Samsung

Total revenue reached a new record high of $134.1 trillion, up by 43% from the record set one quarter ago. Operating profit also reached a new all-time high of $57.1 trillion, up 185% QOQ, and the operating margin expanded from 21% in the previous quarter to 43%. Net profit recorded $47.1 trillion, 2.4 times that of the previous quarter. Earnings per share came in at 7,123 Korean won for common shares and 7,124 Korean won 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 1.8 trillion won on operating profit quarter on quarter, mainly in 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 zone projects with a key customer. Foundry will drive earnings improvement through increased sales in advanced processes while continuing to secure orders for leading edge knowledge based on our two 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 burdens. 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 business, 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 and 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 11.2 trillion won down 9.2 trillion won quarter on quarter, of which 10.2 trillion won was allocated to the DS division and 0.6 trillion won 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 clean room space secured through our forward thinking investments, 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'll 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 372 Korean won per share for both common and preferred shares.

Under our three-year shareholder return policy for 2024 to 2026, we are committed to ensuring an annual minimum payout of regular dividends totaling 9.8 trillion won through quarterly dividends of 2.5 trillion won. 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 10 trillion won share repurchase program aimed to enhance shareholder value, which was completed by September 2025.

Of this amount, the first tranche worth 3 trillion won was cancelled in February 2025. Subsequently, during the first quarter of this year, the Board convened to deliberate on the remaining shares and ultimately resolved 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 1.6 trillion won 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 it in perspective, the cancellations in this round totaled 73.4 million common shares and 13.6 million preferred shares, representing 1.2 percent and 1.7 percent of total shares outstanding in each respective class. Based on the closing price, on the date of the Board resolution, the valuation of the cancelled shares amounts to approximately 14.6 trillion won. Now, let's turn to our executives for commentaries on their respective business units.

We'll begin with Jaejoong Kim, EVP of Memory Business. Good morning. This is Jaejoong 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 a hyperscaler 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 industries first, mass-produced HBM4 and SOCAM2. 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 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 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 DLM 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 a general service tailored for various workloads also will be getting more important, and we expect that the demand for DLM 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 contents 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 the overall supply shortage situation will continue. Considering the additional increase in server demand for DLM and NAND, we plan to actively accommodate the market changes through the flexible PMIX operation. For DLM, 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 SOCAM2.

For NAND, while focusing on addressing the rising demand for key-value cache storage, we plan to lead the early PCIe Gen6 server SSD market with outstanding product performance. Thank you. Jason Hsieh, System LSI Business. Good morning.

This is Jason Hsieh 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 and the backup 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 competitors based on our ultra-high resolution and fine-pixel technologies and pursue growth opportunities in new business areas with a primary focus on custom SOCs. Thank you. Hello, everyone. This is Seok-Chul Kang from the Foundry Business.

In the first quarter, although our earnings declined quarter and 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 a 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 a sequential improvement in earnings supported by robust demand for leading-edge products, including HBM4 base 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 APU 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 AIHBC, automotive, and aerospace sectors. Thank you.

Good morning. This is Chul-Seo from Samsung Display. I would like to review 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 larger 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 larger display business, we anticipate a 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 secure a stable demand of differentiated technologies, such as low power consumption and privacy solutions, which are aligned with the major customers' premium smartphones.

For IT products, we will increase revenue through the ramp-up of brand new 8.6th 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 risks, unpredictable market conditions, and memory supply issues. We will strive to achieve revenue growth by strengthening our premium portfolio based on our technology leadership.

Thank you. Hi, this is Sung Cho from the MX division. Let me share our first quarter results as well as the future outlook. The smartphone market declined quarter on quarter due to seasonality, with volume and revenue decreasing across premium and mass segments.

For the MX business, Q1 revenue reached $37.5 trillion won, and we delivered a combined operating profit of $2.8 trillion across the MX and the network businesses. Despite numeral launch schedule adjustments and geopolitical uncertainties, we delivered QOQ 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 ultramodels. 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 FE 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 Q2.

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 innovations.

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 lineup. 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-led sales powered by AI leadership and pursue cost efficiency initiatives to minimize the impact on profitability.

Thank you. Hello, everyone. I'm Won-Wook Im, head of sales strategy group of Visual Display. I'd like to briefly explain the market conditions and share our first quarter results along with our outlook for the rest of the year.

In the first quarter, overall TV demand declined after year-end peak season, but demand for QLED, OLED, and 75-inch above remained solid. We focused 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, decline 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 event.

