Earnings Release Q3 2012 Samsung Electronics October 2012 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 Q3 2012 financial results is completed. The audit outcomes may cause some parts of this document to change. Thi document This d contains i "forward-looking "f d l ki statements"" - that h is, i statements related l d to future, f 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" statements by their nature address matters that are, are to different degrees, degrees uncertain. uncertain “Forward-looking 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 · Unanticipated dramatic developments in our major businesses including CE (Consumer Electronics), IM (IT & Mobile communications), Semiconductor, DP (Display Panel) · Numerous other h matters at the h nationall and d internationall levels l l which h h could ld affect ff our future f results l These uncertainties may cause our actual results to be materially different from those expressed in this document. Segment Sales & Operating Profit Sales (Unit: Trillion Won) Total DMC CE - VD IM - Mobile DS Semiconductor - Memory DP - LCD Others 3Q ’12 12 Y-on-Y Y on Y 3Q ‘11 11 2Q ’12 12 52.18 26%↑ 41.27 47.60 41.90 41%↑ 29.71 36.57 11.60 2%↑ 11.40 12.15 8.23 2%↓ 8.38 8.58 29.92 67%↑ 17.94 24.04 26.25 82%↑ 14.42 20.52 17.40 6%↑ 16.49 17.03 8.72 8%↓ 9.48 8.60 5.22 5%↓ 5.50 5.42 8.46 19%↑ 7.08 8.25 5 40 5.40 0 5%↓ 0.5%↓ 5 42 5.42 5 63 5.63 △7.12 - △4.93 △6.00 3Q ’12 12 Y on Y Y-on-Y 3Q ‘11 11 2Q ’12 12 8.12 91%↑ 4.25 6.72 5.88 112%↑ 2.77 4.90 CE 0 43 0.43 38%↑ 0 31 0.31 0 76 0.76 IM 5.63 132%↑ 2.42 4.19 2.29 50%↑ 1.53 1.88 Semiconductor 1.15 28%↓ 1.59 1.11 DP 1.09 - △0.09 0.75 △0.05 - △0.05 △0.06 ※ Sales includes intersegment sales Operating Profit (Unit: i Trillion illi Won) Total DMC DS Others Note) DMC (Digital Media & Communications), CE (Consumer Electronics), IM (IT & Mobile communications), DS (Device Solutions), DP (Display Panel) ※ Information on annual earnings was re-stated according to the current business divisions. 1 Income Statement 3Q ’12 % of sales Y-on-Y 3Q ’11 % of sales 2Q ’12 % of sales 52.18 100% 26%↑ 41.27 100% 47.60 100% Cost of Sales 31.99 61.3% 15%↑ 27.75 67.2% 29.97 63.0% Gross Profit 20.19 38.7% 49%↑ 13.52 32.8% 17.63 37.0% R&D expenses 2.98 5.7% 22%↑ 2.43 5.9% 2.87 6.0% SG&A expenses 9.22 17.7% 36%↑ 6.80 16.5% 8.36 17.6% Oth operating Other ti profits/losses fit /l 0 13 0.13 0 3% 0.3% - △0.04 0 04 △0.1% 0 1% 0 33 0.33 0 7% 0.7% 8.12 15.6% 91%↑ 4.25 10.3% 6.72 14.1% Equity method gains/losses 0.13 0.3% 55%↓ 0.29 0.7% 0.27 0.6% Finance incomes/expenses p 0.05 0.1% - △0.41 △1.0% △0.26 △0.6% 8.30 15.9% 101%↑ 4.13 10.0% 6.73 14.1% 1.74 3.3% 152%↑ 0.69 1.7% 1.54 3.2% 6.56 12.6% 91%↑ 3.44 8.3% 5.19 10.9% (Unit: Trillion Won) Sales Operating Profit Profit Before Income Tax Income tax Net profit Key Profitability Indicators 3Q Q ’12 ROE 22% 3Q Q ’11 2Q Q ’12 24% 15% 20% Profitability (Net income/Sales) 0.13 0.08 0.11 Asset turnover ((Sales/Asset) / ) 1.26 1.17 1.18 Leverage (Asset/Equity) 1.52 1.50 1.52 23% 18% 22% EBITDA Margin 24% 23% 18% 20% 15% 3Q ’11 ROE 2Q ’12 EBITDA Margin 3Q ’12 2 Cash Flow Statement (Unit: Trillion Won) 3Q ’12 Cash (Beginning of period)* 23.80 25.39 11.54 5.93 Net profit 6.56 5.19 Depreciation 3.87 3.74 Others 1.11 △3.00 △5.75 5 75 △6.48 6 48 △4.94 △6.18 Cash flow from Finance 0.84 △0.78 Increase in Debt 0 93 0.93 0 27 0.27 6.54 △1.59 30.34 23.80 Cash flow from Operation C h flow Cash fl from f Investment I Increase in tangible assets Net increase in cash Cash (End of period)* 2Q ’12 * Cash = Cash + Cash equivalents + Short Short-term term financial instruments + Short Short-term term available-for-sale available for sale securities Cash Balance Cash 21.75 9.60 3Q ’11 Net Cash 26.88 25.39 12.23 11.52 4Q ’11 1Q ’12 30.34 23.80 9.33 2Q ’12 14.99 3Q ’12 3 Statement of Financial Position 3Q ’12 2Q ’12 3Q ’11 82.08 73.46 67.21 Cash* 30.34 23.80 21.75 Trade accounts and notes receivable 24.37 24.12 21.73 Inventories 19.47 17.44 16.63 Non-current assets 94.65 92.84 80.95 Investments 14.80 13.66 12.01 PP&E 69.00 68.84 59.66 176.73 166.30 148.16 15.34 14.47 12.15 60.19 56.04 49.50 116.54 110.26 98.66 (Unit: Trillion Won) Current assets Total assets Debt Total liabilities Total shareholders’ equity * Cash = Cash + Cash equivalents + Short-term financial instruments + Short-term available-for-sale securities Key Financial Indicators 3Q ’12 12 2Q ’12 12 3Q ’11 11 Current ratio* 172% 165% 161% Liability/Equity 52% 51% 50% Debt/Equity 13% 13% 12% △13% △8% △10% Net debt/Equity * Current ratio= Current assets/Current liabilities 4 3Q results Semiconductor DP [Memory] [ LCD ] □ Market : PC DRAM demand continued to be weak due to weak seasonal effect; Mobile/server DRAM demand remained relatively strong □ Market : Panel demand grew 2%QoQ due to solid demand in emerging markets and competition for new product launches in tablet market - DRAM : PC DRAM oversupply l persisted i t d amid id weakk back-to-school b kt h l demand. However, mobile DRAM demand continued to increase led by strong smartphone demand - NAND : Demand increased due to new mobile device launches in end end-3Q, 3Q, while suppliers remained conservative about capex □ Samsung : Focused on securing profit by expanding portions of high value-added products - DRAM : Concentrated on sales expansion of high value-added products such as mobile/server DRAM products - NAND : