Morning and good evening. First of all, thank you all for joining this conference call. Now we will begin the conference of the fiscal year 2016 first quarter earning results by Samsung Electronics. This conference will start with a presentation, followed by a Q&A session. If you have a question, please press star one, star N one on your phone during the Q&A. For cancellation, please press star two, star N two on your phone. Now we shall commence the presentation on the fiscal year 2016 first quarter earning results by Samsung Electronics.
Good morning. This is Robert Yi from Investor Relations. Thank you for joining our first quarter 2016 earnings call. With me from the business units are Mr. Chun Sei Won, he's the Senior VP of Memory Marketing. Mr. Hur Kuk, he's the VP of System LSI. Mr. Lee Chang-hee, he's the VP of Samsung Display. Lee Kyeong-tae, he's the VP of IT and Mobile Business. Mr. Lee Yoon, he's the Senior VP of Visual Display. Mr. Kim Sang-hyo, he's the VP of IR 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 it. 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 getting into business results, I would like to update you on the share buybacks. Of the 11.3 trillion KRW buyback program that we announced last October, we completed the first two phases this month. We invested approximately 7.4 trillion KRW during these two phases, and we were able to repurchase and cancel 4.33 million common shares and 1.77 million preferred shares. In both phases, we were able to reduce the total amount spent in the buyback by increasing the proportion of preferred shares relative to the outstanding share ratio. Today, the board of directors approved the third phase of the buyback program. The total amount is approximately 2 trillion KRW with 1.3 million common shares and 320,000 preferred shares to be repurchased. It will take about three months to complete, starting tomorrow. At this pace, we'll be able to complete the total 11.3 trillion KRW buybacks in early fourth quarter.
Now I will go over our first quarter results. In the first quarter, the overall revenue was KRW 14.8 trillion , increased by 5.7% year-on-year. The increase was mainly driven by the early launch and successful sales of Galaxy S7, expanded 14nm supply of System LSI products, and increased sales of OLED panels. The gross profit increased by 1.2 trillion KRW year-on-year. Most of the improvements came from the set business as high-end product mix of smartphones and TV improved. As for SG&A expenditures, the % of revenue decreased slightly year-on-year, despite the increase of marketing and promotional expenses associated with the early launch of Galaxy S7. The company's continued efforts to bring more efficiencies in managing expenses, including streamlining mid- to low-end smartphone lineups, have contributed to this result.
The operating profit increased by 0.7 trillion KRW year-on-year to 6.7 trillion KRW, and the percent of revenue increased by 0.7 percentage point. We estimate that weak Korean won against major currencies such as U.S. dollar and EUR in the first quarter positively impacted the operating profit by approximately 400 billion KRW, mostly for the component business. Other non-operating profit of 360 billion KRW mostly came from a gain on sale of investment in Samsung Card. I would like to make a few comments on operating profit by major businesses. For the semiconductor business, despite weak memory demand due to seasonality and supply-demand imbalance, the memory business achieved solid earnings by expanding sales of high-value-added products while continuously reducing costs through technology migrations for both DRAM and V-NAND.
For the System LSI business, while quarter-on-quarter earnings decreased slightly due to the impact of component inventory adjustment by customers, year-on-year earnings increased, led by increase of 14nm products. For the display panel business, although OLED earnings improved, mainly driven by Galaxy S7, overall earnings of the display panel business decreased due to a sharp decline in LCD earnings. LCD business experienced temporary yield issues while adopting new process technology as well as TV panel price decline in the first quarter. The IM business achieved a substantial earnings improvement both year-on-year and quarter-on-quarter. The improvement was mainly driven by the early launch of Galaxy S7 and its strong sales. As well as improved cost efficiency through the streamlining of mid-to low-end smartphone lineups. In the Q1, we had one-time expense reduction from a royalty settlement, but the impact on operating profit was less than 1% of IM revenue.
Now I would like to turn to the outlook. In the second quarter, we expect our solid performance to continue. As a result, we are cautiously optimistic that operating profits to increase quarter-on-quarter, led by earnings improvements of display panel and consumer electronic business, and continued solid earnings in mobile and semiconductor business. For the set business, mobile business will focus on securing solid earnings in the second quarter by expanding sales of Galaxy S7 and continue to secure strong profitability of mid-to low-end products. Consumer electronic business is expected to improve earnings led by strong seasonal demand of air conditioner and release of new TV models, including upgraded SUHD TV.
For the component business, semiconductor will strive to maintain solid earnings by improving high-valued memory product mix, such as V-NAND SSD sales for the server market, and also by expanding supply of System LSI components for premium smartphones. In the display panel business, we expect the earnings to improve sizably compared to the previous quarter. LCD profitability is expected to improve with the stabilized yield of TV panels, as well as improved supply-demand conditions. OLED business will maintain solid earnings driven by increased shipments for Galaxy S7 and expanded external customer base. In 2016, we expect the set business to continue to generate higher earnings than that of the previous year, while focused on stabilizing component business earnings in the second half. Our semiconductor business will continue to manage DRAM business with a focus on sustaining solid profitability while enhancing technology competitiveness.
For V-NAND, we believe we have a very strong technology leadership coupled with a solid opportunity to expand V-NAND-based SSD into a server market. System LSI business will also strive to improve profitability year-on-year by enhancing overall fab utilization and expanding mid-to low-end SOC lineups by applying 14 nano process. With display panel business, we expect OLED earnings to increase, driven by increase of flexible and high-resolution panels. We expect LCD profitability to improve in the second half, mainly driven by improved product mix amid better supply-demand conditions. For the IM business, we expect the sales of flagship products to increase year-on-year, especially with the strong Galaxy S7 demand and new model launches in the second half. We will continue to manage cost efficiencies through a streamlining of smartphone lineups.
For consumer electronic business, we plan to focus on profitability by increasing premium products utilizing SUHD and curved lineups. With the Olympics and other major sporting events driving global demands for the large-sized TVs, we expect strong improvements in operating results year-on-year. Digital appliance business will strive to improve earnings by expanding sales of premium products, including smart appliances, as well as enhancing B2B business. I would like to comment on our capital expenditure plan. During the first quarter, we executed KRW 4.6 trillion in capital expenditure, including KRW 2.1 trillion for semiconductor and KRW 1.8 trillion for display. We have not finalized the annual plan for 2016, but we may see the expenditure to increase slightly compared to last year's with various business opportunities we have. Based on our current view, CapEx for the display panel business may increase as we see strong market demands for OLED panels.
For DRAM capital expenditure, our strategy is to be flexible based on supply and demand conditions. At this point, it is likely to decrease year-on-year. Before the presentation of each business unit, I would like to share several data points for key business areas for your convenience. For DRAM business in Q1 this year, our bit growth was low single digit with low teens of ASP decline. For the second quarter, we expect the market DRAM bit growth to be low teens, and we expect our bit growth to be in line with that of the market growth. For the year, we expect the DRAM bit growth to be somewhere around mid-20%, and again, we will grow in line with the market. For NAND flash, in Q1, our bit growth was high single digit, and we saw mid-single digit ASP decline.
For the second quarter, we expect NAND market bit growth to be high single digit, and we will grow with the market. For the year, we expect the NAND bit growth for the market to be around 40%, and we will outgrow that of the market growth. For the mobile business, our total handset shipments in Q1 was 92 million units, and we had 6 million tablet shipments. The total blended ASP of these units were slightly above $ 210. The mix of the smartphone within the total handset was about mid-80%. In Q2, we expect the total handset shipment to be slightly lower than that of the Q1, as well as our tablet shipment. We do expect the improvement in blended ASP, and the mix of the smartphone within total handset would reach high-80%.
