Earnings Release Q4 2013 S Samsung Electronics El t i January 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 Q4 2013 fi financial i l results lt is i 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 (Unit: KRW Trillion) 4Q ’13 13 % of sales 3Q ’13 13 % of sales 4Q ’12 12 FY ’13 13 % of sales FY ’12 12 % of sales Sales 59.28 100.0% 59.08 100.0% 56.06 228.69 100.0% 201.10 100.0% 36.45 61.5% 35.53 60.1% 34.55 137.70 60.2% 126.65 63.0% Gross Profit 22.83 38.5% 23.56 39.9% 21.51 91.00 39.8% 74.45 37.0% SG&A expenses 14.52 24.5% 13.39 22.7% 12.67 54.21 23.7% 45.40 22.6% - R&D expenses 3.79 6.4% 3.66 6.2% 2.96 14.32 6.3% 11.53 5.7% Operating Profit 8.31 14.0% 10.16 17.2% 8.84 36.79 16.1% 29.05 14.4% Other non-operating p g income/expense 0.86 1.4% △0.03 - △0.51 0.82 0.4% △0.02 - Equity method gain/loss △0.04 - 0.15 0.3% 0.22 0.50 0.2% 0.99 0.5% Finance income/expense 0.12 0.2% △0.04 - △ 0.01 0.26 0.1% △0.10 - 9.25 15.6% 10.24 17.3% 8.53 38.36 16.8% 29.92 14.9% 1.95 3.3% 1.99 3.4% 1.49 7.89 3.4% 6.07 3.0% 7.30 12.3% 8.24 14.0% 7.04 30.47 13.3% 23.85 11.9% Cost of Sales Profit Before Income Tax Income tax Net profit Key Profitability Indicators 4Q ’13 3Q ’13 4Q ’12 FY ’13 FY ’12 4Q ’12 22% 25% 25% 22% 21% 25% Profitability (Net profit/Sales) 0.12 0.14 0.13 0.13 0.12 A Asset turnover (S (Sales/Asset) l /A ) 1.20 1.21 1.33 1.16 1.19 Leverage (Asset/Equity) 1.46 1.47 1.51 1.46 1.51 21% 24% 22% 23% 22% ROE EBITDA Margin 3Q ’13 25% 4Q ’13 22% 24% 22% 21% ROE EBITDA Margin 1 Segment Sales & Operating Profit Sales (Unit: KRW Trillion) Total CE VD IM Mobile DS Semiconductor - Memory DP 4Q ’13 13 QoQ 3Q ’13 13 4Q ’12 12 FY ’13 13 YoY FY ’12 12 59.28 0.3%↑ 59.08 56.06 228.69 14%↑ 201.10 14.27 18%↑ 12.05 14.56 50.33 2%↓ 51.11 10.07 31%↑ 7.68 10.52 33.12 5%↓ 35.04 33.89 7%↓ 36.57 30.71 138.82 31%↑ 105.84 32.17 9%↓ 35.20 29.60 133.72 32%↑ 101.63 17.00 5%↓ 17.90 17.52 67.76 1%↓ 68.29 10 44 10.44 7%↑ 9 74 9.74 9 59 9.59 37 44 37.44 7%↑ 34 89 34.89 6.52 2%↑ 6.37 5.33 23.71 14%↑ 20.86 6.46 20%↓ 8.09 7.75 29.84 10%↓ 33.00 3Q ’13 4Q ’12 FY ’13 O Operating ti Profit P fit (Unit: KRW Trillion) Total 4Q ’13 QoQ YoY FY ’12 8.31 18%↓ 10.16 8.84 36.79 27%↑ 29.05 CE 0.66 ↑ 88%↑ 0.35 0.70 1.67 28%↓ ↓ 2.32 IM 5.47 18%↓ 6.70 5.47 24.96 29%↑ 19.42 DS 2.14 31%↓ 3.09 2.56 10.00 35%↑ 7.42 Semiconductor 1.99 3%↓ 2.06 1.42 6.89 65%↑ 4.17 DP 0.11 89%↓ 0.98 1.11 2.98 7%↓ 3.21 Note) CE (Consumer Electronics), IM (IT & Mobile communications), DS (Device Solutions), DP (Display Panel) ※ Sales for each business unit includes intersegment sales. ※ 2012 sales and operating profit of each business stated above reflect the organizational change in 2013. 2 4Q Results Semiconductor DP [Memory] [ LCD ] □ Market : Demand remained solid under peak season □ Market : Panel price declined due to continued oversupply despite strong seasonality - DRAM : PC demand upheld amid strong seasonality Demand increased for new game consoles and servers - TV panel : Demand decreased QoQ as set makers’ inventory adjustments led to lower panel order - NAND : Demand remained stable led by increased SSD adoption Demand D d up led l d by b increased i d sales l off tablets t bl t and high density card under seasonality □ Samsung : Improved earnings through migration and