Earnings Release Q2 2014 S Samsung Electronics El t i July 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 2Q 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 2Q ’14 14 % of sales 1Q ’14 14 % of sales 2Q ’13 13 52.35 100.0% 53.68 100.0% 57.46 31.67 60.5% 32.05 59.7% 34.34 Gross Profit 20.68 39.5% 21.63 40.3% 23.12 SG&A expenses 13 49 13.49 25 8% 25.8% 13 14 13.14 24 5% 24.5% 13 59 13.59 3.70 7.1% 3.69 6.9% 3.54 7.19 13.7% 8.49 15.8% 9.53 Other non-operating income/expense 0.25 0.5% 0.96 1.8% 0.09 E it method Equity th d gain/loss i /l 0 06 0.06 0 1% 0.1% 0 03 0.03 0 1% 0.1% 0 21 0.21 Finance income/expense 0.28 0.5% 0.17 0.3% △0.003 7.79 14.9% 9.65 18.0% 9.83 1.53 2.9% 2.07 3.9% 2.05 6.25 11.9% 7.57 14.1% 7.77 (Unit: KRW Trillion) Sales Cost of Sales - R&D expenses Operating Profit Profit Before Income Tax Income tax Net profit Key Profitability Indicators ROE 2Q ’14 1Q ’14 2Q ’13 16% 20% 24% Profitability (Net profit/Sales) 0.12 0.14 0.14 Asset turnover (Sales/Asset) 0 95 0.95 0 98 0.98 1 19 1.19 Leverage (Asset/Equity) 1.42 1.44 1.48 22% 23% 23% EBITDA Margin 2Q ’13 24% 1Q ’14 2Q ’14 23% 22% 23% 20% ROE 16% EBITDA Margin 1 Segment Sales & Operating Profit Sales (Unit: KRW Trillion) Total CE VD IM Mobile DS Semiconductor - Memory DP 2Q ’14 QoQ 1Q ’14 2Q ’13 52.35 2%↓ 53.68 57.46 13.00 15%↑ 11.32 12.78 8.06 9%↑ 7.39 7.94 28.45 12%↓ 32.44 35.54 27.51 12%↓ 31.36 34.96 16.23 4%↑ 15.56 17.05 9 78 9.78 4%↑ 9 39 9.39 8 68 8.68 6.92 10%↑ 6.29 5.70 6.33 4%↑ 6.10 8.18 1Q ’14 2Q ’13 O Operating ti Profit P fit (Unit: KRW Trillion) 2Q ’14 QoQ 7.19 15%↓ 8.49 9.53 CE 0.77 300%↑ 0.19 0.43 IM 4.42 31%↓ 6.43 6.28 DS 2.09 12%↑ 1.87 2.92 Semiconductor 1.86 5%↓ 1.95 1.76 DP 0.22 △0.08 1.12 Total - 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 2Q Results Semiconductor DP [LCD] [Memory] □ Market : Solid demand for main applications continued despite low seasonality □ Market: TV and notebook/monitor panel demand increased - TV Panel : Demand increased driven by the World Cup and - DRAM : Stable market supply and demand condition continued; Stable PC/server and strong game console/consumer pp y growth g was limited demand continued while supply UHD TV growth (QoQ 8%↑, YoY 2%↑) · ASP increased due to improved supply and demand (QoQ 4%↑) - IT Panel : Overall demand declined due to decrease in tablet - NAND : Solid demand for PC/datacenter and brand SSD; demand despite window XP replacement demand Demand growth continued for high-density card and the Chinese mobile market increase in notebook and monitor (QoQ 1%↓) □ Samsung : Earnings improved QoQ led by higher TV panel shipments □ Samsung : Improved profitability by addressing demand growth and continuing the expansion of process migration - DRAM low-10 %, YoY : Improved profitability by expanding 20nm-class migration and addressing demands from application segments with flexible product mix - NAND - TV panel : Shipment increased by mid single-digit %, QoQ · Shipments up for premium products such as curved, 60”+/UHD - IT panel : Shipment declined due to lower tablet market demand : Maintained profitability through expansion of process migration and 3bit products, while increased sales of SSD/solution products and high-density card [[System y LSI]] □ Sales down slightly QoQ due to weak customer demand for mobile AP - LSI products sales increased including high-pixel CIS [OLED] □ Earnings slightly increased driven by new high-end smartphone product shipment growth - New high-end FHD panel sales increased and started mass production of 5.1” QHD panel 3 2Q Results IM C E [TV] [Handset] □ Market : Amid low seasonality, Smartphone demand remained flat for QoQ while declined slightly QoQ for Tablet - Developed market: Demand remained solid in US but weaken in EU due to high channel inventory level - Emerging E i market k t : IIn Chi China, 3G demand d d declined d li d in i anticipation ti i ti of 4G LTE expansion □ Samsung : Earnings declined; Lower smartphone & tablet shipments due to higher inventory level; and increased costs related to ramp-up sales of S5 and inventory reduction - Smartphone : Mid to low-end shipments down due to weak demand in EU and lower 3G demand coupled with intensified price competition in China - Tablet : Shipments down due to weak overall demand, including declined demand for replacements [[Network] et o ] □ Earnings down QoQ due to decrease in LTE investments of domestic and overseas market under low seasonality □ Market : Amid low seasonality, seasonality FPTV market grew slightly QoQ led by UHD TV growth and the World Cup demand (QoQ 1.5%↑) - Latin America : Strong demand increase driven by the World Cup impact (QoQ 15%↑) - UHD TV : Strong