For TV set business, we shipped in Q1 roughly 10 million units of LCD TV. In Q2, we expect to see mid-single-digit increase, and we see the mid-to-low single-digit increase on TV sales for 2016. Now I'll turn the call over to the gentlemen from the business units, starting with semiconductor.
Good morning. This is Sewon Jeon from the memory marketing team. I am going to present our business results for the first quarter and the market outlook for the next quarter. NAND, although overall set demand was low due to seasonality, SSD demand continued to grow, driven by increased adoption of high-density products. Mobile demand remained solid due to content growth, as Chinese smartphone brands led adoption of high-density products over 32 GB. We will reinforce product competitiveness and profitability by expanding the mass production of 3rd generation V-NAND and process migration of a 10-nano class planar. Especially, we strengthen our SSD product competitiveness by expanding shares of client SSD over 256 GB and high-density enterprise SSD. For DRAM, even though overall demand was weak, affected by the slow PC market, smartphone density continued to grow, and server DRAM demand remained solid, driven by high-density demand from data center.
We strengthened cost competitiveness by expanding our 20-nanometer product portfolio and focused on maximizing profitability through profit-focused product mix and supply management according to the market situation of each product. Next, our comment on the memory market outlook and our strategy for the second quarter. NAND, we expect a strong growth trend for high-density SSD due to the expansion of cloud services, service diversification by mobile and internet companies, and accelerate transition of HDD to SSD by enterprise companies. For mobile, we expect the adoption of high-density products over 64 GB to expand, led by growing trend of high-resolution and specification smartphones. Supply and demand for each application can vary depending on each supplier's strategy for increasing demand for solution products.
We will continue to lead the demand growth of high density and value-added solution products by actively responding to high-endurance enterprise SSD, and also by increasing supply of differentiated mobile storage products based on front-end product competitiveness. Also, we will make our best effort to improve earnings in our NAND business through the process migration of a 3rd generation V-NAND and planar. For DRAM, PC demand is expected to improve, and high-density server demand is expected to be solid, driven by expansion of new server platforms. We also expect mobile demand to improve, driven by new smartphone launches and continuous content growth, mainly in China. We will focus on strengthening market leadership and securing profitability by increasing sales of competitive 20-nanometer high density and value-added products such as 8 gigabit DDR4 and LPDDR4, and by actively responding to mobile, server, and graphics demand.
Although there are uncertainties in macroeconomic conditions and the IT industry in 2016, we expect the server and mobile to drive overall demand with the trend of cloud service expansion and mobile content growth. Supply and demand will depend on 20 nanometer ramp-up and V-NAND mass production status in the industry. On NAND, we will strengthen product competitiveness by expanding 3rd generation V-NAND mass production. Also, we will reinforce our market leadership and lead high value-added storage market growth by expanding sales of high density and value-added enterprise and PC SSD, as well as mobile storage such as UFS and EMCP. For DRAM, we will continue profit-focused product mix and flexible supply management according to supply and demand conditions in the market. Also, we will concentrate on reinforcing stable mid- to long-term profit base by proceeding with 10 nanometer class migration. Now, moving on to the System LSI business.
In the first quarter, while earnings decreased QOQ due to customers' inventory adjustment, we could achieve solid year-over-year growth led by increased demand for 14 nanometer process. In the second quarter, we expect the earning to improve, driven by new premium smartphone launches and inventory restocking of customers. In 2016, despite expected challenges from muted premium mobile market demand growth, we will strive to improve our profitability through diversifying 14 nanometer foundry customer base and by enhancing product lineup of mobile SOC. We will continue to focus on strengthening foundation for long-term growth through starting 10 nanometer production by the end of year 2016, and diversifying application base into wearable, VR, IoT, and networks. Thank you.
Good morning. This is Lee Chang-hee from the planning department of Samsung Display. In the first quarter, although we brought solid result from OLED panels, our total earnings declined from the previous quarter, mainly due to the decreased shipments of LCD panels. For LCD panel, in the first quarter, our earnings sharply declined QOQ due to the decrease in demand under the weak seasonality and continued ASP decline as well as the adoption of the new technologies. We have applied new technologies in order to strengthen the competitiveness of our LCD panels, but experienced a production delay in the process of migration. However, most of the issues have been cleared, and we expect production yield to be stabilized during the second quarter. In the second quarter, we expect TV demand to be fueled by sports event, Chinese Labor Day, and display trend moving towards larger size.
In response to these market conditions, in the second quarter, we will reinforce profitability by stabilizing yield of the new TV production, increasing shipment of strategic products, enhancing P-mix with cost reduction. For OLED panel, in the first quarter, our results reflect enhanced QOQ due to increased demand for mid to low-end smartphones and launches of new high-end smartphone panels. In the second quarter, we will make the best effort to improve our earnings by actively responding to the demand for new products as well as enhancing utilization led by expanded external customer base. Now, I'd like to present the display market forecast and our core strategies in 2016. While the display industry expects some encouraging signs such as continuous UHD TV market growth and size migration to larger size, there will also be continued challenges by the industry capacity expansion.
We will appropriately respond to these market conditions in 2016 by focusing on cost reduction, inventory management, and expanding the portion of high-value product while continuously monitoring the market conditions. For the OLED industry, we expect the global smartphone market to slow down, the growth mainly coming from the low-end products. The demand for OLED panels is expected to increase continuously. Under these conditions, we will address the new products to major customers and expand customer base. We will also secure capacity according to the market demand and reinforce the competitive edge, we will reinforce our market leadership by continuously developing new applications. Thank you for listening.
Good morning, everyone. I'm Ki Tae Lee from the mobile communication business. I'd like to present our 2016 first quarter business results and the future outlook for the IT and mobile communication business. During the first quarter, market demand for both smartphone and tablet decreased from the previous quarter due to weak seasonality. As for our mobile communication business, smartphone shipment slightly dropped QOQ as a result of the market seasonality, reduced sales of our longstanding mid to low-end models. Our profit increased compared to the last quarter, thanks to the strong sales of Galaxy S7 and Galaxy S7 Edge released in the first quarter, which improved product mix, in addition to enhanced profitability of mid to low-end smartphone. Our earnings improved from the previous year. We launched our latest flagship models, the Galaxy S7 and Galaxy S7 Edge, on March 11th, a month earlier than their predecessors.
For the Galaxy S7 and Galaxy S7 Edge, we enriched design attractiveness of the product while enhancing features such as high-resolution camera, memory slot, water and dust resistance, bigger battery capacity, and advanced the UX. To provide our customers with value and meaningful experience in everyday life. We address the needs of our customers in diverse lens of focuses of marketing, include the product, reflected those needs in our newest flagship model. With these efforts, the Galaxy S7 and Galaxy S7 Edge are receiving much interest and affection from our customers. This three, the Consumer Reports and The European Consumer Organisation of the U.K., France, Spain, Belgium, and the Netherlands, appraised the newest flagship models as the best smartphone in the market. Currently, our flagship models are showing robust sales performance in all regions, including North America and Europe.
The Galaxy S7 and Galaxy S7 Edge are outselling the predecessors in terms of sell-out, accordingly, inventory level is very healthy. Looking at our tablet business, our shipments declined in the first quarter as a result of a market slowdown and the typical effects of seasonality. Our earnings decreased from the previous quarter, mainly because of reduced LTE network investment by some partners. I would like to talk about the outlook for the second quarter. Market demand for smartphone and tablet is expected to remain at a similar level to the first quarter. For our mobile communication business, we will maintain our current positive sales momentum through full-fledged global sales of the Galaxy S7 and Galaxy S7 Edge.
