Samsung Electronics GDR Aktie

Hello, everyone, and welcome to the Samsung Electronics 2026 First Quarter Financial Results Conference Call. I will be your coordinator. [Operator Instructions] As a reminder, this call is being recorded. I would now like to turn the conference over to the Investor Relations team. Please go ahead.

Good morning, good afternoon and good evening, everyone around the world, and thank you for joining Samsung Electronics' First Quarter 2026 Earnings Call. I'm Daniel Oh, Head of Investor Relations. As a reference, all materials presented today, including the slide deck and this webcast, are available at samsung.com/global/ir, and they will be accessible for your convenience even after the call.

Please note that certain aspects of today's discussion may contain forward-looking statements from which actual results may vary. Please refer to the associated slide for our full legal disclaimer.

For our meeting agenda, today's call agenda, EVP Soon-Cheol Park, our Head of Corporate Management Operations and Chief Financial Officer, will lead off the discussion with the company's first quarter 2026 financial results and outlook. I will then follow up to address capital expenditures and shareholder returns before handing over to our executives for their own business segment updates. We will then hold a Q&A session before completing the call today.

The executives joining us today are as follows: EVP Soon-Cheol Park, our Head of Corporate Management Operations and Chief Financial Officer; EVP Jaejune Kim, Head of the Global Sales and Marketing Office Representing Memory; EVP Jason Shin, Head of the Sales team for System LSI; EVP Sukchae Kang, Head of Sales and Marketing Office for Foundry; EVP Charles Hur, Head of the Corporate Strategy Team for Samsung Display Corporation; EVP Seong Cho, Head of Strategic Marketing Office for Mobile Experience; and finally, VP Wonwoo Kim, Head of the Sales Strategy Group for Visual Display.

Now I would like to invite our CFO, Soon-Cheol Park, to present the first quarter financial performance and our outlook.

Good morning, and thanks to our investors from around the world for joining us today for our first quarter 2026 earnings call.

I am Soon-Cheol Park, CFO of Samsung Electronics. In the first quarter, we delivered our highest ever quarterly revenue and operating profit driven by continued AI technology innovations and our proactive market response. Amid the challenging macro environment, this performance reflects the strength of our technology leadership within core businesses and successful execution focused on our high value-added product portfolio. Looking ahead, we will continue to strengthen our competitive edge through innovation and lead the global market.

Let me now go into the details of our first quarter 2026 results. Please be advised that the figures I'm about to present have been rounded for clarity. Total revenue reached a new high -- a new record high of KRW 134 trillion, up by 43% from the record set 1 quarter ago. Operating profit also reached a new all-time high of KRW 57 trillion, up 185% Q-o-Q and operating margin expanded from 21% in the previous quarter to 43%. Net profit recorded KRW 47 trillion, 2.4x that of the previous quarter. Earnings per share came in at KRW 7,123 for common shares and KRW 7,124 for preferred shares.

In the DS division, revenue increased from the previous quarter, driven by stronger sales of high value-added AI products and higher ASPs and the Memory business posted its second straight quarterly earnings record. Operating profit rose sharply, led by the Memory business, while system semiconductor delivered improved results, thanks to expanded sales of flagship SoCs.

In the DX division, revenue grew from the previous quarter, supported by the launch of new flagship smartphones. Despite higher cost pressures, we limited the profit decline through expanded sales of high value-added products across businesses and improved resource efficiency. On the currency front, the appreciation of major currencies, including the U.S. dollar, had a positive impact of approximately KRW 1.8 trillion on operating profit quarter-on-quarter, mainly component businesses. Additional details for each business will be provided shortly by the executives.

Let me now turn to our outlook. In the second quarter, despite geopolitical headwinds such as Middle East tensions and rising oil prices, semiconductor demand is expected to remain strong, supporting continued improvement in overall earnings.

In the DS division, we expect memory price to stay on the current upward trend driven by ongoing expansion in AI infrastructure. In memory, we will continue to increase sales of HBM4, high-density DDR5 and eSSD to expand profitability. System LSI will look to offset earnings pressure through volume driven project with a key customer. Foundry will drive earnings improvement through increased sales in advanced processes while continuing to secure orders for leading-edge technology based on our 2-nanometer technology.

In display, amid demand uncertainties, we target performance improvement by ensuring stable supply to key customers with our leading technology and mass production expertise. In the DX division, we expect profit to decline due to rising cost pressures. To mitigate the earnings impact, we will enhance the product mix with the sales expansion of the S26 series and the launch of premium lineups, including Micro RGB TVs and AI combo while improving our cost structure and driving efficiencies. To strengthen our core businesses, we will expand our market share and presence while enhancing our mid- to long-term competitive position.

At the same time, we aim to secure future growth drivers, including through M&A. In the second half of this year, we expect a mixed business environment with growth in semiconductor demand driven by AI expansion on one hand and the rising cost for IT products on the other despite continued external uncertainties such as geopolitical risks and global tariffs. Against this backdrop, we will remain agile in responding to market changes while maintaining a profitability focused approach and expanding high value-added products to deliver stable business performance. Thank you.

Thank you, CFO Park. Let me now walk you through our capital expenditures. CapEx in the first quarter totaled KRW 11.2 trillion, down KRW 9.2 trillion quarter-on-quarter, of which KRW 10.2 trillion was allocated to the DS division and KRW 0.6 trillion was allocated to Display business.

Now I will discuss the CapEx by business segment in more detail. The business -- in the Memory business, CapEx declined quarter-on-quarter, reflecting the front-loaded nature of certain investments made last year, including the addition of new clean room space at the Pyeongtaek site. By strategically utilizing the fab and premium space secured through our forward-thinking investment, we anticipate a significant increase in equipment expenditures as we progress with the deployment of this newly acquired capacity. This planned expansion is expected to contribute to a comprehensive increase in CapEx throughout the entire fiscal year, thereby reinforcing our commitment to sustainable growth and operational efficiency for the Memory business.

In the Foundry business, CapEx declined from the previous quarter due to the base effect set by major infrastructure investments at the Taylor Fab in the fourth quarter of 2025. However, investments to support the ramp-up of the Taylor Fab are expected to increase steadily throughout the year, starting in the second quarter.

In the Display business, CapEx remained roughly flat sequentially with investments focused on enhancing existing lines after completion of the Gen 8.6 line last year.

Let me now turn to our full year CapEx outlook. In 2026, we anticipate a substantial year-on-year increase in CapEx driven by sustained demand related to AI. We'll further expand preemptive R&D investments in next-generation processes and core technologies to solidify our technology leadership. Additionally, we will strengthen strategic production hubs and secure additional infrastructure to stay ahead of future demand. As a result, our investment decisions will remain flexible, carefully adjust to the rapidly evolving market conditions.

Moving on to shareholder returns. The Board of Directors today approved a quarterly dividend of KRW 372 per share for both common and preferred shares. Under our 3-year shareholder return policy for 2024 to 2026, we are committed to ensuring an annual minimum payout of regular dividends totaling KRW 9.8 trillion through quarterly dividends of KRW 2.5 trillion. The distribution for the first quarter is scheduled for payment in May.

Let me also address treasury shares. Following a Board resolution in November 2024, the company announced a KRW 10 trillion share repurchase program aimed to enhance shareholder value, which was completed by September 2025. Of this amount, the first tranche worth KRW 3 trillion was canceled in February 2025. Subsequently, during the first quarter of this year, the Board convened to deliberate on the remaining shares and ultimately reserved to proceed with their full cancellation. This resolution was made in accordance with the commitments communicated during the previous earnings call, thereby reinforcing the company's dedication to transparency.

Notably, the Board decided to retain only the KRW 1.6 trillion worth of shares specifically allocated for employee compensation. The cancellation of the remaining shares was completed earlier this month, marking a significant milestone in the company's ongoing efforts to enhance shareholder value. To put in a perspective, the cancellations in this round totaled 73.4 million common shares and 13.6 million preferred shares, representing 1.2% and 1.7% of total shares outstanding in each respective class. Based on the closing price on the date of the Board resolution, the valuation of the canceled shares amounts to approximately KRW 14.6 trillion.

Now let's turn to our executives for commentaries on their respective business units. We will begin with Jaejune Kim, EVP of Memory Business.

Good morning. This is Jaejune Kim from Memory Global Sales and Marketing. In the memory market in the first quarter, robust demand focus on server application became increasingly visible with the hyperscalers' CapEx expansion to secure AI infrastructure and the initial demand for agentic AI. Under the strong demand from AI, while concentrating on expanding sales focus on server products, we started shipping industry's first mass-produced HBM4 and SOCAMM2. In addition, after the on-time development of PCIe Gen 6 SSD in the first quarter, we are now undergoing customer qualification. Also, we already got a positive feedback on our outstanding performance competitiveness.

In the second quarter, we expect growth in the AI industry will drive demand for memory products following the previous quarter. Therefore, in order to maintain our technology leadership in the rapidly growing AI market, we will provide the first samples of HBM4E in the second quarter. In addition, from a product mix perspective and within the limited supply capability, we will continue our supply operation focusing on AI products for both DRAM and NAND, while planning to proactively respond to the initial demand for GPU and CPU that will be newly launched in the second half.

In the second half, as hyperscalers expand their AI services, and major LLM providers speed up the introduction of B2B services, the spread of agentic AI is likely to accelerate at a much faster pace than initially expected. Therefore, in addition to AI servers, the role of general servers tailored for various workloads also will be getting more important. And we expect that the demand for DRAM and SSD for conventional servers will increase more sharply than previously anticipated.

On the other hand, for mobile and PC, we expect some impact on demand due to price increases in end products and changes in memory content per box, which is driven by the price increase of key components. However, due to the server-oriented product mix execution in the industry, we expect that overall supply shortage situation will continue. Considering the additional increase in server demand for DRAM and NAND, we plan to actively accommodate the market changes through the flexible PMIC operation.

For DRAM, we plan to expand HBM4 supply to multiple key customers and keep increasing the portion of AI-related products such as high-performance and high-density DDR5 and SOCAMM2. For NAND, while focusing on addressing the rising demand for key value cache storage, we plan to lead the early PCIe Gen 6 server SSD market with the outstanding product performance. Thank you.

Good morning. This is Jason Shin from the System LSI business. In the first quarter, despite weak demand in the smartphone market, our overall earnings improved quarter-over-quarter driven by SoC sales on the back of flagship product launches from major customers and favorable seasonality. In the second quarter, revenue is expected to be lower compared to the previous quarter due to seasonal factors. In response, we will continue to focus on sales of SoCs and imaging sensors for high to mid-range smartphones for our major customers.

In the second half, amid persistent cost pressures stemming from rising component prices, overall consumer market demand is expected to soften. In the light of this external environment, we will continue to strengthen our market leadership based on our technological edge. In particular, we plan to increase sales by securing new design wins for our flagship SoC and reinforce our product lineup centered on the 200-megapixel sensor.

Looking ahead, we will concentrate on expanding high-value products and securing new growth drivers. We will continue to strengthen our image sensor competitiveness based on our ultra-high resolution and fine pixel technologies and pursue growth opportunities in new business areas with a primary focus on custom SoC. Thank you.

Hello, everyone. This is Sukchae Kang from the Foundry business. In the first quarter, although our earnings declined quarter-on-quarter due to seasonally weak customer demand, aligning with the industry pattern of first half low, second half high, we achieved double-digit year-on-year revenue growth, maintaining the momentum of our business improvement. From an order perspective, we continued to expand our customer base and deepen engagement across high-performance computing applications, sustaining our solid order momentum throughout the quarter. Notably, we secured a strategic project from a leading optical communication module player, marking a significant milestone in establishing the foundation of our silicon photonics business.

In the second quarter, our advanced nodes are expected to reach full utilization rate. We anticipate our sequential improvement in earnings supported by robust demand for leading-edge products, including HBM4-based die. The development of the 1.4 process is progressing as planned, ensuring the readiness for future technology. Additionally, we are actively engaging with major customers for the 2-nano process.

In the second half, we will start mass production of the second-generation 2-nanometer process. Additionally, we will expand the application of the 4-nanometer process for memory products and MPU products for AI applications. Through these initiatives, we expect to achieve double-digit revenue growth and earnings improvement. Furthermore, we are actively pursuing structural transformation by diversifying our application portfolio beyond mobile into AI/HPC, automotive and aerospace sectors. Thank you.

Good morning. This is Charles Hur from Samsung Display. I will now brief you on our results for the first quarter of 2026. For the mobile display business, our performance declined quarter-on-quarter due to seasonality and memory price pressure. For the large display business, we maintained stable sales, thanks to strong demand in gaming monitors.

Next, let me share the outlook for the second quarter and the second half. In the second quarter, the smartphone and IT market demand is likely to be weak, mainly due to memory supply and price. In response, we will focus on high-end products where demand is expected to be relatively stable. For the large display business, we anticipate the demand increase supported by sports events and our major customers' new product launches.

In the second half, market environment is expected to be uncertain and difficult to predict. However, we aim to maintain profitability by focusing on premium product strategy. For smartphones, we will secure a stable demand of differentiated technologies such as low power consumption and privacy solution, which are aligned with the major customers' premium smartphones. For IT products, we will increase revenue through the ramp-up of brand-new 8.6 generation IT OLED line. For QD OLED, we will continue to strengthen our positioning in the premium segment while expanding our monitor business into the consumer and enterprise market.

Lastly, 2026 will be a challenging year due to geopolitical risk, unpredictable market conditions and memory supply issues. We strive to achieve revenue growth by strengthening our premium portfolio based on our technology leadership. Thank you.

This is Seong Cho from the MX division. Let me share our first quarter results as well as the future outlook. The smartphone market declined quarter-over-quarter due to seasonality with volume and revenue decreasing across premium and mass segments. For the MX business, Q1 revenue reached KRW 37.5 trillion, and we delivered a combined operating profit of KRW 2.8 trillion across the MX and network businesses. Despite numerous launch schedule adjustment and geopolitical uncertainties, we delivered Q-o-Q growth in both revenue and operating profit. On a year-on-year basis as well, we achieved solid ASP and revenue growth driven by a higher contribution from ultra models. While memory costs increased, we secured single-digit profitability through proactive resource efficiency improvements.

Next, let me share the outlook for Q2. Overall, smartphone demand is expected to decrease quarter-on-quarter due to seasonality. For the MX business, we expect Q2 revenue to decline quarter-on-quarter. We plan to sustain flagship-centric sales, supported by continued momentum of the S26 series, along with the solid sales of the foldable and M-1 and $3 models. Also, through the successful launch of the new A Series models, we will drive growth across all segments. However, cost pressure on key components in Q2 are expected to intensify. While we will ensure stable supply through strategic partnership with suppliers, a decline in profitability appears inevitable.

Next, let me share the outlook for the second half. The smartphone market is expected to decline in shipments due to rising costs, while revenue are projected to grow driven by expansion of super premium products. Tablets are expected to decline in volume and value due to cost pressures and reduced promotions. The note PC market is projected to see value growth driven by ASP increase, but shipments are expected to decline.

MX will maintain our strategy focused on expanding flagship sales through our leadership in advancing AI capabilities and form factor innovation. For foldable devices, we plan to strengthen our product development to stay ahead of evolving customer needs. For eco products, we will drive premium sales with even more advanced Galaxy AI capabilities and health features and expand our TWS liner. We also plan to deliver immersive multimodal AI experiences through diverse form factors such as AI glasses.

2026 will be a challenging year with ongoing geopolitical uncertainties and profitability impacted by rising cost pressures across the industry. Nevertheless, we will maintain our focus on expanding flagship sales powered by AI leadership and pursue cost efficiency initiatives to minimize the impact on profitability. Thank you.

Hello, everyone. I'm Wonwoo Kim, Head of Sales Strategy Visual Display. I'd like to briefly explain the market conditions and share our first quarter results along with the outlook for the rest of the year. In the first quarter, our TV demand declined after year-end peak season, the demand for QLED, OLED and 75 inch have overall remained solid. We focus on premium products such as Neo QLED, OLED and large size TV, thereby solidifying our market leadership. However, in terms of profit, despite showing improvement versus last quarter, declined year-on-year due to stagnant demand and rising raw material cost. For the second quarter, while uncertainties in the external environment are likely to persist, TV demand is forecast to grow year-on-year, driven by a major international sporting events.

Against this backdrop, we will capture related demand by deploying differentiated marketing strategies and maximize the launch effect of new models such as Micro RGB TVs to secure both sales and profitability.

In the second half of 2026, following the sporting event, the market may see a downward trend compounded by macroeconomic and geopolitical risks. On this front, we aim to reinforce sales leadership by expanding AI features to pioneer the AI TV market. On top of that, we drive growth momentum and elevated profitability by expanding advertising services such as TV Plus and performance-based advertisement while also strengthening OS competitiveness to further broaden our licensing business. This is the end of my speech. Thank you for your attention.

Thank you, all presenters. That brings our presentation on the first quarter performance of 2026 to a close. And we'll now start the Q&A session, which will be conducted in Korea. Our CFO, Soon-Cheol Park, will address company-wide questions, while questions regarding the business segments will be answered by the respective business representatives. Thank you for your attention.

We will now begin the Q&A session. [Operator Instructions] The first question will be made by Lee Sei Cheol from Citigroup.

Yes, this is Lee Sei Cheol from Citigroup. First, I'd like to congratulate you on record high quarterly performance. I have a question for semiconductor and then a company-wide question as well. The first question is about semiconductors versus specific specifically memory. There's a lot of talk in the sector about multiyear contracts and LTE. So are you also seeking this kind of multiyear contracting for your memory products?

And the second question is general. I do understand you're in talks with the labor union on bonus payouts. So will the payout be reflected in first quarter provisions? If so, what would be the expected size?

Yes. Let me take your first question regarding multiyear contracting for memory. First, due to our NDAs with customers, we are not able to go into too much detail on our multiyear contracts with customers. So I seek your kind understanding. That said, major customers are quite confident in future AI and AI-related demand. And they have been approaching us, seeking supply volume commitments for the mid- to longer term. Based on these requests we have been pursuing multiyear supply agreements, of course, within our available supply capacity and have already signed finalized contracts with some customers.

Unlike existing supply contracts which are based on mutual trust, these multiyear contracts present a higher level of binding commitments. Compared to the past in today's environment where investment size, time line and technical complexity have all increased significantly, investments and capacity-related operational risk are much more challenging. We expect multiyear agreements to help enhance business stability and visibility for both us and our customers. We will manage the size of our investments flexibly depending on the mid- to long-term demand we see from our customers and react proactively to changing market conditions.

Let me address the question on provisions for 1Q. The incentive-related provision you mentioned is under discussion between labor and management. And as the specific amount -- payment conditions and amounts have not been finalized, it hasn't been reflected in this quarter's results. Depending on the outcome of the negotiations, the related costs may be recognized in the future. And once finalized, it will be appropriately reflected in the financials.

[Interpreted] Thank you. We will move on to the next question, please.

Yes. I'm Woo Dong-je from Bank of America. I would also like to congratulate you on delivering very strong performance despite the challenging business environment. So in the first quarter, I think your solid performance was in large part driven by the Memory business. So if you could provide more color or more details on the memory performance.

And the second question is company-wide. As the CFO mentioned, just now, there does seem to be a lot of labor union issues. According to the media report, a general strike has been announced for May. So do you anticipate any disruptions to production or otherwise, any negative impact on performance, any other management issue?

Yes. So let me provide the answer to the first question on first quarter memory performance. The adoption of Agentic AI drove further growth in relevant demand mostly for HBM, server DRAM and server SSD. That said, despite this rising demand, because of the industry-wide constraints in expanding capacity, the supply shortage has actually become more intense relative to robust demand. Under these circumstances, in line with growing AI demand trends, we focus on expanding sales for mostly server applications in the first quarter, resulting in server bit shipment growth in the low teens percentage Q-on-Q for DRAM and low 20% Q-on-Q for NAND as we posted record high quarterly sales in the server segment.

So consequently, we met our bit growth guidance for DRAM, while exceeding guidance for NAND with NAND bit growth increasing by a high single-digit percentage Q-on-Q amid a sharp price in market pricing and the effect of our improved product portfolio following expanded server application sales, our blended ASP rose by low 90% range Q-on-Q for DRAM, high 80% Q-on-Q for NAND.

So overall, in the first quarter, thanks to strong market demand and the strength of our products, our Memory business set another all-time high in quarterly performance following the previous quarter. We will continue to do our best to preemptively anticipate and identify market needs while developing products in a prompt timely manner that meets customer requirements to deliver continued strong performance.

[Interpreted] Let me address this question. The labor union on April 23 held a rally at the Pyeongtaek site and has announced a general strike from May 21 to June 7. While it is difficult to comment further at this stage or even in the event of a strike, the company plans to respond to dedicated teams and response system within the legal framework to minimize potential production disruptions.

Also, separately from our response to their potential strike, the company is addressing labor management issues in accordance with laws and procedures and will continue to prioritize dialogue with the union to reach an amicable resolution.

We'll move on to the next question. The next question will be made by Kim Sun Woo from Meritz Securities.

I'd like to ask about the shareholder return policy. This year marks the final year of the 3-year shareholder return policy. Will the company execute the previously announced policy as committed? Also, could you share the direction of the next shareholder return policy?

And lastly, can you explain the details on the corporate value enhancement plan announced in March?

[Interpreted] Let me address your questions on shareholder returns. As previously committed to our shareholders, the company will faithfully execute its current shareholder return policy, which is one of our key management priorities aimed at enhancing shareholder value. Also, management and the Board are currently gathering various views and engaging in deep discussions on the next shareholder return policy. Centered on the Board, we will continue to carefully review and develop the optimal policy to enhance shareholder value, and we'll share details once the direction is decided.

Regarding our corporate value enhancement plan, the company plans to invest over KRW 110 trillion in facilities and R&D to strengthen our strategic production basis for future, including the Pyeongtaek site, the U.S. Taylor Fab and the Yongin semiconductor cluster as well as to advance R&D in next-generation technologies.

Also in terms of M&A, to drive continued future growth and enhance shareholder value, we will continue to reassess our business portfolio. Also, we'll proactively pursue inorganic growth strategies to ensure mid- to long-term growth.

In addition to M&A, to identify new technologies and businesses and to discover and collaborate with promising tech companies, we are pursuing a wide range of investments, including venture and equity. Through these efforts, the company aims to strengthen the competitiveness of its established businesses, while also responding to rapidly evolving global tech trends.

In HVAC, automotive electronics, medical technology, robotics and other future growth drivers, we'll continue investing to secure future technology leadership. We'll share updates as these initiatives progress.

[Interpreted] The next question will be made by Nicolas Gaudois from UBS.

With the prolonged conflict in the Middle East, there are growing concerns about potential supply disruptions for raw materials that heavily depends on regions such as naphtha and helium gas. In addition, importing energy and oil remain crucial for electricity supply for your fab in South Korea. Are there any company-wide issues related to these? And what measures is the company taking to address them?

And secondly, we're raising semiconductors costs and Inflating market headwinds expected in Q2, how does the company plan to secure profitability for MX specifically?

[Interpreted] Let me address the Middle East related risks. Our semiconductor production lines are operating normally, and there have been no supply chain issues to date. While we source some process gases from Israel and the Middle East, we have secured sufficient safety stock and respond in line with local logistics conditions. Also, we have secured alternative logistic routes and diversified suppliers, including the U.S. and Japan. So the overall risk remains limited. Based on our past experience with export controls, natural disasters, trade disputes and wars, we are managing supply-demand balance flexibly from mid- to long-term perspective.

Regarding power supply, we are closely monitoring utility cost trends amid rising oil prices. And through close coordination with the government, we will maintain a stable power supply system. However, oil price increases driven by the war are impacting global ocean and air freight costs, which is expanding the risk of higher shipping rates. In response, we are closely monitoring global inventory levels while optimizing supply chain operations to minimize cost burden from international transportation.

Also, based on the mid- to long-term partnerships with shipping and air freight providers, we're engaging in negotiations and utilizing alternative transportation options to mitigate the impact of high logistics costs. Also in case the war is prolonged, we are developing diverse scenarios and through long-term contracts with logistics providers and fuel-linked freight rates, we plan to maintain cost competitiveness and supply capacity while strengthening our response capability to volatility. Thank you.

[Interpreted] I will take the MX question. With the growing demand for AI server memory, memory supply shortages for mobile and upward trend in prices have persisted. In 1Q 2026, memory prices surged, weakening profitability year-on-year. Also in 2Q, prices are expected to rise further, adding to cost pressures. We will leverage our stable supply to expand sales of S26 and new A-Series. At the same time, across development, procurement and sales, we will enhance cost efficiency to mitigate the impact of rising memory prices on profitability. Thank you.

[Interpreted] The next question will be by Mr. Kim Dongwon from KB Securities.

[Interpreted] Yes, I would like to congratulate you on your all-time high performance as well. I have a question for memory and then company-wide question. The memory sector is expected to see a continued up cycle. So what is your business outlook for the second quarter? Also, if you could provide a bit growth guidance for Q2?

Also, the second question. Humanoid robotics and physical AI are sectors expected to see high growth. So could you explain your strategy in addressing these growth markets?

[Interpreted] Yes. So let me address your question on the Memory business outlook. We do expect AI-related demand to continue to drive growth momentum for memory for the time being. With the spread of agentic AI, token processing is increasing in volume and technologies improving the efficiency of data processing are being introduced, and the AI ecosystem is growing even faster than ever. That said, although advancements in AI technology are a structural driver of increased memory demand, when you consider the lead time involved for new fab expansions, supply growth is expected to remain constrained within the industry for the time being.

We also have very tight inventory and available supply is far short of customer demand. In fact, our demand fulfillment rate is now at a record low. And unlike previous years, customers who are concerned about supply shortages are actually bringing forward their demand for 2027 already. So currently, just based on prebooked demand alone, the supply-demand gap is looking to widen further in 2027 versus this year. With available capacity under such constrained conditions, we plan to maintain our product mix focus on servers in the second quarter, and we're expecting DRAM bit growth to increase by single-digit percentage Q-on-Q. While for NAND, considering limited available capacity from a reduced inventory level in the first quarter, bit growth is expected to be constrained at the low single-digit level Q-on-Q.

[Interpreted] Let me address our fiscal AI strategy. Over the past year, under the leadership of Jun Ho Oh, a leading robotics expert in Korea, we have made meaningful technological progress and established a foundation to catch up with global leaders. Also, we are internalizing key robotics components and building capabilities to develop customized parts optimized for our own robots. The robotics industry driven by technological developments such as physical AI is becoming increasingly viable.

Through the development of humanoid robots, the combination of advanced robotics technologies, we aim to innovate manufacturing productivity and daily experiences. With our manufacturing production basis, we plan to develop manufacturing robots. And then by leveraging the technologies we accumulate, we will expand into home and retail applications. Also to accelerate technology advancement and deployment, we will focus on securing our own technological capabilities. And at the same time, we'll cooperate with competitive global partners as part of a 2-track strategy. And where appropriate, we will consider strategic investments or acquisitions.

[Interpreted] Our next question will be by Mr. Kim Sung Kyu from Daiwa Securities.

[Interpreted] And also congratulations on strong performance as well. I have a question on memory and display. So let me start with HBM. In the first quarter of this year, you were the first in the industry to commence HBM4 mass production and shipments. I understand you've already been receiving quite good feedback in terms of performance. So how much sales growth do you expect for HBM4 this year?

Also, could you provide a status update on not only HBM4, but the HBM4E business as well?

For display, amid shortages in memory supply, also, I think downward pricing pressure is likely to increase for displays. So what measures are in place to defend against those trends and also to maintain profitability?

I guess let me address the HBM question first. First of all, as we explained at the last quarterly earnings call, we expect HBM sales to increase substantially by more than threefold year-on-year in 2026 leveraging our cutting-edge 1C nano processes, we have secured industry-leading product competitiveness. This has allowed us to play a leading role in raising the bar on performance requirements for HBM4. As customers adopt these enhanced specifications, our outstanding performance has been translating into actual premium on pricing. The differentiated performance of our HBM4 led to concentration of demand and our production-ready capacity is fully booked and sold out.

So after we became the world's first to commence commercial shipment of HBM4 in February, we are now proceeding with ramp-up as scheduled with supply volume expected to scale meaningfully in the second half of the year. And HBM4 sales are expected to exceed 50% of total HBM sales from the third quarter onwards and also account for roughly half on a full year basis.

Going forward, based on the competitiveness of our 1C nano technologies accumulated through HBM4 mass production, we've been accelerating development of next-gen HBM4E products with pin speed of 16 giga bps and bandwidth of 4.0 terabytes per second with samples set to start shipping within the second quarter. We will continue to build on our leading technology to provide HBM products optimized to customer needs on a timely basis as we carry forward our market leadership. Thank you.

[Interpreted] I'll take the display question. Rising memory prices driven by supply-demand imbalances have increased cost burdens for [ set ] manufacturers, which is expected to reduce overall set demand. Accordingly, display demand is likely to weaken and downside ASP pressure is expected to persist. We'll respond to such conditions by enhancing operational efficiency and strengthening competitiveness across our business.

First, we'll drive extreme productivity improvements to strengthen cost competitiveness and accelerate the development of differentiated technologies. On the business side, our portfolio centered on premium products with relatively robust demand will be strengthened and also we will expand our customer base. In particular, the performance of a new privacy protection technology introduced in smartphones this year, which is MPP, will be further enhanced, and we will broaden its applications. We'll continually develop differentiated technologies to strengthen our leadership in high-end products, thereby securing stable profitability.

[Interpreted] The next question will be by Mr. Lee Giuni from Goldman Sachs.

[Interpreted] Congratulations on a very good performance. I have a question on foundry and VD. First, for foundry, I think the -- I would like to hear an update on new order wins for advanced 2-nano 4-nano nodes and legacy processes.

And for VD business amid reduced profitability, I do believe there have been growing concerns over performance. So what kind of countermeasures are you getting ready?

[Interpreted] So let's cover the foundry question first. We have been diversifying our portfolio looking out to the mid- to longer term across more end markets, and we have been working to expand project awards across diverse application areas, including AI, HPC, automotive, robotics and aerospace as well. Amid recent increase in AI and data center demand, memory supply remains limited. And clearly, we're seeing demand for turnkey solutions that cover both memory and foundry together.

In line with these market dynamics, we are in active talks with multiple large-scale AI and HPC customers on 2 nano projects, expect to secure more visible results in the near future for certain accounts.

Our HBM4 baseline, which is built on 4 nano processes, has been gaining recognition for differentiated and competitive performance, leading 4-nano demand. And we have been actively considering possible expansion of supply and response. We are also in discussions with many automotive or robotics customers in the U.S. and wider China on adoption of 2 or 4 nano processes and leveraging our products delivered to major large accounts, we have been validating our technology and establishing stronger reliability.

For data centers, we are seeing growing demand for high bandwidth and low power data transmission which is set to a rapid rise in demand for silicon photonics. We are developing not only silicon photonics components, but also technology for the CPO, or co-packaged optics business, based on advanced processes and 3D packaging, and in parallel are engaged in discussions with several large-scale global accounts on commercialization projects. We will be starting mass production for major optical communications module player starting in the second half.

[Interpreted] This year, the TV market amid rising raw material costs and among certain external business environment is expected to face challenges in securing both revenue and profitability. The company will average differentiated product marketing strategies and proactive measures in its service business to further solidify its #1 position. This year, the TV market amid rising raw material costs and an uncertain external business environment is expected to face challenges in securing both revenue and profitability. The company will leverage differentiated product marketing strategies and proactive measures in its service business to further solidify its #1 position in the global TV market.

To this end, we will reshape the Micro RGB, OLED and mini LED centered competition landscape with a successful introduction of new models while maximizing launch effects. The premium segment in addition compared to previous years, this year's World Cup will feature more participating teams on extended tournament period and a higher total number of matches, which is expected to drive TV demand in the second quarter. Accordingly, to capture this demand, we will use our differentiated marketing strategy to strengthen collaboration with key retail partners and expand strategic SKUs and promotions.

Lastly, based on its leadership as the global #1 TV brand, the company will proactively address market shift toward the service business as well as consumer trends. The TV Plus as well as Samsung Art store will be further advanced so that we can secure differentiated competitiveness.

[Interpreted] The next question will be by Chae Minsook from Korea Investment Securities.

[Interpreted] This is Chae Minsook from Korea Investment Securities. I have a question on Memory and System LSI each.

First, regarding memory. Recently, there's been a rapid rise in conventional DRAM prices. And some have been suggesting that focusing on conventional DRAM sales over HBM may be better in terms of margins. So what are your plans for product mix between HBM versus conventional DRAM? And regarding System LSI, can you provide an update on development of Exynos 2700? Do you believe that you will be able to increase market share on the next-gen model? And any plans to expand beyond mobile into AI applications?

[Interpreted] Yes. Let me comment on the question for DRAM sales mix. Recently, we have seen a rise in lower-spec legacy memory prices. And it is true that conventional DRAMs have higher margins versus HBM. And we are aware of certain outside views that focusing our sales mix on conventional DRAMs may be more beneficial in terms of short-term performance versus HBM.

So per industry practice for HBM, we negotiate projected pricing in events on an annual basis, considering the lead time required to prepare back-end capacity for HBM, whereas for conventional DRAM, the negotiations are done on a quarterly basis. As conventional DRAM pricing has continued to rise sharply every quarter, this has resulted in inversion of margins between HBM and conventional DRAM. However, given the constrained supply conditions for HBM with a sustained widening of the supply-demand gap, the margin differential versus conventional DRAM is expected to be significantly reduced in 2027.

With the spread of [ inference ] services and also agentic AI, the importance of not only AI servers, but conventional servers has also been growing in terms of AI infrastructure, which is an indication of the close connection between HBM and conventional DRAM demand. If we were to focus our product portfolio on conventional DRAM looking to achieve a short-term performance only, this could potentially pose constraints on the build-out of the underlying AI infrastructure itself, which is why we believe a balance in supply between HBM and conventional DRAM is necessary in order to continue to generate AI-driven demand.

So in conclusion, we intend to take various factors into consideration, including mid- to long-term growth potential, long-term customer engagements, technology competitiveness to execute a balanced product mix.

[Interpreted] Yes, let me answer from the System LSI side. First, regarding Exynos. Exynos 2700 is under a smooth development as planned, building on the flagship technological competitiveness of the predecessor 2600 model, and we expect to be able to expand market share further by offering enhanced AI performance.

In terms of expansion into new business areas, AI market trends are shifting quickly from training to inference with a market for specialized inference solutions and customized offerings growing. In response to these market changes, we are advancing our business so that we can offer customer-optimized solutions and architectures from data center to on-device applications in order to shape differentiated competitiveness in the AI market.

[Interpreted] The next question will be made by Young Ryu from NH Investment Securities.

[Interpreted] I'm Young Ryu. I'd like to ask about the MX and DA businesses. Rising component costs and an overall slowdown in smartphone demand and raising concerns over a market contraction. And under such unfavorable conditions, what are the company's strategies to defend market share and secure sales growth momentum?

And for the DA business, I have 2 questions. Recently, there have been multiple media reports on profitability-driven transformation in DA business. Can you share an update on the current initiatives? Additionally, the importance of the cooling solutions market is rising, and you acquired FlaktGroup last year. Could you elaborate on your business strategy?

[Interpreted] I'll take the MX question. In value terms, the 2026 market is expected to see slight growth year-over-year, while volume is projected to decline significantly. Despite a contracting market, the company aims to expand flagship sales to drive revenue growth and leverage its full price tier portfolio to outperform the market in both value and volume. Despite price increases for new model launches, we improved performance and key customer experiences, thereby enhancing perceived consumer value with S26 series -- with S26 sales already expanding year-on-year in value terms. Alongside the S26 series, leveraging foldable showing strong sales predecessor and FE models, we will drive revenue growth while promoting growth across all segments based on A57 and A37 launched in April.

The impact of rising component costs will be mitigated through premium-focused sales and upselling. And through mobile AI leadership and a stable supply chain, we will pursue sales expansion. However, we expect to see a decline in profitability compared to the previous year.

[Interpreted] First, I will address the question regarding the structural improvement of the DA business, and then the question on cooling solutions will be answered by EVP [indiscernible] Head of Sales Marketing team of the DA business. Amid intensifying global competition, tariffs, geopolitical risks, followed by shifts in external environments, the DA business is facing increasing profitability pressure.

In response, we are taking a selective and focused approach across the business. We are concentrating resources on core businesses with competitive advantages to build a foundation for sustainable growth while reviewing diverse measures to diversify our profit structure. We'll share further details with our shareholders once these plans are developed.

[Interpreted] I'll proceed with the answer. The demand for generative AI and high-performance computing is growing rapidly. Accordingly, global data centers are expected to continue expanding through 2030. And the data center cooling market is projected to grow from $4.7 billion in 2024 to $16.6 billion by 2030, growing at an average annual rate of around 24%.

In response, the company successfully acquired FlaktGroup, a Germany HVAC specialist last year, thereby establishing a strategic foothold for entering the data center cooling market. Currently, the company is operating the business centered on FlaktGroup in Europe and plans to expand into the largest global data center market in North America. Also, we plan to establish a Korean subsidiary and factory of FlaktGroup to enter the Korean market. We'll strive to secure leadership in the data center market by expanding our product portfolio and diversifying our geographical footprint.

[Interpreted] The next question will be by Mr. Jay Kwon from JPMorgan.

[Interpreted] Thank you for the opportunity to ask a question on NAND. So amid expansion of AI infrastructure, it's mostly been DRAM and HBM drawing great interest. But recently, NAND has been gaining attention as well. So your outlook on the NAND market for AI applications.

[Interpreted] So let me take the question on NAND for AI. So with proliferation of AI, this has led to higher data capacity and memory requirements to run large language models. And to respond to these trends with high-priced HBMs and DRAM structure only, this will increase the cost and capacity burden, prompting the need to broaden the scope of use cases for storage. Recently, at GTC, NVIDIA proposed an architecture such as CMX that extends AI inference data storage beyond HBM to NAND-based storage rather than relying solely on HBM. This will likely lead to rising demand for high-performance storage such as TLC-based PCIe Gen 6 SSDs.

Further, as storage use cases increase in AI systems in the future, there will likely be growing requirements to reduce data transfer latency resulting from performance differences between HBM, DRAM and storage. For large-scale inference and data-intensive workloads, in particular, requirements for high-performance low latency solutions are becoming more critical. We are production ready for super high-performance NAND storage solutions, not only Gen 5, but Gen 6 as well, offering enhanced features.

And for Gen 6, we have received positive feedback from major customers for early sample shipments. We will be focusing on AI server and data center segments and we will lock in preemptive lead in the early Gen 6 market in the second half of the year. Also, we're focused on capturing QLC demand, which has been growing consistently while accelerating V9 migration within QLC as well. In March, we finished development of 2-terabit QLC, delivering differentiated performance and reliability features with plans to strengthen our market response by expanding our super high capacity lineup, including the 256-terabyte server SSDs.

So based on high-performance TLCs built on advanced nodes and the high capacity of QLC NAND, we will work in close collaboration with our major customers to proactively address and respond promptly to AI-driven NAND demand.

[Interpreted] Because of the limited time, we will accept just one final question.

[Interpreted] The final question will be by Mr. Lee Jong Wook from Samsung Securities.

[Interpreted] Yes. I have a question on VD and foundry. The TCL and Sony recently established a joint venture. How will it impact the TV industry? And what's your response?

And the next question is on foundry. Driven by recent increase in orders, there are growing expectations for increased investments. Could you provide an update on the expansion status of the U.S. Taylor Fab and whether the company is considering the construction of new fab too? On the other hand, mature nodes seem to have relatively low utilization rates. Could you elaborate on your operational strategy?

[Interpreted] Amid intensifying competition due to market stagnation, the TV industry continues to see shifts in the competitive landscape. The establishment of a joint venture between TCL and Sony, combining their manufacturing capabilities and brand strength is a scenario that could have been expected based on past precedents. Across all segments from premium to entry level, the company aims to strengthen its competitiveness to proactively reshape the competitive landscape and lead the market.

Starting this year, we will introduce Micro RGB and other new form factor products to strengthen differentiated premium leadership. Also in volume zone where competition is intense, we will launch new mini LED to expand our response capabilities to the market. Moreover, the company plans to further advance consumers' AI experiences and further complete a differentiated device experience with competitive services so consumers can be satisfied and make purchase decisions.

[Interpreted] Yes. Let me answer the question on foundry. So for Taylor Fab, as of last week, April 23, to be exact, we had a successful ceremony with the local community for Fab 1 commemorating the move-in of the equipment and lines. As scheduled, we plan to start operations in 2026 and commence mass production in 2027 and gradually expand 2-nano capacity. Fab 2 is in the early review phase in parallel with discussions with global customers on potential awards. For mature process lines, we will focus capacity on high value-add specialty demand, which have higher entry barriers while boldly closing out uncompetitive processes. That is the baseline strategy.