demand increase in developed and Chinese market, following a successful new products rollout (QoQ 88%↑) □ Samsung : Earnings up QoQ while outperforming market growth led by successful new model launches and increasing sales thanks to the world-cup demand - Increased premium product sales in developed markets · Premium LCD TV(7000 series~) sales up QoQ 63%↑, YoY 31%↑ 60”+ ultra large-size LCD TV sales up QoQ 42%↑, YoY 86%↑ - UHD TV : Increased shipments largely outperformed the market by meeting the increased market demand for UHD TV and improving mass market product line ups in China [ Digital Appliances ] □ Overall demand increased in developed market, while Samsung earnings improved QoQ led by strong sales of premium products and peak season for air conditioners 4 Outlook [2nd half] Semiconductor □ Memory : Expect tight supply and demand market condition to continue under strong seasonality - DRAM: Expect strong demand from major applications amid limited supply growth; Demand to increase driven by new mobile product launch and Chinese mobile market growth - NAND: Expect strong mobile and Enterprise/PC SSD demand growth, while the overall demand expansion to be driven by increased contents for major applications, including card □ System LSI : Expect weak customer demand for high-end mobile AP to continue, amidst new 20nm mobile AP product launch ※ 14nm product development is on track to begin mass production by year-end; well in-line with our plan to secure customer base IM □ Handset : Expect smartphone and tablet demand to grow under strong seasonality - Smartphone · High-end : Expect growth led by TD-LTE expansion in China and lower inventory level in Europe · Mid/Low-end : Expect demand to grow led by emerging markets ※ Competition to intensify with new product launches □ Tablet : Expect demand to increase under strong seasonality, new model & price competition to intensify - Expect substantial growth in 4Q demand driven by year-end seasonal promotion CE DP □ LCD : Expect stable market condition led by strong seasonality; T end toward to a d increased inc eased demand fo ge size si e and UHD TV Trend for la large - UHD TV : Expect shipment increase in mass market products and premium products, including curved and 60”+ □ OLED : Focus on enforcing competitiveness and securing long term growth - High-End : Start mass production of new flexible and ultra-high resolution products □ TV : Expect demand to grow YoY driven by strong seasonality and d solid lid emerging i markets k t growth th momentum t - Expect UHD TV competition to intensify in developed/China market · Global UHD TV demand (QoQ): 3Q 3.6M (103%↑) → 4Q 6.1M (70%↑) □ Digital Di it l Appliances A li : Expect E td demand d to t iincrease YoY Y Y amid id economic recovery in North America and emerging markets - Mid-End : Increase sales by diversifying product line-up 5 [Appendix 1] Statement of Financial Position (K-IFRS) (Unit : KRW Billion) Jun 30, 2014 Mar 31, 2014 Jun 30, 2013 112,800 116,246 104,791 - Cash * 60,663 61,478 46,986 - A/R 24,433 25,236 27,108 - Inventories 18,276 19,649 21,562 9,428 9,883 9,135 111,923 109,047 98,971 - Investments 17,549 14,677 15,725 - PP&E 75,594 76,519 70,398 4,220 4,120 4,062 14,561 13,730 8,786 224,723 225,293 203,762 65,210 69,731 65,382 13,972 12,479 13,825 - Trade Accounts and N/P 8,162 10,263 10,527 - Other Accounts and N/P & Accrued Expenses 17,044 19,988 18,043 - Income Tax Payables 4,305 5,117 3,066 - Unearned Revenue & Other Advances 2,294 2,830 2,884 19,433 19,054 17,037 Shareholders' Equity 159,513 155,562 138,380 - Capital Stock 898 898 898 224,723 225,293 203,762 Current Assets - Other Current Assets Non Current Assets - Intangible Assets - Other Non Current Assets Total Assets Liabilities - Debts - Other Liabilities Total Liabilities & Shareholder's Equity ※ Cash * = Cash and Cash equivalents + Short-term financial instruments + Short-term available-for-sale securities Jun 30, 2014 Current ratio * Liability/Equity Debt/Equity Net debt/Equity ※ Current ratio * = Current assets/Current liabilities Mar 31, 2014 Jun 30, 2013 226% 214% 197% 41% 45% 47% 9% 8% 10% -29% -31% -24% [Appendix 2] Cash Flow Statement (K-IFRS) (Unit : KRW Trillion) 2Q '14 1Q '14 2Q '13 61.48 54.50 43.56 8.91 12.21 8.60 Net profit 6.25 7.57 7.77 Depreciation 4.20 4.00 3.81 Cash flows from investing activities -8.84 -6.54 -6.00 -4.68 -5.94 -5.47 -0.16 1.26 0.42 1.91 1.25 1.33 -0.82 6.98 3.43 60.66 61.48 46.99 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 Jun 30, 2014 Mar 31, 2014 Jun 30, 2013 46.69 49.00 33.16 ※ Cash * = Cash and Cash equivalents + Short-term financial instruments + Short-term available-for-sale securities