Earnings Release 1Q 2014 S Samsung Electronics El t i April 2014 Disclaimer The financial information in this document are consolidated earnings results based on K-IFRS. This document is provided for the convenience of investors only, before the external audit on our 1Q 2014 fi financial i l results lt iis completed. l t d The Th audit dit outcomes t may cause some parts t off this thi document d t to t change. h This document contains "forward-looking statements" - that is, statements related to future, not past, events. In this context, "forward-looking statements" often address our expected future business and financial performance, and often contain words such as "expects”, "anticipates”, "intends”, "plans”, "believes”, "seeks” or "will ". “Forward-looking statements" by their nature address matters that are, to different degrees, uncertain. For us, particular uncertainties which could adversely or positively affect our future results include: · The behavior of financial markets including fluctuations in exchange rates, interest rates and commodity prices · Strategic actions including dispositions and acquisitions p dramatic developments p in our major j businesses including g CE ((Consumer Electronics), ), · Unanticipated IM (IT & Mobile communications), DS (Device Solutions) · Numerous other matters at the national and international levels which could affect our future results These uncertainties may cause our actual results to be materially different from those expressed in this document. Income Statement 1Q ’14 14 % of sales 4Q ’13 13 % of sales 1Q ’13 13 53.68 100.0% 59.28 100.0% 52.87 32.05 59.7% 36.45 61.5% 31.38 Gross Profit 21.63 40.3% 22.83 38.5% 21.49 SG&A expenses 13 14 13.14 24 5% 24.5% 14 52 14.52 24 5% 24.5% 12 71 12.71 3.69 6.9% 3.79 6.4% 3.33 8.49 15.8% 8.31 14.0% 8.78 Other non-operating income/expense 0.96 1.8% 0.86 1.4% △0.10 E it method Equity th d gain/loss i /l 0 03 0.03 0 1% 0.1% △0 04 △0.04 - 0 18 0.18 Finance income/expense 0.17 0.3% 0.12 0.2% 0.19 9.65 18.0% 9.25 15.6% 9.05 2.07 3.9% 1.95 3.3% 1.89 7.57 14.1% 7.30 12.3% 7.15 (Unit: KRW Trillion) Sales Cost of Sales - R&D expenses Operating Profit Profit Before Income Tax Income tax Net profit Key Profitability Indicators ROE 1Q ’14 4Q ’13 1Q ’13 1Q ’13 24% 20% 22% 23% Profitability (Net profit/Sales) 0.14 0.12 0.14 Asset turnover (Sales/Asset) 0 98 0.98 1 20 1.20 1 14 1.14 Leverage (Asset/Equity) 1.44 1.46 1.49 23% 21% 24% EBITDA Margin 23% ROE 4Q ’13 1Q ’14 22% 23% 21% 20% EBITDA Margin 1 Segment Sales & Operating Profit Sales (Unit: KRW Trillion) Total CE VD IM Mobile DS Semiconductor - Memory DP 1Q ’14 QoQ 4Q ’13 1Q ’13 53.68 9%↓ 59.28 52.87 11.32 21%↓ 14.27 11.24 7.39 27%↓ 10.07 7.43 32.44 4%↓ 33.89 32.82 31.36 4%↓ 32.56 32.17 15.56 8%↓ 17.00 15.81 9 39 9.39 10%↓ 10 44 10.44 8 58 8.58 6.29 3%↓ 6.52 5.12 6.10 6%↓ 6.46 7.11 4Q ’13 1Q ’13 O Operating ti Profit P fit (Unit: KRW Trillion) 1Q ’14 QoQ 8.49 2%↑ 8.31 8.78 CE 0.19 71%↓ 0.66 0.23 IM 6.43 18%↑ 5.47 6.51 DS 1.87 13%↓ 2.14 1.85 1.95 2%↓ 1.99 1.07 0.11 0.77 Total Semiconductor DP △0.08 - Note) CE (Consumer Electronics), IM (IT & Mobile communications), DS (Device Solutions), DP (Display Panel) ※ Sales for each business unit includes intersegment sales. ※ 2013 sales and operating profit of each business stated above reflect the organizational change in 2014. 