More specifically, for CIS and DDI product family where process migration is expected to continue, capacity will be transitioned to the advanced 17 nano nodes while for PMIC, DDI, CCIS, which are currently in mass production on 8-inch wafers, well designs are scheduled for phased closeout. We will optimize our product portfolio, reflecting profitability, investment efficiency to continue to improve our business fundamentals while focusing on developing new specialty products to expand our share of global customers.

[Interpreted] Thank you for the answer. I'd like to thank everybody who shared their valuable opinion. That completes our conference call for this quarter. We wish all of you and those close to you stay strong and in good health. We thank everyone for your participation today, and we look forward to speaking with all of you soon. Thank you.

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]

Hello, everyone, and welcome to the Samsung Electronics 2025 Fourth Quarter Financial Results Conference Call. I will be your coordinator. [Operator Instructions] As a reminder, this call is being recorded. I would now like to turn the conference over to the Investor Relations team. Please go ahead.

Good morning, everyone. Thank you for joining us this morning in Seoul time. I'm Daniel Oh, Head of Investor Relations at Samsung Electronics. I'm grateful to have you with us today for our earnings call for the fourth quarter of 2025. Before we proceed, allow me to address several key administrative and legal points.

For your convenience, today's webcast and slide deck are accessible via our IR website at www.samsung.com/global/ir. I would like to note that this call is being recorded, and it will remain available on our website for future reference. We appreciate your engagement and focus as we move through the results as today's session aims to deliver comprehensive insights into our financial performance and outlook.

Please be aware that today's discussion may contain forward-looking statements reflecting our present, expectations of our future developments. Such statements should not be viewed as guarantees of future outcomes. Actual results may vary significantly from these projections due to numerous factors including, but not limited to, market dynamics, regulatory changes and operational environment. We respectfully seek your understanding of these important considerations as we seek to uphold transparency and accuracy.

I will begin the discussion today with the highlights of our fourth quarter financial performance, followed by EVP Soon-Cheol Park, our Head of Corporate Management operations and Chief Financial Officer, with details on our business outlook and shareholder returns. I will then share a brief update on capital expenditures and sustainability initiatives. At that point, our executives will provide in-depth comments on their respective business areas.

Following their presentations, we open the call to analyst questions. This call is expected to last about 1 hour, and we appreciate your time and attention throughout. Several key executives have joined us on today's call. In addition to myself and our CFO, we have with us EVP Jaejune Kim, representing Memory; joining the call for the first time, EVP Jason Shin for System LSI; For Foundry, EVP, Sukchae Kang; and returning the call, EVP Charles Hur for Samsung Display Corporation; also both joining the call for the first time, EVP Seong [ Hyuk ] Cho for Mobile eXperience; and EVP Hun Lee for Visual Display.

Now let's begin with our consolidated financial performance for the fourth quarter of 2025. We delivered our highest quarterly revenue ever at KRW 93.8 trillion, up by 9% quarter-on-quarter. In the DX division, revenue declined 8% sequentially due to the fading impact of new smartphone launches and softness in home appliances in the wake of U.S. tariffs.

On the other hand, the DS division showed strength with a sales increase of 33% quarter-on-quarter, driven by expanded sales of HBM and other high value-added products, thanks to stronger market prices. And Memory recorded another new all-time high for quarterly revenue, surpassing the level set 1 quarter ago.

SG&A expenses were KRW 24.2 trillion, up by KRW 2.9 trillion quarter-on-quarter. And SG&A as a percentage of sales was up by 1 percentage point sequentially to 25.8%. R&D investments totaled KRW 10.9 trillion, up by KRW 2 trillion quarter-on-quarter and set a full year record of KRW 37.7 trillion, a testament to our commitment to investing for the future.

Operating profit also set a new quarterly high of KRW 20.1 trillion, up KRW 7.9 trillion from the previous quarter. Operating margin also increased, rising 7.3 percentage points sequentially to 21.4%. While operating profit in the DX division declined due to the slowdown in the MX and home appliance businesses, the DS division more than compensated with its significantly stronger quarter-on-quarter performance driven by robust improvements in Memory profitability.

Currency movements also worked in our favor. The sharp appreciation of the U.S. dollar and other currency had positive effect of adding approximately KRW 1.6 trillion to company-wide operating profit centered on the component businesses.

More detailed fourth quarter results of each business will be presented by executives shortly. Before that, I would like to pass the conference call over to our CFO, Soon-Cheol Park, who will discuss our outlook and shareholder return.

Thank you, Daniel, and good morning, everyone. I am Soon-Cheol Park, CFO of Samsung Electronics. I am pleased to continue our update. We entered 2025 under difficult conditions, both at home and abroad, and the first half of the year post many challenges. Yet, thanks to the trust and support of our shareholders, the second half unfolded as we promised and marked the clear turnaround for the company.

We achieved the highest annual revenue in our history. Profit in the fourth quarter also set an all-time high, and our stock price increased sharply. I am deeply grateful to our shareholders for standing with us through the challenges and this turnaround.

The DS division introduced globally competitive products, including HBM4 and GDDR7, and some customers summed up our achievement with the idea, Samsung is back, sending a clear signal of the strength behind our differentiated performance. The Foundry business is primed for a major leap forward supported by its technology and the trust it has earned through recent deals with leading global clients. The DX division added to our technology leadership with TriFold smartphone and Micro RGB TVs while delivering distinct customer experiences powered by advanced AI technology across the Galaxy ecosystem. We also secured new growth drivers through strategic acquisitions, including FläktGroup in HVAC, ZF in ADAS, Xealth in digital health care and Masimo's audio business.

Looking ahead to 2026, we expect several risks to persist, including continued global trade barriers and geopolitical uncertainties. To address this, we remain proactive and stay ahead of external shifts. The DS division will continually secure leadership in the AI semiconductor market by drawing on our unique position as the one semiconductor company in the world capable to delivering a true one-stop solution including logic, memory, foundry and advanced packaging.

In Memory, we'll regain our core technology leadership; and in Foundry, we'll turn our expanded order opportunities secured through advanced process maturity into tangible results. For System LSI, we aim to transform the business by reinforcing our core strengths. We also drive innovation by applying AI solutions optimized for semiconductors and capture new opportunities with enhanced customer-centric products. The DX division will expand AI-driven products and constantly integrated our AI technologies across all of the DX division's device features and service ecosystem while providing the best AI experience to our customers.

Through this, we aim to become the leader in the era of AI transformation. To maintain our competitive advantage, we'll secure our position by leveraging our distinctive products, diversifying our supply chain and optimizing global operations to address the issues such as compound costs and global tariff risks. Furthermore, we will continue to invest in future growth engines including HVAC, automotive electronics, medical technology and robotics to secure technology leadership in the years ahead.

Company-wide, we'll strengthen our processes and improve cost efficiency by promoting AI-driven innovation and adopting digital twin technologies. Also, we'll strive to make this a year in which we deliver tangible progress in our humanoid robotics business as part of our preparations for the future.

Next, our outlook for the first quarter of 2026. In semiconductor industry, we expect structural growth opportunities to increase driven by AI and server demand. In response, we will maintain our focus on profitability while monitoring macro uncertainties, including tariff impacts.

For the DS division, in Memory, we believe market conditions will remain favorable, driven by AI demand and the industry-wide supply constraints. And we expect to sustain our strong performance by focusing sales on server DRAM, eSSD and other high value-added products supported by our technology leadership. In Foundry, although results may decline somewhat due to seasonal effects, we will preserve our growth momentum by advancing process maturity and securing new orders from major customers. In System LSI, while there are concerns regarding customers' cost burdens, we'll seek to maximize sales of new and high value-added products.

For the DX division, the MS business will reinforce its leadership in the AI smartphone market by delivering AI experiences that enhance everyday life supported by the launch of new models. While headwind from rising component costs are expected to persist across the industry, we aim to secure profitability through improved supply stability and resource efficiency initiatives. In the VD and home appliance businesses, amid continued challenges such as intensified competition and tariffs, we expanded our presence in the high value-added product market by delivering high personalized customer experiences powered by enhanced AI technology.

Moving on to the shareholder returns. The Board of Directors today approved a year-end per share dividend of KRW 566 for common stock and KRW 567 for preferred stock. On our shareholder return policy for 2024 to 2026, we committed to regular quarterly dividends of KRW 2.45 trillion from annual payout of KRW 9.8 trillion. Last year, the government introduced the separated taxation scheme for dividend income from high-dividend companies aiming to increase dividends and vitalize the capital market. To meet the requirement for 2025, the Board resolved to declare an additional dividend of KRW 1.3 trillion. The fourth quarter distribution is scheduled for payment in April following final approval at the AGM in March. Thank you.

Thank you, CFO. This is Daniel again. Now I'll provide a brief update on capital expenditures. In the fourth quarter of 2025, CapEx rose by KRW 11.2 trillion from the previous quarter to KRW 20.4 trillion, with KRW 19 trillion allocated to the DS division and KRW 0.7 trillion to the display business. For the full year, total CapEx was KRW 52.7 trillion, down KRW 1 trillion from a year earlier. Of the total, the DS division accounted for KRW 47.5 trillion, while the display business represented KRW 2.8 trillion.

In the Memory business, investments increased both quarter-on-quarter and year-on-year as we transition to advanced process to expand sales of high value-added products such as HBM. In the Foundry business, CapEx was up from the previous quarter driven by increased investments in the U.S. Taylor fab. For the full year, CapEx declined as we maintain our conservative investment approach overall. In Display business, CapEx decreased both in the fourth quarter and on a full year basis following the completion of 8.6 generation line. For 2026, although detailed investment plans are still being finalized, we expect Memory CapEx to increase considering the market outlook.

Now I would like to highlight our sustainability performance. We are proud to be the first in the industry to develop and deploy a helium reuse system for semiconductor manufacturing. Helium is essential to the manufacturing process, and this system, which has been applied to selected production lines, enables us to recover and purify helium for redeployment, cutting annual consumption by approximately 4.7 tons and achieving a reuse rate of around 19%. This initiative not only helps stabilize the procurements of helium, which has a high import dependency, but also enhances our resource circularity in our semiconductor manufacturing process.

In addition, to verify the energy-saving impacts of the SmartThings AI Energy saving mode, we partnered with Carbon Trust, a global carbon footprint verification organization, to conduct a yearlong measurement of actual energy savings -- sorry, actual energy consumption across approximately 187,000 high-efficiency washing machines in 126 countries. The results confirmed energy savings of around 5.02 gigawatt hours, equivalent to around 30% of the total energy consumption. To put that in perspective, this is enough electricity to power 14,000 households in Seoul during the hot summer season. We remain committed to strengthening our sustainability practices and delivering measurable impacts.

Now let's hear from the executives for detailed commentary on their respective business unit's fourth quarter performance and outlook. First up is Jaejune Kim, EVP of the Memory business.

Good morning. This is Jaejune Kim from Memory Global Sales and Marketing. In the memory market, in the fourth quarter, demand for servers increased continuously and significantly exceeded industry supply, driven by hyperscalers' expanded CapEx in the race to establish early dominance in the AI market. In addition, for mobile and PC, the supply-demand situation remained tight as the industry supply response focused on server combined with seasonal demand effects.

Under the low inventory levels and supply constraints, we expanded HBM sales and concentrated on improving profitability by addressing the demand for high value-added products for servers such as high-density DDR5, LPDDR5X and server SSDs. As result, in the fourth quarter, our sales for both DRAM and NAND matched the initial bit growth guidance. And combined with the overall market price increases, our Q-o-Q performance improved by more than it did in the previous quarter.

Now let's move on to the outlook for the first quarter. In the first quarter, we expect the market will remain robust following the previous quarter as AI applications continue to drive the overall market. Thus, we plan to keep our product mix focused on high value-added products for AI. However, considering the significantly low inventory levels, we expect that Q-o-Q DRAM bit shipment growth will be limited to the low single digit. For NAND, we expect the shipment to increase by mid-single-digit percentages due to the base effect from the low bit shipment in the last quarter.

Lastly, let me talk about the outlook for 2026. We anticipate that the demand for AI applications will remain strong this year. In particular, the high-performance HBM4 market should dramatically rise and the high-density trends for server DRAM is likely to keep expanding. For NAND, we expect demand growth for high-performance test products to accelerate with the introduction of PCI Gen 6 SSD, which is Key-Value SSD for AI inference. However, in the case of mobile and PC applications, we need to monitor potential decline in such shipments resulting from increased end product prices and reduced content per box driven by BOM cost pressure from rising memory market price.

In an environment of rapidly growing our demand focus on AI, we aim to lead the AI era with our product competitiveness in 2026. For DRAM, targeting on GPU and ASIC that will be newly introduced in the AI market, we will proactively address customer demand by expanding supply of our HBM4 with competitive performance in a timely manner. In the meantime, we play -- we plan to continue increasing the portion of AI-related products such as high-density DDR5, SOCAMM 2, GDDR7 and so on. For NAND, we plan to focus on our demand expansion for high-density TLC-based Gen 5 SSDs in conjunction with the strong demand for Key-Value SSD for AI. In addition, while PCI Gen 6 server market is projected to rapidly expand in the second half, with the introduction of new GPU platforms, we will lead the market from the initial stage with our V9-based high-performance products. Thank you.

This is Jason Shin from the System LSI business. In the fourth quarter, the smartphone market continued a gradual recovery despite ongoing U.S.-China trade uncertainties and persistent regional geopolitical tensions. While demand in the premium segment remained resilient, shipment volume in the mid- to low-end segment declined, resulting in a different pace of recovery across segments.

Our earnings declined quarter-over-quarter due to seasonal demand fluctuation among major customers and adjustments to new product launch schedules. However, image sensor revenue grew on the back of expanding sales of the 200 megapixels and 50-megapixel products launched in the second half of last year. In particular, we strengthened our technology leadership through the industry's first 200-megapixel image sensors, featuring 0.5 micrometer pixels.

In the first quarter, external uncertainties are expected to persist while rising prices of key components are increasing cost burden for smartphone OEMs. As a result, shipments are likely to slow, particularly in the mid- to low-end segment. However, demand for high-value components is expected to remain relatively solid, supported by the launch of new premium smartphones. We plan to focus on improving earnings by ramping up supply of new SoC products and expanding our lineup of 200-megapixel image sensors while further strengthening our portfolio of high-value products.

Looking ahead to 2026. Overall smartphone demand is expected to soften, while growth opportunities should continue to be concentrated in the premium segment. With the expansion of on-device AI, performance enhancements and differentiated user experience are becoming key competitive factors across devices, and demand for related semiconductors is expected to continue to increase.

In SoC, we will focus on improving earnings by expanding sales based on differentiated performance and stable yields while also exploring new opportunities in the custom SoC business. In image sensors, we will continue to strengthen our competitiveness in fine pixel technology and sustain our leadership through Nanoprism technology, which enhances light sensitivity. Thank you.

Hello, everyone. This is Sukchae Kang from the Foundry business. In the fourth quarter, strong demand from AI and HPC applications continue to drive growth in advanced nodes. Meanwhile, virtual nodes sustained growth supported by demand stemming from China's localization strategy, even as non-AI and consumer segments remained stagnant and price competition intensified. We began ramping up mass production of our first generation 2 nano products and initiated shipments of 4 nano HBM-based die products.

Revenue increased quarter-on-quarter, driven mainly by strong demand from U.S. and Chinese customers. However, earnings improvement was limited due to the recognition of provisions.

For the 2 nano GAA process, we focused on process stabilization while developing next-generation processes on schedule. In packaging, we continue to strengthen our advanced packaging competitiveness by establishing 3D hybrid copper bonding technology for advanced nodes.

Looking ahead to the first quarter. Seasonal demand softening is expected. However, the overall market is projected to continue growing, supported by price increases in advanced nodes.

We expect our revenue to decline quarter-on-quarter due to seasonally weaker customer demand. For 2 nano, we expect our first generation mass production to further stabilize, and we are working to secure manufacturability and develop design infrastructure for the second generation process, targeting its mass production in the second half of the year. In addition, we are focusing on expanding specialty processes, including 4 nano RF, 8 nano eMRAM for automotive applications and 14 nano RF millimeter to enhance our technological competitiveness. On the other front, we will continue to expand orders, focusing on HPC and mobile customers.

For 2026, as policy support for the global semiconductor industry continues to expand, we expect ongoing supply chain restructuring driven by increased domestic production and persistent geopolitical risks. With the full-scale entry into mass production of 3 nano and 2 nano processes, demand for the advanced nodes is expected to remain robust, led in particular by AI and HPC applications.

In contrast, mature nodes are projected to face intensifying competition due to continued capacity expansion, especially in China. Based on solid demand from AI and HPC applications, we plan to broaden our customer base and target double-digit year-on-year revenue growth centered on advanced nodes along with continued improvement in earnings.

In the second half, we will begin mass production of new products based on second-generation 2 nano process and prepare performance and power optimized 4 nano process for mass production. Through this effort, we will continue to stabilize advanced node and strengthen our technological competitiveness.

In addition, Taylor fab in the U.S. is under construction as planned, aiming for a timely commencement of operation this year. Finally, to meet the high performance, low power and high bandwidth requirements of advanced nodes, we will continuously strengthen our business competitiveness by delivering optimized solutions that integrate logic, memory and advanced packaging technologies. Thank you.

Good morning, everyone. This is Charles Hur from Samsung Display. I will now brief you on our results for the fourth quarter of 2025. For the Mobile Display business, we achieved a solid result thanks to sales increase of high-end smartphones and our stable supply capability. In addition, IT and automotive performance increased quarter-on-quarter which contributed to earnings growth. For the large display business, revenue increased compared to the previous quarter, supported by market demand during the year end peak season and the improvements in productivity and product mix.

Next, let me share the outlook for the first quarter of 2026. For the Mobile Display business, even though overall smartphone demand is likely to be weak due to seasonality and the memory supply and price impacts, we'll increase sales through the timely development and supply to support our major customers' new flagship smartphones. For the large display business, while overall market demand is expected to decrease, QD-OLED is likely to be relatively stable. we'll Actively respond to new product launches and keep expanding sales.

Next, I'll share the outlook for 2026. In 2026, price pressure on nonmemory components is expected to intensify due to memory supply and price issues. We'll maintain profitability by expanding high value-added products and retaining our leadership in smartphone market with differentiated technologies. Also, we'll drive revenue growth through mass production of a brand-new 8.6-generation IT OLED line while expanding sales of nonsmartphone products, too.

For large display, demand for high-performance products is expected to keep rising in premium TV and monitor market. We'll maintain our premium market leadership by focusing on high brightness products for TV market and continue to expand monitor sales based on QD performance advantages. Thank you.

Hi, everyone. This is Seong [ Hyuk ] Cho from the MX Strategy Marketing. Let me share our Q4 results as well as our future outlook. The smartphone market rebounded in Q4, driven by the year-end peak season effect with global demand increasing, particularly for premium products compared to the previous quarter. For the MX business, Q4 saw smartphone shipments of 60 million units, tablet shipments of 6 million units and a smartphone ASP of USD 244. Due to the fading effect of the new model launches and then lower flagship smartphone sales, both revenue and profit declined compared to the prior quarter. However, year-on-year, quarterly smartphone sales increased, resulting in revenue growth.

On an annual basis, we achieved steady growth in both unit volume and sales for flagship smartphones. Notably, the strong growth of our foldable series combined with the stable sales performance of the A Series and the ecosystem products enable us to deliver double-digit profitability for the full year.

Next, let me share the outlook for Q1. Overall, smartphone demand will decrease quarter-on-quarter due to seasonality trends. In the MX business, we expect to see an increase in smartphone shipments and ASP due to the launch of the new models, while tablet shipments should stay similar sequentially. We plan to drive sales growth focused on flagship models with the launch of the Galaxy S26. We will actively promote agentic AI experiences and enhance competitiveness of our products while strengthening collaboration with partners to continue leading the AI smartphone market. However, as cost pressure of the key components increases across the industry, we'll ensure stable supply through strategic partnership with major suppliers and continue to drive resource efficiencies to minimize profit erosion risks.

Next, I'll share our outlook for the 2026. The smartphone market is projected to experience modest revenue growth, while volumes are expected to remain flat. However, given the heightened volatility in industry conditions, including fluctuation in memory supply, market forecast may be subject to further adjustment. For ecosystem products, while tablets are experiencing a slowdown in replacement demand, the notebook PC segment is expected to expand due to growth of the AI PCs and Windows 10 replacement demand.

