Samsung Electronics GDR Stock

Hello, everyone, and welcome to the Samsung Electronics 2026 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.

Welcome, everyone, and thank you so much for taking time out of your busy schedules today to join our 2026 2nd quarter earnings call. We truly appreciate your continued interest in the company. I'm Daniel Oh, Head of Investor Relations at Samsung Electronics. And it is my pleasure to guide you through today's earnings call. For those joining us today, we kindly invite you to visit samsung.com\global\ir, where all materials from today's call, including the sliding deck, and webcast are available and will remain accessible after the call concludes.

First, I would like to briefly mention our important legal disclaimer before we begin the session, as is our standard practice. We kindly ask you be aware that today's discussion may include forward-looking statements that could differ materially from the actual results. For your reference, our full disclaimer is provided on the associated slide.

During today's call, EVP Soon-Cheol Park, our Chief Financial Officer and Head of Corporate Management Operations, will review our second quarter 2026 financial results, shareholder returns and business outlook. I will then follow up with updates on capital expenditures and our sustainability initiatives before handing the call to the business executive officers for details on their respective business performance and outlook. We will then wrap up the call with a Q&A session. We expect today's conference call to last approximately 1 hour.

The executive officers joining us today include EVP Soon-Cheol Park, our Chief Financial Officer and Head of Corporate Management Operations; 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; VP Daniel Araujo, Head of Strategic Marketing Office for Mobile Experience; and EVP Hun Lee, Head of the Sales and Marketing Team for Visual Display.

Now I would like to turn the call over to our CFO, Soon-Cheol Park, for his comments on our second quarter financial performance.

Thank you, Daniel. Good morning, and thank you, our shareholders, investors and analysts for joining today's earnings call. I'm Soon-Cheol Park, CFO of Samsung Electronics. Building on our record first quarter performance, we delivered new highs in the second quarter for both revenue and operating profit driven by our continued technology leadership in AI and ability to navigate challenging market conditions.

We achieved these results despite the ongoing macro and geopolitical uncertainty demonstrating the differentiated technology we have built across our core businesses. Looking ahead, we will keep strengthening our future growth engines through sustained technology innovation further expanding our leadership in the global market.

Let me now review our financial results for the second quarter. Our total revenue reached KRW 171.5 trillion, up 28% quarter-on-quarter, while operating profit increased 56% to KRW 89.5 trillion, and the operating margin improved to 52% up from 43% in the previous quarter. We also continued to actively invest in future technology leadership with R&D expenses, reaching a new quarterly high of KRW 16 trillion from KRW 11 trillion in the previous quarter.

On a quarter-on-quarter basis, net profit increased 52% to KRW 71.6 trillion and earnings per share for both common and preferred shares increased by 52% to KRW 10,849, which is, I believe, among the highest level of global tech companies.

The DS division added to last quarter's record performance at the shipment of both DRAM and NAND semi all-time highs driven by robust market demand and the strength of our products. System LSI faced a headwind from the mobile market. On the other hand, Foundry gained from higher utilization rates and growing demand for our advanced node while continuing to expand orders from major customers for 2 nano HPC. The DX division achieved year-on-year revenue growth supported by strong sales of premium and AI product. However, operating profit declined as rising component costs low profitability.

To minimize the decline in product profit, we will strengthen our portfolio with more high value-added products and continue to improve our cost structure, optimize our process and enhanced operational efficiency. On currency effects, the stronger U.S. dollar against the Korean won had a positive quarter-on-quarter impact of around KRW 3.1 trillion on operating profit, mainly in our component businesses. The executives with us today will share more detailed business updates shortly.

Now I would like to discuss shareholder returns. The Board of Directors today approved our second quarter dividend of KRW 374 for both common and preferred shares. Under our 3-year shareholder return policy for 2024 to 2026, we have committed to on annual regular dividend of KRW 9.8 trillion distributed through quarterly payment of KRW 2.45 trillion. The second quarter dividend is scheduled to be paid in August. Our current shareholder return policy continues to be of great interest to our shareholders. Consistent with what we communicated in the previous earnings call, we remain fully committed to delivering on the program as promised and we'll provide further updates very soon.

Let me now turn to our outlook for the second half of the year. We expect our growth momentum to continue building in the second half supported by sustained strength in semiconductor demand. For the DS division, despite the launches of new finished products, macro uncertainties, rising component and material cost pressures are likely to continue, and the division will remain focused on defending profitability. The DX division will strive to overcome profitability changes, challenges by strengthening its businesses and fundamentals. We are targeting leadership in the agentic AI market by delivering hyperpersonalized AI experiences with an open platform and sales expansion of premium products across our businesses.

At the same time, we will improve our business fundamentals through AI driven innovation and better resource efficiency, while building a foundation to respond to market changes. For the DS division, we anticipate the division will continue delivering growth driven by strong demand, stemming from the rapid spread of agentic AI.

In Memory, we will further strengthen our technology leadership and lead the market with expanded sales of high-performance products such as HBM4, including HBM4E, DDR5, SOCAMM2 and eSSD. System LSI will grow in high value-added business by advancing it to new custom SoC business while broadening applications for sensors and power ICs.

