Begin the conference of the fiscal year 2016 first quarter earnings results by Samsung Electronics. This conference will start with a presentation, followed by a division Q&A session. If you have a question, please press star one, that is star and one on your phone during the Q&A. For cancellation, please press star two, that is star and two on your phone. Now we shall commence the presentation on the fiscal year 2016 first quarter earnings results by Samsung Electronics.
Good morning. This is Robert Lee. Thank you for joining our call this morning. With me representing each of the business units are Mr. Jun Se Won, Senior VP of Memory Marketing, Mr. Ho Gok, he's the VP of System LSI, E Chang-hun, VP of Samsung Display, E Kyong Tae, Vice President of IT Mobile Business, and E Yoon, Senior VP of Visual Display. We also have Mr. Kim E-Tae and Kim Sang-yo, both from Investor Relations Group. 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, and all such statements are subject to certain risks and uncertainties that could cause our actual results to be materially different from those expressed in today's discussion. Before we go over the earnings results, I would like to update you on 2016 shareholder return.
2016 annual free cash flow came in at approximately KRW 24.9 trillion. Based on the shareholder return policy that we announced last November, the 50% of KRW 24.9 trillion will be allocated to 2016 shareholder return, which brings the total amount to KRW 12.5 trillion. We will allocate KRW 4 trillion to 2016 annual dividends and the remaining KRW 8.5 trillion to share repurchase program. This will bring 2016 total share repurchase amount to KRW 9.3 trillion after adding KRW 0.8 trillion carried over from 2015. Taking into consideration of the daily trading volume and other factors, the share repurchases will be carried out over three to four phases, and all shares repurchased will be canceled. The board of directors approved today to pay an year-end dividend of KRW 27,500 per share for common and KRW 27,550 for preferred.
Including interim dividend, the annual 2016 dividend per share represents about 36% increase over 2015 dividend. In addition, the board of directors approved the first phase of share repurchase program with 1.02 million common shares and 255,000 preferred shares. It will start January 25th and take approximately three months to complete. Excuse me. For 2016, we achieved solid results despite Note 7 issue in the second half as a result of our continuous efforts during the past two to three years to strengthen competitiveness of our component businesses by focusing on high value-added products via widening the technology gap in the DRAM business, as well as strategic investments in vertical NAND and OLED panels. We also made several key acquisitions and divestitures under the select and focus strategy, which will enable the future growth. In the fourth quarter, the total revenue was KRW 53.3 trillion.
The year-over-year increases in revenues from memory and OLED businesses were offset by reductions in IM division from lower smartphone sales. On a quarter-on-quarter basis, the total revenue increased by 12%. The gross profit was KRW 22.4 trillion, up KRW 3.1 trillion year-over-year, and the gross profit margin improved by 5.8 percentage points. The SG&A remained flat year-over-year. The operating profit increased by KRW 3.1 trillion year-on-year to KRW 9.2 trillion, and the operating profit margin was 17.3%, improvements of 5.8 percentage points year-on-year. The component business recorded a significant improvement in earnings, driven by robust sales of high-value products in the memory business amid tight supply-demand balance. Strong LCD panel prices and improved utilization of OLED panel capacity. With regard to the set business, IM division achieved improved earnings led by solid sales of the Galaxy S7 and improved profitability of mid-to-low-end models from efficiency of lineups.
For the CE business, despite the sales increase of premium TV, the operating profit declined due to strong panel prices, as well as the impact of new investment in the home appliance B2B business. In the fourth quarter, the weakening of Korean won against the U.S. dollar had a positive impact on the operating profit by approximately KRW 300 billion quarter-on-quarter, mostly on the component business. Now I'd like to address the business outlook for 2017. In 2017, operating earnings are projected to grow year-on-year, mainly from the component businesses. With respect to the memory business, we expect favorable supply-demand balance to continue throughout the year. We will focus on expanding sales of high value-added products and continuing technology transitions to 64-layer V-NAND, as well as the 1Xnm DRAM.
The System LSI business will focus on maintaining a high utilization rate by diversifying its customer base and expanding the supply of high value-added LSI products, as well as securing stable supply of 10nm products. For the OLED business, we plan to expand the supply of high value-added flexible panels to external customers, and the LCD business will focus on improving profitability via product mix towards 55-inch-plus panels. In the mobile business, amid concerns over a slowdown in smartphone market growth, we will strive to regain customers' confidence by ensuring product safety. At the same time, we will focus on expanding sales of high-end products with a differentiated design and features, as well as enhancing user experiences utilizing artificial intelligence.
Regarding our CE business, we'll focus on selling new premium products such as QLED TVs and the Family Hub Refrigerators version 2.0, while increasing B2B investment in home appliances and reinforcing the smart home business. For the first quarter in 2017, for the component business, despite the seasonality, memory prices are expected to be solid due to limited supply on the industry-wide low level of inventory at the year-end. For the System LSI business, we expect to increase production of 10nm products, while the display business is expected to see higher demands for OLED from new products being prepared by its customers. However, we expect overall company earnings to decline quarter-on-quarter as earnings in the set business are projected to decline, resulting from increased marketing expenses in the mobile business and sales decreases of TVs due to weak seasonal demand.
In 2016, we invested KRW 25.5 trillion in capital expenditure, KRW 9.8 trillion for display, and KRW 13.2 trillion for semiconductors. The split between memory and System LSI was about eight to two. The actual CapEx for 2016 was slightly lower than previous guideline of KRW 27 trillion, mainly due to the fact that some of the year-end investments in display business were carried over to 2017. The capital expenditure plan for 2017 has not been finalized. Looking out to the mid to long term, based on paradigm shifts in the IT industry from the growth of IoT, AI, automotive businesses, we expect the growth of new demands in the component businesses. In addition, new designs and usability are expected to emerge in the set business.
In semiconductor, we expect to see a huge growth in demand for high density, high performance memory for processing big data in the server market and chipsets for automotive and AI. In the OLED business, the demand for high value-added flexible panel is projected to grow substantially from the innovations in smartphone form factors. In the set business, the importance of solutions such as cloud AI on mobile devices will expand rapidly, as well as connectivity such as smart homes. Through these new developments, we expect that there could be a significant new business opportunities. However, we also have to be mindful of uncertainties in domestic and global political and business environments, which could bring challenges in executing our mid to long-term business strategies through M&A and investment decisions, as well as disruptions in developing new growth engines.
Before the presentations of each business unit, I would like to share with you several data points on key business areas. On DRAM, in Q4, our bit growth came in low single digit, and our ASP increased high single digit in Q4. For Q1 2017, we expect the DRAM market bit growth to decline high single digits, and our bit growth will decline low teens. For 2017 whole year, we expect DRAM bit growth to be high teens, and our bit growth will be similar level. For NAND flash, for Q4, our bit growth was low teens, and we saw mid-single-digit ASP increase. For Q1, the market NAND bit growth, we expect to decline mid-single digit, and our NAND bit growth will decline high single digit. For the year, we expect NAND market bit growth to be approximately 30%, and we expect our bit growth to be low 30%.
For handsets, in Q4, total handset sales came in at 90 million units with about eight million units in tablets. Our blended ASP for the handset was $180 range. The mix of smartphones within total handset was about mid 80%. For Q1, we expect our total handset sales to increase over Q4, while tablet, we expect small decline. We expect the blended ASP to increase in Q1 over Q4, and the mix of smartphone within total handset shipment will increase to high 80%. For our TV business, we saw in Q4 16 million units shipment. Q1, we expect sizable decline of about 40% because of seasonality. For the year, we expect our TV sales to increase low single digit. Now I'll turn the conference call over to gentlemen from the respective business units. Thank you.
Good morning. This is Sewon Jun from the memory marketing team. In the first quarter, supply and demand conditions remained tight, and prices increased in all applications due to solid demand driven by content growth, as well as increased accessories due to peak seasonality. The memory division achieved outstanding earnings growth by focusing on high profitability and differentiated product mix management. For NAND, demand for high-performance, high-density SSD solutions, as well as mobile solutions, was solid. The industry failed to fulfill mid demand due to 3D NAND ramp-up delays in the market. This results still in continuous tight supply and demand conditions. We achieved outstanding improvement in earnings compared to the previous quarter by scaling 48-layer V-NAND, and by actively responding to demand for high-density enterprise SSD over 4 terabytes and mobile DRAM over 64 gigabytes. For DRAM, supply and demand conditions remained solid.
As demand continued to grow, fab supply was limited. More specifically, mobile demand was strong, driven by smartphones with higher specifications and new smartphone launches. Demand for PC and server remained solid as well, driven by an increased portion of high-end PCs, including gaming PCs, as well as content growth in data center. As we did with NAND, we achieved outstanding improvement in DRAM earnings by responding to increased demand for mobile, server, and PC, and by concentrating on a profit-focused product mix. Next, I will comment on the memory market outlook and our strategy for the first quarter and 2017 overall. In 2017, for NAND, SSD demand is expected to be strong, driven by an increased portion of high-density NVMe over 256 gigabytes in client, increased adoption of high-density SSD in data center, and all-flash arrays in the enterprise server market.