We expect the Galaxy S7 and S7 Edge to show clear distinction in sales compared to its predecessors, based on continued current sales trends and its differentiated product capabilities. As for the Galaxy A and J series, we will increase our shipment volume, mainly with the newly released models in 2016, while maintaining the profitability of mid-to-low-end models to continue our strong profit in the second quarter as we did in the first quarter. For the network business, we will seek further growth leveraging the LTE expansion of our main overseas partners. Lastly, let me address the outlook of the year 2016. Market growth for smartphone is expected to slow down Y on Y, while the tablet market demand may decline from the previous year. We will improve our profitability to increase our earnings Y on Y by expanding smartphone sales and maintain optimized product portfolio strategy.
Especially in the premium segment, we will strengthen our leadership with the Galaxy S7 and S7 Edge, and our new flagship model introducing in the second half of 2016. Also, in the mid-to-low-end market, we will increase our shipment volume mainly driven by the Galaxy A and J series, and continue to aim for improving profitability. Moreover, we will constantly drive the global expansion of Samsung Pay and seek out for new business opportunities such as VR and wearables. For our network business, we will strengthen the foundation for further growth utilizing our LTE business experience and technological excellence while entering new LTE markets, including Southeast Asia. Thank you for listening.
Good morning. I'm Yoon C. Lee, Senior Vice President of Visual Display Sales and Marketing team. I would like to present the market conditions and our results for the first quarter. TV market demand, under the typical weak seasonality, declined both year-on-year and quarter-on-quarter, which was impacted by slow economic recovery in the Eurozone and continued weakness of emerging market currencies. Despite such market conditions, our earnings improved compared to the same period last year by expanding sales of premium products such as SUHD and curved TV. In the digital appliance business in the first quarter, while the North American market continued its growth momentum, emerging market demand decreased year-on-year due to slower market growth in China and the impact from unstable currencies from emerging markets.
Under these circumstances, we expanded sales of innovative products such as Chef Collection Refrigerator and Activewash washing machine, and increased revenue in the North American market. Accordingly, our earnings improved from the same period of previous year. Next, let me briefly share with you the market outlook. As for the second quarter TV market, due to the impact of sporting events such as the UEFA Euro 2016 and Rio 2016 Summer Olympics, we anticipate a slight increase in TV demand year-on-year. In response, with the focus on our 2016 SUHD TV, we will strengthen premium lineups such as UHD and curved TV in order to further improve profitability as well as earnings. This year, based on the world's only eco-friendly Quantum Dot display technology, 2016 SUHD TV features the most true-to-life picture quality and innovative design.
Furthermore, we will put more focus on positioning 2016 SUHD as the representative next generation premium TV. By addressing consumer pain points, we made significant improvements in Smart TV experience. Our new Smart TV automatically recognizes the exact devices you have connected, and it allows consumers to control various TV-connected devices with one remote. Consumers can access the content from multiple sources quickly and easily through one screen. 2016, while we continue to introduce innovative products which reflect consumers' lifestyle and needs, we will solidify our leadership in premium market based on our strong brand status in order to outperform the market and improve earnings. As for the digital appliance business, in the second quarter, while global market uncertainties persist, as the possibility of increased global currency risk exists, we expect the U.S. digital appliance market to continue to grow.
Under these circumstances, we will continuously improve our business performance by strategically targeting premium digital appliance market through our newly launched products, such as Family Hub Refrigerator. This year, we will make continued efforts to lead the premium home appliance market by continuously launching innovative products. At the same time, we will diversify our revenue sources by enhancing B2B business, including system air conditioner, in order to improve earnings continuously. Thank you.
Okay. This concludes the presentations by the management. Now we'll move to our Q&A sessions. To ensure the communication is perfectly clear, we will be employing the consecutive translation for the session. I know it takes longer, but I think this is the best way to make sure that there's no misunderstanding.
Let's turn to Q&A, please.
지금부터 질의응답을 시작하겠습니다. 질문을 하실 분은 전화기 버튼의 별표와 1번을 눌러주십시오. 질문을 취소하시려면 별표와 2번을 눌러주시면 됩니다.
Now Q&A session will begin. Please press star one, star and one if you have any questions. Question 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.
다음으로 질문해 주실 분은 HSBC의 Ricky Seo입니다.
The first question will be presented by Ricky Seo from HSBC. Please go ahead, sir.
예, 질문 받아주셔서 감사합니다. 3D NAND 관련해서 몇 가지 질문드릴 텐데요. 지금 enterprise storage하고 서버 쪽에서 3D NAND 수요가 급격히 나오고 있는 것 같은데, Xi'an Fab이 연초로 fully ramp up이 된 것 같습니다. 이 수요에 대비해서 하반기에 추가적인 capa 증설 계획이 있는지하고, 있다면 어떤 방식으로 하실 건지하고, 그다음에 48단 전환도 output 증가에 도움이 될 텐데 48단 비중이 연말에 어떻게 될 건지 설명해 주시면 감사하겠습니다.
Yes, I have several questions related with the 3D NAND. First, it seems a main source of the demand for 3D NAND is the enterprise storage as well as servers. It seems that the fab in Xi'an is now ramped up to full capacity as of the start of 2016. In anticipation of greater demand in the second half, do you have any plans of further expanding the capacity? If so, how will you go about and do that? The other part of that question is, will the migration to the 48-layer 3D NAND help increase output? If so, what would the share of your 48- layer 3D NAND be as of the end of this year?
질문에 답변드리겠습니다. 우선 V-NAND 수요는 enterprise 쪽에서 나오고 있는데, 클라우드 서비스 확대가 계속되고 있고, 또 신뢰성을 향상시키면서 동시에 TCO를 개선하기 위해서 고용량, 고신뢰성 서버용 SSD 채용이 급격히 증가하고 있습니다. 이와 함께 저희들의 V-NAND의 장점을 극대화할 수 있는 수요가 계속해서 증가하고 있는 것이 사실입니다. 이에 대해서 당사는 데이터센터 및 enterprise를 포함한 서버용 SSD 시장에서 저전력, 고용량, 내구성 등의 우수한 V-NAND를 기반으로 차별화되는 SSD 공급을 적극적으로 지금 확대하고 있는 중입니다. 당사의 V-NAND capa나 증설 계획에 대해서 정확하게 말씀드리기는 어렵지만, 저희는 3세대 V-NAND 양산이 본격적으로 확대됨과 동시에 고객 수요도 함께 증가하고 있어서 적극적으로 시장을 확대하기 위해서 노력하고 있습니다. 이 정도로 답변을 드리겠습니다.
As you mentioned, a major source of the V-NAND is coming from enterprise applications, especially with the expansion of the cloud services. V-NAND and SSD adoption seems to be the preferred choice by customers because of the high reliability and endurance, as well as in terms of TCO. It is the high endurance as well as high density. V-NAND SSDs are being adopted more, and this is a major source that's driving up demand for our V-NAND. It's the data centers as well as servers and enterprise applications. We believe that with our differentiating of V-NAND products that offers high density as well as high endurance and low power, we are very well fit to meet this demand. It's difficult for me to go through the details of our capacity increase plans or plans to increase our production.
We are expanding our mass production of the 3rd generation V-NAND. At the same time, the customer demand is also increasing on this side, and we will be continuing to meet and further increase our positioning in the market.
Next question, please.
다음으로 질문해 주실 분은 JP Morgan의 JJ Park입니다.
The following question will be presented by JJ Park from JP Morgan. Please go ahead, sir.
네, 두 가지 질문이 있는데요. 첫 번째 IM 쪽에 Galaxy S7 strong demand 말고도 low end 쪽에 Galaxy J 시리즈에서 좀 이익이 나온 것 같은데요. low end 쪽이 굉장히 경쟁이 심한데 Galaxy J 시리즈의 수익성이 개선된 어떤 요인이 있는지, 그리고 향후에 이게 지속 가능한지에 대해서 말씀해 주시면 감사하겠습니다. 두 번째 팔로우업 질문은 답변 들은 다음에 하겠습니다.