Additionally, the watch and TWS market are projected to grow as interest in health and fitness rises, together with the expansion of the AI features. MX will maintain our strategy focused on expanding flagship sales by delivering AI experiences that provide real benefits in daily life from the customers' perspective, along with the innovations in slimmer form factors and lightweight design.

The S26 Series scheduled for release in the first half of 2026 will revolutionize the user experience with user-centric next-generation AI experience and second-generation custom AP and stronger performance, including new camera sensors. Leveraging these strengths, we will innovate the user experience and drive sales expansion. For foldable devices, we plan to strengthen our product lineup and continue form factor innovations, such as TriFold launched in December 2025, to deliver new user experiences in order to expand our customer base.

Additionally, we plan to drive growth across all segments, expanding into new regions and channels as well as upselling based on stronger products to solidify our leadership in volume. In ecosystem products, we aim to increase premium product sales with superior products and more advanced and intuitive Galaxy AI features. In particular, we'll continue to enhance health AI experiences in our watches and further expand our TWS lineup in order to create new demand. For XR, we plan to deliver rich, immersive, multimodal AI experiences through diverse form factors such as next-generation AR glasses.

2026 is expected to be a challenging year due to the rising cost pressure across the industry. Nevertheless, we will maintain our focus on expanding flagship sales powered by AI leadership and pursue cost efficiency initiatives across all processes to secure profitability. Thank you.

Hello, everyone. I'm Hun Lee, Head of the Global Sales and Marketing team of Visual Display. I will briefly explain the market situations and share our results in the first quarter of 2025. In the first quarter, TV market demand increased compared to the previous quarter, mainly due to year-end peak seasonality, but it decreased modestly year-on-year because of continuous stagnant global TV markets. We improved the results compared to the previous quarter by expanding volume and sales during the year-end season, which was driven by strong sales of premium Neo QLED and OLED products as well as diversifying the volume-generating lineup of QLED and 75 inches above big TVs to counter competitors' aggressive pricing strategies.

Next, I will review the outlook for 2026. As for TV market demand, in the first quarter of this year, it is expected to remain flat versus last year due to slowing down demand after year-end peak season and growing internal and external uncertainties. Nevertheless, demand for high value-added products such as Super Big TVs, QLED and OLED models is expected to show decent growth. In line with this, we will focus on promoting differentiated value of our AI TVs by strengthening communication of Vision AI Companion, which was introduced at CES, while focusing on enhancing sales and securing profitability by launching new models in 2026, including Super Big Micro RGB TV and maximizing marketing buzz.

The TV market in 2026 is forecasted to record a modest growth in the first half, thanks to impact of global sports events like Winter Olympics and World Cup. Moreover, QLED, OLED and 75 inches above big TVs will be the key drivers of continuous growth, which will also contribute to increasing our sales portion of premium products. Especially, we will drive sales growth by targeting replacement demand driven by this global sports event and leveraging our 2026 new lineup, including Micro RGB and OLED.

At the same time, we will continuously strengthen growth momentum and improve profitability by further expanding advertising service business supported by enhanced OS competitiveness. More specifically, we will improve targeting advertising together with performance-based advertising. This is end of my speech, and thank you for your undivided attention.

Thank you, everyone. This is Daniel again. So that completes our presentation on the fourth quarter performance of 2025. And now we will move on to the Q&A session, which will be conducted in Korean. Questions regarding company-wide matters will be addressed by our CFO, Soon-Cheol Park, and questions for the other business segments will be answered by relevant business representatives. Please, operator.

[Operator Instructions] The first question will be made by Sung Kyu Kim from Daiwa.

[Interpreted] Congratulations for your good performance. I have 2 questions. First for Memory, regarding fourth quarter performance, it seems, yes, Memory has achieved very solid performance in the fourth quarter. Could you provide more color on DRAM and NAND bit growth and also the rise in ASP? I would appreciate more details.

Second question has to do with MX. Could you also elaborate on your smartphone sales performance for Samsung Electronics overall for full year 2025. Also, as we expect changes to the business environment going forward, could you take us through some key strategic initiatives for 2026?

[Interpreted] Yes. Let me take your question regarding fourth quarter performance for Memory. In the fourth quarter, AI-related demand, particularly from hyperscalers, came through even stronger. And with the spread of agentic AI, inference workloads expanded significantly, leading to a significant surge in demand not only for AI servers but for conventional server applications as well. As a result, DRAM demand was strong and robust, driven by HBM and high-density, DDR5, LPDDR5X for server. Meanwhile, in NAND, we saw a rapid rise in demand for SSDs optimized for AI inference workloads, especially for key value data processing. Also as supply conditions worsen for nearline HDDs, we also saw rising replacement demand for QLC SSDs.

For mobile and PC applications with the industry continuing to prioritize server shipments, supply constraints have become even tighter, prompting concerns among customers about possible memory shortage, leading to a disruption in their end products, and they are now actively securing supply.

With AI server applications driving the overall market, in Q4, we responded proactively to HBM demand while directing supply primarily to the higher margining segment. As a result, bit shipments achieved a new record high consistent with our bit growth guidance from the previous quarter. And driven by higher overall market pricing and our product mix centered toward high value-added server products, DRAM ASP increased by about 40% quarter-on-quarter.

For NAND bit growth, well, due to the high base effect from strong bit shipments in the third quarter, low inventory levels and also bit loss from migration of legacy processes to advanced nodes, including the discontinuation of planar NAND products, NAND bit growth inevitably declined quarter-on-quarter. But this was already factored into our bit growth guidance from the previous quarter. That being said, working within the limits of our available capacity, we focus on expanding higher-margining server SSD sales, and the server sales mix as a percentage of total sales increased by about 10 percentage points Q-on-Q, in line with our guidance. For NAND ASP, certain factors made the increase in blended ASP per bit appear somewhat muted, including a higher mix of QLC sales and phaseout of planar NAND. However, driven by a server-focused product mix, overall rise in market pricing, net ASP increased by mid-20% quarter-on-quarter.

In conclusion, amid a favorable market environment driven by driven by AI, Memory delivered a record-high quarterly performance in Q4. In 2026, as we address unprecedented AI-driven demand, we intend to continue to deliver results that meet market expectations.

[Interpreted] The company has consistently maintained strong leadership in smartphone volume. And for the fourth quarter of 2025 as well as for the full year, smartphone shipments increased year-over-year and outperformed the market.

Furthermore, at this inflection point driven by AI, what matters most is providing better experiences to consumers and leading the direction of the market. In 2026, amid significant industry changes due to rising component prices, we will leverage our AI technology leadership and stable supply chain to expand sales of new flagship models.

In the first quarter, following the successful launch of the S26 Series, we will drive revenue growth through sustained sales of foldables, which are showing strong sales momentum as well as previous [ NFE ] models. In the second half, we plan to launch new foldable products with enhanced competitiveness to pursue further growth. As for the A Series, we will accelerate efforts to discover new business opportunities in growth markets and also create conditions where consumers can purchase our devices more easily and through the broader application of competitive AI features and Knox security solutions, will drive volume expansion.

The next question will be by Mr. Sei Cheol Lee from Citi Securities.

[Interpreted] Yes. This is Sei Cheol Lee from Citigroup. I'd like to first congratulate you on a record-high quarterly performance. Congratulations.

I have some questions about HBM. It seems that we've been hearing quite a lot of good news recently about HBM4 performance from Samsung. Could you provide us an update on the status of your customer qualifications for HBM4 and your development plans for HBM4E, also an update on advanced packaging technology, also your outlook for expected HBM sales for 2026 as well?

[Interpreted] Yes. Let me comment on our HBM business first. First, for HBM4, with the goal of strengthening the fundamental competitiveness of our technology, we have set our performance target high, above JEDEC standards from the outset of development. And even as major customers have been raising their performance requirements, we supplied sample shipments last year with no redesign required and have now entered the final phase of qualifications. Everything is proceeding smoothly.

We are receiving positive customer feedback on the competitive performance of HBM4. Based on this input, we've already commenced production, and HBM4 is now in stable full-scale production as schedule, including HBM4 at 11.7 gigabit products, the highest performance [ bin ] pursuant to customer requirements and shipments will start in February as well.

Next for HBM4E, we are planning to start sampling of standard products for customers sometime around the middle part of this year, whereas custom HBM products based on HBM4E core dies will follow in the second half of the year as we plan to roll out first wafer runs using a cross project, horizontal rollout approach to meet customer time lines.

Regarding your question on HBM packaging and technology, I am aware that there is a lot of market interest toward our 16-high stacking or HCB, hybrid copper bonding technology. For the HBM3 or HBM4 16-stack product, customer demand is quite limited at this time. And since we'll be doing sampling of HBM4E 12-high product of equivalent density around midyear, we have concluded that it will not be necessary to do mass level commercialization of previous generation HBM3E or HBM4 16-high products. That being said, because we've already secured technology for TC-NCF-based 16-layer HBM packaging at mass production-ready level, even if there are changes to customer requirements, we do not foresee any issues in terms of providing a timely response.

For HCB, the next-generation of advanced packaging technology, we have shipped samples based on HBM4 last quarter and have begun technical discussions, and we'll be proceeding with partial commercialization of select products at the HBM4E stage. We will continue to reinforce the competitiveness of our products, focusing on the high-end part of the HBM market where supply shortage is expected for differentiation for HBM4E and custom HBM. Building on the stability of our established 1c nanometer process, we'll continue to maintain our position as a technology leader.

Next, regarding our 2026 HBM sales outlook, all production-ready capacity is currently fully booked with customer POs, and we expect 2026 HBM sales to improve substantially, increasing by more than threefold year-on-year. One thing of note is that despite our efforts to ramp up supply, major customer demand for HBM in 2026 still exceeds available supply from us.

So for volumes in 2027 and beyond, major customers, are seeking to finalize supply discussions as soon as possible to secure supply. And so in the short term, we'll be focusing on expanding capacity to respond to increased demand for HBM3E while also carrying out proactive investments to secure 1c nano capacity for HBM4 and 4E at the same time and so that we can continue to scale up our HBM supply capabilities amid the surge in AI demand.

The next question will be by Mr. Jay Kwon from JPMorgan.

[Interpreted] I will also ask 2 questions, 1 on memory and then display in this order. It seems, first for memory, AI demand has been growing faster than the pace of capacity expansions by memory suppliers and market supply shortages appear to be worsening. So if you could explain more about your business operations and directions for 2026, including your plans for portfolio mix. For display in 2026, how do you think the rise in memory prices will be impacting displays overall? And what are your expectations for full year performance as well.

[Interpreted] So let me take the first question on our 2026 business operations for Memory. Yes. So demand has been rising sharply across AI applications, whereas expansion of supply capacity remain constrained within the memory sector. we expect a significant shortage of supply relative to demand to continue across all product categories, whether it is HBMs, conventional DRAM or NAND with tight undersupply conditions expected for the time being.

We've already been receiving requests from large customers, including GPU or ASIC developers and hyperscalers projected to experience a steep rise in demand for multiyear supply contracts. Given these market demand trends driven by AI servers, we believe that for DRAM, the product portfolio will have to be adjusted with a greater focus around HBM and server DDR for AI application.

Also, when considering the price increases have varied across the products used in AI server applications, we may need to focus our product mix more on server DDR over HBM in the short term from a profitability perspective. However, to support the long-term health and sustainable growth of AI demand, we intend to maintain flexibility and provide a more balanced product mix between HBMs and server DDRs rather than disproportionately favoring any single product category.

Also in the nonserver segment, with profitability in mind, we'll focus supply on high-performance, high-capacity products in each segment to serve the high value-add high-end market. For NAND, similar to DRAM, we continue to see strong demand from AI servers. We expect a particularly sharp rise in demand for TLC-based PCIe Gen 6 SSDs, especially for Key-Value SSD application.

So our market strategy will focus on TLC product category, which provides differentiated performance expected to deliver higher margins to solidify our leadership in the server SSD market and steadily grow server SSDs as a share of total NAND revenue.

Now due to limited clean room availability, supply growth is expected to be constrained in 2026 and 2027, and we expect supply shortages to continue. From the -- we have been receiving requests from customers for multiyear supply commitments, which we intend to respond to selectively to hedge investment risk while internally leveraging clean room space that we have already secured through preemptive investments to expand supply.

[Interpreted] Amidst stagnation in the smartphone market and rising competition among panel makers along with other challenging business conditions, we are strengthening our leadership while delivering robust performance. In 2026, due to demand uncertainty in the smartphone market stemming from rising memory prices and increased pricing pressure on panels, we expect the year to be more challenging than any previous year. Thus, we'll significantly boost cost competitiveness through measures such as productivity improvements and we'll continually develop differentiated technologies to reinforce product competitiveness, thereby maintaining a stable revenue.

Also, through the mass production at the 8.6-generation IT OLED line slated to commence this year, we expect to lead the expansion of OLED adoption in the IT market and contribute to revenue growth. Despite changes in the external environment, we'll maintain a stable profit structure to further solidify the foundation for continuous revenue growth.

The next question will be by Mr. Sun Woo Kim from Meritz Securities.

[Interpreted] This is Sun Woo Kim from Meritz. I would like to ask about your CapEx for 2026. So like you have said, there is a supply shortage and you're expecting strong AI-related demand to persist in the long term. So then what is the direction for your CapEx investments for memory this year?

[Interpreted] Yes. So let me cover the Memory CapEx question. Yes, we do expect AI-related demand to continue. And as we explained last quarter, we are planning a meaningful increase in our CapEx versus last year. Up to now, we have been making preemptive investments over time and have secured new fabs and clean room space in advance, and the additional CapEx will go towards supporting utilization of the available space. This can help us build up more supply in the short term, help us build a more competitive position within the industry.

Going forward, we will continue the strategy of preemptive investments. In particular, as we position ourselves for a potential long-term rise in AI-driven demand, our basic approach is to continue to invest, make advanced investments in new fab space and clean rooms. As we monitor demand trends, we may determine that capacity expansion is needed at some point, at which we'll be able to probably execute the investment quickly.

The increased CapEx amount budgeted for this year, like I said, will go toward preemptively securing new fab space and clean rooms. This will help strengthen our future supply capacity while allowing us to hedge against market volatility risk.

In addition, we have also been investing in our next-gen semiconductor R&D complex, NRD-K. NRD-K will be an independent, self-sustaining research complex where foundational technological research and product development can be carried out in one place, offering access to advanced infrastructure. NRD-K Phase 1 opened starting in Q2 of last year, and we'll continue to expand the complex to solidify our development capabilities in advanced processes.

Thanks to our efforts over the past year to regain technology leadership, we believe we have largely been able to secure product competitiveness. Now building on this, we're actively expanding our advanced node mix. In the rapidly growing AI application market, securing high-performance, high-density products is critical, and to meet the market demands, advanced processes will become increasingly important for both DRAM and NAND. So in response this year, we'll focus on accelerating the buildup of advanced process capacity, the 1c nanometer process for DRAM and V9 for NAND.

The next question will be made by Mr. Nicolas Gaudois from UBS.

[Interpreted] So first one is on Foundry. Could you update us on the progresses for 2 nanometer and 1.4 nanometer nodes in particular and whether you expect further major customer wins after the Tesla order last summer? And if so, in which segment will it be between mobile and HPC-AI? Also, could you comment on your process for your memory, foundry, advanced packaging turnkey strategy?

And then the second question relates to Consumer Electronics, similar to what you discussed in mobile earlier. This Consumer Electronics and TV business is facing intense competition, top line margin pressure perhaps component going forward by memory shortages limiting potentially of sets -- units. How do you see demand in the year ahead? And what could actually Samsung do to overcome those challenges?

[Interpreted] Yes, let me answer your question on Foundry. First, regarding the 2 nano process, second generation, well, development is proceeding smoothly. We've been hitting our yield and performance targets and are on track to start 2 nano mass production in the second half of the year. We're working closely with key customers on PPA assessments and test chip collaboration in parallel for product designs. So technology validation is moving along as planned ahead of mass production.

The 1.4 nano process is also under development, where we're hitting major milestones as planned with the goal of starting mass production in 2029. We're planning to distribute the PDK version 1.0 in the second half of next year. And with the release, we plan to initiate customer designs and ramp up early ecosystem development.

Based on the progress achieved on our advanced node development, we are now in talks with mobile and HPC customers about product or commercial business collaborations. And since the Tesla award, we have been engaged in active discussions with large-scale customers from the U.S. and China. And most notably, we are expecting this year's 2 nano project awards to increase by 130% year-on-year, driven by HPC and AI applications.

We are the only company in the world offering a fully integrated one-stop solution, spanning semiconductor, design, foundry, memory and advanced packaging altogether. We are actively developing and working with partners on the mass production of a range of HBM products, leveraging our one-stop solutions for 3D stacking of base dies built on logic process technology and core dies built on memory process technology. We are in talks with numerous customers seeking our one-stop solution for both product and commercialization opportunities. And so we expect this kind of turnkey business model to deliver tangible results in the mid- to long term.

[Interpreted] I'll take the question on VD. Amid a challenging environment marked by prolonged stagnation in the TV market and intensifying competition, we will secure new growth drivers through next-gen devices and expand our service business, which is expected to keep growing fast. Based on our premium technological capabilities, we will continue to strengthen differentiated product competitiveness to maintain brand advantages in the premium markets. We plan to introduce new Micro RGB models ranging from 55 to 130 inches to preempt customer demand and establish a new mainstream category. Also through the introduction of a differentiated Vision AI Companion, we plan to expand AI experiences that consumers realize in their daily lives. Furthermore, we will enhance lineup efficiency, strengthen purchasing competitiveness and improve process efficiency using AI to lift overall profitability.

Second, we will proactively address the market trend towards service businesses. And the global ad-based free streaming service market, Samsung TV Plus is garnering the most attention and Samsung Art Store has solidified its position in the TV art market. We will further sophisticate these services and strengthen partnerships with diverse content companies to differentiate our offerings and drive revenue growth.

The next question will be by Simon Woo from Bank of America.

[Interpreted] I am Woo Dong-je from Bank of America I have 2 questions. First, when will the company cancel the treasury shares it currently holds? And could you please explain the scale of shareholder return resources generated in 2025? And the second question is that what impact does rising semiconductor costs have on the mobile business. And what are your corresponding strategies?

[Interpreted] I will take the question on the shareholder return policy. First, with respect to the treasury shares, the Board will decide the cancellation schedule and make a public disclosure in the first quarter of 2026. In addition, with the 2025 results in the books, the company's free cash flow was approximately KRW 36.5 trillion, and 50% of free cash flow, which is the basis for shareholder returns, is around KRW 18.3 trillion.

Based on this, the company plans to provide KRW 9.8 trillion in regular dividends for 2025 and KRW 1.3 trillion in additional dividends. In addition, out of the KRW 8.2 trillion worth of shares acquired in 2025, excluding those reserved for employees, KRW 6.6 trillion worth will be canceled to faithfully implement the shareholder return policy.

[Interpreted] We'll move on to the MX question, and I will answer this. As memory demand for AI server has expanded, memory supply shortages for mobile devices and sharp price increases started materializing in the fourth quarter of 2025. Therefore, we expect a challenging business environment in 2026. However, since this is an industry-wide issue, our competitors will also face the same environment. Based on a stable component supply through strategic partnerships with key suppliers, we plan to respond proactively and flexibly to changes in the market and competition landscape while promoting resource efficiency activities across the entire process, thus minimizing risks of profit decrease through strategic measures.

The final question will be by Mr. Young Ho Ryu from NH Investment Securities.

[Interpreted] This is a Young Ho Ryu from NH Investment Securities. Congratulations on the good performance. I have a question on System LSI and then on your shareholder return. So for System LSI, I think it was mentioned that the rise in memory prices are placing added cost pressure for device makers in mobile and PC. So what is the impact from System LSI's perspective? And how will you respond?

And 2026 is the final year of your 2024 to 2026 shareholder return policy cycle. So I know this is still early on in the new year, but have you been examining the new direction for your next cycle? And can you explain more about the additional dividend payout that was mentioned earlier?

[Interpreted] Yes. Let me answer your question on System LSI. So as you've noted, rising memory chip prices have been weighing on mobile set makers driving up BOM costs. Based on our analysis of the smartphone market, while the mid- to low-tier segments are experiencing significant pressure on costs, in contrast, flagship and premium segments, the device makers are expected to differentiate through on-device AI and camera performance. And as a result, we anticipate sustained demand for high-performance SoCs and sensors to continue. We will leverage our new flagship SoC and 200-megapixel image sensor products to support our customers' differentiation strategies and plan on expanding supply to flagship and premium segments.