2 1Q Results Semiconductor [Memory] [LCD] □ Market : Demand for datacenter/game console remained strong despite weak seasonality - DRAM DP □ Market: Panel demand/ASP declined under weak seasonality - TV Panel : Demand decreased QoQ due to reduced orders from set makers (QoQ 10%↓, YoY 3%↓) : Decline in mobile devices demand under weak seasonality; · ASP decline continued (QoQ 4%↓) PC demand stabilized compared to the recent years; Strong server/game console demand continued - IT Panel : Overall panel demand decreased including tablet - NAND : Datacenter SSD and high-density card demand growth continued, while demand for mobile decreased □ Samsung : Improved profitability by addressing applications with relatively solid demand and by expanding leading-edge process migration - DRAM : Improved profitability through addressing increased server/graphic DRAM demand, expanding 20nm-class migration and enhancing production efficiency (QoQ 12%↓) □ Samsung : Earnings down on lower overall shipments and continued ASP decline hi t low l i l di it % growth th QoQ Q Q single-digit - TV panell : shipments, low-10 % growth YoY · Higher shipments of UHD; Reinforced Chinese customer base through new Fab ramp-up - IT panel : Overall shipment declined while increasing portion - NAND : Maintained profitability by increasing shipments of of the high resolution tablet panels high-density solutions/cards in addition to the expansion of process migration despite soft pricing environment [System LSI] □ Earnings down QoQ due to lower mobile AP demand under weak seasonality [OLED] □ Earnings g down Q QoQ Q due to weak seasonal demand and impact from new product model replacement, etc - Started mass production of new high-end 5.1” FHD - CIS sales increased led by ISOCELL high-pixel product launch 3 1Q Results IM C E [Handset] [TV] □ Market M k t : Lower L smartphone/tablet t h /t bl t d demand d under d weakk □ Market k : FPTV demand d d down d amid d weakk seasonality l (QoQ ( 29%↓) ↓) seasonality - Developed market: Channel inventory increased due to intensified competition from the previous quarter - Emerging E i market k t:D Demand dd decreased d under d weakk market k t condition in EM including China □ Samsung : Profit up QoQ driven by smartphone shipment growth, efficiently managing marketing expenses, and d positive iti impact i t from f one-time ti expense adjustments - Smartphone : Shipment increased ; enhanced high-end line-ups with S5 launch in addition to existing S4 & Note3 ; mid to low-end shipments increased but slight growth YoY (YoY 2%↑) - Compared to the previous year, · Latin America : demand grew substantially thanks to the World Cup impact (YoY 22%↑) · EU : turned to growth (YoY 3%↑) · US : demand down (YoY 4%↓) □ Samsung : Earnings down QoQ due to weak market demand despite outperforming market growth - Increased premium product sales in developed markets (US/EU) · 60”+ large-size LCD TV sales YoY 95%↑, UHD TV QoQ 48%↑ - Shipments up QoQ(3%↑)/YoY(74%↑) by addressing the World Cup demand in Latin America with strong sales of Grand 2, etc. - Tablet : Reinforced mid to high-end line ups by launching Note PRO 12.2· and Tab PRO 12”/8” [Network] □ Sales decreased QoQ due to weak seasonality [ Digital Appliances ] □ Earnings declined due to lower shipments under weak seasonality and increased expenses associated with new product launch, etc 4 Outlook Semiconductor □ Memory : Expect higher demand for mobile devices led by new mobile product launches and expansion of Chinese LTE market ; Expect PC DRAM contents to grow ; Expect increased server DRAM/SSD demand for datacenter to continue - FY14 : Expect balanced DRAM supply-demand condition and increased NAND demand for datacenter/PC SSD to increase □ System S LSI : E Expect weakk earnings i momentum to continue i in i 2Q, 2Q but improved results in 2H based on seasonal demand and 20nm production ※ Expect to enhance mid-term