I have two questions. The first question is related with the mobile side. In addition to the strong demand for the new flagship Galaxy S7, it seems also the J series have been a contributor to the good performance. Even though the mid to low end is a very competitive segment, is there a reason why particularly the J series has been able to be more profitable? Do you think this profitability of the J series will be able to continue in the future?
J 시리즈 수익성 개선 원인하고 지속 가능성에 대한 질문인 것 같은데 이에 대해서 답변드리겠습니다.
저희들이 14년 말부터 중저가 라인업에 경쟁력이 있는 Galaxy A하고 J 시리즈로 정비를 하였습니다. 금년 1분기에도 2016년형 신모델이 도입이 되었고, Galaxy A 시리즈는 지금 중국에서 호조하고, 그리고 J 시리즈는 신흥 시장에서 판매량이 계속 증가하고 있습니다. 이러한 모델 효율화를 통해 저희들이 부품 공용화율도 높였고, 그다음에 내자화하고 있는 부품 수율도 개선했습니다. 또 한편으로는 마케팅 비용도 효율적으로 집행을 하고 있어서 원가 구조를 대폭 개선을 했습니다. 앞으로도 이런 사업 체질 개선이나 원가 구조 혁신을 계속할 것이고, 이를 통해서 중저가 모델의 수익성은 지속 유지될 것으로 기대를 하고 있습니다.
As you know, since late 2014, we have revised our mid to low-end product lineup with a focus on the more competitive Galaxy A and J series. With the new models introduced for 2016 first quarter, the sales of Galaxy A is increasing especially around Europe and China, the sales of Galaxy J series is increasing, especially with a focus in the emerging market side. Also, the cost structure of the mid to low-end lineup has been improved. Thanks to optimized lineup, but also the increased use of common components and better yield of internally produced components. Also, our marketing spend related with the mid to low-end lineup has been more efficient. We think that with continued innovation of the business fundamentals as well as continued improvement in the cost structure, this profitability of our mid to low-end models we expect will be maintained in the future.
두 번째 질문은 display panel 쪽인데요. 올해랑 내년 OLED 투자 계획이 어떻게 되시고, 현재 flexible OLED 만드는 A3 라인 cap과 올해 말이나 내년에 cap expansion이 어떻게 되는지 말씀해 주시면 감사하겠습니다.
My second question is related with the display side. Could you give us your investment plans related with OLED for this year as well as next year? Also, could you give us an idea of the capacity of the A3 line which produces the flexible OLED also this year and next year?
저희는 스마트폰 시장에서 OLED 수요가 지속적으로 증가할 것으로 전망하고 있습니다. 그래서 예상되는 OLED 수요에 대비하여서 필요한 경우에 적기에 증설 투자를 진행할 계획입니다. 구체적으로 투자 규모라든지, 그다음에 CapEx에 대해서 말씀드리기 좀 어렵습니다만, 앞으로도 저희가 지금 가지고 있는 경쟁 우위를 지속적으로 강화해 나가기 위해서 저희는 시장 수요를 실례하지 않고, 시장과 고객 니즈에 적절히 대응해 나가면서 사업을 전개해 나가겠습니다. 감사합니다.
We do expect OLED demand from the smartphone market to continue to increase in the future, therefore we are planning to make investments for expansion, if necessary, at the optimal time to meet this increasing OLED demand. Even though it's difficult for me to give you the details of the size or in terms of the capacity of our facility investments, our basic approach is that we will maintain our competitive edge. In order to maintain that competitive edge, we will continue to meet the market demand and customer needs through appropriate investments.
네, 감사합니다. 다음 질문 받겠습니다.
다음으로 질문해 주실 분은 UBS의 Nicolas Gaudois입니다.
The following question will be presented by Nicolas Gaudois from UBS. Please go ahead, sir.
Good morning. I have two questions. First one is actually a follow-up on display. Could you maybe give us an idea of how much would external customers represent of your mobile OLED revenues in 2017 and 2018? Bearing in mind you already gathered, if I'm correct, that for this year those would be around 30% of revenues. I have a follow-up question. Thank you.
먼저 display 쪽에 대한 후속 질문이 있습니다. 2017년, 그러니까 내년도와 2018년 모바일 OLED 매출에서 외부 고객이 차지하는 비중이 어느 정도로 예상을 하시는지. 올해는 한 30% 정도 된다라고 미리 전에 말씀하셨던 것 같은데요. 내년과 후년도 외부 고객 모바일 OLED 매출 비중을 말씀해 주시면 좋겠습니다.
저희가 지난 분기에 말씀드렸던 부분의 계획은 문제없이 계획대로 진행이 되고 있습니다. 저희는 OLED의 강점인 고화질의 제품 성능을 유지하는 한편, LCD와 충분히 경쟁할 수 있는 수준의 원가 경쟁력을 확보하여서 외부 채용 비중을 꾸준히 확대해 나가고 있습니다. 앞으로도 외부 거래선 공급을 확대할 계획으로 이를 위해서 외부 고객과 협력 체계를 계속 강화해 나가고 있습니다. 17년, 18년에 대해서는 현시점에서 구체적으로 답변을 드리기는 어렵지만, 저희는 외부 거래선 확대를 위해서 지속적으로 노력해 나가겠습니다.
The plans regarding our OLED business, especially serving the external customers that we mentioned during the last quarter's conference call, is being carried out smoothly according to schedule. We are not only maintaining the advantages of OLED, which is the high picture quality and performance, but also have gained a cost competitiveness enough to compete with LCD solutions. We are continuously focusing on increasing adoption by external customers. We have also been building up our collaboration system so that we will be able to serve our external customers better and more external customers. At this current time, it's difficult for us to go into details of 2017 and 2018 plans, but we do expect and we do plan to focus on continuously increasing our business towards external customers.
Okay. On the NAND side, if we look at your profitability overall for semiconductors, it's very clear that margins improved for NAND flash in Q1. Is that an indication that 3D NAND flash costs are now mature and optimized, and that therefore you are realizing with 48 layers in particular, some of the cost benefits you would expect to see versus 16 and even maybe 40 nanometer planar as well? Thank you.
Actually, we believe that the main contributing factor to our earnings in the first quarter is the fact that we were able to capture the demand from the SSDs for the high-density enterprise servers. We were able to therefore capture the more profitable opportunities in the market. Regarding the cost of the 3G V-NAND that we are producing, it has already met in terms of cost competitiveness level similar to a 10-nano class planar. As we further expand the mass production of our 3G NAND, profitability is expected to further increase.
Great. Thank you very much.
The following question will be provided by Seung-Hyun Lee from Korea Investment & Securities. Please go ahead, sir. I have two questions related with the TV business. The first is related with the profitability. Even though first quarter seasonality is weak, despite the seasonality, global TV demand was weaker than expected, it seems your TV business profitability has been quite strong and sound. Of course, one reason would be the decrease in the panel prices. Were there other reasons other than the decrease in panel prices that explains the relatively strong profitability of the TV set business? This ties in with the second part of the question, which is the fact that in the second quarter, the panel prices have already started to stabilize. Would this indicate that the TV set business profitability would start to decline in the second quarter?
Are there other reasons other than lower panel prices that would explain your profitability, and therefore actually indicate that the margins of the TV set business will continue to be maintained despite stable panel prices? Second question relates with the Quantum Dot TV, which since last year has been showing good sales, and especially with the LED technology, the light source technology getting better, the color reproduction of Quantum Dot TV technology seems to have been improved as well. Do you think that in terms of picture quality, quantum dot is a competitive solution even to OLED?
