strengthening our cost competitiveness by expanding supply of fourth generation and beyond V-NAND. For DRAM, a high-density trend for server, including growth in machine learning-based AI services and adoption of high-density DRAM from in-memory database and cloud instances is anticipated to continue. Moreover, in the second quarter, thanks to new CPU platform launches, high-density memory demand is anticipated to expand. Demand for PC is also expected to increase, mainly led by contents growth due to the expansion of the high-performance portion like gaming PC.
For mobile, memory demand will remain solid consistently, thanks to continuous high-density trend beyond high-end segment and the high-density trend for mobile devices due to the impact of competition to improve specs in the entry-level market. As for the supply side, even though it may vary depending on the industry 10-nanometer process expansion, rapid expansion of supply is hardly likely due to increases in technological difficulties and capital intensity. We will intensify our competitiveness in the high-value-added market by expanding sales of differentiated products such as high-density server products, HBM2, and high-density MCP for mobile, as well as strengthen our technology leadership. At the same time, by thoroughly monitoring market conditions, we will also focus on ensuring sustainable profitability through efficient investment according to market conditions and flexible capacity management. Thank you.
Good morning. This is Bernard from the System LSI business. In the third quarter of this year, overall earnings in the System LSI business improved quarter-over-quarter, thanks to rising demand of the image sensors in China amid high seasonality and OLED DDIs for flagship smartphones. In particular, our image sensor business achieved a record-high result for any quarter due to expanding adoption of multiple cameras and high-resolution sensors. In the fourth quarter, despite a likely rise in demand from products slated to launch next year, we expect overall earnings to decline due to a seasonal dip in component demand for the mobile image sensors and DDIs. In 2019, even amid a stagnated smartphone market, we expect our earnings to continue to grow solidly, bolstered by contribution from image sensors as demand rise from more sophisticated camera specifications such as multiple cameras and high-resolution sensors.
In addition, we will concentrate on diversifying our customer base in China and the U.S. by enhancing SoC competitiveness through the use of 5G modem technology. We will also focus on expanding our business area by diversifying our product line to include 3D sensors, in-display fingerprint sensors, and chips used in automotive and IoT applications. Thank you.
Good morning, this is Ryan Sanghyun Lee from Foundry Business. In the third quarter, despite the decline in demand for cryptocurrency mining chips, overall earnings continued to grow quarter-over-quarter, thanks to the increased demand for mobile APs and image sensors. In particular, we have secured the technological leadership in advanced processes by completing development and starting production of the EUV-based 7-nanometer process, our first process offering using EUV. In the fourth quarter, demand for mobile APs and image sensors is expected to decline amid weak seasonality for smartphone components. However, on a full year basis, we expect to continue our run of year-over-year earnings growth due to the achievement of customer diversification, including HPC customers. In 2019, we will focus on achieving solid results by ensuring a stable supply of major products such as mobile APs and image sensors.
By diversifying our customer bases in AI, automotive, and 8-inch areas, we will expand our number of customers by more than 30%, striving to establish a bridge ahead to stable growth. In addition, we will maintain our technological leadership through full-scale mass production of our 7-nanometer EUV process. Thank you.
Good morning. This is Wonyong Choi from the Planning Department of Samsung Display. In the third quarter, the total earnings in the display business increased quarter-over-quarter based on increased sales volume in both the OLED and LCD businesses. For the OLED business, earnings increased quarter-over-quarter, led by increased demand for the flexible panels from major customers. In the LCD business, earnings improved slightly quarter-over-quarter, fostered by expanded shipments of value-added products such as those for high resolution and ultra-large TVs. Looking ahead to the fourth quarter, in the OLED business, we expect stable demand from major customers. We plan to focus on increasing customer adoption of OLED panels by increasing technical differentiation of our flexible displays and improving productivity of rigid panels.
On the other hand, the LCD business, under weak seasonality, is likely to keep experiencing unfavorable supply and demand dynamics due to ongoing capacity expansion in the industry. Thus, we'll strive to secure profitability by improving yield, as well as by expanding our value-added products portion of shipments, which include ultra-large and high-resolution TV panels. Now, I would like to present the outlook for the display market and our core strategy for 2019. For the OLED business, we'll work to diversify into new product categories to continue the effort to offer technically differentiated products while expanding our customer base, focusing on flexible displays. We plan to secure growth by reinforcing a partnership with major smartphone customers and increasing our cost competitiveness relative to those of competitors.
At the same time, we will strive to reinforce our leadership in the OLED business by improving technical completeness for new applications such as foldable and automotive and IT. For the LCD business, we expect the market for premium TV panels, such as UHD, ultra-high definition, and ultra-large ones will continue to grow. However, we are concerned about growing uncertainties caused by capacity expansion in the LCD industry. In preparation for such conditions, we plan to focus on sales growth of value-added products such as differentiated panels for quantum dots and 8K and ultra-large TVs. Thank you.
Good morning. This is Byungtaek Lee from the Mobile Communication business. I will now present the IM division's third quarter business results and the fourth quarter and 2019 outlook. In the third quarter, market demand for both smartphone and tablets increased QOQ. Our mobile business achieved solid sales of flagship models backed by the earlier than usual launch of the Galaxy Note9 at the end of August. The Note9 is showing positive sales trends and has been highly praised for its reinforced performance, including memory content and battery life, and useful features such as intelligent camera and Bluetooth S Pen. Despite solid sales of legacy models, overall smartphone shipment remained at a similar level Q on Q due to decreased sales of mass smartphones and increasing competition in mass segments.
We reorganized our lineup for mass smartphones by discontinuing production of old models to prepare for the launch of new models, which negatively affected sales. Our profit decreased Q on Q due to increased total promotional costs, including those related to the Note9 launch and unfavorable foreign exchange rate in some regions. As for the network business, both revenue and profit decreased Q on Q because LTE extension of our major overseas partner concentrated in the first half of this year. Next, let's move on to the outlook for the fourth quarter. Market demand for both smartphones and tablets is expected to increase Q on Q as we enter the year-end peak season.