For mobile storage, it is also expected to grow continuously as density of high-end products increased to 128 gigabytes or over, and for mid to low-end to 64 gigabytes. Supply and demand conditions are expected to remain tight throughout the year, and the industry's 3D NAND supply condition will be a key variable. In order to respond to demand for high value-added products, we are preparing for mass production in the Pyeongtaek campus as planned. We will secure differentiated profitability and strengthen technology leadership by focusing on 64-layer process migration. For DRAM, overall demand is expected to increase, driven by server demand, mainly from data center, and also driven by mobile, where density growth will take place in all segments based on strong growth in China and other emerging markets.
Uncertainty regarding demand fluctuation in the first half has been mostly resolved, and supply and demand conditions are expected to remain solid throughout the year. We will continue to improve earnings and maximize profitability by focusing on sales of high density and low power, high value-added products, and by expanding 1Xnm process migration. In the first quarter, although overall demand may slow down compared to the previous quarter due to weak seasonality, supply and demand is expected to remain solid given the industry's limited supply. For NAND, demand for high value-added solution products such as high-density storage, is expected to remain solid. We will continue to secure product competitiveness by strengthening profitability based on 48-layer V-NAND and by mass producing 64-layer V-NAND. For DRAM, although shipments may decrease due to seasonality, the trend towards adopting higher density is expected to continue in all applications.
We will focus on strengthening products and cost competitiveness by expanding supply of the industry's first mass-produced 10 nanometer-class products, including high density, low power LPDDR4X. Now, moving on to the System LSI business. In the fourth quarter, we achieved a solid result due to consistent strong demand for mid-to-low-range mobile APs, and the growth of the mobile market in China. Also, by beginning mass production of the industry's first 10 nanometer, we have once again demonstrated our technology leadership as we did with our 14 nanometer process. In 2017, we will continue to grow our earnings by maintaining a high utilization ratio. We will expand the supply of 10 nanometer products in a stable manner and address the increasing demand for high-end LSI products such as image sensors and DDIs.
Also, we will strengthen the base for mid-to-long-term growth by diversifying the product lineups to include automotive, wearable, and IoT. In the first quarter, we are focused on improving earnings. To this end, we will ramp up mass production of 10 nanometer products for flagship smartphones, which generate stable yield, and address the increasing demand for LSI products such as DDI and 14 nanometer products for mid-to-low-end smartphones. Thank you.
Good morning. This is Chang Lee from the Planning Department of Samsung Display. During the fourth quarter, total earnings for the display business improved QOQ. This was driven by increased shipments from OLED panels, as well as increased earnings in larger sized LCD TV panels. For the OLED business, in the first quarter, we brought solid earnings due to increased shipments based on expanded customer base and continued cost reduction. For the LCD business, our first quarter earnings improved QOQ on the stabilized ASP led by favorable supply-demand situation. Also, we have strengthened profitability with improved yield and continued cost reduction, as well as expanded value-added products, especially from the larger sized UHDs. Now, I'd like to present the outlook for the display market and our core strategies for 2017.
For the OLED business, we'll strive to achieve an earnings improvement Y-o-Y through expanding supply of the flexible display based on our technology leadership and supply capacity. Although we expect competition to intensify in the LCD industry under the capacity expansion, we also expect that the market for premium TV panels, such as UHD and ultra large-sized TV panels, will continue to grow. Under these circumstances, we will make every effort to strengthen profitability by improving competitiveness of value-added products, focusing on UHDs and larger-sized TVs, as well as expanding a portion of differentiated products, such as frameless and curved TVs. Looking ahead, in the first quarter of 2017, we expect OLED demand to rise as major set makers pursue product differentiation in the form of hardware specification. Under these circumstances, we plan to focus on improving earnings through actively addressing customer demands, as well as enhancing product mix.
In the first quarter, although we expect weak demand for LCD panels under weak seasonality, the market demand for UHD TV and size migration towards larger screens is expected to continue with a favorable supply-demand situation led by dwindling supplies in overall industry. In preparation for these market conditions, we will make the best efforts to secure profits by focusing on cost reduction and yield improvement, as well as expansion of value-added products such as ultra large size, high resolution, and curved panels. Thank you.
Good morning, everyone. I am Kyung-Tae Lee from the mobile communication business. I would like to present the fourth quarter business result and our future outlook for the IM division. For the fourth quarter of the mobile communication business, market demand for smartphone and tablets increased Q-o-Q as a result of year-end seasonality. Despite the absence of the Galaxy Note7, our profits slightly increased Y-o-Y, thanks to strong sales of the Galaxy S7 and S7 Edge, as well as the solid sales of our mid-to-low-end smartphones. As to the network business, our revenue and profit increased Q-o-Q, led by expansion of LTE-related overseas business, and supply of equipment for newly added frequency band in the domestic market. Next, let me move on to the outlook for 2017.
This year, we expect the smartphone market growth to slow down, new services, for instance, artificial intelligence, will emerge as a new differentiator in the smartphone market. As to our business, we will increase our market leadership in the premium market by introducing a differentiated design as well as by applying features of meaningful innovation. Moreover, we will maximize our mid-to-low-end smartphones product competence by adding new features, including water and dust proof and fingerprint recognition. Along with these differentiations in hardware, we will continue to strengthen our software and service capabilities to provide new values to our customers. For example, we will increase the number of models or where the service can be used for Samsung Cloud and Samsung Pay. We will also apply new artificial intelligence-related service in our flagship smartphone.
As to the network business, our goal is to maintain the current sales momentum by expanding LTE business in emerging markets and next generation IoT network business in advanced markets. Now, let me address the outlook for the first quarter of 2017. In the first quarter, market demand for smartphone and tablet is expected to decrease Q-o-Q due to typical seasonality. In response, we will continue to introduce new Galaxy A series smartphones as our mid-end smartphone shipments, including the J series. With these efforts, we expect our smartphone shipment and revenue to increase Q over Q. However, we expect our profit to slightly decrease Q over Q, due to increased expenses, including marketing-related spending to enhance our brand presence.
Lastly, under the principle of putting customer safety and quality first, we will improve on our existing quality-related processes, establish innovative preventative measures, and build human expertise not to repeat what happened with the Galaxy Note7. Through all the aforementioned, we will continue our efforts to improve our profit in 2017, despite all the difficulties that we might face. Thank you.
Good morning. I'm Yoon Lee, Senior Vice President of Visual Display Sales and Marketing Team. I would like to present the market conditions and our results for the fourth quarter 2016. In Q4, the TV market increased by double digits quarter-on-quarter, driven by an increase in demand during the year-end peak season. However, despite the favorable market trend in the advanced markets, the level of global demand remained equal to the same period last year due to the economic downturn that has been observed in the emerging markets, including Latin America. Under these market circumstances, we were able to outperform the market growth rate and strengthen our market share in the premium segment by successfully managing peak season promotion activities, including Black Friday.
In spite of such results, our overall earnings slightly decreased compared to the same period last year due to the headwinds from various factors, including increased panel price and currency fluctuations. As for the digital appliance business in the fourth quarter, although North America has been experiencing a continuous upward growth trend, there was a slight decrease in the overall demand due to the weak performance in the emerging markets, including China. As our sales outcome showed favorable tendencies in the North American and Asian markets, we were able to achieve sales growth in comparison to the same quarter last year by expanding our premium products, including AddWash and Chef Collection Kitchen Appliance Series. However, we saw a decrease in the overall earnings affected by new investment activities in the B2B area. Next, let me share the market prospects for 2017.
With regard to the TV market in 2017, as demand in emerging markets, including Latin America, is to recover while demand in TV replacement is soon to arise, we expect global TV demand to start to show a slight upward trend. Also, we project demand in premium TV products such as large inch and UHD models will continue to expand. However, we also anticipate the increase in demand will be somewhat limited due to the presence of risks that can potentially slow down growth affected by currency fluctuation in the major markets. We project this will eventually intensify competition in the market. With such market prospects, we will focus on securing our profitability and achieving growth by continuing to expand high-value product lineups, including ultra-large and UHD models, led by our newly introduced category, QLED TV.
Our QLED TV, which we first unveiled at CES this year, is applied with new metal quantum dots to produce more delicate and detailed picture quality. We will strengthen our presence in the TV industry as a leading company while we actively promote QLED TVs' premium design that even takes the surrounding space into account, as well as enhanced connectivity and improved usability. In the meantime, we will solidify our leadership in the premium TV market by offering differentiated consumer experience and launching TVs that reflect consumer lifestyle. We will not be satisfied with consecutive 11-year number one brand position and will lay the foundations for sustained growth and profitability in the future by seeking to improve on what kind of values and experiences our TV can offer to consumers.
For the TV market in Q1 2017, as we are entering into slow season after Q4 and expecting continuous economic downturn in the emerging markets, including Latin America and China, TV demand is projected to decline both year-on-year and quarter-on-quarter. Although we expect a slight impact in sales revenue as a result of adjustment in selling price in response to the fluctuation in panel prices, we will focus on profitability by introducing latest lineups earlier while promoting sales increase in the premium product category. As for the digital appliance business, we will strengthen our leadership in the premium market by further introducing differentiated innovative products and smart appliances such as Family Hub 2.0 and FlexWash and FlexDry.
In addition, we will seek to boost our brand position and competitiveness in B2B area by expanding investment in developing products, infrastructure, marketing to target the B2B electronics market, which is currently showing high growth potentials. Thank you. Now we'll turn to our Q&A sessions.
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. J.J. Park from J.P. Morgan. Please go ahead, sir.
Yeah.
My first question is regarding the memory business, about the capacity and the investment plans that you have. As you mentioned during the presentation this year, we are also expecting another tight supply and demand balance in the market, there is in the market talks of possible increase or investments in DRAM facilities by Samsung Electronics. Could you give us in your DRAM aspects, what are your investments or capacity plans for this year? Also on the 3D NAND side, the supply is not that sufficient. In that context, can you also introduce your plans of how to operate the Pyeongtaek Fab this year given the supply situation? Also how much of V-NAND capacity are you able to increase this year?
Regarding the DRAM, because there is strong demand for high performance, high density, high capacity DRAMs, we have decided to execute supplementary investment on the remaining space of Line 17. To clarify, this is not to increase capacity, but to supplement and make up for the natural capacity decrease that we experience as we migrate towards 1X. Regarding the Pyeongtaek Fab, it is being pursued as planned, we are expecting that to start operation possibly in mid 2017. You may have a lot of questions regarding our capacity plan for this year, we have not finalized or decided any specifics of the capacity operation plan. Actually, our approach is that we will take it step by step, monitoring the market situation as well as the competitors.
For your information, our basic approach to the Pyeongtaek campus is that we will expand Pyeongtaek campus, watching the market situation of the semiconductor product. Currently, we have no plans of adding a DRAM capacity to the Pyeongtaek campus.
답변 감사드립니다. 디스플레이 패널 쪽에서는요, A3 라인이랑 작년 말에 페이즈아웃한 L7-1 Capa가 어느 정도 되고 연말에 어느 정도 될지 말씀 부탁드리고요. 그리고 L7-2가 올해 어떻게 phase-out 하는지, 아니면 계속 운영을 하시는지 이쪽에 대한 답변을 부탁드립니다. 이게 최근에 Sharp가 공급 중단한 거랑 좀 연관성이 있는지도 말씀해 주시면 감사드리겠습니다.
My second question is about the display panel. You phased out L7-1 last year. Given that, could you give us your expected LCD line capacity at the end of 2017? What are your plans of L7-2? Are you planning to phase that out this year as well, or will you keep operating that? Is this connected in any way to the discontinuation of supply from Sharp?
LCD L7-1라인은 작년 말에 클로징을 마쳤습니다. 현재 보유 중인 라인의 추가 클로징은 아직은 고려하고 있지 않은 상황입니다. 그리고 OLED Capa에 대해서는 저희가 OLED 수요에 대해서 적기에 Capa를 확보한다는 기본 방침을 가지고 있고요. 시장이나 고객 니즈에 따라서 우리가 보유하고 있는 리소스를 전략적으로 운영할 예정입니다. 마지막으로 저희 Capa는 L7-1이 클로징되어 있으니까 전체 Capa에서 그거를 빼면 될 것 같고요. 저희가 L7-1을 클로징하는 거는 Sharp 건하고 관계없이 그전에 결정된 거기 때문에 크게 연관이 없는 것으로 보시면 될 것 같습니다.
Regarding the LCD line, as you mentioned, L7-1 was completely phased out as of end of last year. Currently, we are not considering a further phase-out of any of the lines that we currently have. Regarding the OLED capacity, our basic approach is that we will secure necessary OLED capacity on time in response to demand. We will be operating our resources strategically to respond to market as well as customer needs. Regarding the phase-out or the closing of L7-1, that was already decided as planned before the Sharp matter came up. That was according to our original plans.
확인했습니다.
다음으로 질문해 주실 분은 다이와 캐피탈 마켓의 SK Kim입니다.
The following questions will be presented by Mr. SK Kim from Daiwa Capital Markets. Please go ahead, sir.
질문 기회 주셔서 감사합니다. 다이와 증권의 김성규입니다. 저도 두 가지 질문이 있는데요. 우선 IM 쪽 질문 하나 드리고, 메모리 쪽 질문드리도록 하겠습니다. 우선 무선 쪽 관련해서는 어저께 Note7 소송 관련해서 조사 결과를 발표하셨는데요. 향후 배터리 등 주요 부품의 안정성 확보에 많은 노력을 기울이실 것 같고, 근데 이에 따라서 발생할 비용이 수익성 부분에 부정적으로 작용도 할 수 있을 것 같습니다. 혹시 이에 대한 의견이나 회사의 계획이 있으시면 답변 부탁드리겠습니다. 답변드리면 다음 질문드리겠습니다.
My first question is towards the IM division. Yesterday, the company announced the results of its investigation regarding the Note7 incidents, it appears that the company going forward will focus even more efforts on securing the stability and the safety of the battery and other components of the handset. This may have increase in cost which may have a negative implication towards your profitability. Could you offer any plans or opinions regarding this possible increase of cost?
저희들이 앞으로 만들어낼 제품이나 서비스 이런 분야에 있어서 혁신은 지속 추구하지만, 하여튼 고객 안전을 최우선으로 해서 지금 저희들이 준비를 할 계획입니다. 그래서 어제 말씀드렸듯이 개발, 제조, 품질 등 모든 프로세스를 기존보다 더욱 강화하는 그런 종합적인 재발 방지 대책을 수립을 했고, 또 경영 전반에 걸쳐서도 품질 최우선 경영 체제를 만들어서 다시는 Note 7과 같은 그런 이슈가 재발하지 않도록 그렇게 하겠습니다. 당연히 이렇게 하면 품질 관련 비용들이 증가할 걸로 저희들도 준비를 하고 있고, 근데 이는 고객들한테 더욱 안전한 제품을 제공함으로써 시장에서 잃어버렸던 신뢰도 회복을 하고, 결국 그렇게 하기 위한 저희들의 어떤 투자라고 생각을 하고 있습니다. 이걸 바탕으로 해서 판매를 더 확대를 하게 되면, 판매를 더 확대를 하고, 그다음에 저희들이 내부적으로도 라인업 효율화라든지, 공정 개선이라든지, 이런 다양한 비용 절감 노력을 통해서 비용 증가에 대응을 하도록 그렇게 하겠습니다.
As you mentioned yesterday, we announced that we will be in our future products as well as services, not only focused on further innovation, but also place top priority on customer safety. We announced yesterday our plan to prevent another recurrence of a Note7-like incident by preparing comprehensive plan that strengthens not only our development and manufacturing, but also our quality related processes. We have also adopted a new business management system that places quality first. It's the quality of first business management system. We do expect that quality related costs will increase as a result of these new processes and systems. We believe that this is actually an investment that will help us recover our credibility from the customers by providing safe products. We believe that this is an investment that would lead to increased sales.
That would be a way of also covering the increased quality-related costs. Internally, we will continue to raise the efficiency of our product lineup, as well as further improve our processes to enhance the cost efficiency.
답변 감사드립니다. 다음 질문은 메모리 쪽인데요. 최근 DRAM, NAND 메모리 제품들이 타이트한 수급 상황의 영향으로 가격 강세가 계속 지속되고 있습니다. 이에 따라서 우리 supplier들의 수익성은 크게 개선되고 있지만, 반면으로 이렇게 가격 강세가 지속될 경우에는 특히 스마트폰의 BOM cost 부담으로 수요 시장 성장 위축이 될 것이라는 우려가 제기되고 있습니다. 오늘 스피치에서 견조한 수요 전망을 말씀해 주셨는데요. 가격 강세에 따른 수요 둔화에 대한 우려와 관련해서 수요와 가격 측면에서 의견 좀 부탁드리겠습니다. 감사합니다.
The second question is about the memory business. Both DRAM and NAND are showing very strong prices under very tight supply and demand situation. This does help improve the profitability of the supplier, but if such tight supply and demand situation and strong prices continue, the BOM cost, the B-O-M cost of the set makers such as smartphone makers will increase, which is giving rise to concerns that this may actually hurt overall market growth. Within that context, can you give us some of your opinions regarding the possibility of these strong prices and tight supply possibly hurting the overall market?
2016년 하반기부터 수급 불균형에 따른 가격 강세가 이어지고 있는데, 지난 2, 3년간의 가격 흐름을 보면 2015년부터 지난해까지 큰 폭으로 가격이 하락한 이후에 정상 수준으로 조정되는 과정 중에 있다고 생각합니다. 물론 이러한 공급 부족이 부품 전반적으로 장기간 지속되어 가격 상승으로 이어진다면 세트 성장에도 부정적인 영향을 줄 가능성이 있다고 생각합니다.
If you look at some of the long-term price trends, even though due to the shortage of supply, the prices have been strong since second half of last year. If you look at the past two to three years, from 2015, there was a large drop in prices, and we think that we're still in the process of those prices normalizing, adjusting to the normal levels. As you mentioned, if this goes on for a long time, if this shortage of overall components continue pushing up prices and that lasts for a long time, this may have a negative impact that you suggest.