increased high value-added product mix ※ QoQ Q Q 1%↓, 1%↓ YoY Y Y 9%↓ · Drop in ASP continued (QoQ 7%↓) - IT panel : Tablet growth (QoQ 10%↑) momentum continued □ Samsung : Lower earnings impacted by inventory adjustments by customers and ASP drop - DRAM : Enhanced cost competitiveness by expanding 20nm-class; Managed flexible product-mix according to market conditions - TV panel : Shipments decreased by low single digit % QoQ increased by low single digit % YoY based on high value-added product competitiveness - NAND : Increased 10nm-class portion and expanded solution product sales including SSD [System LSI] □ Overall sales slightly up due to lower-than-expected demand for high-end mobile components, while AP shipments increased for major customer’s new products · Increased UHD sales and expanded customer base through new FAB in operation - IT panel : Tablet sales growth continued [ OLED ] □ Earnings down due to decreased total shipments, while new product sales increased 3 4Q Results IM C E [Handset] [TV] Ma ket Smartphone Sma tphone and tablet demand increased inc eased □ Market: □ Market : FPTV demand up under peak season (QoQ 29%↑), 29%↑) under peak season - Smartphone : Demand increased QoQ in both developed and emerging markets led by year-end/holiday rally - Tablet : Demand increased substantially with the expansion of global promotions □ Samsung : Earnings decreased QoQ due to seasonally higher marketing g expenditure p and one-off expense, p , etc. - Smartphone : Shipments down slightly due to year-end inventory adjustments and the base effect from strong 3Q growth - Tablet : Shipments up sharply QoQ driven by strong sales 1(2014) released during end-3Q of Tab3 and Note 10 10.1(2014), ☞ Strong sales growth continued driven by developed market (North America/Europe) [Network] □ Sales improved led by increased LTE equipment shipments in domestic and overseas markets Growth led by developed market (QoQ 53%↑) ※ YoY demand slightly increased, up 1% - 60”+ large-size TV demand up substantially (QoQ low-50%↑) - Compared to the previous year, Developed : demand down due to economic situation in Europe (YoY-2%↓) Emerging : demand up led by CRT replacement demand (YoY 2%↑) □ Samsung : Outperformed market growth by reinforcing seasonal promotions, improved earnings - Strong shipment growth in developed market (QoQ 90%↑, YoY 7%↑) led by increased premium products sales : · 60”+ large-size g TV sales Q QoQ Q 80%↑,, Smart TV sales 63%↑ ☞ Margin improved driven by increased premium product sales [ Digital Appliances ] □ Focused on sales expansion p of p premium p products in US and Europe amid slight demand improvement in developed markets. 4 Outlook Semiconductor □ ’14 Outlook - DRAM : Expect server/graphic DRAM demand to remain solid amid limited supply pp y growth; g ; tablet and mid-to low-end smartphone p to drive demand for mobile devices - NAND : Expect demand to remain solid led by increased SSD adoption by datacenter and content growth in mobile devices - S.LSI : Expect to introduce 20㎚-class mobile AP and to expand new customer base; Expect to enhance competitiveness of LSI products such as high-pixel CIS □ 1Q : Expect more balanced market despite low seasonality while demand for server/game consoles/SSD to