첫 번째 1, 2분기 실적 관련해서 말씀드리겠습니다. 1분기 패널가 하락이 됐는데요. 이거는 당사뿐만 아니라 다른 업체들도 공통된 환경이었고, 당사는 이런 패널가 하락에 더불어서 여러 가지 시장 기회를 분석을 해서 주로 선진시장 중심으로 SUHD Curved 같은 프리미엄 제품군 판매가 많이 늘었습니다. 그래서 시장 점유율도 높였고, 또 이 결과로 수익성이 크게 개선이 된 상황입니다. 그다음에 2분기에는 제가 앞서서 말씀드린 바와 같이 저희 신모델이 본격적으로 출시가 되고, 그다음에 당사가 전통적으로 강한 UEFA Euro 2016이라든지 8월에 Rio 2016 Summer Olympics 같은 스포츠 이벤트가 있어서 저희는 사전에 핵심 유통들과 프로모션을 다 사전에 기획을 하고 있고요. 특히 신규 출시되는 SUHD TV를 중심으로 말씀드린 Curved, 대형 같은 고부가가치 제품 판매가 확대를 할 것으로 예상이 되고, 그래서 저희는 패널가 변동이 있더라도 이 영향을 최소화하면서 수익성 중심의 성장을 지속 추진해 나갈 수 있는 준비가 되어 있다고 판단을 합니다.
To answer your first question regarding our earnings in the first quarter and also outlook to the second quarter. Yes, panel prices were lower in the first quarter, but that's a factor that was enjoyed not only by us, but other competitors in the market. We contribute our first quarter results more to the fact that we were able to analyze the market correctly and focus more on the sales of the premium segment, such as SUHD and curved TVs, especially in the developed markets. By doing that, we were able to enhance our profitability. In the second quarter, actually, we have more factors to look forward to, such as the launch of the new models. There will be the Euro Cup and the Brazil Olympics coming in August, which would also drive demand for TV.
Our plan is to respond to this by having a stronger lineup on the high premium segment, such as SUHD TVs, curved and large screen TVs. With this, we believe that we will be able to minimize whatever increase in panel prices that we may experience and continue to grow and maintain our profitability.
두 번째 퀀텀닷 TV 관련 질문에 대해서는 이렇게 답변을 드리겠습니다. SUHD TV는 알고 계시는 바와 같이 세계 유일의 친환경 퀀텀닷 디스플레이를 채용을 했고요. 당사가 독자적으로 개발한 기술을 통해서 기존 대비 컬러나 밝기를 획기적으로 향상시킨 제품입니다. 그다음에 최근에 할리우드 콘텐츠 제조사에서 프리미엄 HDR 기준으로 1,000 니트 밝기로 규정을 했는데 올해 저희 SUHD 전 라인업은 1,000 니트 이상의 밝기를 표현할 수 있어서 더 많은 소비자분들께 원작자가 의도한 그대로 영상을 즐길 수 있게 저희가 준비를 했습니다. 또한 더불어서 OLED 말씀을 하셨는데 시간에 따라서 색이 바래진 유기물 소재와는 달리, 저희 SUHD TV는 무기물 소재를 사용한 퀀텀닷 디스플레이를 활용함으로써 오래동안 깨끗한 색과 밝기를 유지하면서 소비자들에게 최고의 화질을 제공하는 제품으로 저희가 설계를 했고, 많은 호평을 받고 있는 상황입니다. 네, 이상입니다.
To answer your second question regarding Quantum Dot TV and comparison with OLED solutions. As you know, our SUHD TV is the world's only such solution that uses Quantum Dot TV, which is the eco-friendly solution. It is based on our proprietary technology and is an innovative product in terms of color as well as brightness. Also, recently, the Hollywood content producers have defined the HDR specification as 1,000 nit, and our Quantum Dot TV solution, or SUHD TV, is capable, technically, the ones that were launched this year, to actually reproduce the 1,000 nit or to express 1,000 nit spec pictures. It is a solution and a product that enables viewers to enjoy the content as intended by the original producers of the content.
You've mentioned OLED, but unlike OLED, organic solutions that would lose color as well as brightness over time, our Quantum Dot TV technology is a non-organic solution that can maintain the high quality of color as well as brightness over a long period of time of usage and was designed to do this and will be able to satisfy the customer needs in that aspect.
네, 감사합니다. 다음 질문 받죠.
다음으로 질문해 주실 분은 삼성증권의 황민성 님입니다.
The following question will be presented by Hwang Min Seong from Samsung Securities. Please go ahead, sir.
네, 안녕하세요. 반도체 질문 두 개 있습니다. 먼저 전분기 대비해서 DRAM, NAND 재고 수준이 어떻게 변했는지 궁금하고요. 그거를 재고나 완제품으로 구분해 주시면 더 좋겠고, DRAM 가격이 계속 하락을 하고 있는데 이게 지속이 된다면 DRAM을 NAND로 전환하거나 아니면 재고를 더 늘려서라도 가격 방어를 하실 계획이 있으신지 궁금하고요. 두 번째 질문은 답변 듣고 말씀드리겠습니다.
I have two questions related with the semiconductor side. Could you give us your change in DRAM and NAND inventory on a quarter-over-quarter basis? I would appreciate if you could detail that into work in process versus finished product inventory for DRAM and NAND. Q on Q. Given the fact that DRAM prices have continued to decline, if DRAM prices, even in the future, continue to decline, does the company have any plans or thoughts of trying to defend the prices by either converting DRAM to NAND or by increasing its DRAM inventory?
DRAM하고 NAND의 재고 수준과 제공 수준을 물으셨는데 그거에 대한 답변을 정확하게 드릴 수는 없고요. 저희는 지난 4분기에도 말씀드렸지만 제품별 시장 수급 상황하고 수익성 중심으로 탄력적으로 저희들은 생산을 운영하고 있습니다. 그리고 저희들 현재 DRAM하고 NAND 상황이, NAND는 지금 굉장히 좋은 상태고 DRAM도 그렇게 나쁘게 보진 않고 있습니다. 그래서 현재 저희들 상황은 시장 상황에 따라서 탄력적으로 모든 생산과 제공 재고로 움직이고, 지금 현재 제공 재고 수준은 안전한 수준을 갖고 있습니다.
Please understand that it's difficult for us to give you the details in terms of the work in process, as well as finished inventory for DRAM and NAND. As we mentioned in the fourth quarter conference call, our basic position is that our production is flexibly operated depending on the demand and supply situation for each specific market, as well as the profitability of each specific product segment. Currently, as you mentioned, the NAND market outlook is very strong. Actually, our outlook towards the DRAM market is not that bad either. Our production plan going forward, as well as our inventory, will be managed flexibly, depending on our market outlook. Our current inventory as well as work in process is at stable levels.
네, 두 번째 질문은 스마트폰 업계를 보면 자체 AP를 쓰는 추세가 확대가 되고 있고요. 또 아까 SOC 라인업을 강화하신다고 하셨는데, 삼성의 AP 자체 조달 비율은 어느 정도까지 증가할 수 있는지 전망을 말씀드려 주시고요. 또 lagging edge에서는 어떻게 수익성을 지금 확대하고 계신지 업데이트 부탁드립니다.
My second semiconductor question regards the AP side. It seems when we look at the handset OEMs, there's an increasing trend of handset OEMs using their own AP. This ties in with your comment during the presentation of a System LSI planning to expand its SOC lineup. Given all of that, how much do you think the ratio of Samsung's own AP, or how much of the ratio of your own AP, how far can that increase to, is the first question. My second question regards with lagging edge. What are your plans in terms of enhancing or further expanding the profitability of lagging edge?