Against this background, we will capture related demand by deploying differentiated marketing strategies and maximize the launch impact 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. In response, we aim to re-impose sales leadership by expanding AI features to pioneer the AI TV market. On top of that, we'll drive growth momentum and elevate profitability by expanding advertising services such as TV plus and performance-based advertisement, while also strengthening OS consultative needs 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 Korean. Our CFO Central 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.

If you have a question, press star and one on your phone. And if you wish to withdraw your question, press star and two. The first question will be made by Ezetar from Citigroup. Yes, good morning.

This is Ezetar Lee 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 Semiconductor versus specifically memory.

There's a lot of talk in the sector about multi-year contracts and LTE. So are you also seeking this kind of multi-year 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? Thank you. Yes, let me take your first question regarding multi-year contracting for memory.

First, due to our NDAs with customers, we are not able to go into too much detail on our multi-year 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 multi-year 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 multi-year contracts present a higher level of binding commitment compared to the past in today's environment where investment size, timelines, and technical complexity have all increased significantly. Investment and capacity-related operational risks are much more challenging, but we expect multi-year 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 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. Thank you. We will move on to the next question, please.

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

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 drew further growth in relevant demands, 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 demands.

Under these circumstances, in line with growing AI demand trends, we focused on expanding sales for mostly server applications in the first quarter, resulting in server bit shipment growth in the low teens percentage QonQ for DRAM and low 20% QonQ 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 QonQ. Amid a sharp rise in market pricing and the effect of our improved product portfolio following expanded server application sales, our blended ASP rose by low 90% range QonQ for DRAM, high 80% QonQ 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 meet customer requirements to deliver continued strong performance. Let me address this question. The labor union, on April 23rd, held a rally at the Poundtec site and has announced a general strike from May 21st to June 7th. While it is difficult to comment further at this stage, even in the event of a strike, the company plans to respond through a dedicated teams and response system within the legal framework to minimize potential production disruptions.

Also, separately from a response to the 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. Thank you for the answer. We will move on to the next question. The next question will be made by Kim Sunwoo from Merit Securities.

You may go ahead. I would like to ask about the shareholder return policy. This year marks the final year of the three-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? 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 will share details once the direction is decided. Regarding our corporate value enhancement plan, the company plans to invest over $110 trillion in facilities and R&D to strengthen our strategic production basis for future, including the Pyeongtaek site, the US 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 will 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 will continue investing to secure future technology leadership.

We'll share updates as these initiatives progress. Thank you. We'll move on to the next question. The next question will be made by Nicolas Godoir from UBS.

You may go ahead. Good morning. Thanks for taking my questions. With the prolonged conflict in the Middle East, there are growing concerns about potential supply disruptions for raw materials that heavily depend on regions such as NAFTA and helium gas.

In addition, important energy and oil remain crucial for electricity supply for UFAB in South Korea. Are there any company-wide issues related to these, and what measures is the company taking to address them? Secondly, with rising semiconductor costs and infiltrating market headwinds expected in Q2, how does the company plan to secure profitability for AMEX specifically? Thank you.

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 are responding 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 a 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 burdens from international transportation.

Also, based on the mid- to long-term partnerships with shipping and air freight providers, we are 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. I will take the next question.

With the growing demand for AI server memory, memory supply shortages for mobile and upper trend in prices have persisted. In 1Q2026, 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. Thank you very much. We will now move on to the next question, please.

The next question will be by Mr. Kim Do-won from KB Securities. Please go ahead. 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, robotic, and physical AI are sectors expected to see high growth, so could you explain your strategy in addressing these growth markets?

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. Unlike previous years, customers who are concerned about supply shortages are actually bringing forward their demand for 2027 already. So currently, just based on pre-booked 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 focus on servers in the second quarter, and we're expecting DRAM big growth to increase by a single-digit percentage QonQ. While for NAND, considering limited available capacity from a reduced inventory level in the first quarter, big growth is expected to be constrained at the low single-digit level QonQ. Let me address our physical AI strategy. Over the past year, under the leadership of Junho 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'll expand into home and retail applications.

Also, to accelerate technology advancement and deployment, we'll focus on securing our own technological capabilities, and at the same time, we'll cooperate with competitive global partners as part of a two-track strategy, and where appropriate, we'll consider strategic investments or acquisitions. Thank you. We'll move on to the next question. The next question will be by Mr.

Kim Jong-gyu from Taiwan Securities. Please go ahead. Yes, good morning. Thank you for the opportunity to ask some questions, 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 HBM for mass production and shipment. 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 4E 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?

Yes, 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 translated into actual premium on pricing. The differentiated performance of our HBM4 has 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. HBM4 sales are expected to exceed 50 percent of total HBM sales from the third quarter onward, and also account for roughly half on a full-year basis.

