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

Welcome to all the participants worldwide, and thank you for joining Samsung Electronics Earnings Call for the first quarter of 2025. I am Daniel Oh, Head of Investor Relations. Before we proceed, I have some legal house meters to take care of. First, I want to remind you that quarterly results and supplementary materials to our earnings call are on the Samsung Electronics Investor Relations website at www.samsung.com/global/ir. Our webcast of today's call will also be uploaded to the website. Secondly, we must state that today's call may contain forward-looking statements. These statements represent our predictions and expectations of future events, but numerous risks and uncertainties could cause actual results to differ from those projected. Furthermore, the. The information provided herein reflects the company's views as of the date of today's call, and the company undertakes no obligation to update the information subsequently. With that, now let me briefly outline today's agenda. I will first start the discussion with the first quarter financial performance, capital expenditures and sustainability management, and our Chief Financial Officer will follow with a summary of our business outlook going forward and any updates on shareholder value. We will then turn the call over to executives for details on their respective business areas before opening the call for analysts' questions. The executives joining us on today's call are EVP Soon-Cheol Park, Head of Corporate Management Office and Chief Financial Officer; EVP Jaejune Kim, representing Memory; VP Hyeok-man Kwon for Systems LSI; VP Mijung Noh for Foundry; EVP Charles Hur for Samsung Display Corporation; VP Daniel Araujo for the Mobile eXperience; and finally, EVP Kl Roh for Visual Display. Let's begin with our consolidated financial performance for the first quarter 2025. The company's revenue increased by 4% quarter-on-quarter to KRW 79.14 trillion on new all-time high for any quarter. Revenue in the DX division was up 28%, driven by increased sales of flagship smartphones and high value-added home appliances. However, revenue in the DS decreased by 17%, impacted by a decline in HBM sales due to deferred customer demand, which will be addressed further in detail by EVP Jaejune Kim from the Memory business later. SG&A expenses decreased by KRW 0.6 trillion quarter-on-quarter to KRW 21.4 trillion, thanks to efficient execution. And SG&A expenses as a percentage of sales declined 2 percentage points to 27.1%. Operating profit increased KRW 0.2 trillion sequentially to KRW 6.7 trillion, led by strong sales of the Galaxy S25 series and high value-added products in the Visual Display and Digital Appliances businesses despite headwinds from the DS division. Operating margin was 8.4% comparable to the previous quarter. Regarding currency effects, the appreciation of major currencies, including the U.S. dollar, had a positive impact of approximately KRW 0.5 trillion on operating profit compared to the previous quarter that is mainly in the component business, which has a high proportion of U.S.-based transactions. Next, I will cover capital expenditures. CapEx in the first quarter of 2025 decreased by KRW 5.8 trillion quarter-on-quarter to KRW 12 trillion, of which KRW 10.9 trillion was invested in DS dividend and KRW 0.5 trillion was invested in Display. In Memory, investments also declined sequentially, reflecting our more flexible approach to better align with supply and demand. However, we remain committed to investing in R&D and advanced technology. Foundry investments decreased as we prioritize tech migration considering market conditions and investment efficiency. In Display, CapEx declined sequentially following the completion of major investments in 8.6 generation IT OLED panels. I will now comment on one of our key achievements in sustainability management. Our company recently ranked first in a supply chain human rights assessment of 45 leading global ICT companies conducted by nonprofit organization, Know the Chain. This recognition reflects our strengthened efforts to improve supply chain due diligence and grievance mechanism with particular attention to managing forced labor risk by expanding protections for migrant workers. Our enhanced transparency through broader public disclosure of supply chain information was also positively received. The company remains committed to advancing its sustainability management practices to drive long-term value for all stakeholders. At this point, I will pass the conference over to our CFO, Soon-Cheol Park.