For the mobile communication business, we expect our smartphone shipment to increase Q on Q, thanks to our enhanced lineup for mass smartphones as the new Galaxy A7 and A9 are built to deliver a whole new experience with their multi-camera. On the other hand, we expect profit to decrease Q on Q as marketing cost will increase under strong seasonality. For the network business, we aim to supply 5G network equipment to advanced nations such as the U.S. and South Korea to commercialize the 5G in earnest. Last, I will share our outlook over 2019. We expect overall demand for smartphone to grow slightly, driven mainly by premium segment. However, as the trend of offering higher spec main parts has been extending to mass segments, fierce spec competition seems inevitable across all segments.
For our flagship models, we will strive to extend the sales via offering not only differentiate designs based on innovative core parts such as OLED panels, but also a diversified lineup. At the same time, we will solidify our global leadership and address market competition by rapidly introducing cutting-edge technology for essential features such as camera and display, even to our mass smartphones. As I mentioned earlier, our recently unveiled Galaxy A9 provides an innovative camera experience through its adoption of a world-first quad camera and intelligent camera feature. Looking ahead, we will continue to aggressively adopt next-generation technology and features across our entire Galaxy portfolio, including the Galaxy A, to give more consumers an opportunity to experience cutting-edge innovation. Furthermore, we will pursue strengthening our mid to long-term competitiveness across all businesses.
We aim to lead technological innovation by introducing foldable and 5G devices, which we have been preparing over the past 2 years at an appropriate time. In addition, we will continue to strengthen the foundation for growth by relentlessly developing our own ecosystem based on AI and IoT. We will share more detailed information regarding AI and IoT at the Samsung Developer Conference, which will be held next week. For the network businesses, we will actively respond to global 5G market growth by extending our 5G business to new countries based on our experience commercializing 5G in the U.S. and South Korea. Thank you.
Good morning, I'm Kyungchul Park, Vice President of Visual Display Sales and Marketing team. Let me start with the current market conditions and our result for 2018 Q3. The TV market in Q3 expanded quarter-on-quarter due to favorable economic conditions centering on North America. On a year-on-year base, however, the market stayed similar due to a decrease of consumption caused by exchange rate effect in emerging markets. An increase of sales of high-value products such as QLED and super large screen TVs led profit to improve both quarter-on-quarter and year-on-year. In particular, in their second year of release, our QLED TVs received favorable feedback from both distributors and consumers regarding picture quality and differentiated features such as Ambient Mode and One Invisible Connection.
QLED TVs saw sales triple year-on-year and are now on a mainstream product in the market. As for super large screen TVs of 75 inches and above, Samsung is leading the rapidly growing market by delivering useful features and effectively communicating the benefit of this size. Consequently, we have over half of the market share, and our sales doubled year-on-year, contributing to overall profit growth. The digital appliances market in Q3 continued to show solid growth in advanced markets like the U.S. and Europe. That said, overall market demand slightly declined due to exchange rate effect and political instabilities in emerging markets. Samsung continued to expand sales of premium products such as Family Hub Refrigerator and FlexWash washing machines. Compared to last year, however, our results decreased slightly year-on-year due to economic downturns in emerging markets such as those in Latin America and the Middle East.
Now I will share market prospects for Q4 and 2019. The TV market in Q4 this year is projected to grow slightly year-on-year, mainly in advanced regions. Samsung will strengthen leadership in the premium TV market and improve results by capitalizing on year and peak season demand through close partnership with distributors and by increasing sales of strategic products such as QLED and super large screen TV models. In an industry first, Samsung will offer an AI-based QLED 8K TV, providing consumers with incredible and never-before-seen value. This will open up a new horizon of ultra-high picture quality TV through a viewing experience featuring perfect realism, powered by Quantum Processor, allowing consumers to enjoy content through AI upscaling technology based on machine learning. Samsung will achieve high profitability and maintain its role as the industry leader by staying atop the premium TV market and strengthening its technology leadership.
For the digital appliances businesses, market demand may decline due to global trade issues and amid foreign exchange risk in emerging markets. Samsung will strengthen peak season promotions by region through partnership with distributors and will continue to increase sales of premium products such as Cube Air Purifier and high-volume dryers. As for TV in 2019, the market is expected to stay similar year-on-year, even amid risks that include an absence of a global sporting event, a hike in U.S. interest rate, and economic instability in emerging markets. Samsung will continue to improve profits based on our solidified leadership in the premium market with QLED and super large screen TVs. At the same time, we will also continue to lead the ultra-high quality picture and super large screen TV market by expanding QLED 8K TV sales and reinforcing our line of super large screen models.
As for the digital appliances business, Samsung will focus on improving profitability by releasing innovative premium products and expanding online sales. Also, we will secure a future growth engine by strengthening our B2B business that includes built-in appliances and system air conditions. Thank you.
Thank you. This completes the management's presentation. Now we will go through the questions and answer session.
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. Yu Jong-woo from Korea Investment & Securities. Please go ahead, sir.
Yes. Thank you for providing the question. I will ask one question regarding the DRAM import outlook. There are many opinions in the market that the DRAM price will drop from the fourth quarter, and there are many opinions that it will drop until the first half of next year. Even if it drops, I think there will be a lot of interest in the level of the drop or the period. I would appreciate it if you could tell me your opinion on the drop in the DRAM price from this year's fourth quarter to next year, and especially the soft landing. I would appreciate it if you could also mention the possibility of how short the duration can be.
My first question is about the DRAM demand and supply outlook. Specifically, the amount or duration of price decline that you expect from the company's perspective. I think overall the market is expecting DRAM prices to decline starting from fourth quarter and lasting at least until the first half of next year. I think the focus of the market is the levels of decline and how long this decline would continue. From the company's perspective, can you share your views of how much and how long the price decline in DRAM will go on from fourth quarter this year until next year? I think there is some hope in the market for a soft landing. How short do you think this weak price period could go?