Foundry will improve earnings through increased orders for products from advanced nodes as well as those tied to high-growth AI and HPC. In the display business, sales volume may decline due to higher set prices arising from memory supply constraints, yet we aim to grow revenue through expanded sales of premium products and full-scale mass production at our Gen 8.6 line. Finally, the DS division will continue to strengthen its core technology through both the optimized CapEx and productive R&D investments. The DX division will also continue to bolster our new growth business, including robotic HVAC, automotive electronics and medical technology to lay the groundwork for mid- to long-term growth. Thank you.

Thank you, CFO Park. Let me now share an update on our capital expenditures. Second quarter was KRW 16.8 trillion, representing a sequential increase of KRW 5.5 trillion. Of this quarterly quarter, KRW 15.4 trillion was allocated to DS division, while KRW 0.7 trillion was invested in display business.

By business segment, CapEx for Memory increased quarter-on-quarter as we expanded investments in the new fab in Pyeongtaek and other infrastructure projects on expectations of continued strength in AI demand. We also continue to invest in advanced R&D to extend our technology leadership. CapEx for the Foundry business also increased quarter-on-quarter as investments were expanded to support the Taylor fab ramp-up in the United States, which remains on track. In the display business, capital expenditure increased sequentially due to ongoing supplementary investments in the Gen 8.6 line.

Now briefly, I would like to highlight our key sustainability achievements. In June, we published our 2026 sustainability report, which contains our full account of our progress. On the environmental front, we continued to secure renewable energy by signing on several key PPAs for major global sites. Consequently, the company's renewable energy transition rate reached 32.5% in 2025, an increase of 1.1 percentage points from the previous year.

We have also increased the proportion of recycled plastics in our products to 33.7%, representing a 2.7 percentage point increase year-on-year, thereby advancing our commitment to a circular economy. On the social front, we have achieved 4 consecutive years without any serious workplace accidents, a track record that reflects our steadfast commitment to workplace safety. For more details regarding our sustainability progress, please refer to our 2026 Sustainability Report, which is available on our website. We remain committed to further enhancing these efforts moving forward.

Now I would like to invite our executive officers to provide updates on their respective business units. We will begin with Jaejune Kim, EVP of the Memory business.

Good morning. This is Jaejune Kim from Memory Global Sales and Marketing. In the second quarter, our demand was clearly strong in the memory market, primarily driven by AI applications. In particular, with the spread of agentic AI, additional supply request based on AI-driven demand are mainly from major hyperscaler customers continued for both DRAM and NAND.

As the demand for AI remained robust, we expanded sales focused on server applications, where demand momentum was strong under the given production capacity. As a result, our memory business in the second quarter achieved a record high bit shipment for both DRAM and NAND, while the bit sale portion of some applications also reached an all-time high.

Moreover, for HBM, we expanded the supply of HBM4 with differentiated performance and strengthened our technology competitiveness by shipping the industry-first HBM4E samples to major customers.

Thus, in the second quarter, our DRAM bit shipment increased by the low teens percentage compared to the previous quarter, exceeding our guidance. For NAND, bit shipment increased by low single-digit percentage in line with our guidance. In addition, our ASP in the second quarter rose by mid-40% for DRAM and high 60% for NAND compared to the previous quarter. As a result, based on strong market demand and our product competitiveness, we have once again broken our record for the highest quarterly results following the previous quarter.

For the second half of the year, while hyperscalers continue to expand infrastructure investments to establish early dominance in the AI market and the spread of agentic AI accelerates, we have witnessed robust demand and not only for AI servers, but also for general computing servers. Looking forward, we expect this trend will accelerate further.

As for mobile and PC applications, although we are observing some demand moderation as customers increase their end product prices, the pace of additional demand for server DRAM, SSD and HBM, thereby exceeding such moderation. Therefore, it seems evident that the gap between supply and demand in the following year will become much wider. Despite our efforts to increase production, our customers' demand is outgrowing our supply. Thus, we plan to preemptively optimize our product mix for both DRAM and NAND, considering the changes in demand by applications and the voice of customers.

Regarding the third quarter bit growth outlook, as inventory levels for DRAM and NAND are significantly low, we expect Q-o-Q bit growth to be in the mid-single digit for DRAM and high single-digit for NAND. We plan to proactively address AI-related demand across all product segments and continue to lead the market. by leveraging our industry-leading technology competitiveness and broadly diversified product lineups. Thank you.

Good morning. This is Jason Shin from System LSI business. In the second quarter, our overall demand softened due to flagship smartphone seasonality and weakness in the Chinese mobile market. However, we sustained our quarterly revenue by driving sales of SoC and imaging sensors in the high-volume mobile segment, achieving a record high first half revenue. We also secured our next-generation flagship SoC and continue to build momentum with new awards from major customers across multiple categories such as SoC, image sensor and LSI product.

In the second half, amid persistent cost pressures stemming from rising component prices, overall consumer market demand is expecting to soften. Even in such adverse market conditions, we will strengthen the competitiveness of our core business and further expand into high-value segments. For SoC, we are securing next-generation flagship orders and driving stable sales and also developing more new business opportunities in custom SOC.

For image sensor, we are strengthening our competitiveness in the 200-megapixel sensor and expanding to other applications -- various applications. For LSI, we will continue to reinforce our high-end DDI leadership and grow our IC business. Thank you.

Hello, everyone. This is Sukchae Kang from the Foundry business. In the second quarter, revenue increased driven by growing demand for Memory HBM-based type products as well as product demand centered on customers in the U.S. Earnings also showed significant improvement before incentive-related charges. From an order perspective, we continued to expand our order pipeline centered on major HPC customers, including cloud service providers for our 2-nano process.