Thank you, Daniel, and good morning, everyone. It's a pleasure to join you once again on our earnings call. I will now present our outlook and review shareholder value initiatives. Recently, global trade tensions have led to a slowdown in growth and increased fluctuations in financial markets, raising concern with the performance of tech companies, especially in the semiconductor industry. We expect to encounter elevated uncertainties throughout the year. In this situation, we will continue our efforts to launch a top-tier innovative products and services to overcome the challenges and maintain our position as a leading tech company. First of all, in an environment that is changing faster than ever, we are posing new growth opportunities by developing diverse new businesses, including robotics and AI. For robotics in particular, we are sparing no efforts to outpace peers by advancing both hardware and software through internal development and external partnerships. Through this effort, we are committed to positioning ourselves as an industry leader. To this end, we have emphasized our R&D investments, which reached their highest ever annual total in 2024. Moreover, our R&D spending in the fourth quarter increased by 16% year-on-year, setting a new record high for the fourth quarter. For our full year outlook, we cautiously expect the overall performance to gradually improve as we move into the second half assuming easing current uncertainties. In the DS division, we expect AI server demand to continue growing while mobile and PC demand should benefit from the on-device sale trend. We proactively addressed demand for high-density products such as HBM and improve our market position by focusing high value-added products. Also in foundry, we plan to focus on improving profitability by securing more customer orders in both advanced and mature nodes. In the DS division, despite constant flow of global trade and economic slowdown, we'll strive to increase sales of older devices and other flagship products. The second half launch of this product will provide a unique tailored AI experiences for wearables will capitalize on rising demand across the entire lineup and prospect for broader adoption in emerging markets. Our plan is to reinforce our AI leadership by enhancing and expanding the integration of innovative AI features, including in our TVs and home appliances. However, it is widely understood that the current unpredictable environment is a product of major shift in the global politics and the international trade, resulting in heightened market uncertainties, driving our experiences from our economy numerous crisis since founding. We have managed risks by preparing tailored countermeasures for more scenarios and found this crisis into an opportunity for us to leapfrog. As a global company, we are thoroughly reviewing all options to flexibly utilize our global production facilities and user infrastructure in response the changing environment through these efforts, every member of Samsung Electronics will work together to minimize business impact and enhance corporate value. Lastly, amid regulatory shift to paradigms, we are committed to setting direction with speed and executing without hesitation. Additionally, we are offline AI and robotics technologies to our businesses and continuously expanding their use to improve operational efficiency. On top of these efforts, we harness diverse cutting-edge technologies, including AI, to develop smart products and services. We aim to advance technology innovation in new growth opportunities through cross-correlations that combine the structures of each business unit. Moving on to enhancement shareholder value, the Board of Directors today approved a quarterly per share dividend of KRW 365 for both common stock preferred stock. While in our 3-year shareholder return policy covering 2024 to 2026, the total annual dividend is KRW 9.8 trillion Thus, the payout for the first quarter is KRW 2.45 trillion scheduled for payout in late May. In November 2024, we announced our plan to repurchase KRW 10 trillion worth of shares to enhance shareholder value. Of this amount we purchased and canceled KRW 2.7 in common shares and KRW 0.3 trillion in preferred shares by mid-February. For the remaining KRW 7 trillion, the repurchase of KRW 3 trillion worth of shares is in progress. Turning to stock-based compensation. After through discussions questions, we decided to increase the scope of stock-based compensation for all objectives to encourage and ramp up long-term value creation. Linking objective compensation to stock performance and business regions results that are aligned with our shareholders' interest encouraging a strong focus on corporate shareholder value as well as the sustainable result. In addition, we hope to further enhance shareholder value through a clear incentive structures the promote value creation in the mid- to long term. Thank you. Back to Daniel. Thank you.

Thank you, CFO. Now our executives will provide more detailed information on their respective business units first quarter performance followed by their outlook. We will start with Jaejune Kim, EVP of Memory business.

Good morning. This is Jaejune Kim from Memory Global Sales and Marketing. In the memory market in the first quarter, demand for AI server stayed solid, and the recovery of PC and mobile demand also became more visible than initially expected. But for server SSD market, demand remained relatively weak following the previous quarter as some data center projects were delayed. In this market situation, for DRAM, by expanding our bit shipments focusing on servers, we exceeded the initial guidance by a high single-digit percentage in bit shipments. As a result, our Q-o-Q bit growth increased by a low single digit. However, HBM sales decreased quarter-on-quarter caused by impacts of export control on AI chips and defer demand in anticipation of the upcoming enhanced HBM3E products. For NAND, as server asset demand weaken, bit growth decreased by about 10% compared to the previous quarter. But we slightly exceeded our big guidance, which was projected at the previous call due to additional purchase demand arising from the perceptions that the market price had reached a bottom. Now let's move on to the outlook for the second quarter. In the second quarter, along with a robust demand for AI servers, we have seen a preemptive purchasing activities after the pause on the reciprocal tariffs. Especially since memory inventory for PC and mobile has been normalized earlier than anticipated, because of the stimulated demand -- domestic demand in China in the first quarter, we expect the demand to continue its momentum. However, we need to keep monitoring the direct and indirect impacts on demand, which result from additional changes in tariffs, policies of major countries. In this circumstance, we continue to operate our business focusing on profitability. For the, we plan to strengthen our position in the high value-added market by expanding our initial response to demand for enhanced HBM3E products and operating product mix focused on high-density products for servers. However, from a profitability perspective, we plan to flexibly respond to the demand from PC and mobile segments, where market price increase has been recently observed. For NAND, based on our flexible product mix operation, we plan to focus supply on applications showing signs of recovery and improved cost competitiveness by accelerating the transition to create for all applications. Lastly, let me talk about the outlook for the second half of 2025. For server, our demand for AI server is forecasted to remain robust in conjunction with the launch of new CPUs, and demand for server SSD is also likely to recover as the previous suspended data center projects resume. For PC, we expect demand to improve due to the discontinuation of our Windows 10 services and arrival of the replacement cycle. Moreover, demand momentum for mobile device is also projected to increase, thanks to the spread of AI services and increased content profile. However, as macro uncertainties such as the change of a tariff policy continue to expand, demand volatility is expected to be quite high accordingly. In this situation, for DRAM, we plan to continue expanding the transition to 1b nanometer. In addition, in the server market, we will increase sales of our enhanced HBM3E products as well as high-density DDR5 modules such as 128 gigabyte and higher. As for the mobile and PC market, in which on-device AI trends are expected to keep spreading, we plan to proactively respond to the high density and high performance plans with our industry-leading 10.7 giga bps LPDDR5X products. For NAND, we will actively address the growing demand for high-performance computing SSDs for AI server by offering for PCI Gen 5 lineup of both 16 and 8 channels. And in the mobile market, we plan to promote [indiscernible] products featured with the industry's highest performance. In addition, we will keep strengthening cost competitiveness by accelerating the transition to V8 across all applications. Thank you.

Good morning. This is Hyeok-man Kwon Jung from the system LSI business. In the first quarter, revenue was initially pressured by our service smartphone market and delayed the adoption of our flagship SoC and our key customer. Nonetheless, stronger seasonal demand from major customers enable us to expand the shipments of image sensors and LSI products, resulting in a slight increase in total sales and a modest improvement in profitability. Looking to the second quarter, rising geopolitical risks are leading to global customers diversifying supply chains and adjust inventory strategies, which may heighten demand volatility and discouraging new investment and development. Digital softness could reduce sensor and LSI volumes versus previous quarters, yet we aim to maintain revenue steady by entering our SoCs into major customers and new flagship models and taking advantage of the growing adoption of 200 mega pixel sensors in the Chinese market. In the second half, overall mobile market momentum is expected to remain limited, but component specification upgrade driven by on-demand AI should stay vigilant, and demand for premium mobile and IT devices is likely to persist. For SoCs, we will maximize supply of next-generation product from flagship lineups. For DDI, we will sharpen our solution competitiveness, particularly in type C TCON. For image sensors, we will actively address the high resolution demand for main and telephoto cameras and expand our automotive sensor portfolio. By launching higher value-added products, optimizing cost and improving our product mix, we will improve the division's profitability. Thank you.

Hello, everyone. This is Mijung Noh from the Foundry business. In the fourth quarter, the market recorded a quarter-over-quarter decline due to seasonal weakness in mature nodes. Our short-term performance was also negatively impacted by the ongoing U.S.-China trade tensions, continued inventory adjustment by customers on motor nodes, and the fact that revenue from the new advanced node is expected to be concentrated in the second half of the year. Despite the challenges, we remain focused on enhancing yield and ensuring seamless readiness for mass production of 2-nanometer GAA process. Furthermore, we achieved a quarter-over-quarter increase in order intake for HPC AI applications primarily driven by advanced process node, including 2-nanometer, 4-nanometer and under the 5-nanometer [indiscernible]. Looking ahead to the second quarter, demand for [indiscernible] nodes is projected to be somewhat subdued, but we anticipated a gradual recovery supported by HPC and AI demand. To address Strong demand from the certain U.S. mobile automotive, we plan to ramp up production while simultaneously implementing hedging strategies against risk related to U.S.-China trade tensions. However, ongoing uncertainties surrounding U.S. tariff policies continues to pose a potential risk of demand slowdown. From a technical perspective, we completed the reliability assessment of the first-generation 2-nanometer GAA process and will start [indiscernible] for its production in the second quarter. Simultaneously for the second-generation 2-nanometer and performance and power optimized 4-nanometer process, we are systematically building the technical infrastructure required to support customer design enablement in a timely and efficient manner. We are strengthening our position in advanced node competition by focusing on securing orders from Tier 1 customers in the HPC and automotive sectors. In parallel, we are enhancing the competitiveness of our PPAC within the VirtuNode by advancing the FinFET process development of low power CIS and mobile DDI applications. In the second half, geopolitical and policy risk may intensify and demand associated with mobile and PC market could remain weak. Nevertheless, robust AI and HPC momentum is expected to sustain strong growth at advanced nodes. We will drive earnings higher by increasing the revenue contribution from advanced node, underpinned by the full ramp-up of new robust product, a seasonal rebound in maternal demand and sustain the strength in AI and HPC applications. We will begin mass production for our first generation of 2-nanometer GAA process and accelerate customer orders for the second-generation 2-nanometer node by stabilizing the process. For 4-nanometer, we will continue our low-node strategy by steadily improving yield and ensuring this production capability for automotive grade products. In mature node, we will deepen our specialty portfolio and expand orders for consumer and automotive products. Thank you.