먼저 AP의 자체 조달 비율에 대해서 말씀을 드리면, 저희들 부품 소싱 policy는 어쨌든 시장에서 가장 경쟁력 있는 부품을 채용하는 겁니다. 그래서 특별히 당사 자체 조달에 대한 어떤 기준이 정해져 있는 건 없고요. 그래서 구체적인 사안을 말씀드리기 어렵지만, 어쨌든 시장에 나와 있는 좋은 부품이 있으면 언제든지 채용하는 게 저희들 policy입니다.
To answer your question about the ratio of our own APs that will be used in Samsung handsets, there is no set ratio because our basic policy in terms of component sourcing is that we will adopt what is most competitive that is available out in the market. That policy will be maintained in the future.
System LSI에서 답변드리겠습니다. 자체 조달 AP는 고객사 입장으로 AP를 제조하는 저희가 언급드리기는 드릴 상황은 아닌 것 같고요. Lagging edge에 대해서는 저희가 공정에 대한 policy는 다음과 같습니다. 선단 공정으로 최고의 퍼포먼스를 제공해서 고객사에게 가장 value가 있는 제품을 제공하고요. 그 후에 선단 공정으로 인한 cost saving으로 인해서 가장 저렴하고 수익성 있는 제품을 가능한 한 필요한 만큼 공급하는 것이 저희 System LSI 사업 policy입니다. 감사합니다.
To answer that question from the System LSI side, the ratio of own or in-house or captive AP that's used by the mobile business is a decision or the results of our customers. That's something that the System LSI would not be able to comment on. Regarding the lagging edge, our basic policy towards our process is that at the front-end side, we will provide to our customers the best performance and the most value, and then the cost savings at the following side of the following processes will also be approached as a way of providing the most affordable as well as profitable solution.
네, 다음 질문 받겠습니다.
다음으로 질문해 주실 분은 Goldman Sachs의 Marcus Shin입니다.
The following question will be provided by Marcus Shin from Goldman Sachs. Please go ahead, sir.
네, 질문 기회 주셔서 감사드립니다. IM 관해서 한 가지 여쭤보고 싶은데요. 앞서서 Galaxy S7 판매 호조 원인에 대해서 좀 언급해 주셨는데 S7이랑 S7 Edge sell in이 sell out으로 지금 어떻게 이루어지고 있는지 궁금하고요. 가능하시면 S6랑 비교해서 설명 부탁드리겠습니다. 감사합니다.
Yes, I have one question regarding the mobile side. You've mentioned that the S7 since launch has been showing very strong sales. Could you give us a better picture of the current sellout of S7 and S7 Edge? Would it be possible to compare that to the previous S6? Well, as mentioned during the speech, our Galaxy S7 and S7 Edge are both showing a very stronger sellout compared to the previous flagship model. Especially the market response to the Galaxy S7 Edge has been stronger than expected, and we're seeing very fast turnover speed for the Galaxy S7 Edge in major areas such as North America, China, and Middle East. They are almost being sold immediately upon being supplied, and inventory levels are therefore at very healthy levels.
With current trends expected to be maintained, I think even at a full year basis, the S7 and S7 Edge is expected to show a clear distinction in sales compared to its predecessors. The following question will be presented by Peter Lee from NH Investment & Securities. Please go ahead, sir. I have two questions related with the semiconductor side. It seems you have been continuously reducing your investments on the DRAM side. Could you provide your company's outlook on the DRAM growth for this year, and what is the company strategy regarding the DRAM business this year? Could you once again clarify the data point for the Q2 DRAM that you gave during the presentation? To answer your second question first about the bit growth for DRAM and NAND.
What we saw in the first quarter was that DRAM bit growth, our company bit growth, remained in the lower single digits. Same for the NAND. For second quarter, what we're expecting is for DRAM bit growth in market to grow in the low teens, and the company bit growth in DRAM to be within line of market growth. For NAND in the second quarter, we're expecting a high single-digit growth in market DRAM growth, and we will be in line with that. Regarding the first question, we're seeing the main drivers for DRAM demand growth being the server and mobile applications.
Even though the industry is expected to further its migration towards 20nm technology, the fact that it's dealing with more difficult technology and the fact that it takes some time for customers to evaluate and accept new supplies, we don't expect there to be major increases in supply of DRAM in the near future. Actually, we're thinking that the demand supply situation for DRAM will actually improve as we approach the second half of this year. Given that market outlook, we will continue to manage our product mix flexibly and with profitability in mind to better fit the demand in the market. In terms of full year 2016 DRAM shipment, we expect to be in line with the market growth.
My second question regarding semiconductor is on the new application side and your outlook on new applications, as well as your strategy in meeting these new application demands. VR, as well as self-driving cars, are gaining a lot of attention as new possible applications. What is your outlook and then what is your strategy? Regarding VR, with more and more high-resolution content being used on a wide basis, we think that there will be more demand for high density and high bandwidth memory, not only in PCs, but also peripherals. Regarding automotive applications, even though currently the main source of automotive demand for memory is related with infotainment, we think that with more ADAS tech features being adopted, there will be more demand from the auto side for memory to process the information that comes in from the sensors.
In anticipation of such additional demand from consumer as well as automotive applications, our plan or our strategy is to allocate a specific supply capacity or a line to meet these segments or these application demands so that the customers from these segments and applications will be able to enjoy stable and sufficient supply.
The following question will be presented by Claire Kyungmin Kim from Daishin Securities. Please go ahead, ma'am.
My question in regards to System LSI business, which has been changing its business or operating strategy from year to year, even though I guess the main tone of expanding the captive customer would be maintained, especially given the recent earthquake in Asia, do you see any possibilities of the customer share changing? Also, it seems you would also need to have some new strategies to meet the back-end process related demands of your customers, especially related with POP. What are the details of your strategies regarding the back-end side of your processes? Yes. The recent earthquake was quite a tragic event, and we would like to take this opportunity to express our condolences to everyone who has suffered and also hope that the damage would be repaired and recovered as soon as possible. Regarding the earthquake, we have not sensed any short-term demand changes due to it.
Also, you've asked about the back-end processes of System LSI. We have not changed our approach or policies regarding the back-end processes compared to the start of this year. Our basic approach has always been to continue our R&D efforts so that we are able to provide whatever high-tech and high-performance packaging needs that are necessary and demanded by our customers.
다음 question. 질문 바뀌었습니다.
다음으로 질문해주실 분은 Bank of America Merrill Lynch의 Simon Woo입니다.
The following question will be presented by Simon Woo from Bank of America Merrill Lynch. Please go ahead, sir.
질문 기회 주셔서 감사드립니다. Bank of America Merrill Lynch의 우동재입니다. 두 가지 질문인데요. 첫 번째는 1분기 실적, 제가 보기에는 상당히 좋은 숫자들이 나왔고요. 그리고 자사주 매입 및 소각도 다시 한번 공시도 하셨고 잘 되고 있는 것 같습니다. 근데 앞으로 올해에 발생되는 free cash flow 내에서 어떻게 주주 환원 정책을 특히 분기별 또는 연간으로 하실 내용들이 있으신가 말씀해 주시면 감사하고요. 이렇게 주주 환원 정책은 오늘 언급하신 것 같은데요. 2분기에 더 좋은 실적 트렌드가 이어진다는 가정하에 좀 더 구체적으로 나올 수 있는 건지 설명 부탁드리겠습니다. 그리고 두 번째 질문드리겠습니다.
I have two questions. I'll give you the first question and then ask you my second question after your response. It seems actually the first quarter's earnings have produced some very good numbers. You've also mentioned that the share buyback and cancellation program is moving ahead as scheduled. I would like to hear your plans regarding your shareholder return plans or policies within the free cash flow that will be generated this year. Do you have any planned quarterly or full year that you can share with us at this point? Assuming that your good, strong performance that we saw in the first quarter will continue in the second quarter and thereafter, what kind of shareholder return policies could we look forward to?