In the second half, we will commence mass production of new mobile-oriented products based on the second-generation 2-nano process while ramping up volume production of LPU products for major 4-nano customers and scaling up sales of memory-based die products. Combined with revenue growth across key customers in both the U.S. and China at all nodes, we expect to achieve double-digit or higher year-on-year revenue growth.

Notably, the revenue contribution from advanced nodes is projected to exceed 50%, while the share of AI/HPC applications is anticipated to expand significantly from the high-teens percentage in 2025 to over 30% in 2026. Against this backdrop, we expect profitability improvement to gain full momentum through our strategic shift of our business towards high-growth segments. Furthermore, we will continue to strengthen our mid- to long-term growth foundation by expanding orders for advanced node and AI/HPC oriented products. Thank you.

Good morning. This is Charles Hur from Samsung Display. I will now brief you on our results for the second quarter. For the mobile display business, our performance improved quarter-on-quarter, thanks to solid demand of high-end mobile products. For the large display business, both sales volume and revenue increased quarter-on-quarter driven by the growth of gaming monitor market.

Next, I share our outlook for the second half. Market uncertainty is expected to continue in the second half due to tight memory supply and demand conditions. However, we aim to maintain profitability through a high value-added product and operational efficiency supported by major customer's new product launches.

In the smartphone market, we will focus on the premium segment based on our competitive technology in low power consumption and diverse form factors. For IT, we plan to expand our revenue through the ramp-up of our new 8.6 generation IT OLED line, ensuring timely panel supply. QD-OLED products will increase sales by broadening our customer base in the gaming monitor market and strengthening our product lineups.

We'll also expand differentiated OLED products to the tablet, gaming and automotive market. In the second half, we continue to strengthen our cost competitiveness and accelerate the development of differentiated technologies to solidify our leadership in high-end market and strive to achieve stable performance. Thank you.

Hi, everyone. This is Daniel Araujo from the MX division. Let me share our Q2 results and future outlook. Due to memory shortages, the smartphone market volume declined year-on-year, primarily in the price-sensitive mass segment, while value increased driven by higher ASP and an expanded share of premium products.

For the MX business, Q2 revenue reached KRW 32.3 trillion, and our combined operating profits across the MX and Network businesses turned to a loss of KRW 0.7 trillion. With the solid flagship sales led by the S26 family as well as strong A-Series momentum, our smartphone sales volume increased quarter-on-quarter with revenue also growing year-on-year. However, profit declined due to industry-wide factors, including rising component costs.

In the second half of the year, annual smartphone shipments are expected to decline as demand softens amid macroeconomic uncertainty and rising memory prices. Nevertheless, demand in the premium segment is projected to remain resilient supported by the expansion of AI-enabled features and innovation in form factors. As a result, both full year sales volume and ASP are expected to increase.

While the current business environment is exceptionally challenging, we remain committed to strengthening AI leadership through personalized and intuitive experiences. With this, we are prioritizing 2 strategic pillars: First, we will drive overall market share growth through a flagship first expansion strategy. Within our flagship lineup, we are increasing the sales mix of high value-added products, including our top-tier ultra model, and the newly launched foldable Z8 Series, which offers an optimized mobile experience built on 7 years of innovation and form factors tailored to users' diverse lifestyles.

We will maintain S26 momentum through sustained marketing and the launch of a new S26 FE, while expanding upselling in the mid- to high-end segments by bringing our core AI experiences to the A Series. We aim to capture market opportunities resulting from component supply shortages and drive volume market share growth.

Across the broader Galaxy ecosystem, we will focus on increasing the premium product mix while bringing a new form factor experience for the AI era with the launch of Intelligent eyewear later this year. Second, we will continue driving end-to-end efficiency initiatives while staying agile in response to market shifts, including dynamically adjusting our sales mix and channel operations based on profitability. Thank you.

Hello, everyone. I'm Hun Lee, Head of the Global Sales and Marketing team of Visual Display. I'll briefly explain the market conditions and share our second quarter results, along with the outlook for the second half.

In the second quarter, overall TV demand demonstrated modest growth versus last year driven by a major global sporting event, but declined versus previous quarter. Under these circumstances, we were able to increase both sales and profitability compared to last year, mainly by preemptively capturing demand for the major sporting event and successfully launching our new product categories. However, profitability displayed a marginal drop quarter-on-quarter due to raw more material costs such as memory.

Now let me go over the outlook for the second half of 2026. In the second half, TV market demand is expected to slow down following the end of the sporting event and macroeconomic and geopolitical uncertainties are likely to persist. Against this backdrop, we will expand sales of new categories by leveraging our product competitiveness and highlighting the differentiated experience. Building on this, we aim to strengthen strategic partnerships with key channel partners and capture peak season demand.

Furthermore, we will pioneer the AI TV market by delivering the differentiated viewing experience powered by Vision AI and continue to advance our AI features to reinforce our sales leadership in the face of intensifying competition. At the same time, we will secure future growth engines and elevate profitability by expanding our advertising service business while also strengthening OS competitiveness to further broaden our licensing business. This is end of my speech, and thank you for your attention.