Good morning. This is Charles Hur from the corporate strategy team at Samsung Display. I will now brief you on our results for the first quarter of 2025. For the Mobile Display business, we responded to the demand of our major customers' high-end smartphones in a timely manner. As a result, our performance improved year-on-year, supported by favorable exchange rates. However, our performance declined quarter-on-quarter due to seasonal effects. For the large display business, our major customers launch new to LED products, including 27-inch UHD monitor which features the highest resolution of 160 ppi. Given the positive market feedback, the QLED demand continued to grow. By focusing on new products, we achieved a double-digit growth in monitor sales, which contributed performance improvement compared to the previous quarter. Next, I will share our outlook and strategies for the second quarter of 2025. For the Mobile Display business, our performance outlook is a little bit conservative due to external uncertainties such as changes in tariff policies. We strengthened our product competitiveness and ensure a stable panel supply for our major customers, new products, including foldable smartphones. Furthermore, we will strive to expand our sales in IT and automotive applications. For the large display business, while keeping our sales performance stable, we are planning to launch monitors featuring ultra-high refresh rates. We expect the market to grow as the new monitors enrich gaming experiences. Next, I will share our outlook and strategies for the second half of 2025. Market uncertainties are expected to increase due to intensified competition and weak consumer sentiment. For the Mobile Display business, with the growing demand of AI devices will reinforce our competitive edge and expand sales by enhancing our differentiated technologies in smartphones such as low power consumption and diverse form factors. In addition, we'll continue to increase sales in IT and automotive segments aiming for double-digit revenue contribution to the mobile display business. We believe it will stabilize overall business portfolio. For the large display business, QD OLED demand continues to grow in premium TV and monitor markets supported by high-definition image quality and superior performance. We'll also expand our product line up to include not only premium monitors, but also mainstream models. As a result, we will broaden our presence in both B2C and B2B monitor market. Through continuous efforts we'll accelerate OLED penetration in monitor market and solidify technology leadership of QD-OLED. Thank you.