이에 따라서 저희는 시장 수요 변화를 면밀하게 모니터링하고 있고, 이에 따른 투자나 CapEx 계획을 탄력적으로 대응해 나가서 거래 선수에 최대한 효과적으로 대응해 나갈 계획이고, 시장 가격은 수급 변동에 따라서 최적화된 수준을 찾아갈 것으로 예상합니다.
That is why in terms of our operation, we closely monitor changes in market demand, and we will be operating and executing our investment as well as capacity plans so that we are able to effectively respond to customer demand. Overall, regarding prices, we believe that prices will be recover an optimized level based on market dynamics.
당사는 시장 가격에 따라서 고부가 제품 중심으로 고객 수요에 적극 대응해서 수익성 중심의 제품 운영 기조를 지속 유지할 계획입니다.
Regarding this, we will continue our approach in the product mix, which has been to focus on the high-end, the high-value products, which helps improve our profitability as market prices move.
네, 감사합니다. 다음 질문 받겠습니다.
다음으로 질문해 주실 분은 NH투자증권의 이세철 님입니다.
The next questions will be presented by Mr. Peter Lee from NH Investment Securities. Please go ahead, sir.
네, NH투자증권 이세철입니다. 두 가지 질문드리겠는데요. 일단 첫 번째는 전사적인 측면에서, 그리고 두 번째는 메모리 쪽 관련해서 질문드리겠습니다. 먼저 전사적인 측면에서 질문드리겠는데요. 이게 조금 약간 예민한 부분이긴 한데 최근 특검 이슈가 불거지고 있는데 이에 대한 저희 사업 영향성에 대해서 일단 먼저 설명 부탁드리겠습니다.
I have two questions. The first question is at the enterprise level. This may be a sensitive topic, but there has been issues related with the special prosecution process. Can you comment on the impact that this may have on the business side?
예, 단기적인 차원에서 비즈니스 영향이라고 가늠하기는 좀 쉽지 않은데요. 하지만 장기적인 차원에서 봤을 때, 저희가 보고 있는 글로벌 정세 변화나 산업 구조의
지금 계속되고 있는 상황에서 회사는 미래 성장 동력을 찾기 위한 최고 경영진의 활동이 굉장히 중요한 부분이라고 생각되는데, 이런 것들이 만약에 제한을 받는다면 이런 부분은 우려되는 상황이라고 생각합니다. 어쨌든, 경영진으로서는 이런 성장지의 손실이 발생하지 않도록 최선을 다할 것을 말씀드리겠습니다.
There is concern that the investigation may limit in any way the top management's efforts to identify and foster future growth business. Especially this is concerning given the overall business outlook, that the outlook remains uncertain due to changing global political landscape as well as rapid paradigm shifts in the technology industry. The management will make its best efforts to ensure that the company and its business does not miss out on any growth opportunities due to this.
네, 감사합니다. 두 번째 질문은 메모리 쪽 비즈니스인데요. 최근에 CES 등 여러 매체를 통해서 사실 AI, 인공지능, VR 그리고 AR, 그리고 최근 Automotive 쪽, 이런 쪽으로 시장 환경이 변하고 있고, 그리고 차세대 IT 기술 기기들이 기술적으로 성장하는 모습들이 확인되고 있는데요. 이와 관련해서 저희 메모리 쪽 관련해서 연관성이 어떻게 되고 있는지 의견 좀 부탁드리겠습니다.
The second question is to the memory business. If you look at recent media as well as events such as CES, we are all noticing that there is a shift in the IT industry towards, for example, new technologies such as AI, VR, AR, as well as automotive applications are also taking on a larger share of the overall IT industry. This seems to signal that there is a change in the nature of the market. Also, next generation IT devices, as they are unveiled, are showing different areas and different features. From the memory business perspective, how does this tie into your future business?
당사에서도 중장기적인 수요 변동에 대응하기 위해서 신규 응용처의 콘텐츠와 이를 구현하는 하드웨어의 변화, 에코시스템의 발전 등 여러 가지 시각에서 많은 고민을 하고 있습니다. 이러한 신규 응용처는 단기적으로 큰 영향이 메모리 수요에 있지는 않겠지만 중장기적으로 메모리 수요에 긍정적인 영향을 준다는 것은 확실하고, 특히 신규 응용은 개별적인 성장보다는 네트워크와 모빌리티를 바탕으로 한 커넥티비티라는 특징과 함께 서버를 중심으로 해서 기존 응용처와 연동되어 수요가 함께 성장할 것으로 보입니다.
We are also very closely watching the new trends that you have mentioned, such as the increase in content of new application, changes in the hardware devices that actually implement these new applications, as well as how the ecosystems around these new applications are taking shape. We believe that this has implication, especially in the mid to long term demand changes for the memory business. These new applications may have limited impact in the short term of memory, but we think that in the mid to long term, it would have a positive impact on the memory business. We also note that actually rather than these being individual application and device opportunities, actually it would be more of a network and mobility-based solution where the server is at the center and all sorts of devices and services take place around it.
다만 이러한 신규 응용처는 시스템, 콘텐츠를 포함한 전반적인 에코시스템 성숙에 시간이 필요한 것으로 보이고, 특히 AI의 경우는 고성능, 고신뢰성을 요구하는 기술집약적인 메모리가 필요한 영역으로 사전에 기술적으로 많은 준비가 필요할 것으로 보입니다. 당사는 이러한 신규 응용 시장에 적절히 대응하기 위해서 기술적인 준비뿐만 아니라 고객과의 전략적인 협업을 바탕으로 중장기적으로 기술, 시장 리더십을 유지하도록 하겠습니다.
Also looking at these new applications, we believe that it may take a considerable amount of time for the systems, as well as the content to settle down. Also, if you look at applications such as AI, it requires a very high technology, a cutting edge technology, very technology intensive, high performance, and high reliability memory. We are prepared for some time to take for these new applications to mature as business opportunity. Given the high level of technology that's required, we're not only preparing the technology, but also we're focusing on fostering and building strategic relationships with our customers so that we maintain our technology as well as market leadership as these new application areas open.
감사합니다. 다음 질문 받겠습니다.
다음으로 질문해 주실 분은 UBS의 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. The first one is on NAND flash. I'm wondering how much capacity losses you may have at a wafer level in Line 16 due to conversion there continuing from 2D NAND flash to 3D NAND flash. After this I got a follow-up. Thank you.
첫 번째 질문은 NAND Flash Capa에 대한 질문입니다. 아까 전사 발표에서 올해 2017년 NAND의 bit growth를 연간으로 30% 초반대의 성장을 예상을 하셨는데요. 평택의 램프업이 오래 있을 거라고 하는 거를 감안을 하면 생각했던 것보다 적은 것 같아서 질문을 드립니다. Line 16을 전환을 하는 과정에서 wafer level에서의 capa loss가 어느 정도인지 설명을 해주시면 감사하겠습니다.
지금 질문하신 부분에 대해서는 저희가 구체적인 답변을 드릴 수는 없는 상황인데, 저희들은 중장기적으로 planar Capa는 점점 감소될 거고, 그래서 그런 부분들을 보완하기 위해서 우리가 계속 평택을 올해 하반기부터 증산한다는 것을 말씀드린 겁니다. 구체적인 숫자는 밝히기가 좀 어렵습니다.
Please understand that we cannot offer any specific numbers or data for your question. We do believe that in the mid to long term, our planar capacity share will continue to decrease, and that is part of the reason why we're planning the increase of capacity at Pyeongtaek. At this point, we cannot go into further detail.
Okay, thank you. On a more general manner, we've seen obviously the U.S. dollar appreciating quite a bit since mid-November against some of the key emerging market currencies for markets served by both the consumer electronics and mobile business. At this stage, have you seen, like in 2015, any negative impact on demand by the key business verticals? If so, how are you managing this going into Q1? Thank you.
두 번째는 전체적으로 지금 11월 중순부터 달러가 주요 신흥국 통화 대비 강세를 보이고 있습니다. 특히 가전이나 무선 사업부가 수출하는 신흥 시장들의 통화가 달러 대비 약세로 돌아섰는데요. 이로 인해서 2016년에 사업 버티칼상 부정적인 영향을 혹시 보셨는지 궁금합니다.
전사적으로 봤을 때 과거 15년인가요? 그때 15년 상반기의 상황 같은 그런 급격한 환율 변동은 아직 나타나지 않고 있기 때문에, 어떤 수요에 대한 영향은 아직까지는 없고요. 환율이 이게 점진적인 달러의 강세라든지, 아니면 로컬 Currency의 약세는 수요에 큰 영향을 주지 않고, 어떤 급격한 변동에 따른 가격의 변화가 실질적인 수요에 impact을 주기 때문에 아직까지는 그런 상황은 보이지 않고 있습니다.
Actually, we have not yet seen any impact on the demand in these markets. Unlike what we saw in 2015, if you recall, in 2015, there were some major exchange rate fluctuations. This time, what we saw at the end of last year is not to that degree, and so we are not noticing any effect on the demand side. Based on our experience, we believe that gradual change, gradual strengthening of the dollar, or gradual weakening of emerging market currencies do not have much impact on demand. Unless the change in exchange rate is rapid, that brings about change in prices. That is when the demand is affected.