질문하신 내용에 대해서 답변드리겠습니다. 금년 4분기하고 '19년 1분기의 경우 계절적 영향에 따라서 시장 상황이 다소 완화될 수는 있겠지만, 2분기 이후에 신규 CPU 플랫폼 출시와 함께 16 gigabit base DDR4 제품을 채용한 고용량 메모리 수요가 본격화되면서 하반기에는 서버와 모바일 중심의 견조한 수요가 지속되는 가운데 수요 증가세가 공급 증가세를 상회할 것으로 현재 예상하고 있습니다.
Until fourth quarter and at least first quarter next year, due to seasonality, there could be some easing in the market condition. In the second quarter next year, there will be the launch of a new CPU platform and also with the wider adoption of the 16 gigabit DDR, there will be a greater demand for high density. We believe that both on the server and the mobile application side, starting from the second half of next year, the increase or pace of demand growth would outpace supply growth.
현재까지 2년 이상 지속된 공급 부족 상황은 공급사하고 고객들 모두 한 번도 겪어보지 못한 일이고, 최근의 가격 반전은 공급사를 포함한 업계 내 플레이어들의 심리적 영향 또한 다소 작용하고 있다고 보입니다. 물론 이러한 심리적 요인과 함께 고객사의 재고 수준, 수요의 계절성, 수요와 공급이 증가되는 시점의 차이에 따라 일시적인 수급 불균형이 일어날 수도 있겠지만, 5G라든지 AI 수요 등이 본격화되면서 메모리 수요의 펀더멘탈은 중장기적으로 매우 견고하고, IT 산업이 데이터 센트릭화되는 트렌드의 연장선에서 볼 때 메모리의 중요성은 더욱 증가할 것으로 판단하고 있습니다.
The period of a supply shortage that extended for more than two years was something that both the suppliers as well as the customers had never experienced before. In a sense, this current turnaround in prices, I think, is affected in part by a psychological factor. There could be temporary mismatch in demand and supply due to various factors such as the level of inventory at the customer side, also the seasonality of demand and also the time difference between demand and supply. However, given the fact that there will be continuous demand driven by 5G AI in the mid to long term, the memory industry demand overall remains very solid. Given the overall IT industry trend that's becoming more and more data centric, we believe that demand for mobile will continue to remain strong.
네, 감사합니다. 다음 질문 받겠습니다.
다음으로 질문해 주실 분은 HSBC 증권의 Ricky Seo입니다.
The next question will be provided by Mr. Ricky Seo from HSBC. Please go ahead, sir.
자사주 관련 질문하고 IM 관련 질문 두 가지 드리겠습니다. 작년 4월에 자사주 잔여분 50%를 올해 소각한다고 발표하셨는데 오늘 이사회에서 결정이 없었던 것 같습니다. 근데 당초 계획에 어떤 변동이 있는지 궁금합니다.
My first question is about the treasury share, which was to be retired or canceled. Your original plan that you announced in April was that you will be canceling 50% of your treasury share. I noticed that today the BOD did not make any resolutions regarding this. Does this mean your plans have changed?
올해 안에 저희가 보유한 나머지 50% 자사주를 소각하겠다는 계획에는 변함이 없습니다.
To answer your question, there is no change in plans of canceling the remaining 50% of the treasury shares within this year.
IM 관련해서 폴더블 스마트폰 출시 시기가 대략 언제쯤으로 예상하시는지 궁금하고요. 일단 라지 스크린 외에 어필링 포인트로서 다른 어필링 포인트가 뭐가 있는지 궁금하고, 기존 제품하고 유저 인터페이스 차이가 클 것 같은데 어떤 변화가 있을지 좀 대략적으로 설명해 주시면 감사드리겠습니다.
Question is about the foldable phone. Can you give us a bit more idea of when that would be launched? When I think of a foldable phone, in addition to a larger screen, what kind of appeal points are you planning? I'm assuming that with a foldable phone, the UI, user interface would have to be significantly different from the existing smartphones. Can you give us a preview on what kind of UI changes you're planning?
네, 폴더블 관련해서 말씀드리겠습니다. 폴더블 제품은 폴더블이라는 혁신적인 폼팩터를 통해서 휴대성과 대화면 경험을 완벽하게 결합하려고 하고 있습니다. 접었을 때는 스마트폰 사용성을, 그리고 펼쳤을 때는 타블렛 사용 경험을 제공할 것입니다.
특히 동시에 여러 작업을 빠르고 편리하게 할 수 있는 새롭고 혁신적인 멀티태스킹 환경을 제공하고, 이를 통해서 고객에게 진정 의미 있는 제품을 전달하도록 하겠습니다. 또한 제품 출시 전 새로운 폼팩터에 맞는 앱 최적화가 필요하고, 폴더블 특화 개발을 위해 고려할 사항도 많이 있기 때문에 앱 개발자들과 관련된 내용을 공유하는 자리를 조만간 가지려고 하고 있습니다. 질문 주신 유저 인터페이스 차이 등에 대해서는 다음 주에 진행되는 Samsung Developer Conference를 통해서 확인을 부탁드리고, 구체적인 출시 일정을 이 자리에서 말씀드리기는 어려운 부분을 이해해 주시면 좋겠습니다. 완성도 있는 제품으로 잘 준비해서 선보이도록 하겠습니다.
To answer your question about the foldable phone, we are focusing on combining perfectly both portability as well as the large screen experience by leveraging this innovative form factor called the foldable phone. We're planning to have users experience a smartphone when it's folded, and then unfold it to have a tablet experience. At the same time, a key focus of the foldable will be to have an innovative and new multitasking environment where multiple tasks, multiple jobs can be done very quickly and conveniently in order to provide customers with a product that has significant and genuine value. We also realize that optimizing applications to fit the new form factor will be critical before the product launch. Because there are many factors to consider in developing foldable specific apps, we are also preparing opportunities to share the content with the app developers.
Regarding the user interface differences, what will be new, actually the details, I think, will be dealt with at the Samsung Developer Conference that we're planning next week. Even though we're not able to share with you the specific launch schedule for our foldable phone, we will deliver a very high level of completeness through this new product.
네, 감사합니다. 다음 질문 받겠습니다.
다음으로 질문해 주실 분은 UBS증권의 Nicolas Gaudois입니다.
The next questions will be presented by Mr. Nicolas Gaudois from UBS. Please go ahead, sir.