[Interpreted] I'll answer the question on the company-wide matters. First of all, we are faithfully implementing the current 3-year shareholder return policy. And when it comes to a new shareholder policy, management and the Board believe enhancing shareholder value is a top priority and are actively reviewing a new active shareholder return policy based on sustainable growth. We will provide updates when the direction of the new policy is finalized.

The regular dividend is KRW 371 per common share and KRW 371 per preferred share, and the additional dividend is KRW 196 per share for both common and preferred shares. In order to increase dividends and vitalize the capital markets, the government introduced a separate taxation scheme for dividend income from high dividend companies.

To meet the requirements, our company must maintain a dividend payout ratio of at least 25% and increase its total dividend amount by at least 10% compared to the previous year. The company decided to join the government initiative aimed at promoting cash dividends and stimulating both the domestic stock market and real economy while meeting market expectations and offering potential tax benefits for shareholders and accordingly, resolve to pay additional dividends.

[Interpreted] Thank you for the answer. I'd like to thank everybody who shared their valuable opinion. That completes our conference call for this quarter. We wish all of you and those close to you stay strong and in good health. We thank everyone for your participation today. Thank you.

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]

Hello, everyone, and welcome to the Samsung Electronics 2025 Third Quarter Financial Results Conference Call. I will be your coordinator. [Operator Instructions] As a reminder, this call is being recorded.

I would now like to turn the conference over to the Investor Relations team. Please go ahead.

Welcome, everyone, and thank you for joining us from around the globe. I am Daniel Oh, Head of Investor Relations at Samsung Electronics. It's my pleasure to be with you on our earnings call today to discuss our third quarter results.

Before we begin, I would like to address some important housekeeping and legal matters. As a reminder, you can follow today's broadcast and slide presentation on our IR website at www.samsung.com/global/ir. Additionally, this call is being recorded, and it will be accessible on the same platform for those who wish to review it at a later time. We kindly ask for your attention and cooperation as we move forward as this session is designed to provide you with comprehensive insights into our financial performance and strategic outlook.

I would like to remind everyone that this conference call may include forward-looking statements which are based on our current expectations regarding future events. These statements are not intended to serve as guarantees of future performance. Our actual results could differ materially from these statements due to a variety of factors, including, but not limited to, market conditions, regulatory changes and operational challenges. We appreciate your understanding and attention to these important considerations in our efforts to provide transparent and accurate information.

With that in mind, I would like to outline today's format. I will begin the discussion with our third quarter financial performance, followed by EVP Soon-Cheol Park, our Head of Corporate Management Office and CFO, who will share our business outlook, capital expenditures and updates on shareholder returns. We will then turn the call over to our executives who will take this opportunity to discuss their respective business areas in detail. Following their presentations, we will open the floor to our valued analysts for any questions they may have. Please note that this call is planned to last approximately 1 hour, and we appreciate your time and attention throughout the discussion.

In addition to myself and our CFO, the other executives joining today's call are EVP Jaejune Kim, representing Memory; VP Hyeok-man Kwon for Systems LSI; EVP Sukchae Kang for Foundry who has joined us for the first time; EVP Joonyoung Park for Samsung Display Corporation; VP Daniel Araujo for the Mobile eXperience; and finally, VP Mark Kim, representing Visual Display for this quarter.

Now let's begin with our consolidated financial performance for the third quarter of 2025. Our total revenue reached KRW 86.1 trillion, up by 15.4% quarter-on-quarter. In the DS division, sales increased by 19% sequentially with the memory business setting a new all-time high for quarterly sales driven by strong growth of HBM3E and server SSDs. In the DX division, revenue was up 11% quarter-on-quarter, thanks to launch effects of new folding phones and solid flagship sales. SG&A expenses came in at KRW 21.3 trillion. And SG&A expenses as a percentage of sales declined by 3.1 percentage points sequentially to 24.8%.

As of the end of the third quarter, year-to-date R&D expenses climbed to a record high of KRW 26.9 trillion, reflecting our commitment to innovation and long-term growth.

Operating profit totaled KRW 12.2 trillion, representing a sequential increase of KRW 7.5 trillion, and operating margin increased by 7.9 percentage points quarter-on-quarter to 14.1%, led by DS division with increased memory sales, improved foundry line utilization and significantly reduced onetime inventory value adjustments compared to the previous quarter. Meanwhile, in the DX division, an increase in sales of high value-added products such as Fold 7 contributed to the growth.

Regarding currency effects, the Korean won's relative strength against the U.S. dollar weighted on our component business as a significant portion of its transactions are in U.S. dollar. However, the negatives were largely offset by positives in the DX division, resulting in a minimal overall impact on the company's operating profit.

More detailed third quarter results of each business will be presented by executives shortly. Before that, I would like to pass the conference call over to our CFO, Soon-Cheol Park, who will discuss the outlook for the fourth quarter and 2026.

Thank you, Daniel. And good morning, everyone. I am Soon-Cheol Park, CFO of Samsung Electronics. It's a pleasure to join you once again on our earnings call.

Firstly, our management is fully aware of the concerns of the market and the shareholders had concerning our performance through the previous quarter. However, thanks to the collective dedication of our employees in overcoming challenges, our third quarter results showed a clear rebound and meaningfully met market and shareholder expectations. Looking ahead, we will continue strengthening our business overall, and we remain committed to delivering strong performances to meet expectations.

Before we move on, I would like to express my sincere gratitude to our shareholders for your patience and confidence in Samsung Electronics, especially during such a challenging environment.

Now let's begin with the outlook for the fourth quarter of this year. We anticipate our mixed market environment in the fourth quarter characterized by ongoing global trade and geopolitical risks on one hand. And on the other, the potential for growth driven by the rapid advancement of the AI industry.

In light of this outlook, the DS division will focus on enhancing its performance by increasing sales of high value-added memory products tail-loaded for AI. In the DX division, ongoing challenges such as heightened competition and tariffs may impact our projections for additional earnings growth. Nevertheless, we are persistent in our effort to expand sales, placing a strong emphasis on advanced AI products.

Next, I would like to share our outlook for the coming year. In the first half of 2026, we expect the semiconductor market to remain strong driven by ongoing AI investment momentum. However, due to the uncertainties such as tariffs for the second half, we will provide a more detailed outlook during our earnings call for the second quarter of 2026. To navigate this uncertain environment, we utilized our strong technologies and diverse product portfolio to mitigate risks and maximize opportunities resulting in continuous sales turnover growth.

In the DS division, the Memory business will make a timely investment and maintain each operational focus on profitability to actively respond to demand for high value-added AI products. At the same time, we will promote the expansion of sales for cutting-edge products such as HBM and high-capacity DDR5 and SSD. For System LSI, we plan to increase sales of premium SoCs and image sensors. The foundry business will work to strengthen its advanced processes and ensure timely ramp-up for the U.S. Taylor Fab.

In Display, we will further reinforce our leading market position with our competitive product from the new 8.6 generation IT OLED design and by advancing our differentiated technologies and product excellence to meet the demand of AI devices. The DX division will strengthen its efforts to launch AI products equipped with the most innovative technologies through open collaboration with the leading global partners in respective business segment. Through digital initiatives, we'll expand sales of premium products and enhanced profitability, driving overall growth and reinforcing our leadership across the board.

In the MX business, the launch of the S26 and other flagship products will provide our customers with enhanced performance and more intuitive and elevated AI experience. Moreover, we'll continue to lead form factor innovations with the recently released Galaxy XR and the upcoming launch of Tri Fold and leverage our differentiated Galaxy ecosystem to grow sales led by premium devices.

In the VD business, we will drive sales growth by enhancing our premium leadership through the innovative new lineup, including Micro RGB and OLED, and we'll deliver unique customer experience with continually improving AI features. In the DA business, we will accelerate sales by strengthening the product lineups overall and improving differentiated connectivity between our products.

Turning to CapEx. In the third quarter of 2025, CapEx decreased by KRW 1.9 trillion compared to the previous quarter and by KRW 3.3 trillion compared to the same quarter last year, coming in at KRW 9.2 trillion. This included KRW 7.8 trillion invested in the DS division and KRW 0.8 trillion in Display.

For the first 3 quarter of this year, total CapEx was KRW 32.3 trillion, down KRW 3.6 trillion year-on-year. Of this amount, the DS division accounted for KRW 28.5 trillion, while the Display business represented KRW 2.1 trillion.

For the full year of 2025, CapEx is projected to decline by KRW 6.3 trillion year-over-year, reaching a total of KRW 47.4 trillion. Within this total, the DS division is expected to account for KRW 4.9 trillion in CapEx, down KRW 5.4 trillion, while the CapEx for the Display business is anticipated to be KRW 3.3 trillion, down KRW 1.6 trillion.

In Memory, we expect overall CapEx to remain relatively flat year-over-year, although infrastructure investments are projected to decline. On the other hand, equipment investment, particularly related to advanced node transitions, are anticipated to increase as we focus on expanding sales of high value-added products. In Foundry, we are continuing to invest in advanced node including 1.4 nanometer technology. However, we foresee a decline in total investment with the operations focused on improving and transitioning our current mass production line.

In the Display business, our CapEx was mainly concentrated on reinforcing and upgrading existing production facilities as major investment in the 8.6 generation line are nearing completion. We expect the overall spending to decrease compared to the last year. In 2026, we will flexibly respond to the growing demand for AI by increasing investments strategically as needed.

Moving on to shareholder returns. The Board of Directors today approved the quarterly dividend of KRW 370 per share for both common and preferred stock. On our shareholder return policy for 2024 to 2026, we are committing to an annual payout of regular dividends totaling KRW 9.8 trillion. The distribution for the third quarter amounting to KRW 2.45 trillion is scheduled for the payment in late November. Thank you.

Thank you, Soon-Cheol Park. And to wrap up this portion of the call, I am pleased to report that Samsung Electronics has maintained its position as the world's fifth most valuable brand for the sixth consecutive year in the Interbrand Best Global Brands Top 100 ranking. Our brand value was assessed at $90.5 billion, which was the highest among non-U.S. companies. The evaluation highlighted positives such as our AI capabilities across all business units, the application of AI home experiences across our products, focused investments in AI semiconductors and our consumer-centric brand strategy.

Now the executives will provide more detailed information on their respective business units third quarter performance, followed by their own business outlook.

We'll start with Jaejune Kim, EVP of Memory business.

Good morning. This is Jaejune Kim from Memory Global Sales and Marketing. In the Memory market in the third quarter, demand remained strong and continued focus on HBM, high density DDR5 and server SSDs as the need for high performance and high-density server products are growing with the increasing investment in generative AI. As for mobile and PC, supply-demand dynamics remained tight, due to the impact of industry supply disruption focusing on servers. In this situation, along with increasing HBM3E sales, we proactively address the demand in overall application, including server. And our memory business in the third quarter recorded its strongest sales performance ever. Also, our performance improved significantly quarter-on-quarter, and the reduction in the inventory related onetime charges that occurred in the previous quarter also somewhat contributed to the performance improvement.

Now let's move on to the outlook for the fourth quarter. Although uncertainties from tariffs and macroeconomic trends exist, we expect data center companies to continuously expand their hardware investments because of the ongoing competition to secure AI infrastructure. Therefore, our AI-related server demand keeps growing, and this demand significantly exceeds industry supply.

For mobile and PC, we expect a supply shortage to intensify further in conjunction with the industry server-focused supply trend, increased content products driven by on-device AI and seasonal demand effects.

In the fourth quarter, we will maintain our active response to rising server demand. For DRAM, we plan to optimize overall profitability by managing our product mix, focusing on HBM3E and high-density server DDR5 products in response to the robust demand for AI and conventional servers. And also for NAND, we will concentrate on expanding sales of high-density, high-performance server SSDs.

Now let's move on to the outlook for 2026. With the continued expansion of AI investments next year and the increase of memory-intensive computer servers prompted by the spread of AI agents, we expect to see simultaneous growth in AI and conventional server demand. Moreover, in mobile and PC segment, we expect the trends of growing content products to continue with the spread of on-device AI. Especially for NAND, we expect supply constraints to intensify as industry inventory levels roll down sharply with the effect of SSD adoption as a replacement for nearline HDDs, which are in short supply.

Accordingly, across overall applications, we are currently receiving memory demand for the year of 2026 and it is much stronger and faster than usual. It is expected that customers' demand for the next year will exceed our supply, even considering our investment and capacity expansion plans.

In this situation, for DRAM, we plan to continue increasing the sales base for HBM. In particular, as for HBM4, from the initial stage of product development, we have already secured speed above 11 Gbps, exceeding the customers' requirement. With our industry-leading performance, we will focus on offering HBM4 centering on the high-end segment.

Also for conventional DRAM, we plan to increase the portion of high value-added products related to AI application, such as high-density DDR5, LPDDR5X and GDDR7. Also, for NAND, we will increase the sales portion of server SSDs and heightened security in line with the strong demand for AI, and we plan to strengthen our portfolio, focusing on cutting-edge products by continuing the transition to V8 and V9. Thank you.

Good morning. This is Hyeok-man Kwon from the System LSI business. In the third quarter, the smartphone market showed signs of slowing growth following modest gains in the first half. Major smartphone OEMs, which had built up inventory in anticipation of potential U.S. tariff risks began destocking in the second half, leading to weaker overall demand. We launched our industry's first 200 megapixel image sensors, featuring 2.5 micrometers, ultrafine pixels, laying the foundation for expansion in the high resolution segment.

In SoC, efforts were focused on the stable supply of premium products to major customer flagship lineups. However, overall demand declined versus the first half due to broad-based inventory adjustments and seasonal impacts, resulting in flat quarterly earnings. In the fourth quarter, growth is expected to remain limited amid continued global economic uncertainty. With major OEMs maintaining cautious inventory level, demand recovery is likely to be measured. Against this spectrum, we aim to expand the shipment to key customers' premium lineups and continued cost reduction initiatives to defend earnings.

Looking out to 2026, overall smartphone demand in major markets, such as China and the U.S., is expected to remain subdued, while the premium segment continued to post solid growth driven by lineup expansion and specification upgrades by leading OEMs. We are accelerating process stabilization and performance enhancement of our X nodes to secure production in key flagship models, while continuing to expand its market share in image sensors through differentiated technologies, such as the 200 megapixel and nanoprism sensors. Thank you.

Hello, everyone. This is Sukchae Kang from the Foundry business. In the third quarter, while U.S. export controls on China impacted sales to certain clients, revenue was sustained at the previous quarter's level driven by expanded sales to key customers in the U.S. and increased sales of memory products. Furthermore, profits saw a significant improvement due to a reduction in one-off cost, better line utilization and the realization of cost-saving efficiencies. We also began mass production of our first product using the first generation of nanoprocess while achieving our record high order backlog, driven by large-scale customer wins centered on advanced nodes.

Looking ahead to the fourth quarter, the market is projected to see a slowdown in demand that had temporarily slowed due to the U.S. government tariff policies. However, strong demand in AI and HPC, along with the trend of semiconductor self-sufficiency in China is expected to fuel continued growth. We aim to expand our sales by ramping up mass production of 2nm products, increasing shipments of HPC, automotive and memory products and further improve earnings by enhancing fab utilization.

In advanced node, development of the second-generation 2 nano process is processing as planned -- progressing as planned. We expect to expand orders for HPC and mobile applications based on our 2 and 4 nano processes. For mature node, we plan to broaden our customer base by diversifying into automotive and other applications through an expanded portfolio of specialty processes.

For 2026, while the mobile market is projected to remain stagnant, we forecast continued robust demand for AI HPC applications. Notably, the first scale extension of 3-nano and 2-nano process mass production is expected to drive growth in advanced nodes. However, global supply chain uncertainties stemming from intensifying U.S.-China technology competition and the U.S. government semiconductor tariff policies are likely to persist, meaning demand volatility will also remain a factor. We plan to continuously increase the proportion of advanced nodes to address strong demand from AI HPC applications, thereby aiming for stable revenue growth.

Specifically, we will pursue the mass production of second-generation 2 nano process products based on secured stability and focus on developing differentiated processes to strengthen our technological competitiveness. Additionally, we plan to expand demand for mobile and HPC through mass production of the performance and power optimized 4nm process and HBM4-based die. In addition, our new Taylor fab in the U.S. currently under construction is scheduled to commence operations from 2026. Thank you.

Good morning. This is Joonyoung Park from Samsung Display. In the third quarter, we delivered a sequential performance improvement in the mobile display business, thanks to the robust demand for our customers' flagship smartphones and newly launched products. Furthermore, we also achieved sales growth supported by an increase in the IT-led adoption rate.

For the large display business, amid the rising demand for QD-OLED gaming monitors, we recorded double-digit growth in moving to sales compared to the previous quarter by actively meeting our customers' needs. Also, we introduced a new 27-inch QHD lineup, laying the groundwork for an additional increase in demand for QD-OLED monitors.

Next, let me share the outlook for the fourth quarter. On the back of favorable year-end seasonality, we expect the demand for premium products to stay solid. In response, we will expand our sales by actively addressing customer demand for smartphones and boosting sales in non-smartphone segments such as IT, automotive and gaming. We aim to maximize the sales of QD-OLED monitors with the expected full-scale launches of our new lineup. Furthermore, we will respond to our major customers' demand for TVs in the year-end peak season in a timely manner.

Moving on to 2026. Our outlook is quite conservative considering the intensifying impact of tariffs and lingering macroeconomic uncertainties. However, OLED adoption is continuously rising in diverse applications, thanks to its outstanding performance. Under these conditions, we plan to strengthen our product competitiveness for diverse segments, solidifying our market leadership.

To start with, our new 8.6 generation IT OLED line slated for mass production next year will deliver competitive products, accelerating OLED penetration rate in the IT market. In addition, we will expand our technology lead in smartphones by enhancing the quality of foldable and introducing differentiated technologies for AI device such as low-power consumption and high refresh rate. Finally, for larger displays, we will continue to enhance the differentiated performance for TVs, such as brightness and solidify our position in QD-OLED monitor market by expanding lineups for both B2B and B2C and diversifying our customer base. Thank you.

Hi, everyone. This is Daniel Araujo from the MX division. Let me share our results for Q3 as well as our future outlook. The smartphone market rebounded in Q3 as macro uncertainties were somewhat alleviated due to progress in tariff negotiations among major countries together with expectations of interest rate cuts. For the MX business, Q3 saw smartphone shipments of 61 million units, tablet shipments of 7 million units and the smartphone ASP of $304.

The launch of new flagship models contributed to growth in both sales and operating profit compared to Q2. Strong sales centered around the Fold 7 resulted in double-digit growth in both shipments and value for foldable devices compared to the previous year, while the S25 series also maintained solid sales momentum. The growth of flagship sales as a portion of total smartphone sales, along with improved sales of new tablet and variable products, enabled us to sustain robust double-digit profitability.

Next, let me share the outlook for Q4. The smartphone market is expected to grow compared to the previous quarter due to seasonal factors. However, competition is expected to intensify especially in the premium segment. In the MX business, we expect a decrease in both smartphone shipments and ASP in Q4 as well as a decline in tablet shipments compared to the previous quarter. We aim to continue robust sales of AI smartphones, including our foldable devices and the S25 series, and we'll also press forward with expanding Galaxy ecosystem product sales in conjunction with seasonal demand, focusing on premium new products. Although we anticipate intensified competition and price increases in key components such as memory, we will persist in our efforts to achieve year-on-year annual revenue growth and maintain profitability through flagship focused sales and efficiency improvements across all processes.

Next, I'll share our outlook for 2026. The smartphone market is projected to be roughly flat in both value and volume. Within the premium segment, the ultra premium segment is expected to see significant growth, especially around foldable devices. The mass segment is also anticipated to grow, mainly focused on higher price points.

For ecosystem products, while tablets are experiencing a slowdown in replacement demand, the notebook PC segment is expected to expand due to growth of AI PCs and Windows 10 replacement demand. Additionally, the watch and TWS markets are projected to grow as interest in health and sports devices, together with the expansion of AI features.

And next, we will continue strengthening our leadership in AI and form factor innovation, maintaining our strategy focused on expanding flagship sales. At the same time, we plan to drive growth across all segments by expanding into new regions and channels as well as upselling based on product competitiveness to solidify our leadership in volume.

The S26 series will revolutionize the user experience with a user-centric, next-generation AI experience, a second-generation custom AP and stronger performance, including new camera sensors.

