The most significant incremental information from the conference call is as follows: Due to the quarterly pricing of traditional DRAM (currently in a period of rapid price increases) and the annual locked pricing of HBM, the profit margin of traditional DRAM has now surpassed that of HBM. Starting from the third quarter, sales of HBM4 are expected to exceed 50% of total HBM sales. Looking ahead, the memory 'super cycle' is far from peaking, with customers having already pre-booked capacity for 2027. It is anticipated that the supply-demand gap will further widen by 2027.
Driven by the robust demand for memory chips fueled by the AI boom, $Samsung Electronics (005930.KR)$ operating profit in the first quarter of 2026 soared 756% year-on-year, not only setting a new historical record but also revealing during the earnings call the surprising phenomenon that 'traditional DRAM is more profitable than HBM.'
Propelled by the sustained rise in demand for generative AI and supercomputing power, Samsung Electronics' latest disclosed results for the first quarter of 2026 show that the company's total revenue reached a record-breaking 133.9 trillion Korean won (approximately USD 90.13 billion), with an astonishing operating profit of 57.23 trillion Korean won, marking a staggering year-on-year increase of 756%.
Behind this 'explosive' earnings report, the core driver is clearly the memory business under the wave of AI. According to disclosures from the earnings call, Samsung Semiconductor (DS Division) saw its operating profit surge to 53.7 trillion Korean won, achieving an incredible 48-fold year-on-year growth, contributing approximately 93.9% of the company’s total profits; sales of memory products increased 292% year-on-year.
However, beyond these dazzling figures, the most critical incremental information conveyed to the market during this earnings call was the rare 'profit margin inversion' between HBM (High Bandwidth Memory) and traditional DRAM, as well as customers’ extreme anxiety about future production capacity.
Following the release of the financial report, Samsung Electronics' stock price fluctuated downward, closing with a drop of over 2%.
"Currently, traditional DRAM is more profitable than HBM."
This was the core piece of information that garnered the most market attention during this conference call.
In response to analysts' questions on "whether the product mix should tilt towards traditional DRAM to capture higher short-term profits," Samsung's management gave a rare direct answer:
"It is indeed a fact that the profit margin of traditional DRAM is higher than that of HBM."
Management further explained the structural reasons for this "profit inversion": The pricing of HBM products is locked in annually in advance, while the pricing of traditional DRAM is negotiated quarterly. As the price of traditional DRAM rises significantly each quarter, and the annual contract price of HBM has already been fixed, this has led to an inversion in profit margins between the two.
According to industry practice, considering the lead time required for backend capacity preparation, we negotiate expected pricing for HBM on an annual basis in advance; whereas traditional DRAM is negotiated quarterly because its prices continue to rise significantly each quarter. This creates a profit margin inversion between HBM and traditional DRAM.
However, management clearly stated that they would not shift heavily toward traditional DRAM for short-term gains:
If we concentrate our product mix on traditional DRAM and only pursue short-term performance, this could constrain the construction of AI infrastructure itself – which is why we believe a supply balance between HBM and traditional DRAM is necessary.
Management also provided a timeline: By 2027, with the proliferation of inference services and agent AI, the profit margin gap between HBM and traditional DRAM is expected to narrow significantly.
AI Infrastructure Sparks Capacity Anxiety; Supply-Demand Gap Expected to 'Widen Further' by 2027
The market is highly focused on the sustainability of AI demand, and Samsung offered an extremely optimistic outlook during its earnings call, even describing the current state of the supply chain as 'extremely tight.'
Our available supply currently falls far short of customer demand. In fact, our demand fulfillment rate is now at its lowest historical level.” A Samsung executive emphasized during the call.
Unlike previous years, customers worried about supply shortages have actually brought forward their 2027 demand. Currently, judging solely from pre-orders, the supply-demand gap in 2027 will widen further compared to this year.
In response to this long-term capacity anxiety, the rules of the market game are changing. Samsung revealed that major hyperscalers are seeking medium- to long-term supply commitments.
In accordance with these requirements, we have been pursuing multi-year supply agreements... Unlike existing supply contracts based on mutual trust in the past, these multi-year contracts exhibit a higher level of binding commitment.
HBM4 commercialization accelerates as NAND also enters an 'AI-driven growth phase'.
In terms of specific product lines, Samsung is accelerating the iteration of its high-end memory products. The company announced that it has become the world's first enterprise to begin commercial shipments of HBM4 and has secured premium pricing for its 1c-nanometer process products based on actual performance validation by customers.
Our prepared production capacity has already been fully booked and sold out.” A Samsung executive forecasted, “The supply volume of HBM4 is expected to achieve substantial expansion in the second half of the year. Starting from the third quarter, sales of HBM4 are projected to exceed 50% of total HBM sales.” Additionally, the next-generation HBM4e product, featuring a bandwidth of up to 4.0 TB/s, will begin sampling in the second quarter.
Notably, the AI-driven demand for memory is spreading from DRAM to NAND. As large language models require higher data storage capacities, relying solely on expensive HBM and DRAM solutions will impose significant cost burdens.
At GTC recently, NVIDIA proposed an architecture that extends AI inference data storage to NAND-based storage rather than relying solely on HBM.” A Samsung executive noted that this has driven demand for high-performance PCIe Gen 6 SSDs. Samsung stated that its ultra-high-capacity products (such as 256TB server SSDs) and Gen 6 product lines are ready and will secure an early lead in the Gen 6 market in the second half of the year.
Mobile segment under pressure as chip foundry seeks 'non-mobile' growth drivers.
Compared to the semiconductor division's success, constrained by soaring memory chip prices, Samsung’s Mobile Experience (MX) division is facing severe cost pressures. Despite strong sales of the Galaxy S26 series, executives acknowledged:
Cost pressures from key components are expected to intensify in the second quarter… A decline in profitability seems inevitable.
Smartphone market shipments are projected to shrink in 2026, forcing Samsung to maintain revenue growth by selling super-premium products.
In the field of chip foundry, Samsung is attempting to reduce its reliance on mobile devices. Senior executives revealed:
"We are actively negotiating with several major AI and HPC clients regarding the 2-nanometer project... We anticipate that certain clients will achieve more significant results in the near future."
Moreover, Samsung will commence mass production for a leading silicon photonics optical communication module manufacturer in the second half of the year, marking a major step in low-latency transmission technology for data centers.