Thanks very much.
다음으로 질문해 주실 분은 HSBC의 리키 서입니다.
The next questions will be presented by Mr. Ricky Seo from HSBC. Please go ahead, sir.
네, 감사합니다. TV 쪽하고 System LSI 쪽 질문 두 개 드리겠습니다. TV 쪽, 최근에 Sharp에서 패널 공급 불가에 대해서 announce가 있었는데, 그거에 따라서 향후에 65인치하고 72인치 대형 패널에 대한 소싱 계획 전략이 어떻게 되는지하고, 좀 디테일한 계획이 있으시면 설명해 주시면 감사하겠습니다.
My first question is to the TV business. Recently, Sharp announced that it can no longer supply panels. As a result of that announcement, what are your plans and strategies regarding sourcing of the 65 and 72 inch panels? I would appreciate if you could give us some details of your plans.
Sharp로부터는 저희가 사전 협의 없이 그냥 통보를 받은 상황이라서 60인치, 70인치는 공급 차질이 일부 있을 수 있습니다. 그래서 저희는 지금 거래선들과 협의하에 다른 인치대로 전환 판매를 추진 중에 있고요. 근데 다행히 17년 라인업상에서 말씀하신 65, 75 대체 모델을 저희가 준비를 하고 있어서 이를 중심으로 판매를 확대할 계획입니다. 그리고 앞으로도 지속적으로 패널 업체와 전략적인 협업을 통해서 올해 확보해야 할 패널 물량은 차질 없이 확보를 할 계획을 가지고 있습니다.
Actually, Sharp had notified us without any prior or advanced consultation. There may be some issues in securing the 60 and 70 inch panels. However, we are also talking with our customers in order to, for example, switch up the panel sizes to meet such disruptions if they do occur. We were already planning to substitute the lineup for the 65 and the 75 inch for this year. We are already preparing models to substitute the inches that are affected. Overall, by continuing to cooperate and to talk with these panel suppliers and by maintaining a strategic relationship, we believe that we will have no issues in securing the panel volume that we need for this year.
System LSI 관련해서 7나노 양산 계획에 대해서 설명 부탁드리고요. 저희가 미디어에서 봤을 때는 경쟁사 대비해서 스케줄이 좀 늦는 걸로 나오는데, 그거에 따라서 고객 leading edge 고객에 대한 이탈 가능성에 대해서 설명해 주시면 감사드리겠고, 혹시 EUV 도입 여부도 말씀해 주시면 고맙겠고, 그거에 따라서 step 수가 기존 conventional technology로 하는 거에 대비해서 어느 정도 save 될 수 있는지 설명 부탁드리겠습니다. 감사합니다.
Second question to the System LSI division is, can you give us some details or ideas of your 7 nano mass production plan? According to information, it seems that your 7 nano mass production plans are a bit behind or later than that of competitions. Do you think that this may cause any customers of yours leaving due to the 7 nano mass production plan being later? Also, are you planning to adopt EUV technology? If so, in terms of number of steps versus conventional technology, how much of an increase would that bring about?
저희 System LSI는 10나노부터 선단 공정 경쟁력을 강화하여 industry에 가장 처음으로 고객 서비스 시작하고 있습니다. 7나노 역시 '25년 초도 생산 목표로 추진하고 있으며, 기존에 말씀드린 것과 같이 EUV를 사용할 것이고, EUV 장점을 최대한 극대화해서 성능, power scaling 측면에서 경쟁력을 확보할 예정입니다.
The System LSI division has always served our customers first in the industry by maintaining a cutting technology leadership since the 14 nano technology. We will maintain that in the 7 nano technology as well. We plan to start initial production of 7 nano from 2018, and we will be using EUV technology. We will maximize the advantages of EUV in terms of performance, power, and scalability.
다음 질문 받겠습니다.
다음으로 질문해 주실 분은 대신증권의 김경민 님입니다.
The next question will be presented by Ms. Kim Kyung-min from Daishin Securities. Please go ahead, ma'am.
질문 기회 주셔서 감사드립니다. 대신증권 김경민입니다. 첫 번째로 반도체, 두 번째로 IM 부분 관련 여쭙겠습니다. 첫 번째 질문은 System LSI 관련인데요. 최근 foundry 쪽에서 고객사 다변화 및 제품군 다변화가 전개되고 있습니다. 이와 관련돼서 System LSI의 전반적인 Capa 운영 계획에 대해서 설명 부탁드리겠습니다.
My first question is towards the System LSI division. Recently, the foundries have been implementing strategies to diversify the customer base as well as the product mix. In that context, overall, what is System LSI's plans of its capacity operation this year?
저희 System LSI 비즈니스는 14나노 공정의 안정화에 힘입어 안정된 수율, 양산 체계를 바탕으로 지난해부터 본격적으로 모바일 외 자동차, 네트워크, 그래픽 등 다양한 응용처의 고객들을 대상으로 다변화를 추진해오고 있고, 소기의 성과를 거두고 있습니다. 올해 14나노 수요는 중저가 모바일 및 신규 응용처 시장을 중심으로 견조한 수요가 예상이 되고요. 따라서 이러한 시장과 고객 수요를 수시로 검토하면서 기존 라인을 중심으로 효율적 운영과 생산성 극대화를 통해 탄력적으로 Capacity 운영 계획입니다.
Since the 14 nano technology, we have been able to stabilize overall yield as well as produce or operate at a very stable mass production system. With this advantage, we have been able to develop our customer base in various applications, including mobile, automotive, graphic as well. We believe that we will see a strong demand for our 14 nano technology this year as well, especially with the mid-to-low-end mobile applications as well as new applications. We plan in terms of capacity operation to continuously monitor changes in market as well as demand, and to flexibly operate our capacity to maximize the efficiency of existing lines and also to maximize our productivity.
예, 답변 감사드립니다. 두 번째 질문은 IM 관련된 거고요. 작년 Viv Labs를 인수한 이후에 Artificial Intelligence 서비스를 본격 시작할 것으로 예상이 됩니다. 향후 그 전략 방향성에 대한 설명 부탁드립니다. 추가적으로 AI 분야에서 향후 Google의 인공지능 및 음성인식 플랫폼과의 conflict 우려가 있는데요. IM 부분에서 어떻게 대응하실 계획인지도 궁금합니다.
My second question is towards the IM division. Last year, you acquired Viv Labs and have been focusing on AI services. Could you give us a bit more color and detail of the strategic direction of the AI service that you have? Also, as another question, there are concerns of potential conflict with the AI as well as voice recognition platform of Google. What is your position on that, and how do you plan to respond?
네, 먼저 저희 삼성 무선 사업부의 AI 서비스 전략에 대해서 말씀드리겠습니다. 저희들이 적용하고자 하는 AI 서비스는 저희들 자체 개발한
을 활용해서 대화형 인터페이스를 차기 플래그십 모델에 적용할 계획이 있습니다. 그다음에 이걸 기본으로 하고, 말씀하셨듯이 최근 인수한 Viv Labs사의 역량을 활용해서 저희들 스마트폰 외에 삼성전자가 보유하고 있는 다양한 디바이스들이 많습니다. 태블릿, TV, 가전제품까지 다 연결시키려고 계획하고 있고요. 그다음에 저희들이 지금 서비스하고 있는 Samsung Pay나 Samsung Health 이런 삼성에서 직접 하는 서비스뿐만 아니고, 타사라든지 서드파티에서 하고 있는 서비스들도 저희들이 하고자 하는 AI 서비스에 연결시킬 수 있도록 하는 그런 개방형 생태계도 구축할 예정에 있습니다.
To answer your first question regarding our service strategy for the AI, we are going to implement the AI service based on technology that we have developed on our own. It will take the form of, for example, a conversation-based interface, and we plan to adopt this service on our next flagship model. In addition to that, we will further leverage the capabilities that came with Viv Labs to operate and create an open ecosystem of AI, so that not only our smartphones, but other devices that we manufacture, such as tablets, TVs, and other home appliances, will be connected onto this platform. Also, our services such as Samsung Pay and Health, and also services offered by third parties, would be invited onto this platform. That is one of the strategies that we have for the AI service.
두 번째 질문은 저희들이 하고자 하는 인공지능 서비스나 음성 인식 관련 서비스가 Google하고 좀 겹치지 않느냐는 그런 우려에 대한 질문인 것 같습니다. 저희들과 Google은 어쨌든 오랜 시간 동안 전략적인 파트너로서 긴밀하게 협력을 해왔고요. 특히 이렇게 AI 같은 서비스가 시장 초기에 정착하기 위해서는 서로 협력이 굉장히 필요하다고 생각합니다. 그래서 초기 시장 활성화를 위해서 여전히 Google과 협력하고 있는 상황으로 이해해 주시면 좋을 것 같습니다. 또한 Google이 가지고 있는 서비스, 그다음에 저희들이 가지고 있는 서비스, 이 두 서비스의 어떤 경쟁을 통해서도 AI 서비스가 더 발전할 수 있을 것으로 생각을 하고 있고, 앞으로도 계속 협력을 하려고 하고 있습니다.