For foldable devices, we plan to continue form factor innovations to strengthen our product lineup and provide new experiences aiming to expand our customer base. In ecosystem products, we aim to increase premium product sales with superior products and more advanced and intuitive Galaxy AI features. In particular, we will continue to enhance health AI experiences in our watches and further expand our TWS lineup in order to create new demand. Through these efforts, we will continue our business growth momentum even in the face of anticipated challenges next year. Thank you.

Hello, everyone. I'm Mark Kim from the sales and marketing team of Visual Display. Let me brief you on the market conditions and our results in the third quarter of 2025. In the third quarter, TV market demand increased quarter-on-quarter due to seasonality. However, it is expected to decrease slightly year-on-year as global TV market demand remains stagnant. For Samsung, we achieved solid sales growth in premium segment, including new QLED OLED and large screen TV. In response to intensifying competition in the entry-level market, we also diversified the QLED and 75-inches-and-above lineups to expand sales. If so, our profitability decreased year-on-year due to stagnant TV market demand, declining sales and increased costs driven by intensified competition.

Now let me go over the outlook for the fourth quarter of 2025. In the fourth quarter, TV market demand is expected to increase slightly year-on-year although competition is likely to intensify with the year-end peak season. For Samsung, through strategic collaboration with major channel partners, we will strengthen our sales program for premium and large screen TVs to preemptively capture peak season demand and achieve a turnaround in the second half of the year. The TV market in 2026 is projected to grow slightly compared to this year. Also, the portion of strategic products such as QLED, OLED and large screen TVs above 75 inches, which are our core focus, is expected to expand further.

For Samsung, we will strengthen premium leadership based on our innovative 2026 new lineup, including micro RGB and OLED. In particular, with our new form factors, micro RGB, we will secure new category in advance and reinforce our technological edge. At the same time, we will continue enhancing the competitiveness of the volume segment to drive a turnaround in revenue. By continuously advancing our AI features, we will deliver differentiated customer experience and solidify our leadership in the AI TV market. Lastly, the service business will drive solid profitability and growth momentum by advancing TV plus content and advertisement. Thank you.

Thank you, Mark and all the other executives. That concludes our presentation on the third quarter performance of 2025 and brings us to the Q&A session which will be conducted in Korean. Questions regarding company-wide matters will be addressed by our CFO, Soon-Cheol Park, and questions for other business segments will be answered by business representatives.

[Interpreted] [Operator Instructions] The first question will be made by [indiscernible] from Citigroup.

[Interpreted] Yes. First, congratulations on strong performance. I think recently on the semiconductor and memory side. I have one question for Memory and then for the overall company. In the case of Memory, it does seem that you have achieved strong performance in the third quarter. Could you explain more about third quarter bit growth and also pricing dynamics? And also, what is your outlook on the memory business for the fourth quarter?

My second question is regarding your share buyback program. I understand that Samsung Electronics share buybacks have recently been completed and finished. Could you provide further details on the current status?

[Interpreted] Yes, let me address third quarter Memory performance and fourth quarter outlook. Well, with the expansion of inference applications and wider adoption of agentic AI, AI-related CapEx among data centers has been increasing even more significantly versus our initial expectations. And we continue to see strong demand in the Memory market for both DRAM and NAND driven by server applications.

Also, for mobile and PC applications, with the industry providing priority supply to address AI server demand, there are growing concerns of supply shortages, and we have seen a rise in market prices. So already strong AI-related demand has become even stronger, driving the overall memory market. And in the third quarter, we also have expanded sales primarily of AI-related products to capture that demand.

For DRAM, the expanded sales of HBM and high-density DDR5, LPDDR5X and GDDR74 servers, achieving big growth in the mid-teens percentage. For NAND, our focus was on profitability and we were able to proactively address demand for high margin services fees, recording around 10 percentage bit growth.

Consequently, third quarter bit shipments outperformed our guidance, both DRAM and NAND, with a further reduction in our inventory levels. In the third quarter, impacted by rising pricing trends across the broad memory market, also increase in HBM sales mix. DRAM ASP rose by mid-10% Q-on-Q and then by mid-single-digit percentage.

Profitability-wise, as we explained, inventory valuation adjustments in the previous quarter were reduced, partially contributing to improved earnings performance. Also, in the fourth quarter with major CSPs expected to expand CapEx, solid AI-related demand will continue. Meanwhile, on the supply side, with inventory across the industry dropping to subnormal levels, supply is expected to be highly limited, and rising prices are expected to increase further for DRAM and NAND across all applications.

Given these conditions, we intend to continue our profitability-focused operations. For DRAM, while actively capturing HBM3E demand, we'll also increase the share of high-margin products for server applications. Within servers, we'll focus on high-value add products such as high-density DDR5, LPDDR5X to drive sales. That being said, as overall inventory levels come down, our bit shipment growth is likely to be limited to the low single-digit percentage in the fourth quarter.

In NAND, as we continue to transition to V8 and V9, we'll also look to expand sales of high performance, 16 terabytes and above TLC SSDs for AI in foreign servers. Meanwhile, we'll ramp up supply of ultra-high density QLC SSD, which we collaborate on with large-scale data centers, starting from the fourth quarter onwards. However, as inventory has been declining at a faster pace and made continued migration of legacy lines to advanced nodes, bit production loss may be inevitable in the short term. So we expect fourth quarter bit shipments to come down to around 10% on a Q-on-Q basis. However, the share of server SSDs in our sales mix is expected to increase substantially.

[Interpreted] I will provide an update regarding our treasury shares. In November 2024, we announced a phased share repurchase program of KRW 10 trillion, which was fully completed by September 29. This was ahead of our original target date and the revised target stated in the third share repurchase disclosure. By executing the share repurchase within a shorter time frame, we aim to actively enhance shareholder value.

In addition to the annual dividend of KRW 9.8 trillion, the company also completed further share repurchase during the quarter, reinforcing our active approach to shareholder returns. Also following the completion of the share repurchase regarding the possibility of additional returns, the management and the Board are fully aware of the market's increased interest. As a result, the company is continuously reviewing strategies to enhance long-term shareholder value. Additionally, excluding those reserved for employee compensation, we'll decide on the appropriate timing to cancel the remaining repurchase shares in the near future. Collectively, these actions reaffirm our commitment to creating long-term value for our shareholders. Thank you.

[Interpreted] The next question will be by Mr. Kim Dongwon Dean from KB Securities.

[Interpreted] Yes. Congratulations on the highest performance in 3 years. I just have one question for HBM. I think there has been a great deal of recent interest on whether Samsung Electronics passed the final qualifications from NVIDIA or not for HBM3E. And generally, on the status of your HBMs, so could you provide an overview of your HBM3E and HBM4 business and also your sales outlook for HBM in 2026?

Yes, let me take your question on HBM. First of all, I must say that regarding our HBM qualifications, we are quite aware that the market is very interested. But due to our NDA commitments with our clients, I'm afraid we are not able to comment further. What I can share with you at this point is that we are seeing HBM demand grow at a faster pace than supply, and that we have been expanding HBM3E mass production and sales to all of our customers. As a result, in the third quarter, our HBM bit shipments increased by mid-80% Q-on-Q. And excluding some small tail-end sales of legacy HBMs, our overall sales mix is now fully transitioned to HBM3E.

For HBM4, as we explained at our earnings call late July, our development work is already finished, and we have shipped samples to all customers and are ready to start mass production and delivery in line with customers' required project time lines. One thing to look at regarding HBM4 commercialization is that as competition intensifies among customers for GPU performance, this has prompted some of the customers to change their original plans, and they have been asking for HBM4 with even stronger performance.

From the start-up phase of our development work on HBM 4, we have made it a point to reflect these market needs in advance of the market, setting our performance targets above customer requirements in all our developments. Samples shipped to customers to date are fully capable of meeting 11 Gbps plus performance on low power consumption. Meanwhile, there is now fiercer demand for improved performance from AI applications because we expect a rise in demand for related HBM4, we will be proactive in executing on necessary investments to expand our 1C nano capacity.

[Interpreted] Let me address our sales forecast for HBM next year. While our 2026 HBM bit production plan was set reflecting a significant Y-o-Y increase, we have already secured customer demand -- significant customer demand for the planned volumes. However, as we -- as additional customer interest keeps coming in, we are internally reviewing possible capacity expansion. That's said, the recent rise in conventional DRAM prices has resulted in a sharp improvement in profitability. So for any additional product mix, we will be considering the relative profitability of HBM versus conventional DRAM. Any additional capacity expansion will also be set in an adequate level as we continue to monitor evolving market conditions.

[Interpreted] The next question will be Mr. Jay Kwon from JPMorgan.

[Interpreted] This is Kwon Jay Hyun from JPMorgan. My first is on Memory. This is an extension of the prior question. Could you share your outlook on the memory market for 2026?

And second, I understand that the company has recently announced an expanded stock compensation scheme for all employees and executives. So could you explain more about this in further detail?

Yes. So the 2026 Memory market outlook, let me take that. Next year, we expect the Memory market to continue growth momentum continuously driven by AI application demand. As DRAM requirements become more advanced for AI use cases, the high-performance HBM4 market is expected to emerge at full scale, while server DRAM will continue to shift toward higher capacities. And as industry supply tilts towards HBM and server DRAM, Mobile and PC applications will likely experience supply constraints.

For legacy products like DDR4, LPDDR4X, GDDR6, as legacy processes accelerate transition to advanced cutting nodes across the industry, supply constraints have already been impacting prices, which rose sharply in the second half. This constrained supply condition is expected to continue next year as well. For NAND, similar to DRAM, demand is likely to increase mostly around high-performance, high-density products for AI. Also a supply shortage in nearline HDDs may solidify demand for substitute products, LC SCDs. And inventory -- industry inventory levels may bottom out faster than initially expected.

So consequently, next year, amid overall bullish market conditions, even when assuming our CapEx and expansion and maximum production, customer demand will still exceed available supply and our available supply will remain far short of meeting customer demand.

That said, for the second half of 2026, given various geopolitical uncertainties such as tariffs or export controls on high-end AI chips. We are looking more cautiously at the possible impact to market conditions. Even under such market uncertainties, we will continue to strengthen the competitiveness of our products in line with market demand and we plan to expand the supply of AI-related products, targeting the high-growth area markets, we'll focus on commercialization of HBM4 with differentiated performance, expanding sales of high-density, DDR5, SOCAR, GDDR7 and server SSDs, with products like 10.7 Gbps LP, DDR5 and UFS 5.0, will also actively address specialized demand for on-device AI to lead the market.

[Interpreted] Next, I'll provide an update regarding employee stock compensation. As reported in the media on October 14, to support mid- to long-term value creation, we plan to use performance stock units, or PSUs, and we'll expand stock compensation and the NPI performance incentive to include all employees. The goal is to motivate our people to focus on long-term performance and faster mutual growth across the company through this foundation. Under the performance stock units or the PSU program, the final number of shares granted will be determined by the stock's 3-year performance, and the granting of shares will then be made in installments over 3 years. This is an advanced compensation method linked to the company's future performance designed to align employee rewards with a stock price and enhance shareholder value.

Next, the OPI stock compensation program will be expanded from executives only to include all employees starting from the payout in January 2026. The program for executives which began in January 2025 to strengthen responsible management will be available company-wide. Of the KRW 10 trillion worth of treasury shares repurchased over the past year, excluding the portion allocated for employee stock compensation, KRW 8.4 trillion worth will be canceled at an appropriate time, consistent with our previous disclosure. The KRW 1.6 trillion worth of treasury shares repurchased for employee stock compensation will be used for existing programs such as OPI, while additional shares for the newly announced PSU program will be purchased in the future.

The specific acquisition period and volume will be determined in consultation with the Board and disclosed to shareholders accordingly. Overall, linking employee compensation to the stock price enables employees to focus on enhancing the company's value and delivering long-term performance while providing direct incentives to increase shareholder value so that we can remain committed to enhancing corporate value over the mid- to long term. Thank you.

[Interpreted] The next question will be by Mr. Han Dong Hee from SK Securities.

[Interpreted] Yes, this is Han Dong Hee. I'm in charge of semiconductors at SK Securities. I have a question on foundry and another on smartphones. First, for foundry, it seems third quarter loss appears quite noticeably reduced versus the second quarter. What are the main reasons and drivers? Do you expect this improvement to continue into the fourth quarter.

And for smartphone, in terms of profitability, amid the rise in memory and other component prices, do you think that you will be able to maintain current levels of profitability?

[Interpreted] Yes, let me answer your question on foundry. So in the first half of this year, there was impact from U.S.-China sanctions on advanced AI chips. And we did see an increase in certain one-off costs such as inventory write-downs from products that became unsellable due to sales restrictions. There was also impact from the sale of certain products produced at high cost during a period of low utilization in the second half of 2024 and also low utilization first half of 2025. However, in the third quarter, one-off costs from the second quarter decline and we saw utilization improve primarily around the advanced processes, resulting in cost savings, which combined led to a significant reduction in third quarter loss.

In the fourth quarter, we will be ramping up mass production of new products, applying first-generation 2 nano processes. And we also expect an uptick in sales in high-demand HPC and auto products from main customers in the U.S. and China as well as memory products overall. We will engage in ongoing activities to further improve utilization and for cost efficiency gains, and we expect this to present additional improvements to our earnings.

I'll take your question on MX. So memory prices have seen a significant rebound beginning in Q3 with a steeper rise expected in Q4, leading to increased material costs for MX. Given the rising cost pressures, we aim to leverage the strong sales momentum of the Fold 7 -- Z Fold 7 as well as the continuing strong sales of the S25 series to drive revenue growth from high-margin flagship models. We will also drive sales of our newly launched Tab S11 and Watch 8 series to strengthen our premium market position in ecosystem products. At the same time, we're continuing efforts on process optimization, such as using standardized components as well as sharing components across product lines, while also pursuing efficiency improvements and cost reduction activities. Thank you.

[Interpreted] The next question will be by Mr. Nicolas Gaudois from UBS.

So earlier, you have explained that you expect the memory business to be fairly strong in 2026. So in light of that outlook, could you directionally guide us on what Samsung memory CapEx will be looking like in 2026 compared to 2025 and maybe give a bit of clarity on the DRAM versus NAND flash.

[Interpreted] Yes. Let me address your question on memory CapEx. In 2026, we plan to maintain a proactive stance toward investments in memory. In fact, we are considering a significant year-on-year increase versus 2025. For several years now, we have been making steady investments in infrastructure to secure clean rooms for the future.

Now building on that as a base, we are looking to execute facility investments at a scale required to address rising demand. For DRAM to address the rise in AI demand, we'll build on our 1b nano -- the 1b nano product portfolio and focus on capital investments to boost cutting-edge bit production. Also to respond to mid- to long-term future demand, we will also carry out some construction investments as well. And DRAM share of total investments will likely increase versus this year. For NAND, after confirming market demand, we intend to gradually increase the share of advanced processes in terms of our future directionality.

[Interpreted] The next question will be by Mr. SK Kim from Daiwa Securities.

[Interpreted] Yes. I'm Sung Kyu Kim from Daiwa. I have a question for foundry and another for a Samsung Display. So for foundry, it seems that your investments in foundry for this year were significantly cut. So could you explain the reasons why? What is your direction for investments next year? What will be your areas of focus investment?

And second, for display. Other than smartphones, it seems that OLED penetration is increasing in these other non-smartphone applications as well. So what is Samsung Display's strategy in that regard?

[Interpreted] Yes, let me address the foundry CapEx question. This year, we continue to invest for the future to secure competitiveness in our 2 nano and 1.4 nano advanced node processes. CapEx for advanced production, however, was actually reduced year-on-year as we focus mostly on conversion of existing lines and line enhancements and upgrades. In 2026, we will maintain our basic position of flexible CapEx linked to customer demand and customer acquisition. We plan on finishing up construction on our new Taylor Fab for ramp-up of production and we'll be making facility investments toward our goal of supplying advanced semiconductor products to diverse customers in the U.S.

In parallel, we'll also be preparing for mass production of new processes such as second-generation 2 nano and 17 nano CLS so CapEx will likely increase to 2024 levels.

[Interpreted] I'll give you an answer on the SDC. We have been extending our differentiated technologies proven over many years in smartphones to areas such as IT and auto, leading the expansion of the OLED ecosystem. Recently, across various products, including IT, automotive and watches, the adoption of OLED has been increasing, resulting in a growing contribution to the company's revenue. In particular, with the expansion of AI IT devices, market demand for low power and high-resolution OLED is increasing, and the adoption of OLED in IT products is expected to continue growing.

In response, at the new 8.6 generation IT line, we plan to produce competitive products in 2026 to mainstream the IT OLED, while strengthening production and customer support capabilities to secure a mid- to long-term growth trajectory.

For automotive products, we'll leverage our competitive edge in rigid OLED to expand our business not only in premium, but also in volume segment while applying UDC new form factors and other differentiated technologies to gradually increase OLED market share. We will further strengthen our competitive advantages in existing businesses while expanding our new growth industries including IT and automotive to establish a stable and balanced business portfolio.

[Interpreted] I'll just take one more question due to time constraints.

[Interpreted] The next question will be made by Giuni Lee from Goldman Sachs.

I'd like to ask about the DX division. Could you please provide any update on the status of the Exynos adoption as well as of AI usage patterns for smartphones?

Also, the second question is centering on Chinese brands. Price competition in the TV market continues to intensify. What impact will it have on your TV business? And what are your strategies?

Sure. So we, in MX, have clear standards for the experiences that each of our products should provide to customers, and we thoroughly evaluate APs across many dimensions and select ones that meet our criteria. This year, the Exynos AP was adopted in several of our products, including the Flip 7 and some A-Series models. For next year's S26, the evaluation for the AP is still underway, so we can't yet confirm on next year's flagship plan.

Regarding AI usage patterns, this year's flagship devices show strong AI adoption with usage rates of Galaxy AI features of 60% weekly and 80% monthly. Features like now brief, which provides personalized information and photo assist for AI photo editing has been well received by users. And going forward, we plan to integrate more AI applications through our AI agent in order to streamline complex tasks and expand AI utilization across Galaxy devices.

[Interpreted] I'd like to give you an answer on the TV part. In the TV market, aggressive pricing by competitors has boosted demand for entry-level models within each segment, heightening competition. Amid this difficult environment, we'll leverage our differentiated TV competitiveness to restore market share and return to a growth trajectory.

First, we plan to launch a new form factor, micro RGB, to reinforce our technology leadership. At the same time, we'll expand OLED sales to drive premium growth and maximize synergies between micro RGB and the premium segments.

Second, in the volume segments, we'll expand the application of our TV's key strengths, AI features and lineups while strengthening our real QLED marketing communication to counter competitors, price-focused strategies and shift the basis of competition toward consumer value.

In September, we launched a conversational AI platform that provides natural interactions with Bixby to offer visually tailored information and recommendations called Vision AI Companion. In 2026, we plan to expand its availability across more lineup and countries to lead the AI TV market.

Also, we will highlight the excellence and safety of our QLED TVs, which are the only products certified with real quantum dot display recognition. In addition, within the ultra-large TV segment, we'll expand our entry lineup, thereby strengthening our leadership in the 98-inch and above ultra-large TV market, which is showing a rapid growth even within the volume segment.

Last, our service business, which continues to deliver strong profitability will further be expanded as a new growth driver for our TV business. TV Plus, our SaaS service, will differentiate itself by securing exclusive and live content. And to drive growth in performance-based advertising revenue, we will also secure new advertisers. Thank you.

[Interpreted] Thank you for the answer. I would like to thank everybody who shared their valuable opinion. And that completes our conference call for this quarter. We wish all of you and those close to you to stay strong and in good health. We thank everyone for your participation today, and we look forward to speaking with you. Thank you.

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]

Hello, everyone, and welcome to the Samsung Electronics 2025 Second Quarter Financial Results Conference Call. I will be your coordinator. [Operator Instructions] As a reminder, this call is being recorded.

I would now like to turn the conference over to the Investor Relations team. Please go ahead.

Hello, everyone. Thank you for joining us today for Samsung Electronics' Second Quarter 2025 Earnings Call. I am Daniel Oh, Head of Investor Relations. It's my great pleasure to welcome you all to this earnings call.

Before we proceed with the presentation, I want to take a moment to address some important housekeeping and legal matters. As a reminder, you can follow today's broadcast and presentation deck on our IR website at www.samsung.com/global/ir. Additionally, this call is being recorded and webcast, and it will be accessible on the same platform for those who wish to review it at a little time.

We ask for your full attention and cooperation as we move forward since this session is designed to provide you with comprehensive insights into our financial performance and strategic outlook.

We kindly request your attention to the fact that this conference call may include forward-looking statements, which are based on our current expectations regarding future events. Please note that these statements are not intended to serve as guarantees of future performance. Our actual results could differ materially from these expectations due to a variety of factors, including, but not limited to, market conditions, regulatory changes and operational challenges. We appreciate your understanding and attention to these important considerations as we strive to provide transparent and correct information.

With that, I would like to extend my gratitude once again for your presence and participation. Let us now proceed with the presentation, during which, I will go through the key highlights of our second quarter performance, capital expenditures and sustainability management, which will be then followed by EVP Soon-Cheol Park, our Head of Corporate Management Office and CFO, with our outlook for the second half of the year and comment on shareholder returns. We will then turn the call over to our executives who will take this opportunity to discuss their respective businesses in detail. Following their presentations, we'll open the floor to our valued analysts for any questions they may have. Please note that this call is planned to last approximately 1 hour, and we appreciate your time and attention throughout the discussion.

In addition to myself and our CFO, the other executives joining today's call are Jaejune Kim -- EVP, Jaejune Kim, representing Memory; VP, Hyeok-man Kwon for Systems LSI; VP Mijung Noh for Foundry; EVP Joonyoung Park for Samsung Display Corporation who is joining us for the first time; and VP Daniel Araujo for the Mobile eXperience. Last but not least, EVP KL Roh for Visual Display.

Let us commence with the details of our consolidated financial performance for the second quarter of 2025. Our total revenue decreased by 5.8% quarter-on-quarter to KRW 74.6 trillion.

Turning our attention to the DS division. Sales rose by 11% sequentially, driven by increased sales of high value-added memory products for server such as HBM3E and DDR5 as well as the expansion of major customers in foundry.

In the DX division, revenue declined by 16% compared to the previous quarter, due to the diminishing launch effects of new smartphone models, coupled with intensified competition in TV and other segments.

On the cost management front, SG&A expenses were successfully reduced by KRW 0.6 trillion, bringing the total to KRW 20.8 trillion. This reduction was achieved through the efficient management of sales and marketing costs reflecting our commitment to optimizing operational efficiency.

At the company level, operating profit stood at KRW 4.7 trillion, representing a sequential decrease of KRW 2 trillion compared to the previous quarter. Consequently, the operating margin contracted by 2.2 percentage points, settling at 6.3%.

During the second quarter, the DS division, despite the mentioned revenue growth, recognized inventory value adjustments in the memory business and booked one-off costs related to the impact of the export restrictions related to China in the non-memory business.

In the DX division, operating profit declined quarter-on-quarter, weighed on by a sequential decline in sales volume following the launch of new smartphone models in the first quarter.

Regarding currency effects, the relative strengthening of the Korean won against the U.S. dollar has adversely impacted our operating profit by approximately KRW 0.5 trillion compared to the previous quarter. This impact is primarily observed in our Component business, where a significant portion of transactions are conducted in U.S. dollars.

Now turning to capital expenditures. In the second quarter of 2025, CapEx experienced a decrease of KRW 0.9 trillion on a quarter-on-quarter basis, resulting in a total of KRW 11.1 trillion. Of this amount, KRW 9.8 trillion was allocated to the DS division, while KRW 0.8 trillion was invested in the Display business. This strategic allocation reflects the company's ongoing commitment to optimizing distribution across its key business areas, ensuring sustained growth and operational excellence.

In Memory, investments remained steady quarter-on-quarter as we continue the transition to advanced nodes, not only strengthen competitiveness in HBM and other high value-added products but also to ensure readiness for anticipated demand.

Foundry CapEx was down quarter-on-quarter, reflecting on a conservative investment approach focusing on line conversions.

For Display, CapEx increased slightly quarter-on-quarter due to line upgrades for small to midsized panels.

I will now highlight our key achievements in sustainability management. On June 27, Samsung Electronics published its 2025 sustainability report. The report incorporates materiality assessments that align with global disclosure standards and it features broadened disclosure of climate-related scenarios to reinforce compliance with the international requirements.

In the environmental domain, we remain committed to securing renewable energy as we demonstrated by the signing the power -- new power purchase agreements at key sites. As a result, the DX division achieved a renewable energy transition rate of 93.4%, while in the DS division, we are scaling efforts to reduce direct carbon emissions by continually expanding the implementation of our internally developed regenerative catalytic system at our production sites.

Also, we are committed to reducing Scope 3 carbon emissions across the value chain. As an example of our diverse initiatives, the application of high-efficiency energy technologies in major products achieved on average power reduction of 31.5% compared to the 2019 levels.

Meanwhile, we continue to advance our sustainability goals through the broad application of recycled materials in newly launched Galaxy Z Fold7 and Z Flip7. The new models incorporate an additional recycled material compared to their predecessors, bringing the total number to 9, with recycled materials accounting for 13.7% of the total weight for the Z Fold7 and 18.2% for the Z Flip7. Notably, the cathode materials used in the batteries are made with 100% recycled cobalt and lithium.

Once again, we reaffirm our unwavering commitment to further enhancing and expanding our sustainability initiatives. We recognize the critical importance of these efforts in addressing global environmental challenges and contributing to a more sustainable future. Our dedication to this cause remains steadfast, and we are actively exploring innovative strategies and solutions to ensure that our sustainability efforts are both impactful and enduring.

With that, I will now pass the conference call over to our CFO, Soon-Cheol Park.

Thank you, Daniel, and good morning, everyone. I am Soon-Cheol Park, CFO of Samsung Electronics. It's a pleasure to join you once again on our earnings call. I will now present our outlook and review our shareholder return policy. Let's start with the outlook for the second half.

Despite ongoing global economic concerns driven by uncertain trade policies and geopolitical tensions, the IT industry appears poised for a gradual recovery, fueled by increasing momentum in AI and robotics. In this context, we anticipate a rebound in our performance in the second half following a bottoming out in the second quarter with the earnings expected to improve steadily as the year progresses.

In the DS division, we are making all our efforts to restore fundamental technology innovation. Also, we've taken steps to address operational inefficiencies and have reflected inventory value adjustment in the second quarter. Looking ahead, we are truly preparing for a turnaround in the second half.

In addition, we aim to further reinforce our technology leadership and proactively position ourselves to meet the growing demand for high value-added and AI-driven products. We expect the demand for memory to maintain its momentum across all applications. In this regard, we are actively focused on AI-related products such as HBM3E as well as high-capacity, high-performance offering.

For Systems LSI, we are working to drive sales growth by enhancing the capabilities of our flagship SoCs and capitalizing on the rising demand for ultra-high-resolution image sensors.

For our Foundry business, we expect a gradual improvement in profitability from expanding our customer base and utilization rates while strengthening our 2-nano technology.

In the Display business, we anticipate improved results supported by new product launches from key smartphone customers. Additionally, we plan to expand sales in the IT, auto, monitor and other segments.

In the DS division, with the uncertainties stemming from tariff policies likely to persist, we are seeking diverse methods to minimize the related impact.

In the MX business, we will drive sales of our premium mobile AI devices, including our newly launched foldables and aim to lead the market by expanding our ecosystem through innovative form factors like the upcoming TriFold device and our first XR headset as well as services such as connected health.

As the world-leading seller of mobile devices, MX will establish a distinctive AI ecosystem through the collaboration with the leading global AI and tech companies by positioning our devices as the central platform of truly open and advanced AI ecosystem, will secure AI competitiveness while continually driving business innovation.

For the VD business, we'll further solidify our market leadership with strengthened AI features to deliver unique viewing experiences amid diverse challenges due to stagnant growth and intensified competition in the market -- TV market.

For the DA business, we aim to reinforce sales of innovative AI-based products and focus on aligning the business around high value-added segments such as HVAC. Overall, we are actively driving AI transformation across all business to enhance the internal productivity and strengthen business capabilities.

We will extend our leadership in launching products with internally developed AI functionalities and maximize the product differentiation and service value by connecting AI infrastructure models, devices and services.

Moving on to shareholder returns. Today, the Board of Directors approved a quarterly dividend of KRW 367 per share for both common and preferred stock. Under our shareholder return policy from 2024 to 2026, the annual payout of regular dividends is set at KRW 9.8 trillion and the quarterly distribution of KRW 2.45 trillion for the second quarter is scheduled for payment in late August.

In November 2024, we announced the KRW 10 trillion share repurchase program. As of May 2025, we acquired shares worth KRW 6.1 trillion across 2 separate phases. The KRW 3 trillion worth of shares acquired in the first phase were canceled in February, while the KRW 3 trillion worth of shares from the second phase, excluding common shares was KRW 0.5 trillion, earmarked for executive and employee compensation are scheduled to be canceled in due course.

For the third and finance share repurchase or KRW 3.9 trillion approved by the Board of Directors on July 8, KRW 1.1 trillion worth of shares will be allocated for executive and employee stock compensation, including incentives with the remaining balance of KRW 2.8 trillion designated for shareholder returns. We expect to complete the full program on October 8 ahead of the original 1-year target of November 14. Our primary objective is to fulfill our commitment to shareholders and executing digit buybacks more quickly than originally planned shows our dedication to delivering on our promise in a timely manner.

The KRW 10 trillion repurchase program will be completed as promised. And in the near future, we'll determine the appropriate timing to cancel the repurchased shares aimed at enhancing shareholder value. Thank you.

Thank you, CFO Soon-Cheol Park. Now each executive from different business segments will provide more detailed information on their respective business units second quarter performance, followed by the outlook. We will then start with Jaejune Kim, EVP of Memory business.

Good morning. This is Jaejune Kim from Memory Global Sales and Marketing. In the Memory market in the second quarter, the recovery of demand became more visible than previously expected, thanks to strong AI server demand. And demand for server SSD also increased as previously suspended data center projects resumed.

In addition, we saw an increase in the market price for DRAM legacy products as the supply reduced with the impact of the industry's capacity transition to cutting-edge nodes. In this situation, we increased the sales of HBM3E products and responded to robust demand for servers while expanding the portion of high-density DDR5 products. Moreover, we delivered initial mass products of LPDDR5x for AI servers to the major customer.

As a result, compared to the previous quarter, our bit growth for DRAM increased by low-teens percentage in line with the initial guidance.

For NAND, we exceeded our bit guidance as the bit growth increased by high 20% compared to the previous quarter by actively responding to server SSD demand improvements. Thus, our inventory level decreased significantly.

In the second half of the year, although uncertainties such as tariffs are likely to persist, AI demand should remain robust, thanks to continued investments at major cloud service providers. Therefore, we expect server demand for both DRAM and NAND to remain strong.

In addition, our demand for PC and mobile is expected to show momentum, driven by seasonal effects in the second half and the spread of on-device AI.

We plan to keep operating our business focusing on profitability for both DRAM and NAND in the second half of the year. For DRAM, to align with strong AI server demand, we plan to proactively address the trends toward high density and product diversification with our HBM, high-density LPDDR5, LPDDR5x for AI servers and so on.

For NAND, as we expect our inventory levels to be normalized, we will prioritize the sales of high-density and high-performance SSDs for server and storage. And we will continue to enhance our cost competitiveness by accelerating the transition to V8 for all applications. Thank you.

Good morning. This is Hyeok-man Kwon from the System LSI business. In the second quarter, macroeconomic growth forecasted faced repeated downward revisions, underscoring a notable economic slowdown. Nevertheless, the smartphone market maintained a gradual recovery, bolstered by temporary U.S. tariff exemption and Chinese subsidies. In addition, the launch of new models by major customers further catalyzed the component demand, contributing positively to market dynamics. Amid expanding external uncertainties, we delivered resilient performance through strategic product mix optimization and market diversification.

In the SoC business, we commenced mass production and expand the supply of flagship products utilizing the GAA process, which is specialized in improving performance and power consumption for the future products. Combined with the sensor business' robust sales of 200 megapixel and wide product lines, these efforts drove record-high revenue for the first half of the year. However, increased development cost for our advanced products constrained the extent of our profitability improvement.

Looking ahead to the second half, the smartphone market is projected to experience moderate growth momentum. While the first half benefit from distributors' inventory buildup to mitigate tariff risk and the impact of Chinese subsidies, demand expansion is expected to be limited as major customers focus on depleting accumulated inventory.

In the SoC business, we will prioritize stable supply for flagship models launched in July, while concentrating on securing process and yield competitiveness for next-generation flagship products to secure entry into major customers 2026 lineups.

In the sensor business, we will continue to lead the ultra-high-resolution market and expand the adoption of Nanoprism technology based on products with enhanced low-light image quality. These initiatives aim to sustain revenue and enhance the profitability. Through this strategic efforts, we are committed to strengthen our competitive position and driving sustainable growth in the challenging market environment. Thank you.

Hello, everyone. This is Mijung Noh from the Foundry business. In the second quarter, the broader market faced continued headwind from muted mobile demand and persistent U.S.-China trade restriction. Even so, solid momentum in AI HPC application underpinned overall industry growth.

We commenced full-scale volume production of 3-nanometer GAA mobile products and expanded sales on the back of strong demand from U.S. and Chinese key customers, resulting in a significant quarter-over-quarter revenue increase. Even so, U.S. export control on advanced AI chips for China led to sales restrictions and related to related inventory value adjustment, while sustained lower fab utilization at mature node weighed on profitability. Despite these challenges, we completed reliability assessments for the first-generation 2-nanometer process, ensuring seamless readiness for mass production.

Additionally, we established the technical infrastructure necessary to support customer design enablement for the second-generation 2-nanometer and performance and power optimized 4-nanometer processes in a timely manner. These efforts bolstered our advanced node competitiveness, enabling us to secure increased orders from major customers.

In mature nodes, we enhanced our specialty process capabilities by completing the development of PPAC optimized low power FinFET process for image sensor applications. This has allowed us to actively pursue and expand new business opportunities.

Looking to the second half, geopolitical uncertainty driven by intensifying U.S.-China technology rivalry and potential U.S. semiconductor tariff policies will likely persist. Nevertheless, robust AI and HPC demand is expected to sustain strong growth and advanced nodes.

We anticipate revenue improvement in the second half, driven by the full-scale mass production of new mobile products using the first-generation 2-nanometer process. By continuing to expand sales to Chinese and U.S. customers with strong demand, we aim to simultaneously enhance fab utilization rates and profitability.

In advanced nodes, we will focus on stabilizing the 2-nanometer process while ensuring mass production readiness for automotive-grade 4-nanometer processes supported by stable yields. Furthermore, we will strengthen our advanced node portfolio by securing 2.5D, 3D advanced packaging technologies.

For mature node, we will enhance our competitive edge in specialty technologies, including 14-nanometer automotive, RF millimeter wave and 17-nanometer DDI platforms. By leveraging these advancements, we will actively pursue new business opportunities and expand customer orders. Thank you.

Good morning. This is Joonyoung Park from Samsung Display. I will now brief you on our results for the second quarter.

For the Mobile Display business, we achieved revenue growth compared to the previous quarter despite the stagnant demand in the smartphone market. The growth was supported by timely supply of new smartphone products to our major customers and increase in sales for IP and automotive segments.

For the large display business, sales volumes for TV and monitors increased quarter-on-quarter, driven by strong performance of QD OLED. In detail, we responded to our major customers' needs in the TV market. And for monitors, following our high-resolution products, we further strengthened our premium lineup with the launch of 500-hertz refresh rate model and achieved sales growth, especially in the gaming market.

Now I will share our outlook and strategies for the second half of the year. For the Mobile Display business, we expect our sales to increase as our major customers launch flagship smartphones. However, uncertainties are likely to persist due to external factors such as tariff. In response, we will concentrate on driving sales growth and maintaining our leadership in the smartphone market by further enhancing our differentiated technologies. These include the world's first commercialized polarizer-free technology, which enables low power consumption as well as slim foldables with enhanced durability. We will also continue to expand sales in IT and automotive segments.

Lastly, I will discuss our outlook for the large display business. In the premium TV market, the OLED adoption rate continues to rise. In the second half, we will not only address demand for TVs, but also strengthen our market presence in the premium segment by continually developing high-performance products.

In addition, we expect QD-OLED monitors to continue their strong momentum, driven by rising demand for gaming monitors. By offering diverse refresh rates, we aim to broaden our product lineup across both B2C and B2B sectors, accelerating the penetration of QD-OLED in the monitor market. Thank you for listening.

Hi, everyone. This is Daniel Araujo from the MX division. Let me share our results for Q2 as well as our future outlook.

The smartphone market remained seasonally down in Q2 with demand declining compared to the previous quarter. For the MX business, Q2 saw smartphone shipments of 58 million units, tablet shipments of 7 million units and the smartphone ASP of $270.

While smartphone shipments decreased compared to Q1 when our new flagship models were released, both revenue and operating profit showed year-on-year growth. This was made possible by robust sales of flagship models, especially the S25 series as well as strong performance across our major products, including the A-Series and tablets.

Some components, including memory and displays, saw a slight decline in price versus last year, while we also continued initiatives focused on resource efficiency. And as a result, we maintained double-digit profitability in Q2.

Moving on to the second half of the year. Overall smartphone demand is expected to contract slightly year-on-year due to concerns about rising tariffs in mature markets and a continued slowdown driven by persistent inflation. However, the premium segment is projected to grow modestly, driven by shifting consumer preferences toward higher-end products due in part to economic growth in emerging markets.

While the tablet and wearable markets are also expected to decline year-on-year due to macroeconomic uncertainties, the TWS market is poised for growth as adoption expands in emerging markets.

For the MX business, we expect an increase in smartphone shipments and ASP in the third quarter, while tablet shipments are expected to decline sequentially as we transition to new models later in the year.

We will continue our flagship-first approach in the second half, and we are confident in the strong market reception of our newly launched seventh-generation foldable products, which feature significant advancements in performance, design and durability. The Galaxy Z Fold7, the thinnest and lightest model in the Fold series to date, combines the portability of a bar-type phone with the expansive display of a tablet, featuring ultra-level features such as a 200-megapixel camera.

The Galaxy Z Flip7 delivers improvements in 2 key areas: design and portability and optimizes the Galaxy AI experience for the larger flip cover screen. With the integration of One UI 8 optimized for the foldable form factors, alongside an expanded lineup, we aim to drive new demand and broaden our customer base.

For the Galaxy S25 series, we will focus on maintaining sales momentum with seasonal promotions as well as an earlier launch of the S25 FE.

We are also strengthening the A-Series lineup with new entry-level models, while emphasizing awesome intelligence and extended OS upgrades to differentiate our product experience. Furthermore, we're expanding channel presence in growth markets to increase our market share.

Beyond smartphones, we are accelerating our ecosystem strategy in the second half of the year with a range of new products designed to maximize Galaxy's competitive edge, including the next-generation form factor. First, we are set to release the Galaxy Tab S11 series, powered by enhanced AI capabilities and new mid-tier and entry-level models will complete our portfolio.

In wearables, the recently launched Galaxy Watch 8 series introduces a bold new cushion design across all models and integrates Gemini for innovative AI functionality.

With the refresh of the Galaxy Watch Ultra model for 2025 and the return of the Galaxy Watch Classic after a 2-year hiatus, we are poised to strengthen our position in the premium wearable market.

In addition, with the pending acquisition of U.S.-based digital health care company, Xealth, we aim to accelerate the transformation of Samsung Health into a connected care platform.

In TWS, our Galaxy Buds lineup will expand in order to address demand across all price segments.

Meanwhile, we are also preparing to introduce next-generation innovative products, including our XR headset and TriFold smartphone this year. Our XR headset, which seamlessly integrates the XR ecosystem developed in partnership with Google as well as multimodal AI capabilities will serve as a key stepping stone in solidifying our leadership in future technologies and further expanding the Galaxy ecosystem.

Despite ongoing macroeconomic uncertainties and anticipated increases in material costs, the MX division will focus on expanding flagship sales and our ecosystem business with a focus on new premium products. We will also continue to optimize operations across the board in order to maintain robust profitability. Thank you.

Hello, everyone. I'm KL Roh from the Sales and Marketing team of Visual Display. Let me brief you on the market condition and our results in the second quarter of 2025.

In the second quarter, TV market demand is projected to decrease slightly year-on-year due to the impact of last year's big sporting event. However, demand for premium and big TV remained solid.

For Samsung, we expanded the sales portion of premium products by driving sales of Neo QLED, OLED and Super Big TV. Even so, our profitability decreased year-on-year due to stagnant TV market demand, declining sales and increased cost driven by intensified competition.