Hi, everyone. This is Daniel Araujo from the MX division. I'd like to share our results for Q1 and the future outlook. The smartphone market entered into the seasonally lower Q1 with a decline compared to the previous quarter. For the MX business, Q1 smartphone and tablet shipments were 61 million units and 7 million units, respectively, with a smartphone ASP of $326. We achieved revenue and operating profit growth quarter-on-quarter with the launch of the S25 Series. Its more robust Galaxy AI experience has helped it maintain the strong sales momentum of its predecessor. We saw flagship revenue within the smartphone segment expand year-on-year. We also continue to enhance cost competitiveness through resource efficiency initiatives while Samsung component prices also showed a downward trend in Q1. As a result, we maintained solid double-digit profitability and improved operating profit compared to the previous year. Moving on to our Q2 outlook. Overall smartphone demand is expected to decrease quarter-on-quarter due to seasonality trends. Additionally, there is potential for further adjustments in the forecast due to global tariff policies. The MX business expects a decrease in smartphone shipments and ASP due to the fading effects of our new flagship model launches. While tablet shipments are expected to grow sequentially, we plan to sustain flagship centric sales with a successful launch of the new S25 edge and continued strong sales of the S25 series. We will also expand our AI phone line up by introducing Awesome intelligence to our newest A-Series devices. This brings over many of the highly used AI features from our flagship devices such as Circle to Search and Now Bar. Given the backdrop of volatility in U.S. tariff policies and anticipated increases in key component prices, we are pushing ahead with our premium product strategy and continuing to focus on resource efficiencies. Looking ahead to the second half of the year. Given macroeconomic uncertainty caused by U.S. tariff policies, smartphone market demand is expected to be revised downward and decline year-on-year. The tablet market will also see slower growth but premium demand is expected to remain robust. Wearable product categories are projected to grow due to increased demand for premium products and expansion into emerging markets. Looking across the MX division for our upcoming new foldable devices, we are enhancing the performance, design and durability while also optimizing AI functionality to offer a differentiated user experience. We plan to strengthen our product lineup in order to create new demand and expand our affordable customer base. With the S25 series, including the soon-to-be added Edge, we will continue flagship-centric sales, along with seasonal promotions and sustained marketing efforts. On the A Series, we are reinforcing our efforts to increase market share by offering the differentiated awesome intelligence experience and expanding channel presence in growth markets. We will also launch new ecosystem products with enhanced core functionality, including AI and health capabilities to strengthen product competitiveness and differentiation. In tablets, we will drive premium revenue growth by launching the AI-enhanced TAB S11 series in the latter half of the year and strengthening targeted marketing across the Tab S line to capture new demand. For wearables, we will expand our market presence with a strengthened premium experience while expanding our lineup across all price segments. We plan to launch a new Galaxy Watch with an innovative design and enhanced health-related features. In TWS while we strengthened premium marketing on one hand, we will also address demand across all price segments by launching a new entry-level model. Furthermore, beginning with the successful launch of our XR headset, we will proactively explore new products that meet the diverse needs of consumers while also ensuring market viability. Despite ongoing macroeconomic uncertainty and anticipated increases in material costs, the MX division will drive growth in flagship centric sales and our ecosystem business with a focus on new premium products while we continue to optimize operations across the board to sustain robust profitability. Thank you.

Hello, everyone. This is KL Roh from the Sales and Marketing team of Visual Display. Let me review on the market conditions and our results in the first quarter of 2025. TV market demand decreased quarter-on-quarter after the year-end peak season, but it increased slightly year-on-year due to continued growth in the demand for premium and big TV. For Samsung, we expanded sales share of high value-added products compared to last year through proactively addressing solid demand for Neo QLED, OLED and of our 75 inches. Also, we improved quarter-on-quarter profitability by raising price and reducing material costs. Even so, our profitability decreased year-on-year due to stagnant TV market demand and increased costs driven by intensified competition. Now let me go over the outlook for the second quarter and second half of 2025 In the second quarter, TV market demand is expected to remain the same year-on-year while uncertainties such as the impact of U.S. tariffs are likely to continue. With [indiscernible] on AI, which is the direction our AI screen should move forward, we will launch the new 2025 AI TV model globally with advanced features and lineup, and focus on enhancing sales of premium product and profitability. As for the second half of this year, economic uncertainties are projected to continue. However, demand for high value-added products, including super big TV, QLED and OLED model will stay solid. With newly launched AI TV, we will lead the AI screen market not only by strengthening the core competitiveness of our TV product, including improved picture and sound quality but also by actively promoting differentiated drilling experience. In addition, based on the imported lineup of super big TV, Quality and OLED, we will preemptively capture peak season demand in the second half through strategic collaboration with major retailers. Finally, as the global leader in the TV market for 19 consecutive years, we will advance Samsungs' business, through enhancing TV+ content and diversified advertisements, thereby strengthening profitability and new growth engine.

Thank you all our executives for their comments. That concludes our presentation on the first quarter performance of 2025 and brings us to the Q&A session, which will be conducted in Korean. Operator, you may now open the line for analyst questions.

[Operator Instructions] The first question will be made by Dong Woo from Bank of America Merrill Lynch.

I want to ask about tariffs. There are a lot of uncertainties in the IT sector. What are your response strategies, including supply chain management?

I believe this is one of the most important questions due to the rapid changes in policies and geopolitical tensions among major countries, it's difficult to accurately predict the business impact of tariffs and established countermeasures. For example, the U.S. enacted a 90-day pause on reciprocal tariffs imposed in early April, including the 10% baseline. Our flagship products such as semiconductors, smartphones and tablets are exempt from risk apical tariffs. But a product-specific tariff investigation is underway for these categories. So there are a lot of uncertainties ahead of us. By monitoring likely policy paths in major countries, we are communicating with related countries to minimize negative effects. Also by utilizing our core strengths, managing global production and customer relationships, our agile response measures enable immediate action. The MX business, if tariffs are imposed on semiconductor derivatives and other products, we expect the purchase price of core components to rise the MX by expanding sales of flagship smartphones, including for the soon-to-launch S25 Edge and new premium ecosystem devices will secure profitability. For BD and DA, we will pursue sales expansion of premium products. And if necessary, we'll consider options such as relocating production volumes by leveraging our global manufacturing footprint to minimize tariff impacts. The DS division will monitor the direction of U.S. semiconductor tariff policies and we'll review countermeasures based on various scenarios. Thank you.