Thank you, all speakers. That brings us to the conclusion of our second quarter performance review, and now we will proceed with the Q&A, which will be conducted in Korean. Our CFO, Soon-Cheol Park, will address any company-wide questions, while questions regarding the business segments will be answered by respective business representatives. Thank you for your attention.

[Interpreted] [Operator Instructions] The first question will be made by Dongwon Kim from KB Securities.

I am Kim Dongwon from KB Securities. Congratulations on your record high results. I have 2 questions. And first of all, as you are now halfway through the final year of your 3-year shareholder return policy, could you update us on shareholder returns and your direction for the next policy? And the other one is on memory. The supply shortage in the memory market has continued? And do you expect the supply shortage to continue into next year? Also, if possible, could you share your mid- to long-term outlook for memory demand?

[Interpreted] I will answer the question on shareholder returns. As mentioned during the previous earnings call, we remain committed to implementing our current 3-year shareholder return policy as promised. The Board and management are actively discussing the specific implementation plan for the current shareholder return policy, including this year's special dividend. At the same time, they're also engaged in in-depth discussions on the next shareholder return policy.

Regarding our current policy of returning 50% of free cash flow, I would like to note that customer prepayments under LTAs for our memory business as well as share repurchases for employee compensation may affect FCF. We will continue providing details going forward. For our next shareholder return policy, we are working to drive shareholder value while maintaining on optimal equilibrium between reinvesting for future growth and delivering long-term value to shareholders. We look forward to sharing the details with our shareholders soon.

[Interpreted] Yes. Let me answer your question on the supply-demand dynamics for memory. So amid the accelerated adoption of agentic AI, the amount of tokens being consumed has also grown exponentially. This is driving unprecedented rise in demand, not only for AI servers, but also for broader computing service as well. As many AI frontier model developers struggle to secure sufficient cloud capacity from the hyperscalers, they are increasingly turning to the neo cloud providers for additional service capacity. And as neo cloud providers emerge as major buyers for server OEMs, the OEMs are continuing to seek significant supplies of memory to meet growth -- growing demand.

Nonetheless, as memory supply constraints limit expansion of AI infrastructure capacity at hyperscalers and at the neo cloud providers, the AI frontier model developers increasingly approaching us directly to secure their memory supply. These customers are sharing their mid- to long-term demand forecasting and requesting multiyear supply agreements to ensure access to sufficient capacity. So even as proliferation of agentic AI is accelerating memory demand growth, available supply in the industry again remains significantly limited relative to the requirements.

Moreover, despite industry-wide increases in CapEx, considering the lead time from new fab construction to actual wafer production, which exceeds 3 years, this means that any meaningful increase in supply capacity will take considerable time. So we believe it will be unlikely to see any significant increase in incremental supply through 2028. Based on the incoming requests that we have been seeing from the customers, unmet demand from this year is likely to carry over into the following year, contributing to tight -- tighter supply conditions going forward. The supply constraints are expected to become even more severe in 2027 than 2026, reinforcing our view that the supply shortage will persist through 2028.

Beyond 2029, it is hard to say because of more limited visibility. However, with the surge in AI tokens, expected to drive exponential demand over the mid- to long term. Customers who want to secure substantial AI service infrastructure are increasingly approaching us for multiyear supply. These multiyear arrangements actually are aligned with our objective of hedging our mid- to long-term risk. And so we have been engaging in discussions with customers, prioritizing those who can guarantee committed future captive demand.

Through this kind of approach, we expect to transition our business structure from one that was previously overexposed to supply-demand cycles to a more stable and predictable model. Multiyear supply agreements will provide greater visibility into mid- to longer-term demand, allowing us to execute on our investments with greater flexibility. Under these improved conditions, we'll continue our disciplined supply management approach, deploying clean room capacity first through preemptive investments and then equipment installations, flexibly depending on changes in demand conditions.

[Interpreted] the next question will be by Mr. Ricky Seo from HSBC Securities.

[Interpreted] Congratulations on the good performance. I had one question on the DRAM supply mix. I believe at the last earnings call, you explained that between HBM and conventional DRAM, you wanted to maintain a balanced product mix. So is that stance still valid today? Also, I heard some good news about your HBM4 performance. So could you provide us an update, a little bit more detail on the status of your HBM business?

Yes, let me take that question. So during our last call, we did explain that to support sustained AI-driven demand, independent of the profitability difference between HBM and conventional DRAM, we intended to maintain a balanced supply mix. And as an extension to that, we continue to maintain the same approach amid rapid growth in HBM demand.

For HBM4, which is drawing a lot of market attention customer qualifications for individual projects are being wound down smoothly. And we are seeing a rapid increase in demand, in line with the ramp-up schedules of customer projects in the second half, supported by the expansion of our 1Z-nano process capacity and yield improvements, which are progressing as planned. We continue to expand our HBM supply capacity.

Consequently, we expect HBM4 sales increased by more than 3 full Q-on-Q in the third quarter. Based on our outlook for the second half, HBM4 is expected to account for well over 60% of our total HBM revenue mix. So in the second half, we believe we will be able to achieve HBM market share broadly in line with our overall DRAM market share, resulting in a more balanced business portfolio.

Looking to next year, based on the HBM supply agreements that we have already signed with our customers for 2027, together with the technological leadership of our HBM4E product, which we were the first in the industry to sample, we believe we have established sufficient product competitive to commercialize with our major customers as planned. That said, alongside the spread of agentic AI, we're also seeing exponential growth in general purpose computing demand. We're closely monitoring the relative pace of demand growth for HBM and server DRAM, while maintaining optimal product mix to support long-term AI demand momentum.