The full translation of Samsung Electronics' teleconference (assisted by AI) is as follows:
Participants
Company Participants:
Charles Hur, Executive Vice President and Head of the Corporate Strategy Team at Samsung Display
Daniel Oh, Executive Vice President and Head of Investor Relations
Jaejune Kim, Executive Vice President and Head of the Global Sales and Marketing Office for Memory
Jason Shin, Executive Vice President and Head of the System LSI Sales Team
Seong Cho, Executive Vice President, Head of the Mobile Experience Strategic Marketing Office
Sooncheol Park, Executive Vice President, Chief Financial Officer
Sukchae Kang, Executive Vice President, Head of the Foundry Sales and Marketing Office
Unnamed Spokesperson
Wonwoo Kim, Executive Vice President, Head of the Visual Display Sales Strategy Team
Other Participants (Analysts):
Chae Kwon, Analyst at JPMorgan
Chae Min-suk, Analyst at Korea Investment & Securities
Jongwook Lee, Analyst at Samsung Securities
JuHeon Lee, Analyst at Goldman Sachs
Kyung-Sung Kim, Analyst at Meritz Securities
Nicolas Gaudois, Analyst at UBS Group
Unnamed Participant
YoungWoo Ryoo, Analyst at NH Investment & Securities
Host:
Good day, and welcome to the Samsung Electronics First Quarter 2026 Financial Results Conference Call. I will be your coordinator for today's call. All participants will be in a listen-only mode until the presentation concludes and the Q&A session begins. Please note that this call is being recorded. I will now hand over the call to the Investor Relations team. Please proceed.
Daniel Oh (Head of Investor Relations)
Good morning, good afternoon, and good evening to friends around the globe. Thank you for joining Samsung Electronics' First Quarter 2026 Earnings Call. I am Daniel Oh, Head of Investor Relations.
Please note that all materials presented today, including slides and this webcast, are available on samsung.com/global/ir and can be accessed at any time after the call for your convenience.
Please note that some of the statements discussed today may include forward-looking statements, and actual results may differ. Refer to the full legal disclaimer on the relevant slide as well as the meeting agenda.
The agenda for today is as follows:
Park Soon-chul, Executive Vice President of Corporate Management Operations and Chief Financial Officer, will first present the company's financial results and outlook for the first quarter of 2026. I will then provide an update on capital expenditures and shareholder returns before handing over to the executives of each business division for their updates.
Afterward, we will proceed to the Q&A session, which will conclude this conference call.
The senior executives attending today are as follows:
Park Soon-chul, Executive Vice President of Corporate Management Operations and Finance
Kim Jae-jun, Executive Vice President of the Memory Global Sales and Marketing Office
Jason Shin, Executive Vice President of the System LSI Sales Team
Kang Suk-chae, Executive Vice President of the Foundry Sales and Marketing Office
Charles Hur, Executive Vice President of Samsung Display’s Corporate Strategy Team
Cho Sung, Executive Vice President of the Mobile Experience Strategic Marketing Office
Kim Won-woo, Executive Vice President of the Visual Display Sales Strategy Team
I now invite Chief Financial Officer Sooncheol Park to present the first-quarter financial results and outlook.
Sooncheol Park (Chief Financial Officer)
Good morning, and thank you to investors from around the world for joining us today. I am Sooncheol Park, Chief Financial Officer of Samsung Electronics, and welcome to the Q4 2026 earnings conference call.
In the first quarter, driven by continuous AI technology innovation and our proactive response to market challenges in a difficult macroeconomic environment, we achieved record-high quarterly revenue and operating profit.
This performance reflects our technological leadership in core businesses and the successful execution of our focus on high value-added product portfolios. Looking ahead, we will continue to strengthen our competitive edge through innovation and lead the global market.
I will now provide a detailed overview of the Q1 2026 performance.
Please note that the following figures have been rounded for ease of readability.
Key financial highlights:
Total revenue reached a record 13.4 trillion Korean won, marking a 43% increase from the previous quarter's record.
Operating profit also hit a new high at 5.7 trillion Korean won, surging 185% quarter-over-quarter, with the operating profit margin expanding from 21% in the previous quarter to 43%.
Net profit reached KRW 4.7 trillion, approximately 2.4 times that of the previous quarter.
Earnings per share: KRW 7,123 for common stock and KRW 7,124 for preferred stock.
Performance by business division:
DS Division (Semiconductor): Revenue increased compared to the previous quarter, driven by a rise in the share of high value-added AI products and an increase in average selling prices; the memory business achieved record profitability for the second consecutive quarter. Operating profit significantly improved due to the memory business, while the system semiconductor segment also saw performance improvement thanks to expanded sales of flagship SoC products.
DX Division (Device Experience): Revenue grew compared to the previous quarter, supported by the release of new flagship smartphones. Despite rising cost pressures, we effectively controlled the decline in profits by expanding sales of high value-added products across businesses and improving resource efficiency.
In terms of exchange rates: The appreciation of major currencies, including the US dollar, had a positive sequential impact of approximately KRW 1.8 trillion on operating profit, benefiting various components businesses.
Detailed information on each business will be subsequently presented by the relevant executives.
Next, I will introduce the outlook for the second quarter:
Despite geopolitical headwinds such as escalating tensions in the Middle East and rising oil prices, semiconductor demand is expected to remain strong, supporting continued improvement in overall profitability for the DS Division.
Driven by the ongoing expansion of AI infrastructure, we expect memory prices to maintain their current upward trend. We will continue to expand sales of HBM4, high-density DDR5, and enterprise solid-state drives (ESSD) to enhance profitability.
System LSI will seek to offset profitability pressures by advancing high-volume projects with key clients. In the foundry business, profitability improvement will be driven by expanding sales of advanced process technologies while continuing to secure orders for leading-edge nodes based on 2-nanometer technology.
In the display business, amid demand uncertainties, we will aim to achieve performance improvements by ensuring stable supply to key clients, leveraging our leading technology and mass production advantages.
For the DX division, profits are expected to decline due to rising cost pressures. To mitigate the impact on profitability, we will optimize our product mix by expanding sales of the S26 series and launching high-end products, including Micro RGB TVs and AI Combo solutions. Simultaneously, we will improve cost structures and enhance efficiency to strengthen core operations, expand market share and presence, and boost mid-to-long-term competitiveness. Additionally, we will actively pursue future growth engines through mergers and acquisitions.
Outlook for the second half: We anticipate a complex business environment in the second half, driven by AI expansion fueling semiconductor demand growth on one hand, and pressure from rising IT product costs on the other.
In response to ongoing external uncertainties such as geopolitical risks and global tariffs, we will maintain flexibility to adapt to market changes, remain profit-oriented, and continue to expand high value-added products to ensure stable business performance.
Thank you.
Daniel Oh:
Thank you, Sooncheol Park. Let me now introduce our capital expenditure situation.
Total capital expenditure for the first quarter amounted to KRW 11.2 trillion, a decrease of KRW 9.2 trillion from the previous quarter, with KRW 10.2 trillion allocated to the DS Division and KRW 0.62 trillion to the display business.
Below, I will provide a more detailed breakdown of capital expenditures by business segment.
In the memory business, capital expenditure decreased compared to the previous quarter, reflecting the front-loaded nature of some investments made last year, including the addition of cleanroom space at the Pentech site. By strategically utilizing chip facilities and cleanroom spaces secured through our forward-looking investments, we expect equipment spending to increase significantly as we deploy these newly acquired capacities. This planned expansion is expected to drive overall growth in capital expenditures for the full fiscal year, further reinforcing our commitment to sustainable growth and operational efficiency in the memory business.