Regarding the second part of your question. As you know, Samsung and Google have been cooperating and collaborating very closely. We are very long-term partners. We believe that in order for AI, which is a new application, to effectively take root and successfully take root, actually a collaboration between different companies in the same space would actually help and be beneficial for the initial market to take place. So despite the concerns of potential overlap between our AI and voice recognition service and what Google offers, we believe that actually such competition between the services offered by Google and services offered by Samsung will actually in the end help enhance and develop the AI-as-a-Service further. So we believe that we will be cooperating continuously in the future with Google in this space.
네, 감사합니다. 다음 질문 받겠습니다.
다음으로 질문해 주실 분은 한국투자증권의 유종우 님입니다.
The next questions will be presented by Mr. Yoo Jong Woo from Korea Investment & Securities. Please go ahead, sir.
예, 저도 두 가지 질문드리겠습니다. 먼저 갤럭시 S8 관련된 질문 먼저 드리겠는데요. 시장에 출시 시기에 대한 얘기들이 굉장히 많이 나오고 있는데 혹시 정확한 날짜는 아니더라도 대략적인 시기를 말씀해 주셨으면 감사하겠고요. 아까 반도체 가격 상승 관련돼서 스마트폰 쪽 수요 둔화에 대해 질문을 드렸었는데, IM 쪽에서 반도체 가격 상승, 그다음에 디스플레이 패널 고사양화로 인한 원가 상승 등으로 인해서 BOM이 많이 올라갈 것 같은데 S8 같은 경우에 수익성 확보는 어떻게 하실 계획이신지 말씀해 주시면 감사하겠습니다.
I have a question regarding the Galaxy S8. There's a lot of talk in the market about when that will be launched. Even if it may be difficult to give us a specific launch date at this point, could you give us at least a rough idea of when that launch would happen? As the previous question mentioned, there are increases in prices of major components, including semiconductors. Display prices are expected to go up as more and more high specification, high-end displays are adopted on the smartphone. This may cause, for example, decrease in smartphone demand. Immediately, though, that would increase the BOM cost for the smartphone maker. Specifically related with S8, given these potential BOM cost increase possibilities, how do you plan to secure profitability of the S8?
네, 먼저 S8 출시 시기 관련해서 저도 매번 죄송한 말씀을 드려야 될 것 같은데, 출시 전인 제품에 대한 정보를 이렇게 구체적으로 말씀드릴 수 없음을 양해해 주시기 바랍니다. 하지만 저희들 S8의 성공적인 출시를 위해서 충분히 준비를 하고 있고, 고객에게 더욱 완전한 제품과 최고의 소비자 경험을 제공해 드릴 수 있도록 잘 준비하도록 하겠습니다.
Regarding the first question about the launch of S8, when that would happen, please understand that I am not at liberty to release information of unlaunched products. I can say that we are fully preparing to have a very successful launch of a product that is not only safe, but also delivers the best user experience to our customers.
두 번째 질문하신 여러 가지 부품이나 새로운 기능들이 채택됨으로 해서 BOM cost가 올라가는 부분에 대해서 말씀드리면, 저희들이 항상 새로운 사용자 경험을 제공하기 위해서 다양한 신기술 채용을 시도하고 있습니다. 분명히 이런 걸 통해서 고객 여러분들한테 의미 있는 혁신 제공을 약속드릴 수 있고, 이런 노력들을 계속할 겁니다. 이런 혁신 기술 탑재가 기본적으로 재료비 증가를 가져올 수 있는데 저희들 생각은 혁신적인 제품을 통해서 결국 시장에서 판매를 확대함으로 해서 그 부분들은 대응을 하도록 하고, 저희들 내부적으로도 최적화된 리소스 운영, 그리고 비효율을 최소화해서 이런 수익성 확보할 수 있도록 지속적으로 노력하겠습니다.
Regarding the second part of your question, yes, due to the adoption of new features as well as increase in component prices, this may have upward pressure on the BOM cost. This is part of what we do continuously. We continuously evaluate and consider new technologies, adopting that to our products so that we are able to provide new and differentiated user experiences to our customers. We believe through these new user experiences, we bring meaningful innovation to the customers. In the process, this may bring about increase of material costs in the end handset. We fundamentally respond to this by providing an innovative product that will drive up market demand and by increasing sales in the market. Also internally, we continuously try to optimize our resource operation and also to eliminate any inefficiencies.
네, 감사합니다.
다음으로 질문해 주실 분은 골드만삭스의 마커스 신입니다.
The next questions will be presented by Mr. Marcus Shin from Goldman Sachs. Please go ahead, sir.
네, 질문 기회 주셔서 감사합니다. 저도 두 가지 질문드리고 싶은데요. 첫 번째는 올해 스마트폰 사업 전략에 관해서 질문드리고 싶습니다. 최근에 중국 스마트폰 회사들 출하량 목표나 가격 정책을 보면 해외 중저가 시장에 상당히 공격적으로 진입을 시도한다고 느껴지는데요. 이러한 환경에서 저희 제품의 중저가 시장 차별화 전략이 어떻게 되는지 여쭤보고 싶습니다. 답변 후에 다음 질문드리도록 하겠습니다.
It's about the smartphones business strategy for 2017. If you look at the Chinese handset makers, the shipment plans that they announced, as well as the price plans that they announced, they seem to be prepared to very aggressively attack the mid-to-low-end handset market. Given that competition from the Chinese makers, how do you plan to differentiate yourselves in the mid-to-low-end space?
네, 저희들 중저가 라인에 대한 제품 경쟁력 확보 계획을 가지고 있습니다. 말씀을 드리면, 플래그십 제품의 혁신적인 차별화 기능 중에 실제로 사용자들이 실생활에서 굉장히 유용하게 사용하고 있는 그런 기능들을 중저가 모델로 확대를 하고 있습니다. Galaxy A 2017 시리즈의 경우에도 보면 플래그십 디자인 요소인 3D 글라스를 채용을 했고, 앞으로도 확대를 할 거고, 그다음에 방수, 방진, 그다음에 고화소의 전면 카메라들을 채용을 해서 차별화하도록 그렇게 하고 있습니다. 또한 J 2017 시리즈도 디자인, 카메라 같은 사용자 편의성 측면에서 차별화 요소를 줄 수 있는 기능들을 도입을 하고, 그다음에 하이엔드 제품에서 경쟁력이 입증이 됐던 Samsung Pay 같은 그런 서비스도 J 시리즈로 확산을 시킬 계획이 있습니다. We do have plans and strategies to differentiate our products in the mid to low-end space. For example, there are innovative features that were first adopted on our flagship lines that are considered more practical and widely used.
Those are the features that we will roll out towards the mid-to-low-end models as well. For example, as you've noticed in the 2017 A series, we've adopted a 3D glass. The A series for this year has water-resistant as well as dust-resistant features, and also have adopted a high pixel count camera on the front side. For this year's J series, we plan to enhance the design as well as cameras to provide a better user convenience. We'll be rolling out some of the services that we have been offering on the high-end side that have had very positive responses, such as Samsung Pay. We plan to roll that out to J this year.
예, 답변 감사드립니다. 두 번째 질문은 VD 부분에 관해서 질문드리고 싶은데요. 최근에 하이엔드 TV 시장에서 OLED TV의 성장세가 크게 두드러지고 있는 것 같습니다. 과거에는 OLED TV가 화질만 강조했다면 올해부터는 폼팩터 차별화까지 부각시킨 OLED TV들이 대거 등장하는 것 같은데요. 특히 하이엔드 시장에서 브랜드 밸류를 지키고 있는 소니까지 OLED TV 대열에 합류하면서 저희 삼성전자의 QLED TV 경쟁 열세에 대한 우려가 존재하는 것 같습니다. 이런 상황에서 저희 TV 사업부의 대응 전략 방향에 대해서 설명 부탁드리겠습니다. 감사합니다.
Last year, we've noticed the very strong growth trends in the OLED TVs. I think that's not only because of both picture quality, but also new form factors are driving up exciting demand. We've noticed that major players in the high-end space, including Sony, have also started OLED, which may be a threat to the QLED that you offer. Given this context of strong growth as well as new competition, how do you plan to respond? As we unveiled the QLED TV at the CES, we plan to increase the demand in the premium segment with our new QLED TV, and also to expand our marketing efforts so that we maintain our position in the premium TV segment. We believe that what we launched this year, the new QLED TV, is a TV at a totally different dimension from the conventional TVs.
Technology-wise, it is based on quantum dots technology that uses metal, that has various advantages. For example, it has 100% color volume, so that the same color is maintained despite the brightness or the darkness of the environment. Also, it offers a very bright display of 1,500-2,000 HDR, and also offers the highest contrast in the industry. It also offers a very wide visibility angle so that the pictures do not deteriorate regardless of where the viewer is seated. In terms of picture quality, we believe that it is a completely different offering from what you have seen in the previous displays. Also in the design area, we have also made quite a lot of progress. We have focused on any inconveniences that the consumers may experience in the process of watching TV.
For example, we have changed the cables to individual connections using optical cables, and also the design has been changed so that it offers a new gap wall mount, so that the display, the TV itself, blends into the overall environment, as a part of the integral design. Also, in terms of the control, we have designed in a one remote control system so that the same remote control is used to control other devices, as well as using smartphones to control the displays, and also connecting the smartphone to the TV display, and also adopted voice recognition technology. We believe that all of this will provide a differentiated experience to the consumers, and that is why we believe that this will maintain our leadership in the premium TV segment.
The next question will be presented by Mr. Peter Yoo from BNP Paribas. Please go ahead, sir.
My first question is regarding the semiconductor business, the memory business. I recall that during last quarter's conference call, you did foresee some uncertainty in first quarter as well as thereafter. However, it seems that the tone has changed today. Today's conference call seems to assume that much of this uncertainty has already been resolved, and that you forecast a solid market for the full year. Can you explain a bit more detail of what uncertainties have been resolved, how, to bring about this tone change?
답변드리겠습니다. 지난번에 불확실성이라고 얘기했던 경우는 상반기 스마트폰향 수요의 급격한 둔화라든가 업계의 공급 확대 등 수요 불확실성이 있을 거라고 예상을 했었습니다. 그렇지만 지금 현재 저희들이 수요를 쳐다보면, 현재로서는 그렇게 우려했던 스마트폰향의 수요의 급격한 둔화라든가, 업계의 공급 확대가 급속히 늘어나는 현상이 나타나고 있지 않기 때문에 불확실성이 해소됐다고 말씀드린 겁니다.
To answer your question, the uncertainties that we had mentioned in the last quarter was the risk of both changes happening rapidly on the demand as well as the supply side. On the demand side, the risk was that, for example, demand from smartphone companies may rapidly decrease in the first half or on the supply side, that the industry supply may rapidly increase in the first half. We have not seen neither as of yet. We have not seen smartphone companies rapidly decrease their demand or the industry pump up its supply rapidly. We believe that since we don't see it as of yet, that these uncertainties we can consider to have been resolved.
예, 감사합니다. 좀 더 롱텀한 질문인데요. 요즘 AI 많이 말씀해 주셨는데, 요즘 보면 general processing 하는 processor가 아니라 AI에 특화된, AI를 잘 구현할 수 있는 칩들과 이게 맞는 SDK 이런 것들을 많은 업체들이 새로 내놓는 것 같습니다. 그래서 삼성전자가 이런 AI 관련돼서 반도체 쪽에서 준비하시는 칩이나, 보면 Qualcomm 같은 데도 작년부터 이런 걸 좀 내놓은 것 같은데요. 이런 Application Processor나 AI Block 같은 게 앞으로 들어가실 건지, 단말 쪽에서 AI 서비스를 시작하는 것과 동시에 반도체 쪽에서도 어떤 변화가 생길지 궁금합니다.
The second question is more of a long-term question to the semiconductor business in relation to AI. With so much interest being attracted by AI, some are now developing and offering chips that are specialized for AI applications and SDKs. In that context, you've also heard that Qualcomm last year is announcing an AI specialized platform. In that context, do you plan or are you planning on any specific semiconductor that's specialized for AI such as APs or AI blocks? In addition to what's happening on the set side, I'm wondering if the semiconductor business is also preparing products specialized for the AI application opportunities.
아까 질문에서 우선 답변을 드린 것 같은데, AI라고 하는 이런 응용처는 시스템하고 콘텐츠를 포함한 전반적인 이코시스템 성숙이 필요한 시장입니다. 아까도 AI가 되기 위해서는 고성능, 로우파워, 고신뢰성을 요구하는 기술 집약적인 메모리가 필요한 영역입니다. 지금 당사 같은 경우는 GPGPU의 머신러닝을 위해서 HBM이라든지 TSV 기술을 기반으로 한 HBM, 이런 부분들을 저희들이 지속적으로 개발하고 있고, 고용량을 개발하고 있기 때문에 아까 말씀드린 것처럼 업체하고 고객과 전략적인 협업을 통해서 중장기적으로 저희들이 적합한 메모리 솔루션을 찾아갈 예정입니다.
This does connect to the previous Q&A that we have. As I mentioned during the previous answer, we believe that AI as an application is an area that still needs for the ecosystem to mature in terms of both system as well as content. Of course, to implement AI as an application, a very technology-intensive memory is necessary to deliver the high performance, the low power, as well as reliabilities that are necessary for an AI application. We are therefore preparing various technologies related with machine learning based on HBM or TSV-based HBM, and for high capacities as well. As I mentioned during the previous answer, we are doing this especially in the mid to long term together, collaborating strategically with our customers so that we are able to deliver the memory solutions that better fit the needs of the customers.
여보세요? 예, 메모리 쪽으로 많이 준비하신 걸로 들었는데요. 저기 System LSI 쪽에서 준비하신 게 있는지 궁금합니다.
대답하려고 준비하고 있습니다.
네, LSI 쪽에서 AI 관련 말씀드리겠습니다. 아시다시피 AI는 스마트폰 그리고 ADAS 등 미래의 많은 응용 기술로 대두가 되고 있고요. 저희가 예상하는 것은 고성능 컴퓨팅 파워를 요구할 것으로 예상이 되어서 저희는 AP의 성능을, 컴퓨팅 파워를 업그레이드 시키고 높이는 데 주력을 하고 있고요. 또한 딥러닝 등 여러 가지 알고리즘과 아키텍처를 현재 개발 연구하고 있습니다. 그래서 미래에 다가오는 응용처에 저희 AP가 잘 적용이 될 수 있도록 지속적으로 연구 개발 중입니다.
To answer that question from the System LSI division's perspective, we do expect AI to be a major feature in, for example, smartphones and other applications as well. That's why we are currently in the process of developing, especially the APs to enhance the computing resources and the computing power, because we believe that in order to implement AI, especially on a platform such as a smartphone, a very high-performance computing power will be necessary. Therefore, we are developing the AI to enhance the computing resources on it, as well as developing and researching new algorithms and architectures that would implement deep learning effectively. That is how we will be preparing our products for these new applications as they adopt AI.
시간이 좀 많이 지났는데요. 그래도 연말 4Q 컨퍼런스 콜이니까 질문을 조금 더 받도록 시간을 할애하겠습니다. 다음 질문 받겠습니다.
다음으로 질문해 주실 분은 Bernstein의 Mark Newman입니다.
The next question will be presented by Mr. Mark Newman from Bernstein. Please go ahead, sir.
Hi. Thanks for squeezing me in. Congratulations on great results for the quarter. My question actually is on semiconductors, on memory. Looking at the bit growth for 2016 and guidance for 2017, considering supply-demand is so strong and profitability getting, for DRAM, back to, I think, all-time high levels for Q1 this year, I'm a little bit surprised that Samsung is not looking to be a little bit more aggressive towards capacity additions. Can you talk about what flexibility the company has to potentially grow more than the high teens you guided for DRAM and the 30% or so you guided for NAND flash? If demand continues to be so strong and supply-demand balance remaining tight, is there some possibility that Samsung can actually boost capacity through the year and potentially beat those numbers just like it did 2016?
일단 좋은 분기 실적 감사합니다. 제 질문은 메모리 Capa에 대한 질문인데요. 사실 작년도 그렇고 올해 가이던스도 그렇고 계속 수급 상황이 타이트하고 수익성이 아마 DRAM 같은 경우에 1사분기에 사상 최고치를 다시 치지 않을까 예상이 됩니다. 이런 상황에서도 삼성이 공격적으로 Capa 증설을 하지 않는 것이 약간 의외입니다. 그런 차원에서 아까 그 비트 그로스 가이던스로 올해 DRAM은 한 10% 후반, 그리고 NAND는 30%대의 성장을 예상을 하셨는데요. 만약에 수요 강세가 계속되고 수급이 계속 타이트하게 유지가 된다라고 하면 지금 주신 이런 비트 그로스 가이던스보다 추가적으로 Capa를 증설을 할 수 있는 여지 내지는 유연성이 얼마만큼 되는지. 사실 2016년에도 원래 예상을 했었던 것보다 더 많은 비트 그로스를 달성을 하셨는데요. 이렇게 추가 달성을 할 수 있는 유연성이나 여지가 얼마가 있는지를 말씀해 주시면 감사하겠습니다.
잘 아시겠지만, DRAM 투자에는 많은 비용이 소요가 됩니다. 저희들은 현재 시장 상황을 놓고 봤을 때 저희들의 테크놀로지 마이그레이션으로 시장 수요를 커버할 수 있다고 보기 때문에, 저희들은 가능한 시장 수요에 탄력적으로 대응할 생각입니다.
As you know, DRAM investments are very costly. Looking at the current market situation, we believe that we are able to cover the current market demand through our technology migration. That is why we will be maintaining our operation flexibly and try to cover the market demand within our technology migration.
DRAM 공급의 일시적인 증가는 투자 규모, 투자에 따라서 output까지 기간 등을 고려하면 쉽지 않다는 건 아까도 말씀드린 거고, 공급 부족 시에는 수익 중심의 T-mix를 기본 원칙으로 하고 당사 반도체 Capa의 적절한 운용을 통해서 최대한 고객 수요에 대응할 예정입니다.
Given the size as well as the lead time necessary for increase of DRAM capacity, we believe that temporary increase of DRAM supply is not very easy. Therefore, in a tight supply and demand situation, we will focus our product mix on the higher profitability products and to respond flexibly to our customers' demand.