On going forward, based on the competitiveness of our 1C nano technologies accumulated through HBM4 mass production, we have been accelerating development of next-gen HBM4e products with pin speed of 16 gigabps 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. 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 will expand our customer base. In particular, the performance of a new privacy protection technology introduced in smartphones this year, which is M5P, 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. Thank you.

We'll move on to the next question. The next question will be by Mr. Yi Junyi from Goldman Sachs. Yes, congratulations on a very good performance.

I have a question on Foundry and VD. First, for Foundry, I think there – well, 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?

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've 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 HVM4 base die, which is built on 4-nano processes, has been gaining recognition for differentiated and competitive performance, leading 4-nano demands. 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've 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 has led 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 a major optical communications module player starting in the second half. We also signed an MOU in November 2025 for collaboration on the development of an AI SoC for Unmanned Aerial Vehicles, or UAV, application under the government-led K on Device project. We are preparing for timely mass production in cooperation with domestic fabless and DSPs, and will be building on this initiative to secure competitiveness across diverse applications. And in turn, this is expected to contribute to sales growth in the mid-to-longer term.

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 number one position in the global TV market. To this end, we will reshape the microRGB, OLED, and miniLED-centered competition landscape with a successful introduction of new models, while maximizing launch effects. The premium segment will be led by microRGB and OLED, while the volume segment will be reorganized around miniLED as the core lineup, with a focus on promotions and launches of strategic models.

In addition, compared to previous years, this year's World Cup will feature more participating teams, an 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. Lastly, based on its leadership as the number one global TV brand, the company will proactively address market shifts toward the service business, as well as consumer trends. In a global ad-supported free streaming service market, TV Plus is garnering the most attention, while Samsung Art Store is strengthening its position in the art TV market.

We'll further advance these technologies and improve content offerings to secure differentiated competitiveness. Yes, we will move on to the next question, please. The next question will be by Taemin Sook from Korea Investment Securities. Yes, this is Taemin Sook from Korea Investment Securities.

I have a question on memory and system LSI, one 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? 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 advance 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 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 engagement, technology competence to execute a balanced product mix. Yes, let me answer from the standpoint of Yes, let me answer from the system LSI side. First, regarding Exynos.

Exynos 2700 is under 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 the 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. Thank you.

We'll move on to the next question. The next question will be made by Youngryu from NH Investment Securities. Hi, I am Youngryu, and thank you for the opportunity. I'd like to ask about the MX and DA businesses.

Rising component costs and an overall slowdown in smartphone demand are raising concerns over a market contraction, and under such unfavorable conditions, what are the company strategies to defend market share and secure sales growth momentum? And for the DA business, I have two questions. Recently, there have been multiple media reports on profitability-driven transformation in DA business. Can you share an update on the current initiative?

Additionally, the importance of the cooling solutions market is rising, and you acquired Flag Groups last year. Could you elaborate on your business strategy? 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-to-year 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 sales already expanding year on year in value terms. Alongside the S26 series, leveraging foldables 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. 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 Li Sangjik, 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 will share further details with our shareholders once these plans are developed. I will 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 Flat Group, a German 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 Flat Group 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 Flat Group to enter the Korean market.

We will strive to secure leadership in the data center market by expanding our portfolio and diversifying our geographical footprint. Thank you for the answer. We will move on to the next question. The next question will be by Mr.

Choi Kwon from J.P. Morgan. Please go ahead. Yes, good morning.

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? So, let me take the question on NAND for AI.

So, with proliferation of AI, this is said to hire 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-informed 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 Gen6 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 Gen5, but Gen6 as well, offering enhanced features. And for Gen6, we have received positive feedback from major customers for early sample shipments.

We will be focusing on AI server and data center segments and will lock in preemptive lead in the early Gen6 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 demands.

Thank you. Because of the limited time, we will accept just one final question. The final question will be by Mr. Lee Jong-wook from Samsung Securities.

Please go ahead. Yes, thank you for the opportunity to ask questions. I have a question on VDN 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 US Taylor Fab and whether the company is considering the construction of a new Fab 2?

On the other hand, mature nodes seem to have relatively low utilization rates. Could you elaborate on your operational strategy? 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 brainstamps, 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 microRGB 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.

Yes, let me answer the question on Foundry. So, for Taylor Fab, as of last week, April 23rd 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 to 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 70 nano nodes, while for PMIC, DDI, CCIS, which are currently in mass production on 8-inch wafers, while these lines are scheduled for a phased close-out. 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.

Thank you. 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.