Yes, good morning. Thanks for taking my question. My first question is on DRAM. In the light of the recent reduction in DRAM procurement from data center or hyperscale customers, how much do you think of this is an inventory correction versus a period of digestion of very elevated computing CapEx since H2 2016? If this is partly the latter, how long could we see this period of slow growth continuing, before we see a reacceleration of demand driven by longer term competing requirements by those customers? Then I have a follow-up. Thank you.
첫 번째 질문은 DRAM 수요에 대한 전망입니다. 최근 들어서 데이터센터 내지는 엔터프라이즈 쪽에 구매가 감소하고 있는데요. 이것이 어느 정도가 재고 조정으로 인한 것인지, 아니면 2016년 이후 지속되는 상당한 높은 수준의 CapEx를 반영한 것인지, 어떻게 분석을 하시는지 말씀을 해주시면 좋겠고, 만약에 후자의 영향이 더 큰 거라고 하면 언제쯤이 되면 고객 쪽에서 컴퓨팅에 대한 수요가 다시 증가하면서 DRAM 수요가 다시 가속화될 수 있을 것으로 예상을 하시나요? 앞서도 답변드렸지만 당사는 신규 CPU 플랫폼이 출시되는 내년 2분기부터 수요 회복이 가시화될 것으로 보고 있습니다. 말씀하신 데이터센터 업체들의 재고 조정과 관련해서는 연초 타이트했던 수준은 일부 개선된 것처럼 보이지만, 업체별, 제품별 재고 수준 및 optimization 일정은 상이한 것으로 판단하고 있습니다. 수요 측면에서 하이퍼 스케일 업계의 전반의 메모리 필요량은 지속 증가할 수밖에 없고, 특정 제품 및 거래선의 재고 조정 영향은 단기적으로 제한적일 것으로 예상되고, 중장기적인 관점으로 볼 때 수요의 fundamental은 매우 견고하다고 말씀드릴 수 있겠습니다.
Regarding the memory demand, actually, as we mentioned before, with the launch of a new CPU platform coming up in second quarter next year, we believe that there will be a visible increase in demand already from second quarter. Regarding the data center inventory adjustments, it is true that the tight situation that we saw in the earlier part of this year has improved somewhat. Actually, there's differences depending on the company as well as the product. The inventory levels are different, and I think each company and each product will go through a different optimization process. Given the fact that in the mid to long term, there definitely has to be inevitable increase of memory demand from hyperscale computing, there could be some adjustments by customer or by product, but that would remain short term and also on a limited basis.
Still, we believe that mid to long term demand fundamentals remain very strong.
Thank you. Second question is on NAND flash. You are ramping up 92-layer 3D NAND flash with a single stack structure. Do you expect a better or equivalent yield curve versus 64-layer, which also has a single stack structure? Is it driving some conservatism on capital spending for NAND flash in 2019? Commercially, if yields improve faster, could we see more 92-layer wafer capacity being deployed into 2019? Finally, if you could clarify how long can you continue to iterate this single stack structure since all of your peers have moved to a multiple stack structure now? Thank you.
두 번째는 낸드에 대한 질문입니다. 62단 싱글 스택의 경우에는 64단에 비해서 더 빨리 scale up이 가능할 거라고 예상을 하시는지요? 또 이것이 92단이 19년 CapEx에는 그렇다면 어떤 영향을 미칠 것으로 예상을 하면 되는지요? 그리고 만약에 yield가 92단의 경우 64단보다 yield가 더 빨리 올라올 것으로 예상을 하신다면, 그러면 19년에도 이런 92단을 위한 wafer Capa를 좀 더 많이 배정을 하실 계획이신가요? 그다음에 근본적으로는 경쟁 업체들이 모두 멀티 스택으로 이미 옮겨간 상황에서 싱글 스택의 iteration을 얼마나 더 지속하실 수 있다라고 예상을 하십니까?
5세대 V-NAND ramp up은 계획대로 지금 잘 진행하고 있습니다. yield curve는 4세대 제품이 ramp up 할 때와 비슷하거나 조금 더 좋은 상황입니다. 다만 통상적으로 서버 SSD나 모바일향으로 qualification 기간이 다소 소요되다 보니까 현재는 PC SSD 중심으로 공급을 진행 중에 있고, 19년부터 본격적으로 비중이 확대되면서 서버나 모바일향으로 공급될 예정입니다. 그리고 관련 투자들은 당연히 제품 수요 등에 따라서 지속적으로 검토하여 탄력적으로 운영할 계획입니다. 싱글 스택의 경우 향후 얼마나 더 적용할 수 있을지에 대해 현시점에서 확정적으로 답변드리기는 좀 어렵지만, 지난 Tech Day에서 공개한 바와 같이 기본적으로 6세대 제품에도 도입할 수 있도록 준비를 하고 있습니다. 6세대 제품은 내년 하반기에 양산을 목표로 하고 있습니다.
To answer your question, our ramp up of the 5th generation V-NAND is going according to plan smoothly in terms of the yield curve. It's similar to our 4th generation or a little bit better than our 4th generation because it takes longer to qualify for server or mobile SSD applications. Currently, we're mainly supplying towards the PC SSD applications, but we plan to start supplying to server and mobile applications from next year as the share of our 5th generation increases. In terms of CapEx and investment, as we always do, we will be main operating our CapEx flexibly depending on how yield comes. Regarding the single stack technology, as we mentioned during the Tech Day event, it's difficult to tell you right now how long we will maintain the single stack or how long that would be possible.
As we mentioned on Tech Day, we are already preparing to use the single stack on our 6G, and sixth generation is planned for mass production second half of next year.
예, 감사합니다. 다음 질문 부탁겠습니다.
다음으로 질문해 주실 분은 KB증권의 김동원 님입니다.
The next question will be presented by Mr. Kim Dong-won from KB Securities. Please go ahead, sir.