네, 감사합니다. 다음 질문 받겠습니다.
다음으로 질문해 주실 분은 삼성증권의 황민성 님입니다.
The next questions will be presented by Mr. Hwang Minsung from Samsung Securities. Please go ahead, sir.
황민성 님, 말씀 부탁드립니다.
여보세요. 여보세요.
여보세요.
네. 질문 기회 감사드립니다. 아까 나온 7나노 팔로우업 질문인데요. 선도 공정은 고객이 별로 없기 때문에 고객을 잡는 게 상당히 중요해 보이는데, 14나노, 10나노는 최초 양산을 하셨고, 그런데 7나노는 경쟁사는 하프 노드 쉬링크로 빠르게 나오는 데 반해서 삼성은 풀 노드 쉬링크를 하고 EUV를 도입해서 좀 늦게 나옵니다. 이게 패터닝이 좀 어려워지는 기술적 배경이 있는 건지, 아니면 아까 말씀하신 그런 스케일링을 요구하는 고객의 니즈에 따른 것인지가 궁금합니다.
I have a follow-up question regarding the seven nano technology. In these cutting-edge technology and processes, securing the customer is a key requirement. You were the first to mass produce in the 14 and 10 nanos, but actually the competitor will probably do that first for the seven nano because the competitor is going through a half nano shrink, whereas you're going through a full nano shrink and also adopting EUV. Is this because of technology difficulties, such as in terms of patterning, or is this in order to meet the customer needs in terms of scaling? Regarding the seven nano technology, it is progressing as our plan, so it is on schedule. In terms of patterning as well as scaling in seven nano space, both are challenging. We believe that in the technologies, our seven nano is the most stable technology.
We are very confident that we will be able to provide a competitive solution, and therefore, we are confident that we will be securing customers for the seven nano technology, and that we will maintain the leadership that we have in the advanced technologies as we did in the 10 and 14 nanos. There's three more people on the queue. We will take the three questions before ending the call.
The next question is presented by Mr. Mehdi Hosseini from SIG. Please go ahead, sir.
Thank you. Thanks for taking my question. Two follow-up question on your memory. Can you please share with us your plans for the Xi'an fab in China? Also, what do you see in terms of DRAM and NAND inventory down in the channel? I understand that manufacturers' inventories are very lean, but I would like to learn more of what you see down the stream. Thank you.
Regarding the Xi'an fab, actually, no changes have been made to our original plan, that will be operated as planned. Regarding the inventory, as of end of fourth quarter, since we have been responding to market demand in the DRAM, in the case of DRAM as of end of fourth quarter, our inventory is quite tight on a quarter-on-quarter basis. Our information is that the market inventory is also a bit low, even though we cannot disclose the numbers that we have.
The next question is presented by Mr. Seung Woo Lee from IBK Securities. Please go ahead, sir.
I have two simple questions. First is in terms of depreciation, or if you look at your depreciation, second quarter was about KRW 4.8 trillion, third quarter KRW 4.7 trillion, but in fourth quarter, we're noticing that that went up to KRW 6 trillion. So in terms of modeling for 2017, can you give us some guidance of what to set the depreciation for on a full year 2017 model? Second question is about HARMAN acquisition. Is that going smoothly according to plan? When do you think you'll be able to close the deal, and when do you think HARMAN therefore will be consolidated onto your financial statements, for example, around third quarter?
6년 토탈 투자가 한 25조 나갔기 때문에 2015년하고 비교했을 때 그런 큰 차이가 없다고 봤을 때, 2017년에 16년 대비 글쎄요, 어느 정도 %로 increase를 하시는 게 적절하지 않은가라는 생각은 드는데 분기별 감가상각 때문에 연간 감가상각의 큰 변화를 지금 가이드런스 드리기에는 좀 안 맞는 것 같습니다.
Regarding the first question. We've never actually provided guidance on depreciation. Basically, given that there was KRW 25 trillion investment made roughly in 2016, and given everything else is equal versus 2015, I guess a certain percentage of increase would be warranted for your 2017 model. I don't think we can give you a guidance of what the depreciation would be for the full year 2017 just based on fluctuation from quarter to quarter.
참고로 4분기 감가상각을 어디서 보셨는지 모르겠는데 저희가 갖고 있는 숫자랑은 좀 틀린 것 같거든요. 다시 한번 보세요. 그리고 하먼 건에 대해서는 저희 입장에서는 변화는 없는데, 미국 쪽에서 지금 저희가 뉴스를 통해서 듣고 있는 주주들의 어떤 액션이나 이런 부분들은 저희는 결론을 봐야 될 것 같고요. 저희 입장에서는 현재로서는 아무런 변화가 없습니다.
Also to note, I think the fourth quarter, the depreciation number that you gave us is different from what we have. You may want to check that again. Regarding the HARMAN matter, there's nothing that has changed from our perspective. It's going on as planned. We've heard through news that there are some actions being taken by shareholders in the U.S., which we will have to watch. Nothing has changed from our perspective.
다음 질문 받겠습니다. 마지막 질문인가요? 예, 마지막 질문 받겠습니다.
마지막으로 질문해 주실 분은 Bank of America Merrill Lynch의 Simon Woo입니다.
The last questions will be presented by Mr. Simon Woo from Bank of America Merrill Lynch. Please go ahead, sir.
예, 우동재입니다. 질문 기회 주셔서 감사드리고요. 첫 번째 질문은 메모리 관련된 빅그로스고요. 두 번째는 LSI 쪽 질문입니다. 지난 4분기 실적에서도 보여주신 것처럼 메모리 쪽 반도체 이익도 굉장히 좋은데 오늘 말씀하신 특히 NAND 빅그로스 30%대 초반은 너무 우리가 보수적으로 전략을 짜신 게 아닌가. 특히 3D capa도 많이 들어오고 64단도 양산으로 가고 Enterprise Solution 쪽 비즈니스도 좋게 보이는데 통상 40~50% 정도의 빅그로스가 맞지 않을까라는 생각이 들어서요. 이거에 대한 설명 좀 다시 한번 부탁드리겠고, LSI 질문 좀 올리겠습니다.
My first question is about the bit growth projections that you've offered for the 2017 full year on the memory side. As we saw in the fourth quarter results, the profitability of the memory business is very strong. For the full year 2017, you've projected a NAND bit growth of low 30%, which I feel is maybe too conservative given the fact that you'll be adding 3D capacity, that you'll be mass producing 64 layers, and also the demand from the Enterprise Solution business appears to be very strong this year. I'm thinking maybe 40%-50% bit growth would be more reasonable or realistic. Can you offer some explanation towards your NAND bit growth projections for this year?
NAND 빅그로스 관련해서는 아까 말씀드린 것처럼 평택 공장의 NAND가 하반기부터 가동이 될 텐데, 그 가동되는 것이 스텝 바이 스텝으로 가동이 될 겁니다. 그래서 어느 한순간에 capa가 확 올라가는 게 아니고 단계적으로 올라가기 때문에 보시는 것처럼 그렇게 확 증가하는 것처럼 보이지 않을 수 있습니다.
As we mentioned, yes, we will be operating the NAND capacity at Pyeongtaek from second half of this year, but we will be doing that on a step-by-step basis. That's why the capacity increase may appear to be more gradual than what you expect, because it's not going to be a full one-step increase.
예, 감사드립니다. LSI 관련해서는 특히 OLED 투자가 굉장히 많아지고 있는데 우리가 자체적으로 DDI, 즉 Driver IC 쪽에 대한 생산이 OLED capa 증설과 함께 제대로 되고 잘 준비가 됐는지 궁금하고요. 특히 20나노나 14나노급에서 OLED Driver IC를 많이 만들어야 더 경쟁력이 좋은지, 아니면 이미 감가상각이 끝난 30노드급에서 만들어도 되시는 건지 좀 설명 부탁드리겠습니다. 감사합니다.
The second question is to the LSI division related with the DDIs for the OLED. I've noticed that there's a lot of OLED investments that are being made. I'm wondering if the preparations in terms of capacity to produce your own DDIs are going smoothly. Also in terms of profitability and economics, is it more profitable or competitive to do the driver ICs on 20 nano or 14 nano class technology? Or is it more effective or profitable to do that on, for example, 30-node class technology that's already been depreciated?
저희는 OLED에 사용되는 DDI뿐만 아니라 LCD TV 여러 응용체에 사용되는 DDI는 현재 사용된 capa를 가지고 수요에 대비하고 있고요. 질문하신 선단 공정 사용 여부에 대해서는 현재 성능 혹은 또 여러 가지 ROI 측면을 고려해서 필요시에 선단 공정을 사용할 가능성도 있고, 지금 현재 계획으로는 아직 선단 공정을 사용할 구체적인 계획은 확정되지 않은 상황입니다.
Regarding the DDIs, our DDIs for not only OLEDs, but also LCDs, we're currently preparing for demand based on our current capacity. As you mentioned, whether we will use the cutting edge processes or not will have to be decided depending on performance as well as the ROI considerations that you've mentioned. Currently, we have not specifically decided to use cutting edge technologies for the DDI production.