우선 저희 주주 환원에 대한 policy는 작년 말에 발표한 내용과 전혀 변화된 사항, 내용이 없고요. 그대로 계속 진행할 거고. 투자는 올해 소폭 증가할 가능성이 있다고 아까 말씀을 드렸고, 영업이익이나 순이익에 대해서는 지금 연간 기준으로 말씀드리기는 조금 너무 이른 것 같고요. 하지만 중요한 거는 아시다시피 작년에 저희가 주주 환원에 free cash flow의 30%를 allocate 한 부분 중에서 아직 사용하지 않은 부분도 있기 때문에, 올해의 주주 환원 free cash flow에 대한 fluctuation이 일부 있을지, 없을지는 두고 봐야 되겠지만, 그 부분에서도 커버할 수 있기 때문에 큰 변화는 없을 거로 봅니다. 그리고 어쨌든 free cash flow의 30에서 50%를 주주 환원에 활용하겠다라는 그 원칙은 전혀 변함이 없고요. 분기 배당은 어떤 뜻으로 여쭤봤는지 잘 모르겠지만, 우선 2016년에 1분기가 지금 발표를 하는 상황에서 저희가 발표 안 한 걸로 보면 2016년에 분기 배당 도입은 안 하는 걸로 인식하시면 되실 것 같고요. 매년 해왔던 중간 배당은 7월 말 이사회에서 결정해서 발표할 계획입니다.
Regarding our shareholder return policy, the policy that we announced at the end of last year has not changed. We are maintaining that policy. As we mentioned during the presentation this year, we're expecting investments or CapEx. There is a possibility that it may increase slightly. It's too early in the year to talk about operating profit or net profits on a full year basis. Also, it may be worth considering that there is still part of the 30% of free cash flow that we announced as part of last year's shareholder return that has not yet been used. Even if there is some fluctuation in the free cash flow expectations for this year, I think what we have left would be able to cover it and us not change our shareholder return policies.
Our free cash flow, 30%-50% of it being used for shareholder return, that policy is not changed and is being maintained. You've mentioned about quarterly dividend. I think the fact that we have not announced a dividend at this point indicates that this year we would not be adopting a quarterly dividend policy. We have been paying out a mid-year dividend, which usually is announced after the BOD meeting resolves it at the end of July.
네, 감사드립니다. 반도체 LSI 관련해서 질문이 있는데요, 마지막으로. 대만 업체들 보면 요즘 wafer-level packaging을 하고, 기존의 단일 칩에서 어떤 칩이라는 SIP 칩을 통해 가지고 integration을 많이 시키고 있습니다. 오늘도 10나노 연말 시작하신다고 말씀하셨는데 이거는 기본적으로 무어의 법칙으로 가는 방향인 건 맞는데요. 저희가 이제부터는 좀 더 back end라든지, 칩을 칩끼리 좀 더 integrate 시키는, 기존의 POP에서 좀 벗어나는 그러한 구체적인 전략이 있으신가 질문드리겠습니다.
My second question regards the System LSI business. Recently, some Taiwanese companies have started wafer-level packaging. There's also integration SIP on a single chip basis. You have mentioned your plans of starting mass production of 10nm at the end of this year, but that is the traditional track of following Moore's Law. Aside from that, I'm thinking looking at how the industry is moving, there will be a greater need towards new back-end solutions that not only based on POP, but that finds new ways, for example, integrating chip to chip. Could you tell us the company's plans and strategies regarding that aspect?
먼저 저희 10나노에 대해서는 저희가 계획대로 진행이 되고 있고요. 패키지 관련해서는 기존의 패키지 외에도 저희 선단 공정을 위한 가장 적합한 패키지를 내부에서 개발, 그리고 또 양산할 그런 단계를 가지고 있고요. 지속적으로 기술 개발을 통해서 저희 실리콘의 발전과 더불어 백엔드도 같이 맞춰서 고성능, 그리고 밸류를 낼 수 있는 그런 지속적인 연구 개발을 진행 중입니다. 이상입니다.
Regarding the 10nm production plan, the plan is moving ahead smoothly with the target of year-end. Regarding the packaging, in addition to the existing packaging technologies, we are continuously developing internally, new packaging solutions that best fit the front end. In line with the new developments at the silicon level, we will continue our R&D to develop high performance as well as high value back-end solutions.
네, 감사합니다. 시간이 많이 진행된 관계로, 한 3명 정도 질문 더 받고 끝내도록 하겠습니다. 다음 질문.
다음으로 질문해 주실 분은 SIG의 Mehdi Hosseini입니다.
The following question will be presented by Mehdi Hosseini from SIG. Please go ahead, sir.
Yes. Thank you. I actually have a follow-up question to the 10nm capacity for System LSI. When you are ready for mass production, what should we think about additional capacity? Should we think about that you would convert existing capacity to 10nm? The first question has to do how to
첫 번째 질문은 10나노 생산 계획과 관련이 된 후속 질문인데요. 10나노 양산에 쓰실 Capa는 추가되는 Capa인가요? 아니면 기존의 라인을 전환을 하신 Capa인가요?
현재 10나노 Capa는 기존에 있는 양산 라인에서 전환을 해서 사용 중입니다.
To answer your question, the current 10nm capacity has been converted from existing lines.
How do you plan on adding additional capacity? Do you need to wait till later this year to better forecast demand, or do you plan on converting additional capacity?
그러면 기존 지금 갖고 계신 10나노 외에 추가 Capa를 하실 때, 연말까지 기다려서 10나노에 대한 수요를 보신 뒤에 추가를 하실 건가요? 아니면 지금부터도 기존 Capa를 전환을 해서 10나노 Capa를 키우실 수 있으신가요?
현재 10나노 투자 계획은 현재 저희가 보고 있는 수요를 비교해서 진행이 되고 있고요. 저희 공장 혹은 증설이 필요할 경우에, 공장 증설의 리드 타임에 맞춰서 장기 포커스를 통해서 필요시에 추가 설비를 확보할 예정입니다.
Regarding our investment plans for 10 nano, we are looking at market demand currently, and if necessary, and if justified by market outlook, we will be making investments. For example, procuring the equipment, if additional capacity is necessary, to be considering the lead time of the equipment procurement, so that we will be in time with the demand that we expect on the long term.
Sure. One follow-up question on DRAM. How should we think about cost and benefit of 10-nanometer class DRAM versus 20-nanometer?
DRAM 쪽에 대해서 질문을 드리면, 10나노급 DRAM과 20나노 DRAM을 비용과 효과적인 측면에서 비교를 하면 어떻게 보는 게 맞나요?
10나노 DRAM은 Gross die 입장에서 30% 증가하고 있고, 저희들은 지금 10나노 DRAM에 대해서 계획대로 1x-nm에 대해서 양산 준비를 하고 있습니다.
In terms of gross die size or area, the 10-nano class DRAM would increase by about 30%. Also our plan for the 1x-nm mass production is being carried out according to schedule.
네, 다음 질문 받겠습니다.
다음으로 질문해 주실 분은 Bernstein Hong Kong의 Mark Newman입니다.
The following question will be presented by Mark Newman from Bernstein Hong Kong. Please go ahead, sir.
Hi, thanks for taking my question. I've got a question on the handset side, then if I may, a follow-up on the semis. On the handset side, obviously very, very strong profitability. I think that's been very good to see that. I'm interested to see what's going on, what do you predict on the volumes and market share side? Although the profitability has improved a lot, the volumes don't seem to be particularly strong. Considering also that you are now reasonably profitable on the A line and J line, your low-end, mid-end phones, considering also that some of the emerging players, some of the local Chinese players, Huawei, etc. are making or have made huge share gains and are getting increasingly stronger.