Looking to next year, we expect industry supply to remain constrained, and we'll manage our HBM and conventional DRAM business in a balanced manner, achieving HBM market share in line with conventional DRAM share.

[Interpreted] The next question will be made by Sei Cheol from Citigroup.

[Interpreted] I'm Sei Cheol from Citigroup. I have 2 questions regarding company-wide matters. First is about bonus accrual. I remember that the bonus accrual was not recognized in the first quarter. Could you comment on the amount of the second quarter bonus accrual and your plan going forward? And also, the second question is about the U.S. ADR. Following a competitor's U.S. listing, there has been growing market interest and the possibility of a Samsung ADR. Also, there have been recent media reports that the company is in the early stages of reviewing a U.S. listing. Could you comment on the possibility of an ADR listing?

[Interpreted] First, I will answer the question on the bonus accrual. To provide reasonable compensation aligned with business performance and secure top talent, the company operates a performance-based incentive program. As negotiations were still underway and the incentive details were not yet finalized. No incentive accrual was recognized in the first quarter. In the second quarter, we recognized a cumulative accrual for the first half reflecting a special performance incentive equivalent to around 10.5% of cumulative first half operating profit.

To help with understanding, it's important to note that there is a timing difference under accounting standards between recording a bonus accrual in the financial statements and recognizing the related expense in the income statement. A portion of the second quarter bonus accrual was included in the cost of work in progress inventory as manufacturing labor costs in accordance with labor -- in accordance with accounting standards. Thus, the recognized expense amount in the 2Q income statement is lower than the total bonus accrual.

The remaining capitalized amounts will be recognized as cost of sales when the related inventory is sold to customers. This is standard accounting treatment. Accordingly, the bonus accrual amounts recorded in a given quarter will not necessarily match the recognized expense in that quarter's income statement. Beginning in 3Q, the expense will be recognized in line with sales of the related inventory. Thus, the second quarter earnings reflect this accounting specific characteristic.

Next, I will answer the question on the ADR. An ADR listing involves more than simply listing overseas. It requires careful consideration of fundraising needs, the effect of expanding the global investor base and the additional disclosure and operational burden. In addition, an ADR is a structure where a limited portion of shares is treated in a separate market. So liquidity and supply-demand conditions in the overseas market may create a value gap between the ADR and the domestic underlying shares.

We thus need to carefully review whether it would provide tangible benefits to all shareholders, including domestic shareholders who have long trusted and invested in the company. Since the company provides stable cash generation based on its diversified business portfolio, the need for an ADR as a means of raising new capital is not high. While recent media reports have suggested the possibility of a U.S. listing, we're not currently reviewing an ADR issuance. That said, from a mid- to long-term shareholder value enhancement perspective, we view it as one of several possible options that could be open for consideration.

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

[Interpreted] Yes, this is Dong Hee Han from SK Securities. Thank you for the opportunity to ask 2 questions, one on Foundry and one on MX. First, could you provide an update on some order awards from major customers for advanced process nodes? And how do you intend to improve the profitability of the MX business and also monetization plans for your service offerings as well?

[Interpreted] Yes, let me cover the answer for foundry as well. I will update you on the advanced node customer order wins for the second quarter. We have secured 2-nano projects from major CSPs and AI/HPC customers and have commenced the project design phase on those projects. We're also in talks with Broadcom and other major customers on diverse other projects as we continue to broaden our design win portfolio across advanced process nodes. Building on this order momentum, we expect our 2-nano project wins to increase by more than double year-over-year in 2026.

So for MX. Right now, the massive demand for AI servers is creating a shortage and driving up prices for mobile memory. We already saw this in Q2 as memory prices rose quarter-on-quarter, leading to pressure on our profitability, and we expect that soft burden to continue through the second half of the year. To manage this, we are focused on maintaining strong sales momentum of the S26 series while ensuring the successful launch of new premium products coming out in the second half, such as the new foldable series Tab S12 and Watch Ultra 2.

We're also putting a lot of effort into upselling within the A Series, specifically with the A57 and A37. And on top of that, we are tightening up how we allocate resources across areas like procurement, sales and R&D to minimize the impact on earnings. We absolutely recognize the importance of expanding value creation beyond selling devices. So we're looking into various ways to generate revenue, leveraging our global installed base.

But rather than just chasing short-term profits, we are focused on a premium value approach, providing meaningful value and real convenience like hyper-personalized services tailored to each user's specific situation and context, all without compromising the user experience. That said, we're taking a phased approach, considering factors such as service maturity and how our global customers are responding.

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

[Interpreted] Yes. Thank you for the opportunity to ask some questions. My name is Jay Hyun Kwon from JP. I'd like to ask one question on Memory and then a company-wide question as well. First regarding Memory. AI-related demand growth appears to be spreading beyond DRAM into NAND and also server SSD as well, drive greater interest in the NAND market. So if you could provide a business update on that and highlight some of your unique competitiveness?

And then my next question has to do with HARMAN's acquisitions of ZF and Sound United. What are the expected benefits from those acquisitions? And what will be the strategic or the strategy for leveraging those assets?