예, 질문 기회 감사드립니다. 저는 IM과 System LSI에 질문드리겠습니다. 첫 번째 질문은 내년 5G 시장 개화에 따른 네트워크 장비의 수주 확대 가능성과 함께 5G 도입에 따른 플래그십 스마트폰의 수요 촉진 효과와 무선 사업안의 차별화 전략에 대해서 말씀 부탁드리겠습니다. 두 번째로는 System LSI가 갖고 있는 모바일 5G 모뎀칩 경쟁력하고요. 향후에 5G 시장이 확대될 경우에 무선사업부의 신규 고객 확보 가능성에 대해서도 말씀 부탁드립니다. 감사합니다.
I have two questions related with the 5G market. First question is towards the IM division. With the opening of the 5G market next year, do you expect to have more contract, more orders regarding network equipment for 5G? Also, do you think that there will be a positive effect on driving demand for your flagship hand smartphones? If so, how much? What do you see as your competitive advantage in terms of 5G market as a company that also does mobile devices? Second question is towards the System LSI, also on 5G. How do you assess your own competitiveness for your 5G modem chips? Do you think that you'll be able to add new customers on the mobile side?
IM 부분에서 먼저 말씀드리겠습니다. 먼저 장기 측면에서 보면 올해 통신 선진시장인 한국하고 미국에서 5G 상용화를 시작할 예정에 있습니다. 내년에는 일본, 중국, 유럽 등에서 5G가 상용화가 될 예정이고, 2020년 이후에는 인도 등 성장이 시장에서도 계획을 하고 있습니다. 5G 국가 확산과 더불어 저희들한테는 많은 기회가 있을 것으로 기대하고 있습니다.
To answer your question about the 5G, first on the equipment side, this year commercial 5G service is expected to start in the leading markets. Korea and the U.S. will start first, followed by Japan, Europe and China next year, also rolling out to other growth markets such as India in year 2020. As 5G service rolls out to various countries, we will be facing various opportunities.
네, 단말 측면에서 또 말씀을 드리면 5G 도입은 현재 정체된 스마트폰 시장 분위기를 전환시킬 수 있는 좋은 기회로 보고 있습니다. 특히 4K 이상의 초고화질 동영상을 포함해서 실시간 개인 방송, 클라우드 게임, 그동안 네트워크 속도 제약으로 인해서 활성화되지 못했던 다양한 서비스 부분들이 본격화될 것으로 전망하고 있습니다.
To answer your question from the handset side, actually there will also be a very important turnaround with the adoption of 5G. It will be a good catalyst to shake up the stagnant overall market in the handset. Especially with the adoption of 5G, various services that could not be fully enjoyed due to restrictions on network speed will now be enjoyable. For example, ultra high picture resolution, 5K or 4K plus video or live streaming, cloud games, these will all now become possible with 5G service.
이에 따라서 고화질, 고성능, 고용량 메모리에 대한 니즈가 커질 것으로 보여지고, 저희들한테는 high-end smartphone 단말의 교체 수요가 증가할 것으로 기대하고 있습니다.
With these new services possible, we believe that there will be a greater need for high picture quality, high performance, high density memory on the handset, and this will drive stronger demand for handset replacement, especially around the high-end smartphones.
당사는 5G 장비 그리고 단말, 그다음 chipset을 모두 보유하고 있는 강점을 가진 회사입니다. 이를 바탕으로 세계 최초 5G 상용화를 위해서 지속 노력을 하고, 특히 전 세계 주요 정부가 인증한 security 기술을 기반으로 보안 관련된 부분에 있어서도 철저하게 준비하고 대응하도록 하겠습니다.
Regarding 5G, as you mentioned, we have the strength as a company that has not only 5G equipment, but also handsets and chipsets. Based on this strength, we are focusing on delivering first commercial 5G service in the world. Also, we would like to highlight the fact that we have been preparing thoroughly on the security side as well. We have security technology that is recognized by major country governments around the world.
또한 초고속, 초저지연, 초연결 등의 5G 특성을 당사의 장비와 스마트폰과 같은 디바이스에 극대화하기 위해서 고화질 비디오 실시간 스트리밍, 게임과 같은 다양한 차별화 포인트도 준비하겠습니다.
Also, while preparing for 5G commercial service, we're also focusing on delivering diverse and differentiated points around high quality video, real-time streaming, and game experience that actually maximizes the benefits of 5G that can be enjoyed on our handsets, as well as delivered through our 5G equipment. 5G characteristics being high speed, low latency, and hyper-connected service.
네, 시스템 side 답변드리겠습니다. 당사의 모뎀 기술은 이미 LTE에서 그 품질과 성능을 충분히 보여주었고, 글로벌 140개 이상 통신사업자들에게 5억 개 이상의 모뎀 칩을 이미 상용화한 이력이 있습니다.
I think in terms of our quality and the performance of our technology, we have already established a clear track record on the LTE side. We have already supplied to more than 140 service providers, more than 500 million products.
당사의 5G 모뎀은 5G 주요 출시국 일정에 맞게 일정이 진행되고 있으며, 각 출시국에서 요청하는, 요구하는 기술 사항도 충분히 맞출 수 있도록 모든 기술의 준비를 갖추고 있습니다.
In terms of our 5G modem preparations, it is synced to the 5G commercial rollout schedule of each country. We are also reflecting the unique technology requirements country by country.
또한 이러한 5G 선도 기술력을 중국, 미국 등 주요 고객에게 전파하기 위해서 적극적으로 프로모션을 진행 중입니다.
We're also backing this up with active promotion, especially to customers in China and the U.S., so that they are able to appreciate the leadership we have in 5G technology.
네, 감사합니다. 다음 질문 받겠습니다.
다음으로 질문해 주실 분은 하나금융투자의 김경민 님입니다.
The next question will be presented by Ms. Claire Kyung Min Kim from Hana Financial Investment. Please go ahead, ma'am.
질문 기회 주셔서 감사드립니다. 저는 전재원 전무님께 NAND에 대해서 질문을 드리겠습니다. NAND 가격 하락이 지속되고 있는데요. 가격 하락에 의한 수요 증가 효과라든가 이에 따른 향후 수급 안정화 가능성에 대해 시장의 관심이 매우 높은 것 같습니다. 향후 어떤 응용처에서 수요 탄력성에 따른 수요 확대 효과를 기대할 수 있는지, 그리고 이와 함께 전반적으로 2019년 수급 전망은 어떻게 보시는지 말씀 부탁드리겠습니다.