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

This is Kown Jay Hyun from JPMorgan Securities. I also have one question. You explained about the performance for your memory business in the first quarter. I'd appreciate if you could provide a little bit more detail, please?

Yes. Let me explain further on our Memory performance. Over the first quarter, AI server demand remains solid, and there were growing perception that prices are pretty much bottomed out for both PC and mobile applications. And as a result, we saw a pickup in additional purchasing demand. Also amidst concerns are ahead of changes to global tariffs. Companies have been increasing preproduction of their finished products, leading to a faster-than-expected drawdown of their components inventories and recurring demand has been gaining more visibility versus our initial outlook. As for HBM, clients have been deferring demand ahead of the planned launch of our enhanced HBM products. And together with the impact of export controls on AI chips, we said to a gap in HBM demand as we projected in January in our earnings call with sales decreasing quarter-on-quarter. Despite these conditions, our server DRAM bit shipments increased by a mid-teens percentage Q-on-Q which helped conventional DRAM post high single-digit bit growth. And meanwhile, ASP decreased by a mid-single percentage Q-on-Q. For NAND, as some data center storage projects were postponed, overall, we saw weaker demand in the SSD market. Previously, in the first quarter, though, with services enjoying higher margins, there was a supply concentration in software SSDs within the industry with service SSD product prices falling by more than other products. As server SSD take up a big share of our revenue mix, our ASP in the first quarter fell by mid-10% level while bit growth was down by about 10% Q-on-Q. Still, as overall demand conditions improved compared to the start of the quarter, bit growth came in slightly above our previous guidance.

Next question will be made by Sang Kyu Kim from Daiwa Securities.

I'd like to ask about company overall and mix. Regarding the KRW 10 trillion stock repurchase, are there any plans to cancel the shares acquired in the second phase? And do you have any plans for possible M&A deals? And regarding MX' first quarter profit growth, what drove the growth? And is the improved cost structure sustainable throughout the year?

I will answer the third question. Of the KRW 3 trillion in the second phase, excluding the share designated for employee stock compensation, we will cancel KRW 2.5 trillion worth of shares in line with the first phase to enhance shareholder value. For the programs remaining KRW 4 trillion, the Board will identify options to enhance shareholder value. They will thoroughly review the timing and the scale of the potential cancellations, accounting for the company's management, financial and regulatory environments. We'll provide update when plans have been concerned. Last, we plan to utilize our cash reserves so that even in the currently challenging and uncertain environment, we can facilitate operational stability, continue to invest in initiatives for future growth and fastly implement our shareholder return policy. We are continuously exploring strategies for our cash holdings to enhance shareholder value and pursue M&A opportunities. We will also share details when plans are more concrete.

And on your question about smartphone profitability, so in Q1, overall sales of flagship models grew and the product mix also improved. So the portion of flagship model revenue within smartphones increased compared to last year. We also saw a profit improvement from optimization and efficiency enhancements across our development, manufacturing and logistics processes, including sales costs. We also secured additional cost competitiveness as the memory and display prices declined compared to last year while we also optimized product specs and standardized components across more products. So given the uncertainties surrounding U.S. tariff policies as well as rising component prices, we aim to expand the portion of flagship revenue through the, on to the S25 Edge and grow our premium ecosystem to sustain profitability. Thank you.

The next question will be from KB Securities, Mr. Kim Dongwon.

My name is Kim Dongwoon from KB Securities. I have a question for memory and V8 First, on HBM, within the market, I believe there is still a high degree of interest in Samsung Electronics HBM. So what is your business outlook for HBM from the second quarter onwards? And then for your TV business, it seems that your TV market share has been decreasing recently. Do you think that a rebound will be possible this year? If so, what is your main VD rebound strategy?