[Interpreted] So I will cover the first question on NAND. Up to now, market interest is more concentrated on DRAM rather than NAND. But with the recent spread of agentic AI, we are now seeing strong demand growth for server SSD across a broad range of segments, such as general purpose computing servers or dedicated storage servers for KV cache. NAND is also transitioning toward a higher value-added business centered around server SSD.

NAND, in fact, made a significant contribution to our solid Memory business performance in the second quarter. We are also in talks with major customers on multiyear agreements to enhance the mid- to long-term visibility of our NAND business as well. We are also proactively addressing server SSD demand growth related to AI use cases. And this year, server SSD is expected to exceed 60% of our NAND sales mix, which is an increase of more than 20 percentage points year-over-year.

And to meet growing demand for high-performance TLC-based storage, our PCle Gen6 SSD have been receiving positive feedback already from major customers for differentiated performance. We expect to take a leading position in the early market for next-gen Gen6 AI platforms translating our technology leadership and solutions into tangible business results. On the QLC front, after completing development of our V9 2-terabit QLC in March. We've since expanded our product lineup to include 256 terabyte high-capacity server SSDs. We also expect QLC bit shipments in the second half to more than double versus the first half.

To prepare for the future V10, V-NAND featuring bonding and a 3-stack architecture scheduled for mass production in August. By increasing the share of advanced nodes, we will improve bit productivity to better respond to growing customer demand while ensuring timely supply of V10-based solutions for applications requiring high in-out speed. We will continue to develop new products timely -- in a timely manner to meet customer demand for new technology and further solidify our position in the NAND market for next-gen AI platforms.

[Interpreted] As a member of HARMAN's Board, let me address your question. To actively respond to rapidly evolving market trends and strengthen business competitiveness HARMAN recently entered into 2 M&As. In the automotive business, by acquiring ZF's ADAS business, we move beyond digital cockpits and car audio products into the ADAS business, providing smart camera sensors and high-performance controllers. This acquisition will not only broaden the customer base and create a new engine for stable growth, but also strengthen the digital cockpit business by adding ADAS capabilities, positioning HARMAN to proactively address the tech trend toward integration around centralized controllers in future vehicles.

Going forward, HARMAN will leverage synergies with Samsung to deliver enhanced in-vehicle IT and AI experiences and expand into autonomous driving to become a leading global player in auto electronics. Also in the Lifestyle business, the acquisition of Sound United will optimize our brand portfolio and enhance the recognition of our premium audio brands. reinforcing our position as a global leader in audio. In addition, to respond to evolving technologies and customer needs in the audio market, we need to expand consumers' connectively and sound experiences. To this end, we plan to strengthen our collaboration with Samsung in AI and connectivity.

[Interpreted] The next question will be by Min-sook Chae from Korea Investment & Securities.

[Interpreted] This is Min-sook Chae. Across the memory market overall, we're hearing a lot news about multiyear contracts. I believe at the last call, you also said that Samsung Electronics was also pursuing multiyear arrangements. So to the extent possible, could you provide us with the status update and some color on the terms?

[Interpreted] Yes. Let me cover the question on memory multiyear contracts. So amid growing demand for AI service infrastructure in the mid- to longer term, market expectations are rising, but the memory supply shortage is likely to persist for an extended period. As a result, many customers are requesting multiyear supply agreements from us. These long-term arrangements are, in fact, aligned with our own interest of hedging against mid- to long-term future risk.

And so accordingly, we are negotiating the contractual terms giving priority to customers willing to accept mutually binding and contractual conditions and we can provide assurance about committed demand. We continue to see strong demand for additional supply across both DRAM and NAND with market prices on the rise, almost all major customers are interested in asking for long-term supply. So it's increasingly difficult to accommodate all of the requests given our available capacity.

Initially, we intended to maintain flexibility in supply allocation and plan to allocate approximately 60% to 70% of our total capacity to long-term supply agreements, while preserving sufficient capacity to support customers without multiyear contracts. However, given the growing number of customers seeking multi-year commitments, including those who already have existing agreements, the capacity allocation is increasingly becoming constrained.

But we actually have been signing multiyear supply agreement based on a 5-year term. And this is by contract, subject to annual negotiations where the parties can agree to add on additional year, effectively operating on a rolling basis. We want to establish this type of rolling contract-based business structure for greater visibility. And we have already finalized agreements with the top 5 global data center customers, are also in the final stages of talks with 5 additional major accounts to support their AI-related demand. That said, given that more customers are also seeking multiyear supply arrangements, we expect this number to increase.

So once we finalize on the currently pending contracts as well, we believe that DRAM and NAND supply volumes under multiyear supply contracts will easily account for 60% to 70% of our planned capacity based on our current mid- to long-term production plan. We will continue discussions with other customers also seeking additional supply and examine various options in conjunction with potential mid- to long-term capacity expansion scenarios.

To enhance the binding nature of multi-year supply commitments, we've included substantial advanced payments as a contractual requirement to be maintained over the multi-year contract period. We've already received a significant portion of these payments and the overall balance is expected to grow going forward. So we have already received 1/4 of these payments. We cannot share more on the size of the advanced payments due to our NDA commitment.

Regarding our pricing model for multi-year agreements, our objective is to incorporate pricing structures that provide sufficient compensation for a certain level of future investment risk. We're applying differentiated pricing models depending on the customer segments and product categories and progressing on contract discussions through mutual alignment. For mainstream products, we have established minimum price floors at a level to -- sufficient to mitigate against future investment risk arising from market price volatility.