growth momentum through a collaboration with Globalfoundries on 14nm. DP □ LCD : Expect market condition to improve driven by demand increase from the World Cup effect and UHD TV market expansion - UHD TV : Expect shipment increase of mass market products and premium products such as curved TV - FY14 : Expect supply and demand to improve as capacity growth slows down amid solid demand g growth □ OLED : Expect to increase shipments of new high-end smartphone panels; to expand mid-end line ups; to increase applications to wearable devices (smart watch), etc. IM □ Handset : Slight growth QoQ as weak seasonality to continue in 2Q - Smartphone · High-end : Expect replacement demand growth led by early upgrade program in North America and TD-LTE expansion in China · Low/Mid-end : Expect demand to grow in emerging markets; p to intensifyy with new product p Competitions launches among set makers □ Tablet : Slight demand growth under weak seasonality - Forecast competition to intensify with line up diversification by set makers amid slowdown of growth trend CE □ TV - Expect slight demand growth driven by the impact of the World Cup and new product launches - In particular, UHD TV market to grow significantly due to competition over new model launch and line-up expansion · 2Q Global UHD TV demand : 1.8M ((QoQ 58%↑, D.Search) □ Digital Appliances - Forecast market to grow slightly QoQ led by increased demand in developed market and strong seasonal sales for air conditioner 5 [Appendix 1] Statement of Financial Position (K-IFRS) (Unit : KRW Billion) Mar 31, 2014 Dec 31, 2013 Mar 31, 2013 116,246 110,760 95,198 - Cash * 61,478 54,496 43,559 - A/R 25,236 24,989 23,398 - Inventories 19,649 19,135 19,502 9,883 12,141 8,739 109,047 103,315 95,645 - Investments 14,677 12,661 14,630 - PP&E 76,519 75,496 68,766 4,120 3,981 4,077 13,730 11,177 8,172 225,293 214,075 190,843 69,731 64,059 62,037 - Debts 12,479 11,161 12,356 - Trade Accounts and N/P 10,263 8,437 10,478 - Other Accounts and N/P & Accrued Expenses 19,988 20,541 16,690 - Income Tax Payables 5,117 3,386 4,291 - Unearned Revenue & Other Advances 2,830 2,882 3,053 19,054 17,652 15,169 Shareholders' Equity 155,562 150,016 128,806 - Capital Stock 898 898 898 225,293 214,075 190,843 Current Assets - Other Current Assets Non Current Assets - Intangible Assets - Other Non Current Assets Total Assets Liabilities - Other Liabilities Total Liabilities & Shareholder's Equity ※ Cash * = Cash and Cash equivalents + Short-term financial instruments + Short-term available-for-sale securities Mar 31, 2014 Current ratio * Liability/Equity Debt/Equity Net debt/Equity ※ Current ratio * = Current assets/Current liabilities Dec 31, 2013 Mar 31, 2013 214% 216% 189% 45% 43% 48% 8% 7% 10% -31% -29% -24% [Appendix 2] Cash Flow Statement (K-IFRS) (Unit : KRW Trillion) 1Q '14 4Q '13 1Q '13 54.50 52.68 37.45 12.21 10.28 12.82 Net profit 7.57 7.30 7.15 Depreciation 4.00 3.94 3.78 Cash flows from investing activities -6.54 -7.67 -4.45 -5.94 -8.08 -3.40 1.26 -0.40 -2.62 1.25 -0.38 -2.69 6.98 1.81 6.11 61.48 54.50 43.56 Cash (Beginning of period)* Cash flows from operating activities Increase in tangible assets Cash flows from financing activities Increase in debts Increase in cash Cash (End of period)* ※ Cash * = Cash and Cash equivalents + Short-term financial instruments + Short-term available-for-sale securities □ Current State of Net Cash (Net Cash =Cash* - Debts) (Unit : KRW Trillion) Net Cash Mar 31, 2014 Dec 31, 2013 Mar 31, 2013 49.00 43.34 31.20 ※ Cash * = Cash and Cash equivalents + Short-term financial instruments + Short-term available-for-sale securities