In the foundry business, capital expenditures decreased compared to the previous quarter due to a high base effect caused by significant infrastructure investments in the Tail of Fab during the fourth quarter of 2025. However, related investments supporting the ramp-up of Tail of Fab capacity are expected to steadily increase throughout the year starting from the second quarter.
In the display business, capital expenditures remained largely flat quarter-over-quarter, with investment focus centered on upgrading and retrofitting existing production lines following the completion of the 8.6th generation line last year.
Let me now provide an overview of the full-year capital expenditure outlook.
In 2026, driven by sustained robust demand for AI, we anticipate that capital expenditures will increase significantly compared to the previous year. We will further expand our forward-looking R&D investments in next-generation processes and core technologies to solidify our technological leadership. Additionally, we will strengthen the construction of strategic production bases and expand infrastructure reserves to proactively address future demand. Consequently, our investment decisions will remain flexible and will be prudently adjusted in response to rapidly changing market conditions.
Regarding shareholder returns, the board today approved a quarterly dividend of KRW 372 per share for both common and preferred stock under the three-year shareholder return policy spanning from 2024 to 2026. We are committed to ensuring a minimum annual regular dividend payout of KRW 9.8 trillion through quarterly dividends of KRW 2.5 trillion each. The dividend payment for the first quarter has already been arranged.
Unnamed Spokesperson:
Let me now explain the situation regarding treasury shares.
In accordance with the board resolution in November 2024, the company announced a KRW 10 trillion share repurchase program aimed at enhancing shareholder value, which was completed in September 2025. Among this, the first batch of shares worth KRW 3 trillion was canceled in February 2025. Subsequently, in the first quarter of this year, the board convened to deliberate on the remaining shares and ultimately resolved to cancel them all.
This resolution was made in fulfillment of the commitment made during the previous earnings presentation, further demonstrating the company's unwavering commitment to transparency. Notably, the board decided to retain only KRW 1.6 trillion worth of shares specifically earmarked for employee compensation, while the cancellation of the remaining shares was completed earlier this month, marking a significant step in the company’s ongoing efforts to enhance shareholder value.
In terms of specific figures, this round of cancellations involved a total of 73.4 million common shares and 13.6 million preferred shares, representing 1.2% and 1.7% of the total outstanding shares of each category, respectively. Based on the closing price on the day of the board resolution, the valuation of the canceled shares amounted to approximately KRW 14.6 trillion.
We will now invite the executives to provide commentary on their respective business divisions.
Jaejune Kim
First, we would like to invite Mr. Jaejune Kim, Executive Vice President of the Memory Business, to speak.
Hello everyone, I am Jaejune Kim from the Global Sales and Marketing Division of the Memory Business.
In the first quarter, strong demand in the memory market centered on server applications became increasingly prominent, with hyperscalers continuing to expand capital expenditures for AI infrastructure construction. Early-stage demand for Agentic AI has also emerged.
Supported by robust AI demand, while focusing on expanding our product lineup with a server-centric approach, we have taken the lead in mass-producing and shipping the industry’s first HBM4 and SCO2. Additionally, we completed the development of PCI Gen 6 SSDs on schedule in the first quarter and are currently undergoing customer certification. We have received positive feedback regarding our exceptional performance competitiveness.
In the second quarter, we expect growth in the AI sector to continue from the previous quarter, further driving demand for memory products. Therefore, to maintain our technological leadership in the rapidly growing AI market, we plan to provide the first samples of HBM4E in the second quarter. Furthermore, within the constraints of limited supply capacity, we will continue to prioritize AI-focused products in our DRAM and NAND supply operations, while proactively responding to early-stage demand for new GPUs and CPUs set to launch in the second half of the year.
In the second half of the year, as hyperscalers expand their AI services and major large language model (LLM) providers accelerate the rollout of B2B services, the adoption of Agentic AI is likely to progress much faster than initially anticipated. Consequently, in addition to AI servers, the importance of general-purpose servers for various workloads will also increase significantly. We anticipate that demand for DRAM and SSDs in traditional servers will rise more notably than previously expected.
On the other hand, in the mobile and PC sectors, price increases for end-user products and key components, coupled with changes in memory capacity configurations per device, are expected to impact demand. However, due to the overall industry shift toward a server-oriented product mix, we anticipate that the tight supply situation will persist.
Taking into account the further growth in server-side DRAM and NAND demand, we plan to actively respond to market changes through flexible product mix (PMIX) operations.
For DRAM: We plan to expand the supply of HBM4 to multiple key customers and continue to increase the proportion of AI-related products, such as high-performance, high-density DDR5 and Socket 2.
For NAND: While focusing on meeting the growing demand for key value cache storage, we aim to leverage our superior product performance to lead the early development of the PCI Gen 6 server SSD market.
Thank you.
Jason Shin:
Hello everyone, I am Jason Shin from the System LSI business.
In the first quarter, despite weak demand in the smartphone market, SoC sales drove an overall performance improvement quarter-over-quarter, benefiting from flagship product launches by major customers and favorable seasonal factors.
In the second quarter, revenue is expected to decline compared to the previous quarter due to seasonal factors. In response, we will continue to focus on selling SoCs and image sensors for high-end to mid-range smartphones to key customers.
In the second half of the year, overall consumer demand is expected to slow down due to ongoing cost pressures caused by rising component prices. Facing this external environment, we will continue to consolidate our market leadership through technological advantages. Specifically, we plan to expand sales by securing new design wins (Design Win) for flagship SoCs and strengthening our product lineup with a core focus on 200-megapixel sensors.
Looking ahead, we will focus on scaling up high value-added products and exploring new growth drivers. We will continue to enhance the competitiveness of image sensors based on ultra-high resolution and fine pixel technology, while actively pursuing growth opportunities in new business areas with customized SoCs as a primary direction.
Thank you.
Sukchae Kang:
Hello everyone, I am Sukchae Kang from the foundry business. In the first quarter, although profitability declined quarter-over-quarter due to seasonally soft customer demand, consistent with the industry's typical first-half low and second-half high pattern, we achieved double-digit year-over-year revenue growth, maintaining momentum for continuous business improvement.
From an order perspective, we continue to expand our customer base and deepen collaborations in high-performance computing applications, maintaining robust order momentum throughout the quarter. Notably, we secured a strategic project with a leading optical communication module manufacturer, marking a significant milestone in establishing a foundation for our silicon photonics business.
In the second quarter, our advanced process nodes are expected to reach full utilization. Supported by strong demand for leading-edge products, including the HBM4 base chip, we anticipate sequential profitability improvement. Development of the 1.4-nanometer process is proceeding as planned, ensuring readiness for future technologies. Additionally, we are actively collaborating with key customers on the 2-nanometer process. In the second half of the year, we will begin mass production of the second-generation 2-nanometer process. Furthermore, we will expand the application of the 4-nanometer process to memory products and APU products for AI applications. Through these initiatives, we expect to achieve double-digit revenue growth and profitability improvements.