I'm just curious why Samsung's not being more aggressive to protect share, given that you've already lost a fair bit of share, especially in China and other markets. It seems to me that there's an opportunity to gain some of that share back. Is that not the strategy? I'm just kind of curious how you think about the share question versus profitability.
먼저 휴대폰에 대한 질문이 있고요. 이어서 반도체에 대한 후속 질문을 드리도록 하겠습니다. 첫 번째 휴대폰 쪽은 이번에 수익성이 굉장히 좋아졌고요. 그와 관련해서 앞으로의 판매량 내지는 시장 점유율에 대한 전망, 그리고 이에 대한 회사의 전략과 접근법을 여쭤보도록 하겠습니다. 수익성은 굉장히 좋아졌지만 판매량이 그렇게 강세를 보이고 있지는 않은 것 같고요. 반면에 중저가 라인인 A와 J 시리즈의 수익성이 어느 정도 합리적인 선으로 회복이 된 것을 감안을 하고, 또 그 사이에 이미 중화 업체들, Huawei 등이 시장 점유율을 특히 중국 같은 경우에 많이 뺏어간 것을 감안을 하면 이번 기회에 공격적으로 시장 점유율을 보호 내지는 그동안 없어진 시장 점유율을 되찾을 기회로 삼으실 생각은 없는지 궁금합니다.
판매량에 대한 연간 전망 부분들은 어쨌든 저희들이 구형 중저가 모델을 축소를 하고 이런 부분들이 있지만, 그래도 어쨌든 전년 대비 물량이나 매출에 있어서는 아무튼 성장하는 걸로 저희들이 노력을 하고 있고요. 그다음에 마켓 셰어 늘리는 기회로 이야기를 하셨는데, 저희들 입장에서는 마켓 셰어, 마진 모두 중요하다고 생각을 합니다. 근데 굳이 마켓 셰어를 늘리기 위해서 꼭 마진이 희생되어야 된다고는 생각하지 않고 있고, 오히려 저희들이 보유하고 있는 다양한 제품 포트폴리오를 시장 상황이나 그런 경쟁 상황에 맞춰가지고 지역별로 최적화시키면 마켓 셰어도 확대를 하고 수익성도 개선할 수 있다고 그렇게 생각을 합니다. 저희들은 그래서 프리미엄 세그에서도 플래그십 제품이라든지 브랜드 파워를 활용해가지고 수익성을 찾고, 중저가 세그에서도 적정 마진을 확보를 해서 양적으로나 질적으로 아무튼 사업에 기여를 할 수 있도록 그렇게 최대한 노력을 하겠습니다.
In terms of full year volume outlook, even though there is some decrease effect due to the fact that many of the mid to low end models, the long-running ones will no longer be sold. We think that both in terms of revenue as well as volume shipments, we will be able to grow on a year-over-year basis. Regarding whether this is an opportunity to go and get back our market share. We don't necessarily think that we need to sacrifice our margins for the sake of market share. Both are important. We believe that by operating an optimal portfolio that meets each specific market segment and offering competitive offerings for each region, we are actually be able to increase our market share and also maintain profitability.
For example, while we leverage our brand power and our flagship models in the premium segment, we will continue to increase our sales in the mid to low segment. By doing that, we actually aim to gain on both market share and profitability.
Thank you. That's extremely helpful. On the semiconductor side, my question is on NAND flash. It seems to me that with 3D NAND, you have a very clear leadership in technology. Others seem to be struggling somewhat. I'm just wondering, does that mean Samsung could be incrementally more aggressive going forward, similar to what Samsung did in 20nm for DRAM? When you have a technology leadership, kind of extending that leadership and taking advantage given the competitors struggling. My question is, could you be more aggressive on capacity and bring in more capacity for 3D NAND this year?
두 번째 반도체 관련 질문은 NAND flash의 경우에는 3D NAND와 관련해서 삼성이 확실하게 기술 리더십을 보이고 있는 것 같고요. 다른 업체들은 이 분야에서 조금 고전을 하고 있는 것으로 보입니다. 그런데 삼성이 이제 20나노 DRAM에서도 기술 리더십을 확보를 했을 때 굉장히 공격적으로 나왔던 것을 감안을 하면 3D NAND 쪽에서도 삼성이 현재 가지고 있는 확실한 기술 리더십을 활용을 해서 또 공격적으로 이쪽 3D NAND Capa를 올해 늘리실 계획은 없으신 건가요?
당사의 3D NAND 리더십은 시장에서 증명이 돼 있고, 그거는 데이터 센터나 엔터프라이즈 등 서버형 스토리지 시장에서 요구하는 저전력 고용량, 내구성 등의 우리 V-NAND 장점을 거래선들이 인정했다는 것입니다. 그래서 당사는 V-NAND에 대해서 실질적으로 증산을 계속하고 있고, 시장 리더십을 가져가기 위해서 계속 V-NAND에 집중해서 저희들은 운영할 예정입니다.
I think our leadership in the 3D NAND space is market proven. The fact that our 3D NAND solutions are high density, low power consuming, as well as highly reliable, and are the best solution for data center as well as enterprise servers have already been proven. Based on this leadership, we have actually continued to increase our production on V-NAND. V-NAND will be a major focus this year as a way of leveraging our market leadership.
네, 감사합니다. 이제 마지막 질문 하나만 받고 끝나도록 하겠습니다.
마지막으로 질문해 주실 분은 한국투자증권의 유종우 님입니다.
The last question will be presented by Jong-woo Yoo from Korea Investment & Securities. Please go ahead, sir.
반도체 관련해서 두 가지 질문드리겠습니다. 설비 투자가 지금 현재 시점으로 줄어들 걸로 보고 계시고, DRAM 쪽도 아마 작년 대비 줄 걸로 보여지는데, 그럼 웨이퍼 투자보다는 공정 전환이 조금 더 비중이 높아질 것 같은데 저희 DRAM 1x-nm 양산 시점하고 연말에 어느 정도 비중까지 올라오는지 하고요. 그다음에 NAND 쪽에서는 저희 지금 3세대 제품 양산이 원활하게 진행이 되고 있는 것 같은데 다음 4세대 제품의 양산 시점은 언제쯤으로 저희가 보면 될지 말씀해 주시면 감사하겠습니다.
I have two questions related with the semiconductor business. It seems this year semiconductor CapEx may slightly decrease also for DRAM. I guess that implies that rather than investing at wafer level, it would be more of process migration. In that context, when do you expect to go into mass production of 1x? What will be the share of 1x at the end of this year? Second question is, your third generation 3D NAND or V-NAND seems to be going very smoothly. Could you give us a bit more details about what you expect or when you expect the fourth generation to start?
당사의 1x-nm DRAM은 현재 샘플링 중에 있습니다. 양산 ramp-up은 시황과 고객의 needs, 기존 제품의 longevity 등을 종합적으로 고려해서 탄력적으로 저희들이 진행할 예정입니다. 4세대 V-NAND 관련해서는 지금 계획대로 개발되고 있고, 다만 현재는 3세대 양산 ramp-up에 집중하고 있습니다. 당사는 지금까지 시장을 이끌었듯이 아까도 말씀드렸지만, 지속적으로 경쟁력을 유지해 나가는 기조하에서 적극적으로 개발 및 투자를 진행할 예정입니다.
Regarding our 1x DRAM, it's currently in sampling. The specific time of mass production of 1x will be determined based on market situation, customer needs, as well as the longevity of our existing products. Our plans and development for the fourth generation V-NAND is moving ahead smoothly, but in terms of our business, our current focus is more on ramping up the mass production of our third generation products. Our investment as well as research will continue in order to maintain our technology leadership in this space.