I have a question regarding NAND. The NAND price decline is continuing, but on the other hand, I think the market is hoping that maybe the lower prices will drive up demand, and that could actually put the market back to a supply and demand balance. In terms of which application do you think there's a possibility of greater demand growth? In that context, can you share with us your overall outlook for demand supply situation 2019?
기본적으로 NAND는 DRAM 대비 가격 안정화에 따른 수요 진작 효과가 상대적으로 크다고 볼 수가 있습니다. 실제로 고용량화 트렌드는 가격 안정화에 따라 가속되었고, 특히 모바일 응용에서 고용량 eStorage 채용을 중심으로 10K HDD의 All-Flash Array로의 전환 또한 확대되었습니다. 당사는 이러한 NAND 스토리지의 저변 확대 흐름에 적극 대응해서 두 분기 연속 전 분기의 Bit guidance를 상회하는 출하량을 보였고, 그 결과 이번 분기 재고 수준이 감소하였습니다.
Regarding the effects of demand growth driven by lower prices, I think that effect shows a much larger on the NAND side versus the DRAM side. Especially, we're seeing that with lower prices, the acceleration is happening in terms of adoption of higher density NAND, especially around eStorage on the mobile applications and the conversion from 10K HDD to AFAs are accelerating as NAND prices become lower. We have been tapping, leveraging this widening base of NAND storage so that we have an increase in our shipments two consecutive quarters in a row, and actually our inventory levels have decreased this quarter.
2019년의 경우 상반기까지 계절적 수요 비수기 영향으로 가격 안정화가 예상되지만 하반기에는 계절적 수요 상승과 함께 가격 안정화에 따른 추가적인 수요 둔화가 예상됩니다. 공급 측면에서는 업계의 90단급 3D NAND의 양산 및 풀 전환에 따라 응용체별 수급에는 차이가 있을 것으로 예상되지만 연간으로 볼 때는 올해 대비 비트성장 폭이 크지 않을 것으로 보입니다. 이에 따라 하반기부터는 수요 둔화와 함께 우호적인 수급 상황이 전개될 것으로 예상하고 있습니다.
Looking towards next year, even though until the first half, due to seasonality, the stable prices will probably continue. If we look towards the second half of next year, there will be the seasonal effect kicks in with the increased demand driven by lower prices. Once these two come into force together in the second half, we believe that there will be a strong demand in the second half of next year. On the demand side, looking towards next year, the demand situation would depend, for example, on the mass production of 3D NAND at 90 plus layers, as well as the yield situation for each company. Overall, we believe that bit growth on a year-on-year basis will not be large next year.
Given this demand outlook and also the expected strong demand in the second half, we believe that the demand and supply situation will turn positive next second half.
네, 감사합니다. 다음 질문 받겠습니다.
다음으로 질문해 주실 분은 J.P. Morgan의 JJ Park입니다.
The next question will be presented by Mr. J.J. Park from JPMorgan. Please go ahead, sir.
네, 두 가지 질문이 있는데요. 첫 번째는 시장에서 삼성전자 DRAM 투자 push out 되었다는 얘기들이 계속 나오고 있는데 DRAM을 포함해서 전반적인 투자 계획, 올해랑 또 특히 좀 이르지만 2019년에 대해서 말씀해 주시면 감사드리겠습니다. 두 번째 질문 드리겠습니다.
I think there's a market talk that Samsung has pushed out its DRAM investments. In that context, can you share with us if there is any changes in your investment plans? Even though it's a bit too early, can you share with us your CapEx plans for next year?
최근 시장에서 당사의 투자에 대한 관심이 매우 많을 것으로 생각하고 있습니다. 우선 2018년 투자, 특히 올해 평택 상층 증설은 기존 계획대로 진행 중에 있습니다. 2019년에 잔여 캐파를 어느 시점에 얼마나 증설할지 등에 대해서 구체적으로 결정된 바는 없지만 종합적인 라인 운영과 투자의 효율성을 고려하여 평택 잔여 캐파 증설보다는 16 라인의 NAND를 좀 더 DRAM으로 전환하는 등의 다양한 방안들을 지속 검토하고 있습니다. 그리고 아마 이러한 라인 운영 관련 여러 방안들이 시장에서 회자되고 있는 것이 아닌가 싶습니다.
I do imagine that the market will be very interested on our investment plans. Regarding the investment of the upper level of Pyeongtaek, that is going on according to our original plan. Regarding when and how much of the remaining capacity to invest in 2018, that we will flexibly decide depending on the line operation situation. Right now what we are considering is rather than increasing more capacity, we are, for example, considering converting the '16 line NAND capacity to DRAM capacity. I think part of that is what you're hearing in the market.
한 가지 더 말씀드리면 메모리 비성장은 증설 등에 대한 투자뿐만이 아니고 생산성 효율과 세대 전환 효율 등 다양한 요인에 의해서 결정이 됩니다. 따라서 기본적으로 생산성 향상을 중심으로 비성장률을 확보할 수 있도록 노력하고, 이에 더해서 System LSI를 포함한 반도체 전체의 관점에서 라인 운영 및 투자를 진행하는 것이 기본 전략이라고 보시면 되겠습니다.
Also to add, actually, there's other ways in capacity investments to gain memory bit growth. That's through efficient production and yield, we will be focusing on delivering memory bit growth through efficient productivity. In terms of our line operation and investment, actually, we will be making decisions from the entire semiconductor business, including System LSI.
네, 답변 감사드립니다. 두 번째 질문은 shareholder return 관련된 건데요. 지금 현재 2018년부터 2020년까지 3개년치 기준으로 해서 shareholder return을 2021년에 추가적으로 하는 걸로 알고 있는데요. 지금 현재 올해 cash flow가 예상했던 것보다 굉장히 크고 내년도 아웃룩도 나쁘지 않은데 혹시 이런 상태에서 내년에 추가적인 shareholder return이 있을 수 있는지 궁금합니다. 감사합니다.