be relatively solid Expect low demand of S.LSI due to weak seasonality and inventory adjustment by customers DP □ ’14 Outlook IM □ ’14 Outlook - Handset : Expect price/product competition to intensify amid accelerated replacement from feature-phones feature phones to smartphones · Smartphone : Expect demand growth to continue with LTE service expansion in Europe/China and solid demand growth in emerging markets ※ Expect diverse mid to high-end products to address different customer needs - Tablet : Expect launch of various new products and intensified price competition, amid developed and emerging markets to continue rapid growth □ 1Q : Expect smartphone/tablet demand to decrease QoQ under weak seasonality CE □ ’14 Outlook supply-demand demand than 2013; TV demand - LCD : Expect better supply to increase led by UHD penetration and global sports events impact; solid demand growth of tablet to continue d to t grow lled d by b World W ld Cup C impact i t and d - TV : E Expectt d demand expansion of UHD TV sales · Rapid growth expected in UHD TV ( ’14: 12.7M, D.Search) ㆍUHD TV : Expect growth of mass market segment in addition to premium market segment - OLED : Expect market growth led by expansion of OLED adoption by broader products, including mid-end smartephone, tablets, etc - Digital Appliances : Expect overall demand to grow modestly YoY amid economic recoveryy in developed p markets □ 1Q : Expect weaker panel demand under seasonality □ 1Q : TV demand expect to decline QoQ entering off-season, but slightly increase YoY 5 [Appendix 1] Statement of Financial Position (K-IFRS) (Unit : KRW Billion) Dec 31, 2013 Sep 30, 2013 Dec 31, 2012 110,760 110,166 87,269 - Cash * 54,496 52,684 37,448 - A/R 24,989 26,283 23,861 - Inventories 19,135 21,935 17,747 - Other Current Assets 12,141 9,265 8,212 103,315 100,647 93,803 - Investments 12,661 16,130 14,015 - PP&E 75,496 71,361 68,485 3,981 3,971 3,730 11,177 9,185 7,573 214,075 210,813 181,072 64,059 66,374 59,592 11,161 11,756 14,895 - Trade Accounts and N/P 8,437 11,457 9,489 - Other Accounts and N/P & Accrued Expenses 20,541 18,846 16,895 - Income Tax Payables 3,386 3,509 3,223 - Unearned Revenue & Other Advances 2,882 2,999 2,484 17,652 17,808 12,605 Shareholders' Equity 150,016 144,439 121,480 - Capital Stock 898 898 898 214,075 210,813 181,072 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 Dec 31, 2013 Current ratio * Liability/Equity Debt/Equity Net debt/Equity ※ Current ratio * = Current assets/Current liabilities Sep 30, 2013 Dec 31, 2012 216% 203% 186% 43% 46% 49% 7% 8% 12% -29% -28% -19% [Appendix 2] Cash Flow Statement (K-IFRS) (Unit : KRW Trillion) 4Q '13 FY '13 FY '12 Cash (Beginning of period)* 52.68 37.45 26.88 Cash flows from operating activities 10.28 46.71 37.97 Net profit 7.30 30.47 23.85 Depreciation 3.94 15.47 14.84 Cash flows from investing activities -7.67 -25.19 -24.85 Increase in tangible asse -8.08 -23.16 -22.97 Cash flows from financing activities -0.40 -4.14 -1.86 -0.38 -3.20 0.54 1.81 17.05 10.57 54.50 54.50 37.45 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 Dec 31, 2013 Sep 30, 2013 Dec 31, 2012 43.34 40.93 22.55 ※ Cash * = Cash and Cash equivalents + Short-term financial instruments + Short-term available-for-sale securities