Through these multiyear supply agreements, we aim to establish a more stable and predictable business structure from a mid- to longer-term perspective by providing greater supply visibility to key customers that are playing a very critical role in building the AI ecosystem. We will support the sustainable growth of the broader AI industry. Importantly, we continue to maintain a balanced customer portfolio without expensive overreliance on any specific customers, and we apply the same principle to our multiyear supply agreement.

Historically, the Memory industry has experienced recurring cycles of upturns and downturns driven by demand fluctuations in consumer-oriented applications. However, by increasing the share of longer-term backlog-driven business, we hope to significantly enhance the stability and visibility of our business. Going forward, we'll continue to strengthen our leadership, expanding the portion of our business portfolio focused on AI application.

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

[Interpreted] Yes. This is Sung Kyu Kim from Daiwa Congratulations on good performance. I have a question for Foundry and also VD. For foundry, as growing customer commitments are expected to put pressure on your available capacity. Could you provide an update on any plans for capacity expansions for your Taylor fab or Pyeongtaek, also a potential conversion of legacy lines to advanced processes?

And for VD, amid challenging business conditions, I understand there's been a change in the management, the leadership. So what is the mid- to long-term plan of the new leadership?

[Interpreted] Yes. Let me cover the question on Foundry. Given that demand growth continues to outpace expansion of advanced node capacity, we are taking proactive steps to expand our advanced node capacity. For Taylor Fab 1, our Fab 1 is preparing to commence operations by 2026 as planned, with plans to gradually ramp up 2-nano capacity. And also to ensure timely capacity readiness in line with growing customer demand, Taylor Fab 2 will begin construction by the end of this year, targeting mass production by 2030.

We're seeing an increase in customer inquiries for 1.4-nano as well. We are currently reviewing options to potentially secure additional fab capacity. Detailed plans will be developed in phases based on customer engagements, order development and ongoing discussions. For mature process nodes, our strategy is to optimize our portfolio by shifting toward higher value, higher-margin applications, strengthening our focus on specialty technologies that require differentiated capabilities. Specifically, we're expanding capacity in growth areas with increasing customer demand, such as 8-nano, 17-nano, CIS, eNVM while securing capacity for next-gen technologies such as ISC and silicon photonics.

[Interpreted] Let me cover the question on VD. With the recent leadership change, we intend to strengthen our growth strategy by building on existing strength while responding to the industry shift toward AI and service-centric business models as well as evolving cost needs. The TV set market has remained stagnant, whereas the CTV advertising and services market continues to grow. From a mid- to long-term perspective, we are building on AI TVs that will lead the next era to proactively address the market shift towards services and changing consumer trends while also preparing our device and platform strategy to expand our scale.

By delivering optimal consumer experiences throughout our offerings, including content, we aim to expand our presence as a service platform company. Through this, we will strengthen both growth and profitability. First, with AI TVs, we will differentiate user data and context-based agent AI experience to strengthen our product and market competitiveness. By understanding and remembering users, we will provide context-aware media and lifestyle experiences and expand AI TV's role as everyday devices. At the same time, we will enable consumers to experience the value of agentic AI in their daily lives.

In addition, for TV Plus, we will diversify content and secure popular IP to strengthen our content competitiveness. We will improve usability to advance the content discovery experience and further enhance AI-powered hyper-personalized content recommendations to improve customer satisfaction.

[Interpreted] The next question is by Mr. Simon Woo from Bank of America Securities.

[Interpreted] This is Dong-je Woo from BofA. I also have 2 questions. First, on the Foundry side, what is the current status of utilization rates and also yields? And it seems that margins overall are improving so to what extent are margins expanding? And when do you expect a turnaround to profit for Foundry?

Second question regarding employee compensation packages and also shareholder returns. So you may be required to do a sizable share buyback but if you have to do both at the same time, employee compensation and share buyback, do you believe that you can do that all at once? Would that be feasible in the management's view?

[Interpreted] Yes. Let me answer your question on Foundry. Regarding utilization, utilization rates have improved year-over-year across all nodes. Advanced nodes, 8-nano and below, actually have reached full utilization levels as we maximize sales of high-growth products with underlying -- strong underlying demand. On the yield side, building on the success for mass production of first gen 2-nano technology, we will be ramping up second-generation 2-nano production in the second half. And through this and continuous process optimization, we expect to be able to stabilize yields and improve overall manufacturing productivity.

From a profitability perspective, we expect improvements -- significant improvements year-on-year, supported by higher utilization, improved yields and the effect of pricing adjustments. While it is difficult to predict exactly when we will turn around due to the nature of the foundry business, which is driven by customer orders, we believe the turnaround is possible in the near term.

[Interpreted] I will cover the question on share buyback. The use of treasury shares requires consideration of the respective purposes of employee compensation and shareholder returns together with the relevant regulations and decision-making procedures. Any plan to hold or dispose of treasury shares for employee compensation, must follow shareholder approval and other procedures under the revised Commercial Act.

Likewise, any share buyback or cancellation for shareholder returns will be carried out in accordance with the relevant laws and Board resolution. However, with respect to the timing of share buybacks rather than one large-scale execution, we will determine the optimal method after considering both shareholder value and the effectiveness of employee compensation. We'll strive to develop a capital allocation strategy that strikes the right balance between the company's sustainable growth and maximizing shareholder returns.