Moreover, we are advancing structural transformation by diversifying our application portfolio from mobile to areas such as AI, high-performance computing, automotive, and aerospace. Thank you.
Charles Hur:
Good morning, I am Charles Hur from Samsung Display. Let me review the performance for the first quarter of 2026. In mobile display business, our results declined sequentially due to seasonal factors and storage price pressures. In large-sized display business, we maintained stable sales performance driven by strong demand for gaming monitors.
Next, let me share the outlook for the second quarter and the second half of the year. In the second quarter, smartphone and IT market demand may weaken primarily due to issues related to storage supply and pricing. In response, we will focus on high-end products where demand is expected to remain relatively stable. For logic display business, we anticipate increased demand driven by sporting events and key customers.
In the second half of the year, the market environment is expected to be uncertain and difficult to predict due to new product launches. However, we will maintain profitability by adhering to a premium product strategy. For smartphones, we will ensure stable demand through differentiated technologies such as low-power consumption and privacy solutions, which align with the needs of key customers' high-end smartphones.
For IT products, we will enhance revenue through mass production at our new 8.6th-generation IT OLED line; QD-OLED will continue to solidify our position in the premium market while expanding our display business into consumer and enterprise markets. Finally, 2026 will be a challenging year, with geopolitical risks, unpredictable market conditions, and storage supply issues presenting significant challenges. We will leverage our technological leadership and strengthen our premium product portfolio to achieve revenue growth. Thank you.
Seong Cho:
Hello everyone, I am Seong Cho from the MX department. Let me share our performance for the first quarter and the outlook moving forward. The smartphone market experienced a sequential decline due to seasonal factors, with both shipment volumes and revenue decreasing across the premium and mass-market segments. For MX business, first-quarter revenue reached KRW 37.5 billion, with operating profit totaling KRW 2.8 billion for MX and network businesses combined.
Despite numerous adjustments to release plans and geopolitical uncertainties, we achieved quarter-on-quarter growth in both revenue and operating profit. On a year-on-year basis, driven by an increase in the contribution of ultra-premium models, we achieved robust growth in average selling price and revenue. Amid rising storage costs, we ensured single-digit profitability by actively improving resource efficiency. Next, I will share the outlook for the second quarter.
Overall, smartphone demand is expected to decline quarter-on-quarter due to seasonal factors. For the MX business, we anticipate that revenue will decrease quarter-on-quarter in the second quarter. Supported by the continued momentum of the S26 series, we will maintain a flagship-centric sales strategy while promoting steady sales of foldable, M1, and FE models. Additionally, through the successful launch of new A-series models, we aim to drive growth across all market segments.
However, cost pressures for key components are expected to intensify further in the second quarter. We will ensure stable supply through strategic partnerships with suppliers, but a decline in profitability seems inevitable. Next, I will share the outlook for the second half of the year. Due to rising costs, smartphone market shipments are projected to decline, but revenue is expected to grow driven by the expansion of ultra-premium products.
Tablet shipments and sales are expected to decline due to cost pressures and reduced promotional activities. In the laptop market, sales are projected to grow driven by higher average selling prices, although shipments are expected to fall. MX will continue its strategy centered on expanding flagship model sales, maintaining leadership through ongoing advancements in AI capabilities and innovative form factors for foldable devices. We plan to enhance product development to meet evolving customer demands for eco-friendly products. With advanced Galaxy AI features and health functionalities, we will drive premium sales and expand our true wireless earphone lineup. We also plan to provide immersive multimodal AI experiences through diverse form-factor devices such as AI glasses. The year 2026 will be challenging, with persistent geopolitical uncertainties and rising industry-wide cost pressures impacting profitability. Nevertheless, we will remain focused on expanding flagship LED sales through AI leadership and advancing cost-efficiency initiatives to minimize the impact on profitability. Thank you.
Wonwoo Kim:
Hello everyone, I am Wonwoo Kim, Director of Sales at the Display Division. I will briefly review market conditions and share the results for the first quarter along with the outlook for the remainder of the year. In the first quarter, overall TV demand declined following the year-end peak season. Demand for QLED, OLED, and models larger than 75 inches remained robust. By focusing on premium products such as Neo QLED, OLED, and Rajisatis[phonetic], we reinforced our market leadership. However, in terms of profitability, although there was an improvement compared to the previous quarter, performance declined year-on-year due to stagnant demand and rising raw material costs.
In the second quarter, uncertainties in the external environment are likely to persist. Driven by major international sporting events, TV demand is expected to increase year-on-year. Against this backdrop, we will capture related demand through differentiated marketing strategies and maximize the launch impact of new models such as Micro RGB TVs to ensure sales and profitability in the second half of 2026. After the sporting events, the market may experience a downturn compounded by macroeconomic and geopolitical risks.
To address this, we aim to pioneer the AI TV market by extending AI functionalities to more products, reestablishing our sales leadership. Additionally, we will drive growth momentum and improve profitability by expanding advertising services such as TV commercials and performance-based ads, while strengthening ecosystem demand for our operating system and further growing our licensing business. This concludes my presentation. Thank you for your attention.
Unnamed Speaker:
Thank you.
Host:
Thank you, presenters. This concludes the presentation portion of the First Quarter 2026 Earnings Conference. We will now begin the Q&A session, which will be conducted in Korean. CFO Sooncheol Park will address questions at the corporate level, while business-specific questions will be answered by the respective business representatives. Thank you for your attention, and we will now proceed to the Q&A session.
(Moderator's Note) The first question is from Izet Char of Citigroup.
Q&A Session
Q - Analyst:
Good morning, I am an analyst with Citigroup. First, I would like to congratulate your company on achieving a record high quarterly performance. I have one question regarding semiconductors and another concerning the company as a whole.
Q - Anonymous Questioner:
The first question pertains to semiconductors, specifically memory chips. There has been significant discussion within the industry about multi-year contracts and LTAs (Long-Term Agreements). Is your company also pursuing such multi-year contracts for memory products?
The second question relates to the company overall. I understand that your company is currently in negotiations with the labor union regarding bonus payments. Will this expenditure be reflected in the provisions for the first quarter? If so, what is the estimated amount?
Thank you.
A - Anonymous Spokesperson:
Alright, let me first address your question regarding multi-year contracts for memory products.
First, due to confidentiality agreements (NDAs) we have signed with our clients, we are unable to disclose many details about multi-year contracts with them. We appreciate your understanding in this regard.
That said, our key clients are highly confident about future demand in artificial intelligence and related fields. They have proactively approached us, seeking commitments on medium- to long-term supply volumes.
Based on these requirements, we have been actively promoting the signing of multi-year supply agreements—of course, this is within the scope of our current supply capabilities—and we have now formally signed and completed contracts with some customers.
Unlike previous supply contracts based on mutual trust, these multi-year contracts involve a higher degree of binding commitments.
In today’s environment, where investment scale, cycles, and technological complexity have significantly increased, operational risks related to investments and production capacity have also become more intricate. We anticipate that multi-year agreements will enhance business stability and predictability for both us and our customers.
We will flexibly adjust the scale of investment based on the structural mix of our customers' long-term needs and proactively respond to market changes.
Regarding the provision for the first quarter, the incentive-related provision you mentioned is still under negotiation between labor and management. As the specific amount, payment conditions, and payment amounts have not been finalized, they have not yet been included in this quarter's financial results. Depending on the outcome of the negotiations, the relevant expenses may be recognized in the future and will be appropriately reflected in the financial reports once finalized. Thank you.
Host:
Let’s move on to the next question.
Q - Anonymous Questioner:
Hello, I am Woo Dong Jae from Bank of America. I would like to congratulate your company on delivering an impressive performance in the challenging environment of the first quarter. I believe your company's steady performance is largely driven by the storage business.
Could you provide more detailed information about the performance of the storage business?
The second question relates to the company as a whole. As the CFO just mentioned, there seem to be quite a few issues regarding labor unions. According to media reports, the union has announced a full-scale strike in May. Does your company anticipate any production disruptions or other negative impacts on performance? Are there any other managerial issues that need attention?
A - Anonymous Spokesperson:
Alright, let me first address the performance of the storage business in the first quarter.
The widespread adoption of Agentic AI has further driven demand growth, primarily concentrated in areas such as HBM (High Bandwidth Memory), server DRAM, and server SSDs.
Nevertheless, despite robust demand, supply shortages have become more pronounced relative to the strong demand due to constraints on the industry’s ability to expand production capacity.
Against this backdrop, aligning with the upward trend in AI-driven demand, we focused on expanding sales within the server application segment during the first quarter.
Specifically:
DRAM server shipments grew by approximately low teens percentage points quarter-over-quarter.
NAND server shipments increased by just over 20% quarter-over-quarter.
We achieved a record-high quarterly sales performance in the server segment.
As a result, for DRAM, we met our shipment growth guidance, while for NAND, we exceeded the guidance, with NAND shipments growing by a high single-digit percentage quarter-over-quarter.
Driven by significant price increases in the market and improved product mix from expanded sales in server applications, our blended average selling price (ASP) performed as follows:
DRAM increased by just over 90% quarter-on-quarter (low 90% range).
NAND increased by just over 80% quarter-on-quarter (high 80% range).
In summary, driven by strong market demand and the competitive advantages of our products, our memory business has once again set a new quarterly performance record following the all-time high achieved in the previous quarter.
We will continue to make every effort to anticipate and identify market demands in advance, promptly develop products that meet customer needs, and consistently deliver robust performance results.
Regarding the issue of union strikes:
The union held a rally at the Pyeongtaek plant on April 23 and announced that it would hold a full-scale strike from May 21 to June 7.
At this stage, it is difficult for us to provide further comments. However, even if a strike occurs, the company plans to minimize potential production disruptions through a dedicated response team and an emergency response mechanism within the legal framework.
In addition to addressing the potential strike, the company is also handling labor-management relations issues in accordance with the law and relevant procedures, and will continue to prioritize seeking friendly solutions through dialogue with the union.
Thank you. Let’s move on to the next question.
Host:
The next question is raised by Jin Jingsheng from Merrill Lynch Securities. Please proceed.
Questioner — Jin Jingsheng:
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 implement this policy as previously committed? Additionally, could you share the direction for the next phase of the shareholder return policy? Lastly, could you elaborate on the specific content of the "Corporate Value Enhancement Plan" released in March this year?
Responder — Anonymous Spokesperson:
Allow me to address your questions regarding shareholder returns. As we have committed to our shareholders, the company will faithfully execute the current shareholder return policy, which is one of our core management priorities aimed at enhancing shareholder value. At the same time, the management team and the board of directors, with the board taking the lead, are currently gathering extensive feedback and engaging in thorough discussions regarding the next phase of the shareholder return policy.
We will continue to prudently study and formulate the optimal policy to enhance shareholder value. Once a clear direction is determined, we will promptly share detailed information. Regarding the "Corporate Value Enhancement Plan," the company plans to invest over 110 trillion Korean won in facilities and R&D to solidify its future strategic production foundation. This includes the Pyeongtaek site, the Taylor semiconductor plant in the United States, and the Yongin semiconductor complex, while also advancing R&D and the development of next-generation technologies. Additionally, at the M&A level, to drive sustained future growth and enhance shareholder value, we will continuously reassess our business portfolio and actively pursue an inorganic growth strategy to ensure medium- to long-term growth. Beyond M&A, we will proactively identify new technologies and business opportunities, collaborate with promising tech companies, and advance diversified investments including venture capital and equity investments.
Through these efforts, the company aims to strengthen the competitiveness of its existing businesses while actively responding to rapidly evolving global technology trends in areas such as HVAC, automotive, consumer electronics, medical technology, and robotics. We will continue to invest to secure a leading position in future technologies.
As these initiatives progress, we will share timely updates. Thank you.
Host: Let’s move on to the next question. The next question is raised by Nicolas Godova from UBS Group. Please proceed.
Questioner — Nicolas Godova:
Good morning, and thank you for your question. As the conflict in the Middle East persists, concerns about potential disruptions to the supply of raw materials heavily reliant on the region, such as neon and helium, are escalating. Additionally, energy and oil are crucial for ensuring the power supply to South Korea's semiconductor factories. Could you elaborate on whether there is an overall risk to the company in this regard and what measures have been implemented to address these challenges?
Furthermore, with rising semiconductor costs and anticipated headwinds in infrastructure markets during the second quarter, how does the company plan to safeguard the profitability of its memory business (MX)? Please provide specific details. Thank you.
Responder – Anonymous Spokesperson:
Allow me to address the risks related to the Middle East. Currently, our semiconductor production lines are operating normally, and no supply chain issues have arisen thus far. Although we source some processed gases from Israel and the Middle East, we maintain a sufficient safety stockpile and respond flexibly based on local logistics conditions. Simultaneously, we have established alternative logistics routes and diversified our supplier base to include regions such as the United States and Japan. Consequently, the overall risk remains limited.
Drawing on our past experiences managing export controls, natural disasters, trade disputes, and conflicts, we are managing supply and demand balances flexibly from a medium- to long-term perspective. Regarding electricity supply, we are closely monitoring the trend in power costs against the backdrop of rising oil prices and maintaining a stable power supply system through close coordination with the government.
Nevertheless, the rise in oil prices driven by the ongoing war is impacting global shipping and air freight costs, and the risk of rising transportation expenses is expanding.