My second question is about the shareholder return. The current shareholder return program covers a three-year period from 2018 to 2020, with additional possibilities open for 2021. Given the fact that this year your free cash flow is quite strong and next year outlook is not bad, could there be a possibility of additional shareholder return being announced next year? I think that we could check the free cash flow for the entire three-year period. That's from 2018 to 2020 when we approach mid-2019. Based on that review, we could consider additional shareholder return additional to the KRW 9.6 trillion each year during the three-year period.
The next questions will be presented by Mr. Hwang Min-sung from Samsung Securities. Please go ahead, sir.
Listening to most of the questions that were being asked on today's call, I think that shows that there is quite a lot of concern in the market about the future industry outlook on the memory side. Usually, based on our past experience, when there is an industry downturn, it ends up being worse than what we expect going into the downturn. As the memory industry leader, do you think that this time it will be different, that it would be less than what the market is concerned of? If so, what is the reason? What are the grounds for your confidence? To answer your question, I think one big difference is, while the past IT cycle was mainly driven by PCs, this time we're seeing a more diverse application that's in addition to PCs.
There's a larger share taken up by mobile as well as server demand. This diversification is one difference from the past experience. The other is that compared to PC, mobile, and servers actually have a weaker seasonal cycle as well as a demand cycle. As you know, the seasonal demand change in the server itself is not large compared to PCs. Also, we're in a huge mega virtuous cycle where huge amount of data is being generated from various applications and devices that eventually end up on the server, that is what is driving the server demand. We think that we are just in the start of this virtuous upcycle. We think that actually this isn't just a change, but it's better described as a paradigm transformation. This large demand driven by the server application is a new paradigm in terms of the memory industry.
The fact that the industry has gone through a supply shortage for 2 years, is, I think, explained by 2 main factors. One is on the supply side, the level of technology, the difficulty in processes have become very different from previous as we enter the 20 nano and below technology. So that's one factor. The other is the fact that there's this transformation in terms of the demand base, and these 2 were the reasons why we have been in a supply shortage for 2 plus years. The current price decline can be explained by various factors, including inventory levels at customer level, seasonality of demand, as well as this psychological factor that the customers have never seen prices maintained so strong for 2 years and more. That is a temporary reason why we're seeing a price decline. These temporary price declines can repeat in the future.
We believe that fundamentally, we have a very strong demand base for memory.
네, 감사합니다. 이제 시간이 한 10분 정도 남았는데 우선 두 분 질문받고 그다음에 타임을 다시 한번 보겠습니다.
We will take first 2 more questions.
다음으로 질문해 주실 분은 Daewoo Capital Market의 SK Kim입니다.
The next questions will be presented by Mr. SK Kim from Mirae Asset Daewoo. Please go ahead, sir.
예, 좋은 실적 축하드립니다. 그리고 질문 기회 주셔서 감사드리겠습니다. 저는 디스플레이 쪽에 한 가지 질문이 있고, CE 쪽에 한 가지 질문드리겠습니다. 우선 디스플레이 관련해서는 3분기에 상당히 견조한 실적을 거두었지만, 해외 주요 거래선의 OLED 채용 모델의 고가 전략 등으로 flexible OLED 수요, 그리고 가동률에 대한 우려가 상당히 지속되고 있는데요. 내년에도 견조한 수요 성장 기대가 가능한지, 2019년 OLED 사업 전망에 대해서 좀 구체적으로 설명 부탁드리겠습니다. 그리고 두 번째는 TV 관련해서 새로 출시된 8K TV에 대한 시장 반응, 그리고 내년 판매량에 대한 전망이 궁금합니다. 그리고 또 한 가지는 최근 시장에서 QD-OLED TV의 신제품, 신기술 생산에 대한 루머가 상당히 많은데 이에 대해서 회사 측이 가능한 명확한 입장, 그리고 중장기 TV 제품 기술 로드맵에 대해서 설명 부탁드리겠습니다.
My first question is for the display side. Your third quarter earnings is quite solid as your overseas customers adopt OLED more. I think there's still concern of flexible OLED demand and the utilization levels. Can you share with us your outlook on OLED demand and utilization, including for next year business outlook? The second question is for the CE, the TV side. Can you share with us the response of the market for the newly launched 8K TV? Also, how much in terms of sales are you expecting next year? Also, I think there is quite a lot of rumor in the market regarding the QD-OLED new product as well as the technology. Can you share with us the company's position regarding this rumor? Also, what is your mid to long-term technology roadmap for your TV business?
네, 먼저 디스플레이 부분 답변드리겠습니다. 우선 말씀드리고 싶은 것은 OLED 패널이 flagship smartphone의 메인스트림으로 자리를 잡아가고 있고, 2019년에는 이런 수요가 더욱 확대될 것으로 기대된다는 점입니다.
To answer your question about the display side, we do notice that the OLED panels are becoming the mainstream in especially the flagship smartphones, and we expect this demand to continue next year.
단, 공급 측면에서는 경쟁사의 본격 진입과 그다음에 capacity 확대로 경쟁이 심화돼서 쉽지 않은 시장 환경이 될 것은 우려가 되고 있습니다.
However, on the supply side, with new competitors entering and increase in capacity, competition we're expecting will become fiercer.
당사는 장기간 축적된 기술력을 바탕으로 경쟁 우위를 강화하고 차별을 확대하도록 노력할 예정입니다.
We will leverage our technology advantage, which we have been building up over long-term to maintain our competitive advantage in the market.
특히 19년은 당사의 이러한 차별화된 기술을 바탕으로 새로운 제품군으로 OLED의 사업 영역을 확대하기 위해 노력할 계획입니다. 특히 foldable, automotive, IT 등 높은 기술적 완성도를 요구되는 제품군 진입을 위해 기술 개발에 총력을 기울일 예정입니다.
At the same time, we will be focusing next year on expanding the applications where our OLEDs will be used. For example, we will be leveraging our differentiated technology to expand into applications such as foldable, automotive, and AI, which require a high level of technology.
또한 본격적인 OLED TV를 대비해서 전략 거래선을 다변화하여 안정적인 포트폴리오를 구축하도록 노력하겠습니다.