So regarding our HBM business, let me cover that first. So our enhanced HBM3E, samples have already been shipped out to major accounts. We expect a gradual contribution to our top line starting from the second quarter. Considering uncertainties surrounding the tariffs and semiconductor export controls, this may introduce some volatility to improvement in sales However, we expect HBM sales, which bottomed out in the first quarter will likely start showing a step-by-step recovery with every quarter as we expand sales of our enhanced HBM3 product. For HBM4 development is underway in accordance with customer project time lines with mass production set for the second half as planned. Customer HBMs, which has been driving great interest from the industry is also under discussions with multiple clients for their HBM4 or 4E-based projects. And further, we're expecting custom HBM4 projects to start contributing to revenue starting 2026 alongside standard HBM4, and we are continuously making necessary investments to respond to customer demand for HBM4 and 4E.

I'd like to answer about the TV market. In the TV market, demand for QLED and big TV products of 70 inches and larger is continually rising, but in each segment, the demand centering on entry-level products is growing. So the entry-level share of the TV market is rising, leading to intensified market competition. Amid this environment, will further differentiate our TVs competitiveness and recover market share. First, as mentioned earlier, based on Vision AI, we will enhance the core competitiveness of our TV such as picture and sound quality. Also, we will identify customer needs and tastes to provide tailored experiences and expand our AI TV lineup with more sophisticated and improved AI features compared to previous Neo QLED and oil leading to QLED and the frame to create new demand. Second, to solidify our leadership in the premium market, we will expand the lineup of OLED and super big TVs of 98 inches and larger while strengthening the large entry-level lineup of 75 inches and above, to respond to intensifying competition in the entry-level market. Last, the key strengths of our TV such as security design and small things will be communicated more broadly. At the same time, we'll strengthen our service business such as TVs and advertisements to secure profitability and growth engines.

The next question is by Mr. Han Dong Hee from SK Securities.

This Han Dong Hee from SK Securities. To ask a question on foundry. You have been seeing widening loss recently, it seems deterioration is profitability is deteriorating. So what are the reasons? And do you expect an improvement in the second half?

Yes. Let me cover that question from the Foundry business. In the short term, as global economic uncertainties persist, demand from mobile and PCs are also seeing a continued slowdown. Poor demand from major customers has resulted in a drop in utilization rates and rising fixed costs, which are the main reasons for the recent deterioration in our profitability. In terms of our second half outlook, uncertainties, of course, will continue to remain, but we are expecting a gradual recovery in demand, which, in turn, will help improve utilization and gradually help narrow our loss. More specifically, we are planning -- we are securing stable mass production across our advanced process nodes, helping boost customer trust as we expand customer engagements more assertively. For more mature nodes, we will be optimizing power, performance, cost competitiveness and develop specialty process nodes as we seek to maximize cost competitiveness and expand our markets. This way, we can secure competitiveness in both technology and cost at the same time, which will help us achieve our mid- to longer term objective of improving performance on a sustainable basis.

The next question will be by Mr. Lee Giuni from Goldman Sachs Securities.

Yes, I have a question on memory and also display. For memory due to changes in the tariff policies, market uncertainties on the rise. So what is your outlook for memory given these developments? And what is the Samsung Electronics strategy? For display, the small- to medium-sized OLED market has been seeing intense competition. So what is your strategy to stay competitive?

Yes, in terms of our outlook for the memory market, let me cover that. In the second quarter, we believe that customers' component inventories will normalize and driven by continued AI-related demand, we expect strong fundamentals underlying the memory market to continue. However, we believe changes to the tariff policies of major economies as well as stronger export controls against AI have already been adding to rising uncertainty of expected demand in the second half, especially in the second quarter, the great period on tariffs have prompted some customers to increase preproduction. And we've actually been seeing some pull-in demand for our components. And this preemptive purchasing may likely have some negative impact on demand in the second half. Still to assess the actual impact, it depends on additional changes to tar policies, also available supply capacity relative to for demand. So we'll have to monitor development and see. Given these market conditions, in the short term for DRAM, we expect mobile and PC applications, which had relatively lower ASP to start seeing pricing recovery first in the second quarter. For NAND, in the second quarter, we expect the decline in prices to slow down some product prices may be flat, others may increase sightly, but overall, we expect a change in the pricing overall. To sum up, while there may be a slight fluctuation in our Q2 performance, we expect DRAM to see increased sales driven by an increase in overall shipments Q-on-Q. Meanwhile, given different supply-demand dynamics by application and end market, pricing trends may end up quite different by product. which is why we plan on managing supply flexibly between different applications to manage profitability. We expect DRAM bit growth to increase by low 10% percentage Q-on-Q. For NAND, amid growing perceptions, the prices have reached the bottom, we expect customer demand recover as they rebuild inventory. We will expand supply in line with growth in demand the Gen 5 server PCIe market while managing supply across different applications centered on profitability. We'll also be accelerating our tech migration to V8 to enhance cost competes, and we expect NAND bit growth to be up by a mid-teens percentage Q-on-Q in the second quarter.