Responder – Park Soon-chul:
In response, while closely monitoring global inventory levels, we are optimizing supply chain operations to minimize cost burdens associated with international transportation. Moreover, leveraging our medium- to long-term relationships with shipping and air freight service providers, we are actively negotiating contracts and utilizing alternative transport solutions to mitigate high logistics costs. Simultaneously, in anticipation of prolonged conflict scenarios, we are developing multiple contingency plans. By signing long-term contracts with logistics providers and adopting freight mechanisms linked to fuel prices, we aim to enhance our ability to navigate market volatility while maintaining cost competitiveness and supply capacity. Thank you.
Let me address the next question. With the continued growth in memory demand for AI servers and persistent shortages and price increases in mobile memory, memory prices surged significantly in the first quarter of 2026, resulting in a year-on-year decline in profitability. Entering the second quarter, prices are expected to rise further, intensifying cost pressures. We will fully leverage our stable supply capabilities to expand sales of S26 and new A-series products.
At the same time, we are enhancing cost efficiency across development, procurement, and sales processes to mitigate the impact of rising memory prices on profitability. Thank you.
Host:
Thank you very much. Let us now move on to the next question. The next question will be posed by Mr. Kim Do Won from TD Securities. Please proceed.
Questioner (unnamed participant):
Yes, I would also like to congratulate your company on achieving its best-ever performance. I have one question regarding memory and another concerning the company as a whole. The memory industry is expected to remain in an upward cycle. Could you share your outlook for the second quarter? Additionally, could you provide guidance on growth expectations for the second quarter?
My second question pertains to humanoid robotics and Physical AI, which are anticipated to be high-growth areas. Could you elaborate on your strategy for addressing these expanding markets?
Respondent — Sooncheol Park:
Let me address your question about the outlook for the memory business. We do expect that demand related to artificial intelligence will continue to drive momentum in memory growth in the short term. With the rise of Agentic AI, token processing volumes are increasing, and technologies aimed at improving data processing efficiency are emerging rapidly. The development of the artificial intelligence ecosystem is accelerating faster than ever before.
That said, while advancements in AI technology are a structural driver of memory demand, supply growth within the industry is expected to remain constrained in the short term due to the lead times required for new fabrication plant (FAB) expansions.
Respondent (unnamed spokesperson):
Our inventory levels are also extremely tight, with current supply far from meeting customer demand. In fact, our fulfillment rate has dropped to a historical low. Unlike previous years, customers concerned about supply shortages have already begun securing their needs for 2027 in advance.
As a result, based solely on pre-booked demand, the supply-demand gap for 2027 is expected to widen further compared to this year. Given the tight capacity, we plan to maintain our existing product portfolio in the second quarter and focus on serving our customers. We anticipate DRAM bit growth to achieve a single-digit percentage increase quarter-over-quarter.
As for NAND, considering the limited available capacity due to a decline in inventory levels in the first quarter, bit growth is expected to be constrained, with a sequential increase projected to remain at a low single-digit level.
Let me now introduce our physical artificial intelligence strategy. Over the past year, under the leadership of South Korea's top robotics expert Jun Oh, we have made meaningful technological progress and established a foundation to catch up with global leaders.
At the same time, we are internalizing the R&D of key core components for robots and building capabilities to develop customized parts for our proprietary robots. Driven by advancements in technologies such as physical artificial intelligence, the robotics industry is becoming increasingly viable. By developing humanoid robots – the pinnacle of advanced robotics – we are committed to revolutionizing manufacturing productivity and daily life experiences, leveraging our own production base. Our plan is to first develop industrial robots and then utilize the accumulated technology to further expand into home and retail application scenarios.
Moreover, to accelerate technological progress and implementation, we will focus on building independent technical capabilities while collaborating with competitive global partners through a "dual-track" strategy. We will also consider strategic investments or acquisitions when appropriate.
Thank you.
Host: Let’s move on to the next question. The next question will be asked by Mr. Kim Jung Kyu from Taiwan (Taiwan [phonetic]) Securities. Please proceed.
Questioner (Unnamed Participant):
Yes, good morning. Thank you for giving me the opportunity to ask a question, and congratulations on your strong performance. I have questions about memory and displays, starting with HBM. In the first quarter of this year, your company was the first in the industry to begin mass production and shipment of HBM4, and it has reportedly received quite positive feedback regarding performance. So, how much do you expect HBM4 sales to grow this year?
Additionally, could you not only discuss HBM4 but also provide an update on the status of HBM4E? Regarding displays, amid the backdrop of memory supply shortages, I believe downward pricing pressure on displays may increase. What measures has your company taken to address these trends and maintain profitability?
Responder (Unnamed Speaker):
Alright, let me first answer the question about HBM. First, as we mentioned in the previous quarter's earnings call, we expect HBM sales to see significant growth in 2026, with a year-over-year increase of more than threefold. With our cutting-edge 1c-nanometer process technology, we have established leading product competitiveness in the industry.
This allows us to take a leading role in raising the performance requirement standards for HBM4. As customers adopt these enhanced specifications, our superior performance has already translated into actual price premiums. The differentiated performance of our HBM4 has led to a high concentration of demand, and our production-ready capacity has been fully booked.
Therefore, following our status as the world's first company to begin commercial shipments of HBM4 in February this year, we are proceeding as planned with capacity ramp-up, with supply expected to achieve meaningful scaled growth in the second half of the year. Starting from the third quarter, HBM4 sales are projected to exceed 50% of total HBM sales, and for the full year, they are expected to account for approximately half.
Leveraging the competitiveness in 1C nanotechnology accumulated through HBM4 mass production, we have been accelerating the development of the next-generation HBM4E product, which features a pin speed of 16 gigabits per second and bandwidth of 4.0 terabytes per second. Samples will begin shipping within the second quarter, and we will continue to solidify our technological leadership by providing optimal HBM products that meet customer needs in a timely manner, thereby maintaining our market leadership.
Responder — Sooncheol Park:
Thank you. Let me now address the display-related question. The rise in memory prices driven by supply-demand imbalances has increased cost burdens for end-product manufacturers, which is expected to lead to an overall decline in end-product demand. Consequently, demand for displays may weaken, and downward pressure on average selling prices (ASPs) is likely to persist. We will respond to this situation by enhancing operational efficiency and strengthening the competitiveness of each business unit.
First, we will drive extreme productivity improvements to enhance cost competitiveness and accelerate the development of differentiated technologies. At the business level, we will reinforce our product portfolio centered on high-end products with relatively robust demand while expanding our customer base. In particular, the performance of the new privacy protection technology (mFiTP) introduced this year for smartphones will be further improved, and its range of applications will be broadened. We will continue to develop differentiated technologies to strengthen our leadership in the high-end product segment, ensuring stable profitability. Thank you. Let’s move on to the next question.
Host:
The next question comes from Mr. Joo-heon Lee of Goldman Sachs.