On the customer base, we will be increasing strategic customers so that we have a well-diversified customer base.
이를 통해서 19년은 금년 이상의 가동률을 확보하여 매출 믹스 수익성을 극대화할 수 있도록 노력해 나가도록 하겠습니다.
Based on all of these initiatives, we will focus on recording higher revenue as well as profitability versus 2019 by increasing our utilization versus this year.
네, 마지막 질문.
먼저 8K TV에 대한 반응을 설명을 드리겠습니다. 현재 북미, 구주, 한국 중심으로 판매가 진행 중이고 8K 디테일한 화질과 고급스러운 디자인이 유통과 소비자들로부터 좋은 평가를 받고 있습니다.
To answer your second question about the market response to our 8K TVs. Currently, it is mainly being sold around the North American, European, and Korean markets. Both from the channel as well as customers, it is getting very positive reviews both for the 8K picture quality as well as the design.
올해 QLED 8K TV 출시는 선진시장 중심으로 당사의 테크 리더십 기반으로 초고화질 TV의 새로운 장을 개척했다는 의미가 있고, 내년에는 글로벌 론칭을 통해 유의미한 판매 실적과 더불어 프리미엄 TV 시장에서의 시장 선두를 지속해 나가도록 하겠습니다.
The launch of the QLED TV this year, the significance of that is that we were able to open a new market territory of ultra-high picture quality TVs, leveraging our technology leadership. We will be rolling this out globally next year to record significant sales as well as maintain our leadership in the premium segment.
그리고 QD-OLED TV 준비에 관해서 질문하셨는데, 당사는 고객에게 더 나은 화질 경험과 가치를 제공하고자 지속적으로 연구 개발을 강화하고 있습니다.
Your second question about the QD-OLED TV and the development plans. We have always focused our R&D efforts in delivering better picture quality experience as well as better value to our customers.
QD-OLED가 다양한 TV 기술 중에 하나로 학계하고 업계에서 회자되고는 있으나, 당사는 금년에 판매가 크게 늘면서 대세화를 이루어가고 있는 QLED하고, 컬러 필터까지 없앤 진정한 자발광으로 최고의 블랙, 밝기, 명암비, 시야각 등을 구현할 그런 MicroLED 중심의 투 트랙 전략에 집중할 계획입니다.
Even though QD-OLED is being mentioned in both the industry as well as the academia as one of various TV technologies, we will be focusing this year on the QLED technology, which has started to become a mainstream this year, and also as a two track. In addition to the QLED, we will be focusing on the MicroLED, which has various advantages in the fact that it does not need a color filter, and in terms of black color and visible angle, as well as picture quality and brightness, has many advantages. Our technology roadmap is to have a two track between QLED and MicroLED.
시간이 많이 가서 한 질문만 더 받고 마치도록 하겠습니다.
We will take one last question.
마지막으로 질문해 주실 분은 NH투자증권의 도현우 님입니다.
The last question will be presented by Mr. Do Hyun-woo from NH Investment & Securities. Please go ahead, sir.
네, 파운드리 관련해서 질문 드리겠습니다. 최근에 파운드리 주요 경쟁사 중 하나가 7나노 개발을 포기했는데 관련된 영향이 좀 궁금하고요. 두 번째는 삼성의 EUV 개발 현황에 대해서 조금 더 자세히 말해 주시면 감사하겠습니다. 예를 들어서 7나노 Low Power Plus 공정 초기 몇 개 레이어 정도에 EUV가 적용되는지, 그리고 ArF immersion quadruple patterning 대비해서 몇% 정도 원가 개선이 있는지 궁금하고요. 확보 가능한 고객이 구체적으로 어떤지 전망을 부탁드립니다.
My question is about the foundry business. Recently, a major competitor announced that it will drop its seven nano development. What impact would that have on your business? Second question is, can you give us an update on your EUV development? Specifically, for example, up to how many layers deep are you going to be using EUV at seven nano? If you do that, how much of a cost improvement, in terms of percentage, are you expecting by using EUV versus previous technology? What kind of customers do you think you can gain with your products that are EUV-based?
예, 답변드리겠습니다. 우선 GlobalFoundries 경쟁사 관련된 내용은 직접적인 언급은 힘들겠지만, 당사 7나노는 full EUV로서 고객들로부터 경쟁력을 현재 인정받고 있는 상황입니다. 그래서 EUV 7나노를 비롯해서 선단 공정 관련된 고객의 문의가 이전 대비 대폭 증가하는 것은 사실입니다.
Even though we do not mention directly regarding competitor movements, our seven nano is a full EUV, and has already received recognition for its competitiveness from our customers. It is true that inquiries regarding our EUV seven nano, as well as other cutting-edge technology, has dramatically increased from customers.
당사는 EUV 기반 7나노 개발을 완료해서 현재 고객 제품 생산을 시작하였으며, 19년 본격 양산에 돌입할 예정입니다. 획기적이고 경쟁력 있는 7나노 EUV 바탕으로 모바일, HPC, AI, Automotive 분야를 중심으로 고객 확대를 적극 추진하고 있습니다.
We have already completed our EUV-based seven nano and have already started to produce products for our customers. We plan to go into full scale mass production of our seven nano EUV starting next year. Based on this dramatic and also very competitive product, we will be increasing customers in various applications, including mobile, HPC, AI, as well as automotive.
마지막으로 레이어 수라든가 원가 같은 구체적인 질문을 하셨는데, 레이어 수는 고객에 따라서 맞춤형으로 저희들이 제공을 하도록 지금 되어 있고요. 그다음에 원가에 대해서는 경쟁사 대비 경쟁력 있는 저희들의 가격 구조를 제공할 수 있다는 정도만 말씀드리겠습니다.
You also asked specific questions regarding the number of layers as well as the cost advantage. In terms of layers, actually, we can provide customized layering depending on each customer. In terms of cost, what I can say is that it enables us to offer competitive prices versus competitors.
네, 그럼 이것으로 conference call을 마치도록 하겠습니다. 수고하셨습니다.
That ends our conference call. Thank you very much.