[Interpreted] The next question will be by Mr. Kyunga Lee from CGS International Securities.

[Interpreted] Yes. This is Kyunga Lee from CJSI Securities. I would also like to ask 2 questions. First is on your SoC business. So I think we are seeing a structural transition in the market with limited growth in mobile demand and higher entry barriers in custom silicon. So what is your strategic road map for the SoC business?

And then my second question is on -- for SDC displays. So I think there is growing interest. Your Gen 8.6 IT OLED line has started to ramp mass production. So I'd like to hear more about your strategy in terms of how to deliver competitive advantage and also in terms of margin.

[Interpreted] Yes, we will cover the first question on System LSI. So as on-device AI capabilities are increasingly becoming important differentiating factors in mobile, we are continuing to enhance AI performance while strengthening our competitiveness in next-gen SoC solutions. And we have secured contracts for next-gen flagship SoCs with both development and production progressing smoothly according to plan.

With the expansion of AI customers are increasingly demanding customized semicon solutions tailored to their needs, leading to growing demand for custom SoCs or total solution, leveraging our comprehensive capabilities across design, foundry, memory and packaging, we're actively pursuing global customer opportunities with our differentiated total solution offering.

[Interpreted] I'll answer the question on Display. As you mentioned, starting in July, we began mass production at our 8.6 Gen IT OLED line based on the mass production experience and process technologies, we've built in mobile OLED, we have secured the performance and quality required by the market. We are striving to enhance profitability by continually improving yields. With the launch of the new 8.6 Gen line, we will further expand OLED adoption in the IT market and drive revenue growth.

However, the increase in fixed costs during the initial ramp-up period of the new line is expected to have some short-term impacts on our earnings. To address this, we will promote technology innovation, including full oxide and maximize production efficiency based on the large substrate 8.6 Gen process to boost cost competitiveness. Through these efforts, we will ensure that a new 8.6-Gen IT OLED line strengthens our market leadership and contribute to earnings improvement.

[Interpreted] The last question will be made by Ryu Young Ho from Investment & Securities.

[Interpreted] I'm Ryu Young Ho from NH Investment & Securities. I have 2 questions, one on MX and one on the company-wide matters. First, all major competitors have recently been actively introducing their own AI strategies, making competition in mobile AI increasingly intense. Could you explain the company's AI strategy and how it plans to differentiate itself in this environment? And also, I'd like to ask about robotics. Samsung recently consolidated its robotics capabilities into a dedicated organization to advance its robotics business. Could you comment on the progress of the robotics business and your mid- to long-term growth strategy?

The first question for MX. So on AI, we're going beyond simply adding AI features, but we're redesigning our system architecture into what we call an AI OS, where AI becomes the core of how the system operates. This evolves Galaxy AI into the foundation that integrates the whole mobile intelligence experience. So by leveraging our strong partnership with Google, we're optimizing Galaxy AI to advance towards agentic AI, meaning that the system can understand the user's context, automate tasks and even make proactive suggestions. Specifically through deep analysis and understanding of the user experience, we're going to strengthen personalization based on our personal data engine.

And it's not just about smartphones and wearables. We're going to leverage our massive ecosystem, including TVs and home appliances to elevate the AI experience across the person's entire lifestyle. Also, the more that AI understands the user, the more critical security becomes. That's why under our Knox security framework, we are processing personal context information on device and keeping the data safely isolated with a technology called Knox Enhanced Encrypted Protection, which gives the user of transparent, controllable and trust-based experience to securely manage their data.

[Interpreted] I'll answer the question on robotics. We believe robotics, together with AI will become a key area shaping future industries. Thus, from a mid- to long-term perspective, we've been strengthening our business competitiveness in this area. The establishment of the RX business office reporting directly to the CEO, intends to bring together our company-wide robotics capabilities and integrate strategy establishments, hardware, AI and software development and product planning under a single organization.

Also, we are building a robotics pilot production line and a data factory in Gumi to build a foundation for robot manufacturing and field deployments. In addition, we plan to leverage our global R&D hubs in the U.S., China and Japan to expand our robotics ecosystem. To that end, we appointed EVP Dongkun Lee, who previously led Boston Dynamics Robotics strategy at Hyundai Motor Group to head the Robotic Strategy Team. We also recruited Professor Hyoun-jin Kim of the Lab for Autonomous Robotics Research in aerospace engineering at SNU and an expert in high-performance robotic hands, Professor Ui-kyum Kim of the Department of Mechanical Engineering at Ajou University.

While centering on B2B applications in manufacturing logistics, we aim to secure core technologies and data and develop highly intelligent, multipurpose humanoid robots, thereby gradually expanding into the B2C market. To accelerate this strategy, we are exploring collaborations with promising global start-ups, along with potential investments and M&As.

In addition, in response to the expanding physical AI-based robotics market, we are leveraging our differentiated technology competitiveness across our semiconductor businesses to prepare next-gen semiconductor solutions covering high bandwidth, low power memory, XPU for on-device AI image sensors, foundry for AI semiconductor and advanced packaging capabilities. Building on our semiconductors, software, AI and manufacturing capabilities, we aim to also build differentiated competitiveness in robotics and develop it into a future growth engine.

[Interpreted] Thank you for the answer and also the questions. 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 sincerely appreciate everyone's participation today and your ongoing support for Samsung Electronics. We wish you all a wonderful day. 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 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.]