I'll answer the question about display. Despite high uncertainties such as changing tariff policies, and the challenging business environment caused by intensified competition among OLED panel makers, we are striving to strengthen our competitive edge and maintain our leadership. First, from the early stages of developing new technologies with differentiated performance, we will closely cooperate with customers to continually deliver high-quality products that meet their needs while further strengthening our cost competitiveness, especially technologies with improved brightness, low power consumption, foldable devices and next-gen form factors will continually be enhanced so that in the AI smartphone era, we can lead the display markets. Also, we'll utilize the 5.5 Gen 6 and the upcoming 8.6 Gen IT line to secure and expand our position with optimized products for each line, not only in smartphones, but also in emerging reality markets such as IT and automotive, thus solidifying leadership in the OLED market.

Next question will be made by Geun Chang Roh from Hyundai Motor Securities.

I'm Geun Chang Roh. I'd like to ask about the MX business first. It's about the foldable shipments. The increase of foldable shipment is decreasing. And some people say that it may show reverse growth rates. And can you talk about Samsung's foldable shipment targets? And the second question is about Tri-Fold Huawei and many other Chinese companies are coming up with new smartphones, does Samsung have any plans on launching Tri-Fold? And when we'll be able to meet this new smartphone?

Well, we've continued to lead the foldable market through our innovation. And this year, with more innovation on the foldable form factor, we will improve the competitiveness of our products even further, enabling more customers to experience the benefits of foldables. In terms of technological innovation, we're significantly improving the portability and performance, which are key buying factors for our customers. The advanced Galaxy AI experience from the S25 series will be tailored individually to each of the foldable form factors, fold and flip to deliver a more differentiated and specialized experience. With the fold, we will offer and optimize large screen AI experience. And on the flip, it will feature a portable AI experience that can be used anywhere at any time. We'll expand sales of the high-end models while also strengthening the foldable lineup in order to attract new customers aiming for meaningful growth. Now as for new form factors, we believe that beyond the form factor itself, it's essential to ensure a level of product quality and usability in real-world scenarios that's aligned with market demands and customer expectations. We are reviewing products with new form factors with a focus on securing a meaningful competitive advantage in performance and quality. Thank you.

Due to the time constraint, we'll have one final question. The next question will be by Mr. Lee Sei Cheol from Citigroup.

This is Lee Sei Cheol from Citi. I have a question on Memory, just on your mid- to longer term perspective. So DeepSeek obviously caused a big buzz early in the year. and it's expected to prompt a lot of change regarding AI. So has there been any changes beyond servers like in PCs or the mobile market in terms of demand or product requirements.

Yes. So as you mentioned, at the start of this year, there was a great deal of attention toward DeepSeek and prompting expectations about high accuracy AI inference models bolt-on smaller LLM. And it seems not only for servers, but for PCs and smartphones and other edge devices. We expect lots of different ideas to be tested out the use of AI functionality. First, workstation grade AI PCs have shown the first signs of market traction. High-spec systems deploying at least 128- to 512-gigabyte DRAM power system are being released, and we're seeing a rapid increase in demand. For conventional PCs, considering the size of AI models, care hardware specifications are just not enough, so it will likely take more time to uncover a killer application for AI. So with end of support for Windows 10 in the second half of this year, we expect replacement demand mostly for AI PC. In the mid- to long term, as hardware specification become increasingly upgraded, there will be continuous solid demand for higher memory density and performance. For mobile applications to enable AI processing at the device level, we expect demand for DRAM with improved power efficiency, performance intensity to increase. This year, as AI competition heated up in the flagship segment, the trend toward higher density LPDDR5X products, for example, has become more visible to target the future market looking beyond the second half of 2026, different products such as LPW or LP PIM with improved power efficiency and performance under active discussions along with standard LPDDR6 as well. So the spread of generative AI is involving in many different forms, not only in servers, but at the Edge as well. We are committed to timely development of difference products demand if today's changing market dynamics to preemptively capture new market opportunities.

I'd like to thank everybody who participated in this earnings call. And also, I'd like to thank everybody who share their valuable opinion, and we'll refer to them in our decision-making process. That completes our conference call for this quarter. We wish all of you and those close to you stay strong and healthy. We thank everyone for your participation, and we look forward to speaking with all of you soon. Thank you.