Now let me go over the outlook for the second half of 2025. In the second half, TV market demand is expected to decrease slightly year-on-year as economic uncertainties raised the concern over inflation. However, the growth trend of high value-added products, including QLED, OLED and Super Big TV will continue.

For Samsung, based on the new lineup with enhanced AI feature and viewing experience, we will preemptively capture peak season demand and achieve a turnaround in sales growth.

In addition, we will reinforce growth engine by enhancing communication of our key strengths such as SmartThings, Knox security, slim design and App Store.

Lastly, with an unmatched leadership in global TV sales for 19 consecutive years, the service business will drive solid profitability and growth momentum by advancing TV+ content and advertisement. Thank you for listening.

Many thanks to all the executives who present their business updates. That concludes our presentation on second quarter performance of 2025 and brings us to the Q&A session, which will be conducted in Korean. Given that the company's presentation lasted longer than we expected, we will try to get -- receive as many questions we can today.

Questions regarding company-wide matters will be addressed by our CFO, Soon-Cheol Park, and the other business segments will be answered by each business representative. Operator, you may now open the line for analyst questions.

[Interpreted] [Operator Instructions] The first question will be made by Simon Woo from Bank of Korea (sic) [ Bank of America ]

[Interpreted] I am Woo Dong-je from Bank of America. I'd like to ask about tariff impact. This morning, there was a news article that U.S., Korea have reached an agreement on trade. How will it impact your business? And what's your response strategy?

[Interpreted] We believe that the conclusion of the negotiations between Korea and the U.S. has helped to reduce uncertainties. We will actively monitor the detailed aspects of the agreement by closely paying attention to the follow-up discussions between the 2 governments and will prepare response measures accordingly.

Additionally, in mid-August, the U.S. Department of Commerce's Section 232 investigation on semiconductors and derivative products is expected to be announced, and we are paying close attention to the results.

Considering the investigation includes semiconductors along with smartphones, tablets, PCs, monitors and other end products, the findings may significantly impact our business. We have been sharing our views on the Section 232 investigation directly and indirectly and are in communication with the relevant authorities of both countries. Potential risks and opportunities stemming from both the investigation and agreements will be thoroughly analyzed to prepare response measures in a way that minimizes the impact on our business. Thank you.

[Interpreted] The next question will be made by Mr. SK Kim from Daiwa Securities.

[Interpreted] I'm Sung Kyu Kim from Daiwa. I have some questions regarding your foundry business. So I think there was a recent announcement about the large-scale order win. So if you could elaborate more on those details. And does this mean that there's a likelihood of increased CapEx either this year or next year, including at the Taylor fab?

[Interpreted] Yes. Let me answer the question on the Foundry business. Well, regarding the major client award, I would like to first seek your kind understanding. We're not able to comment on detailed contractual terms. That being said, we have won a $16.5 billion order from Tesla for a next-generation product to be built based on our advanced process technology, which demonstrates the competitiveness of our advanced process capabilities. So with this as an inflection point, we hope to win additional orders from other major customers, and we expect it to help boost higher, more stable fab utilization at our advanced nodes, including the Taylor plant, which will in turn help boost revenue and profit.

Regarding investments, our goal has been to win next-gen chip awards from diverse U.S. clients as we set up our new Taylor fab, which is set to ramp up operations from 2026. Currently, we are working to strengthen local execution to ensure timely operations and customer engagement at the new fab. Meanwhile, our investments in the Taylor plant for this year is projected to be inside the scope of our existing CapEx plan for 2025. That said, when considering the ramp-up time line for the Taylor fab, we'd expect higher CapEx in 2026 versus this year.

[Interpreted] Next question will be made by Jay Hyun Kwon from JPMorgan.

[Interpreted] This is Hyun Kwon JPMorgan. I have some questions about memory. So changes to ASP trends in the second quarter for DRAM and NAND, if you could provide some more details.

And then if you look at the tentative earnings disclosure for the second quarter, it does seem that you recorded some one-off expenses. So do you expect similar one-offs in the third quarter as well?

[Interpreted] Yes. I will cover your question regarding second quarter performance for memory. So due to U.S. tariffs and other geopolitical issues, we did hold a rather conservative outlook on the memory market in the quarter. Later, however, as GPU supply conditions across the industry started to visibly improve, that's when AI-related demand really started to scale, and we saw a clear turnaround in the business cycle from the midpoint of the second quarter onwards.

For DRAM legacy products like DDR4 and LPDDR4x, supply declined amid a broad shift in industry capacity to advanced process nodes, coupled with anxiety from clients over uncertainty of future supply. This led to a steep increase in market pricing across distribution channels starting in the second half of Q2.

Given these conditions, we focused on capturing the short-term upside in demand for legacy DRAM like DDR4, LPDDR4X while boosting sales of advanced products such as HBM3E, DDR5, LPDDR5x and GDDR7. As a result, DRAM bit growth increased by a low teens percentage Q-on-Q, in line with our bit guidance while inventory decreased to below normal levels.

For conventional DRAM, at the start of Q2, based on our conservative market view at the time, we expected ASP to drop by mid-single percentage, but pricing actually ended the second quarter up by a low single-digit percentage versus the first quarter. So after declining in Q1, ASP started rebounding in the second quarter, considering most clients do price negotiations on a quarterly basis. The uptrend in market prices will likely become more fully reflected in ASP starting in the third quarter.

For NAND, driven by growing server SSD demand, bit growth increased by a high 20 percentage Q-on-Q, exceeding our prior guidance, and we saw a significant reduction in NAND inventory for 2 consecutive quarters.

The rebound in demand resulted in a notable improvement in market conditions, limiting the decline in ASP to a low to mid-single-digit percentage Q-on-Q. And for some NAND products, ASP even increased slightly versus the first quarter.

That being the case, Memory business earnings declined compared to Q1 due to one-off expenses, including inventory valuation adjustments, which were recognized in the second quarter as part of conservative financial management, but this is expected to significantly be reduced in the third quarter.

[Interpreted] Sorry, the previous question made by Kwon Yun from JPMorgan, and this question will be made by Kim Dongwon from KB Securities.

[Interpreted] I am Kim Dongwon from KB Securities. I'd like to ask you two questions. First, with 3 major M&As this year, visibility on Samsung's strategy seems to be clearing and market expectations for a major M&A deal in the second half are also rising. What's the company's M&A strategy? And also for the display part, competition among peers to expand the smartphone market share is intensifying. What is SDC's response strategy?

[Interpreted] First, regarding shareholder expectations on M&A as a means to secure growth engines, we have delivered tangible results this year as promised. Following the acquisition of a controlling stake in Rainbow Robotics at the end of last year, Samsung signed agreements in May to acquire Masimo's Audio division and Global HVAC specialist FläktGroup. In July, we started the acquisition process of digital Healthcare Platform, Xealth. These M&As are a part of our strategy to swiftly respond to trends in future growth industries such as AI, robotics, data centers and digital health while further strengthening our position as a premium brand and enhancing overall customer experiences.

In the first half of this year, in addition to M&As, aiming to send future technologies and explore and corporate with leading tech companies, we made venture investments of over $120 million combined in around 40 companies, mainly in AI, robotics and digital health, marking the largest half year venture investment in Samsung's history, despite the high uncertainties involving geopolitics and tariff impacts. As mentioned at the AGM, as part of our commitment to growth and shareholder value, Samsung will continually review its business portfolio while actively seeking opportunities for inorganic growth.

In addition to strengthening the competitiveness of our business, we will proactively address rapid changes in global tech trends to secure technological leadership in a wide range of swiftly evolving industries such as AI, HVAC, medtech, robotics, automotive, electronics, fintech and components. We will share specifics when details are finalized. Thank you.

[Interpreted] Let me give you an answer for the display part. As the smartphone market matures, competition is intensifying. We are using differentiated strategies through technological innovation to reinforce our competitive edge. Among them, our polarizer-free low-power technology named LEAD is an industry's first technology to be developed and mass produced in 2021, where we reduced panel thickness while lowering panel power consumption by over 30%. With the recent expansion of AI, there is a growing demand for low-power and high-resolution technology in the market. With the aforementioned LEAD technology, we'll keep addressing the demand and further strengthen our competitiveness.

Also, as for our foldable products, we have demonstrated our stable technological capabilities and production capacity through which we have introduced increasingly advanced technologies each year. In the latest foldable product, durability has improved as demonstrated by passing the 500,000 folding tests. And with a slimmer panel design competitiveness was also reinforced.

To summarize, touch integrated and power-efficient technologies that combine LTPS and oxide and other high-spec and innovative products have been proactively introduced. Going forward, in form factors like LEAD will continue to develop performance and design differentiated technologies.

[Interpreted] Next question will be made by Ryu Young Ho from NH Investment Securities.

[Interpreted] I am Ryu Young Ho from NH Investment & Securities. I'd like to ask questions about the MX business. Fold7 is receiving better-than-expected feedback. How are the initial sales trend and sales outlook for this year?

Sure. So in light of stagnation in last year's foldable product sales, we very thoroughly revisited our consumer insights and reviewed the products from all angles. And so this year, we've significantly enhanced the product performance and the overall user experience.

The Galaxy Z Fold7 and Flip7, which we unveiled at this year's New York Unpacked event reflect technological innovation that surpassed what existing foldable smartphones are capable of. They feature slimmer, lighter designs, top-tier performance, durability and seamless integration with Galaxy AI to provide real usefulness in people's everyday lives.

So to provide some figures, the Z Fold7 has a thickness of 8.9 millimeters when folded and only 4.2 millimeters when unfolded, which is half the thickness of our first-generation model. And its weight is only 215 grams, so the portability is comparable to bar-type smartphones.

As I mentioned before, the 200-megapixel camera supports photography on par with the Ultra and the durability has also improved, thanks to enhancements in glass, frame and hinge materials.

With the Z Flip7, we improved it to reflect customer demands in terms of design and portability. The new Infinity cover screen has the thinnest bezel among current smartphones, and it's actually 70% thinner compared to the previous model, which provides more aesthetic appeal as well as practical functionality. And we also optimized the new Android OS and One UI 8 for our foldable form factors together with Galaxy AI.

So in actuality, initial results are showing positive growth in line with our expectations. We look to continue the strong momentum from preorders into the remainder of the second half and aim for double-digit foldables growth compared to last year. Thank you.

[Interpreted] The next question will be by Mr. Sei Cheol Lee from Citi Securities.

[Interpreted] Yes. This is Sei Cheol Lee from Citigroup. I have some questions about your Memory business. So there is actually a great deal of market interest still in Samsung Electronics HBM business. Could you elaborate more on second quarter HBM performance as well as future plans, including for HBM4?

And then another big theme is hybrid copper bonding technology. So if you could provide a progress update on this future technology, please?

[Interpreted] Yes, I will take your question on our HBM business. In the second quarter, HBM bit shipments increased by 30% Q-on-Q. And the share of HBM3E from overall HBM sales volume has increased further to a high 80% level. So our goal is to normalize the HBM business. And so we plan to achieve a meaningful expansion in HBM3E sales in the second half versus the first half. We have been steadily securing demand customer by customer by obtaining mass production approval. And we expect HBM3E as a share of total HBM revenue to exceed the high 90% range in the third quarter.

We have obtained mass production approval for 1z-nano mother dies, and we have developed samples of HBM4 based on the 1z process, which have been shipped out to some of our major clients.

Our HBM4 products offer optimized design with the base die fabricated using an advanced logic process, delivering twice the performance of earlier generation HBM3E with significant improvements in energy efficiency.

As we anticipate HBM4 demand to enter into full scale, we intend to expand timing supply in alignment to the rising demand, and we continue to make necessary investments in 1z-nano capacity expansions.

So next-generation stacking technology, hybrid copper bonding has been drawing a lot of attention among customers, and we are in discussions with key clients on the technology in the context of volume production.

[Interpreted] The next question will be by analyst Minsook Chae from Korea Investment Securities.

[Interpreted] So I would like to hear more about your future advanced process road map for foundry. What will be the overall direction? It seems not just for Samsung, but competitors are also moving toward 2-nano volume production. So what is your differentiation strategy in that case?

[Interpreted] Yes. So we have been working to enhance the competitiveness of our advanced process technologies as we seek and obtain more supply orders from large-scale clients. In terms of our advanced node road map, development of 2 nano nodes is currently underway with the goal of achieving greater performance and maturity. And this is part of our long node strategy where we seek to deliver a advanced process node with high degree of execution.

Every year, as new processes are developed, we face various challenges in terms of yield, maturity of performance and timely acquisition of core IP. So to resolve these difficulties, we wish to go beyond our existing single-track road map to adopt a 2-track development approach that distinguishes between leading technologies versus platform technologies.

For a new process development, we will work out yield, maturity, et cetera, with a small number of lead customers and building on that as a base, then the strategy would be to then open up and make the platform technology available to other global customers across diverse application and end markets once we acquire core IP.

We want to minimize process variation between generations focus on improving SI maturity while using design technology co-optimization for additional performance enhancements, and this will solidify the foundation for future growth.

[Interpreted] The next question will be made by Baik Gil-Hyun from Yuanta Securities.

[Interpreted] With the recent acquisition of FläktGroup, there is growing interest in your HVAC business. What's the HVAC market outlook and your strategy for the HVAC business, including the acquired company?

[Interpreted] VP [indiscernible] will answer the following question on the DA business.

[Interpreted] Let me give you my answer. The global HVAC market as of 2024 is valued at approximately $180 billion. With global warming AI data centers and increasing demand for green products, the market is forecast to keep growing. In line with this trend, we'll not only expand our current business, but also acquire and cooperate with leading global players to foster our HVAC business as a future growth engine.

Currently, our business operates in ductless HVAC segment. However, through the joint venture established with Lennox last July, we are expanding our business in North America, the world's largest air conditioning market. With the recent acquisition of FläktGroup, we'll broaden our business scope into the central HVAC segment while also enhancing our position as a pure HVAC player.

FläktGroup and Lennox' outstanding capabilities and SmartThings energy technology will be incorporated to lead the market trend in energy saving. And we'll also expand into specialized markets such as data centers, biotech and commercial applications.

Beyond our current ductless business, we'll enter the central HVAC segment and secure maintenance packages for energy savings and operational cost optimization to build the foundation for a global top-tier HVAC business.

[Interpreted] Next question will be made by Han Dong Hee from SK Securities.

I am Han Dong Hee from SK Securities. I have two questions. First, I'd like to ask about the MX business. What's your profitability outlook for the second half? And what's the direction of your AI strategy?

And next, I'd like to ask about System LSI. The Exynos has reentered your recently launched flagship model. And what improvements make this reentry possible? And can you talk about whether it's likely to be adopted again in the 2026 flagship model?

So first, on the MX second half profitability outlook. Given the uncertain external environment, including potential increased tariff burdens due to changes in U.S. trade policies and currency fluctuations, memory prices are expected to rebound beginning in Q3.

Despite the challenging business conditions, we're aiming to increase smartphone revenue focused on our flagship models with the momentum of our new foldables as well as maintaining the sales momentum of our S25 series.

We're also aiming to expand sales of our ecosystem products like the Galaxy Tab S Series and Galaxy Watch Ultra, driving growth, especially in premium products. We'll also continue efforts in cost reduction, process optimization and eliminating inefficiencies in order to secure robust profitability.

For the AI strategy, we're focusing on enhancing the performance of Galaxy AI in order to improve the user experience and deliver more real-world value. We're at the forefront of a paradigm shift in smartphone interaction, which is a transition from app-centric to agent-centric and from touch-centric to multimodal interfaces. We're aiming for a more personalized and intuitive AI experience by evolving into an open platform that connects to various AI agents and optimizes the interaction depending on the user need. So to get there, we are equipping our devices with optimal hardware components such as the AP and memory, while also researching and developing software technologies that maximize the performance of on-device AI, improve the processing speed, make models more lightweight while also being optimized to our systems.

We have strategic collaborations to deeply integrate AI across the range of Galaxy devices as we continue to expand and develop the Galaxy AI ecosystem.

Together with Google, we implemented the cross-app interface in the S25, which leverages the agent to let users take action across multiple apps with one single prompt, vastly simplifying complex tasks.

And as another example, the Gemini Live feature enables real-time camera and screen sharing, multimodal AI experience that understands and responds to what the user is viewing.

We've optimized these features for the new Fold7 and Flip7 and we'll continue to evolve our AI functionality and its usability for future devices as well. Thank you.

[Interpreted] Yes. Let me take your question on System LSI. So Exynos 2500 made a successful entry into a foldable model that was released in July, thanks to improved AI performance and camera functions. We want to build on this success to expand into other new models. The next flagship Exynos 2600 will be the first flagship chipset fabricated on the latest 2-nano gate-all-around process. We're working closely with the Foundry division on development to secure the required yield and performance so that we can enter the flagship models of key customers in the first half of 2026.

Exynos 2600 offers a significant improvement in NPU performance versus prior version with enhanced support for on-device AI functionality, which will allow users to leverage AI functions in a more comfortable setting. We plan on leveraging 2-nano as our long node for the future, and we're working closely with the foundry division to enhance the process maturity with Exynos as a bridgehead for securing competitiveness of future products.

[Interpreted] Because of the time, we will accept one last question. It will be by Giuni Lee from Goldman Sachs.

[Interpreted] To ask one question on memory. What is your outlook for the memory market in the second half? There are some recent concerns about competition becoming even more intense in the HBM market. So what is your outlook for memory over the second half of the year?

[Interpreted] Okay. So let me answer your question about our outlook. For the server market, there's been a rapid rise in paid subscribers for AI services. So CSPs have been expanding their inference services as well, which is driving investments into underlying infrastructure. Supply conditions have been improving for GPUs and ASICs, which are critical for building out infrastructure. So we expect accelerated growth in demand from AI server applications in the second half. Moreover, we expect robust continued demand for conventional servers and storage for general computing that is required for pretreating data in AI applications.

For PC, we expect upside demand momentum from end of the year promotions as well as other seasonal demand drivers, also the end of support for Windows 10.

For mobile, we project growing demand for high-performance, high-density products, driven by greater on-device AI trends aligned with new product launches by major customers.

So boosted by the overall boost in demand across applications, market prices are expected to increase by a greater margin in the second half for DRAM, while NAND is also expected to see an overall rally in pricing from the third quarter. However, the exact extent of price increases will vary by product depending on supply-demand dynamics. We believe prices of products in legacy DRAM and planar NAND, where there's increasingly tight supply may rise by a bigger extent in relative terms.

So although legacy memory prices are expected to rise, we will continue to focus on advanced node migration for DRAM and NAND to secure competitiveness in the mid- to longer term. We will expand sales of diverse offerings that we have been preparing in expectation of increased growth in AI over the mid to longer term.

For DRAM outside of HBM, we've also been expanding sales of high-density LPDDR5X for AI servers, also high-density DDR5, RDIMM 128-gigabyte and above, 24-gigabit GDDR7 as well, where we already hold a leading position.

In the third quarter, we'll commence mass production and supply of SOCAM as well as reinforce our AI product portfolio. In the third quarter, DRAM bit shipments are expected to increase by high single percentage Q-on-Q. For NAND, we will speed up V8 migration across all applications, including servers to strengthen cost competitiveness while also increasing the share of server SSD sales for better margins.

Server SSDs, in particular, together with product leadership in Gen 5 TLC SSDs, we have seen -- we have obtained a series of customer approvals for high-density 64, 128-terabyte QLC SSDs, which puts us on good track to boost AI server application sales in the second half. This is why we project NAND bit growth at around mid-single percentage for Q3.

Regarding intensifying competition for HBM, for HBM3E, supply actually has grown faster versus demand. So we anticipate supply demand dynamics to change, which will likely impact market prices for the time being. And considering the upward pricing momentum for conventional DRAM, so far, the second half, based on current signals and also near-term expectations, we believe the difference in margins between HBM3E and conventional DRAM is expected to narrow sharply. So to optimize profitability in the short term, this may mean greater need for a more balanced product mix strategy. However, for us, given the strong mid- to long-term demand for HBM driven by AI, we intend to focus on addressing demand for HBM3E while strengthening tight cooperation with customers for commercialization of HBM4 as well. And as an extension, we will continue to develop products for the future, including custom HBM while continuing with necessary relevant investments as well.

[Interpreted] I'd like to thank everybody who shared their valuable opinion, and we'll be sure to refer to them in our decision-making process.

That completes our conference call for this quarter. We wish all of you and those close to you stay strong and in good health. Thank you very much.

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]