Question - Joo-heon Lee:
Alright, first of all, congratulations on your outstanding performance. I have questions about the foundry business and CD business. First, regarding the foundry business, I would like to hear the latest updates on securing new orders for advanced 2-nanometer and 4-nanometer nodes, as well as for legacy processes. Regarding the VD (Visual Display) business, given the backdrop of declining profitability, I do believe external concerns about its performance are growing. What countermeasures is your company preparing?
Response - Sooncheol Park:
Let us first address the question regarding the foundry business. With a focus on medium- to long-term development, we have been diversifying our product portfolio and actively expanding project acquisition across multiple application areas, including artificial intelligence (AI), high-performance computing (HPC), automotive, robotics, and aerospace.
Recently, with the sustained growth in AI and data center demand, memory supply remains tight. We are also clearly observing an increasing market demand for turnkey solutions that encompass both memory and foundry services.
In response to this market trend, we are actively engaging in discussions with several major AI and HPC clients regarding 2-nanometer projects, with expectations of achieving more significant progress on certain client accounts in the near future. Our HBM4 base die, built on a 4-nanometer process, has gained widespread recognition for its differentiated and competitive performance, driving demand for advanced nanometer processes. We are also actively considering the possibility of expanding supply.
Meanwhile, we are in talks with numerous automotive and robotics clients in the United States and Greater China regarding the adoption of 2-nanometer or 4-nanometer processes. Leveraging our experience in delivering products to key large-scale clients, we continue to validate our technical capabilities and establish stronger reliability endorsements for data centers.
We see a continuous increase in demand for high-bandwidth, low-power data transmission, which directly drives the rapid rise in demand for silicon photonics technology. Not only are we developing silicon photonic devices, but we are also advancing technologies related to co-packaged optics (CPO) based on cutting-edge processes and 3D packaging technologies. Simultaneously, we are in negotiations with several global large-scale clients on commercialization projects. Mass production for a major optical communication module manufacturer will commence in the second half of the year.
Answer - Anonymous Spokesperson: This year, the TV market is expected to face challenges in ensuring revenue and profitability amid rising raw material costs and heightened uncertainties in the external operating environment. The company will fully leverage the advantages of its differentiated product marketing strategy and take proactive measures in its service business to further consolidate its position as the global market leader.
To this end, we will reshape the competitive landscape through the successful launch of new models centered around Micro RGB, OLED, and Mini LED while maximizing the impact of new product launches.
Regarding the premium market, compared to previous years, this year’s World Cup will feature more participating teams, a longer tournament duration, and more matches, which is expected to drive TV demand in the second quarter. To capitalize on this opportunity, we will employ differentiated marketing strategies, strengthen collaboration with key retail partners, and expand strategic SKU (stock-keeping unit) positioning and promotional activities.
Finally, leveraging its leadership as the world’s top TV brand, the company will proactively respond to the market's shift toward service-oriented business trends and changing consumer demands. We will further upgrade the TV Plus platform and Samsung Art Store to ensure a differentiated competitive advantage. Thank you.
Host:
Alright, let us move on to the next question. The next question comes from Mr. Choi Min-sik of Korea Investment & Securities.
Question - Cai Minxi:
Hello, this is Minxi Cai from Korea Investment & Securities. I have questions regarding both the memory and System LSI businesses. First, concerning memory, there has been a rapid rise in prices for conventional DRAM recently. Some believe that, from a profitability perspective, focusing on the sales of conventional DRAM might be more advantageous than HBM.
Could you share your plans regarding the product mix between HBM and conventional DRAM? As for the System LSI business, could you provide an update on the development progress of Exynos 2700? Do you think it will be possible to increase market share in the next-generation models? Additionally, do you have any plans to expand its application scope from mobile devices to AI-related fields?
Answer - Anonymous Spokesperson:
Alright, let me respond to the question about the DRAM sales mix. Recently, we have observed price increases for lower-spec conventional memory products. It is indeed true that the profit margin for conventional DRAM is higher than that for HBM. We are also aware of external opinions suggesting that prioritizing the sales mix toward conventional DRAM may yield better short-term financial performance compared to HBM.
Answer - Park Soon-cheol:
In line with industry practices, for HBM, considering the lead time required to prepare backend capacity, we typically negotiate expected pricing on an annual basis. On the other hand, conventional DRAM undergoes quarterly price negotiations. Given the significant continuous quarterly price increases for conventional DRAM, this has led to an inversion in profit margins between HBM and conventional DRAM.
However, given the ongoing constraints in HBM supply and the widening gap between supply and demand, it is anticipated that by 2027, with the proliferation of inference services and the rise of agentic AI, the profit margin gap between HBM and conventional DRAM will narrow significantly. Moreover, as inference services and agentic AI expand, not only AI servers but also traditional servers are becoming increasingly important within AI infrastructure, indicating a close interconnection between the demand for HBM and conventional DRAM.
If we solely focus on short-term performance and concentrate our product mix on conventional DRAM, it could potentially hinder the development of AI infrastructure itself. This is precisely why we believe it is necessary to maintain a balanced supply between HBM and conventional DRAM—only then can we continue to create AI-driven demand sustainably.
In summary, we will implement a balanced product mix strategy by taking into account various factors such as medium- to long-term growth potential, long-term customer relationship management, and technological competitiveness.
Next, I will first address the question regarding system LSI. Concerning Exynos: The development of Exynos 27000 is proceeding smoothly as planned, building upon the technological competitiveness established by the previous flagship model, 26OH. We anticipate further expanding our market share and exploring new business areas by delivering enhanced AI performance.
The trend in the AI market is rapidly shifting from training to inference, with markets for dedicated inference solutions and customized products growing quickly. In response to this shift, we are advancing our business strategy to provide optimized solutions and architectures across the entire chain, from data centers to on-device applications, thereby establishing a differentiated competitive advantage in the AI market. Thank you.
Host:
We will now proceed to the next question. The next question will be presented by Yongyu Liu from NH Investment & Securities.
Question — Yongyu Liu:
Hello, this is Yongyu Liu. Thank you for giving me this opportunity. I would like to inquire about the Amex (Mobile Experience) business and the DA (Home Appliances) business. Rising component costs and slowing overall demand for smartphones have raised concerns about market contraction. Under these adverse conditions, what strategies does the company have to defend its market share and ensure sales growth momentum?
Regarding the DA business, I have two questions. Recent media reports have mentioned that the DA business is undergoing a profitability-driven transformation. Could you provide an update on the progress of these initiatives? Additionally, with the increasing importance of the cooling solutions market, the company acquired Flag Group last year. Could you elaborate on your business strategy in this area?
Answer — Anonymous Spokesperson:
I will address the Amex question. From a value perspective, the market is projected to experience slight year-over-year growth in 2026, but shipment volumes are expected to decline significantly. Despite overall market contraction, the company remains committed to expanding flagship model sales to drive revenue growth while leveraging a full-price-range product portfolio to outperform the market in both value and shipment volume dimensions.
Although the launch prices of new models have increased, we have enhanced product performance and key user experiences, thereby improving perceived consumer value. Sales of the S26 series have already achieved year-over-year growth, and the S26 series, driven by foldable screen models, demonstrates strong sales momentum surpassing the previous NFV models. We will continue to promote revenue growth while driving the expansion of the entire series.
Based on the S Series 57 and 37 models released in April, the impact of rising component costs will be mitigated by focusing on premium sales and upselling, supported by leadership in mobile AI and a stable supply chain to pursue sales growth. However, we anticipate profitability to decline compared to the previous year.
First, I will address the question regarding the structural improvement of the DA business. Subsequently, the question on cooling solutions will be answered by Li Xiangzhi, Executive Vice President and Head of the DA Business Sales and Marketing Team. Amid intensifying global competition, tariffs, geopolitical risks, and ongoing changes in the external environment, the DA business is facing increasing profitability pressures.
In response, we are adopting a selective and focused approach across all business operations. We are concentrating resources on core businesses where we hold competitive advantages to establish a foundation for sustainable growth, while exploring various measures to diversify our profit structure. We will share more detailed information with shareholders. Once the relevant plans are finalized, I will continue my response.
The demand for generative AI and high-performance computing is growing rapidly. Accordingly, the global data center market is expected to continue expanding until 2030. The data center cooling market is projected to grow from USD 4.7 billion in 2024 to USD 16.6 billion in 2030, with an average annual growth rate of approximately 24%.
To this end, the company successfully acquired FlaktGroup, a German HVAC specialist, last year, establishing a strategic foothold in the data center cooling market. Currently, the company operates in Europe with FlaktGroup as its core and plans to enter the North American market, the world's largest data center market.
Furthermore, we plan to establish a subsidiary and factory of FlaktGroup in Korea to enter the local market. By expanding our product portfolio and geographic reach, we aim to secure a leading position in the data center market.
Host:
Thank you for your response. Let us proceed to the next question. The next question will be posed by Mr. Quan Cai from JPMorgan. Please go ahead.
Question — Quan Cai:
Good morning. Thank you for giving me the opportunity to ask a question. My inquiry pertains to NAND. While DRAM and HBM have garnered significant attention amid the expansion of AI infrastructure, NAND has recently begun to attract broader interest. Could you share your outlook on the market prospects of NAND in AI applications?
Question — Anonymous Participant:
I will address the question regarding NAND in the AI field. As AI becomes more widespread, running large language models requires higher data capacity and memory demands. Relying solely on high-cost HBM and DRAM architectures to meet these trends would increase both cost and capacity burdens, driving the need to expand storage usage scenarios.
Answer - Park Soon-cheol:
Recently, at the GTC conference, NVIDIA introduced architectures such as CMX, extending AI inference data storage from HBM to NAND-based storage instead of relying entirely on HBM. This could potentially drive increased demand for high-performance storage, such as TLC-based PCIe Gen 6 solid-state drives.
Furthermore, with the increase in storage usage scenarios in future AI systems, particularly in large-scale inference and data-intensive workloads, the need to reduce data transmission latency will grow due to performance gaps between HBM, DRAM, and storage. The demand for high-performance, low-latency solutions will become increasingly critical. We are ready for mass production of ultra-high-performance NAND storage solutions, covering not only Gen 5 but also Gen 6 with enhanced features. For Gen 6, we have received positive feedback from key customers. Focusing on early sample shipments, we will concentrate on the AI server and data center segments and aim to secure a leading position in the early Gen 6 market in the second half of this year.
Meanwhile, we are focused on capturing the continuously growing QLC demand and accelerating the transition to V9 in the QLC sector. In March this year, we completed the development of 2-terabit QLC, offering differentiated performance and reliability features. We plan to strengthen our market response capabilities by expanding our product lineup to include ultra-high-capacity offerings, such as 256-terabyte server solid-state drives.
Leveraging the high-performance QLC based on advanced processes and the large-capacity advantages of QLC NAND, we will collaborate closely with key customers to proactively address and timely meet AI-driven NAND demand.
Thank you. Due to time constraints, we will now accept only the final question.
Host:
The last question comes from Mr. Lee Jong-wook of Samsung Securities. Please proceed.
Questioner - Lee Jong-wook:
Yes, thank you for giving me the opportunity to ask a question. I have two questions, one regarding the VD (Visual Display) business and the other about the foundry business.
TCL and Sony recently formed a joint venture. What impact will this have on the television industry? How does your company plan to respond?
The second question pertains to contract manufacturing. Driven by the recent increase in orders, expectations for further investment are growing. Could you provide an update on the expansion progress of the Taylor facility in Texas, USA, and whether the company is considering constructing a second plant? Additionally, capacity utilization for mature process nodes appears relatively low. Could you elaborate on your company’s operational strategy?
(Additional information on the question)
Amid market stagnation leading to intensifying competition, the competitive landscape of the television industry continues to evolve. The joint venture established by TCL and Sony, leveraging their respective manufacturing capabilities and brand positions, represents a scenario that is entirely predictable based on prior precedents.
The company aims to comprehensively strengthen its competitiveness across all segments from premium to entry-level, proactively reshaping the competitive landscape and leading the market. Starting this year, we will launch MicroRGB and other new form-factor products to solidify our differentiated leadership in the high-end segment. Meanwhile, in the highly competitive volume-driven market, we will introduce new MINI LED models to enhance our responsiveness to market demands. Additionally, the company plans to further elevate consumers' AI experiences and refine differentiated device experiences through competitively priced services, ensuring customer satisfaction and purchase decisions.
Unnamed spokesperson (response on OEM issues):
Alright, let me address the questions regarding contract manufacturing.
Regarding the Taylor facility, as of last week—specifically April 23—we successfully held the equipment and production line move-in ceremony for Plant One with the local community.
As planned, operations are expected to commence in 2026, with mass production starting in 2027, gradually scaling up the capacity for the 2-nanometer process.
Plant Two is currently in the early evaluation stage, while we are also engaging in discussions with global clients regarding potential orders for mature process lines.
For mature processes, we will focus our capacity on high-value-added specialized technologies with higher entry barriers, while decisively phasing out uncompetitive processes. This forms the basis of our strategy.
More specifically, for the CIS (image sensor) and DDI (display driver IC) product lines that are expected to continue advancing in process migration, production capacity will shift toward the advanced 17-nanometer node. Meanwhile, for products currently mass-produced on 8-inch wafers, such as PMICs (power management ICs), DDIs, and CCIs, related production lines have been scheduled for phased closure.
We will comprehensively consider profitability and investment efficiency, optimize our product portfolio, and continuously improve the fundamentals of our business. At the same time, we will focus on developing new specialty products to expand our market share among global customers. Thank you.
Host:
Thank you for your response. We also extend our gratitude to everyone who shared valuable insights. This concludes our conference call for this quarter. We wish you and your loved ones good health and safety. Thank you for participating today, and we look forward to engaging with you again soon. Thank you.
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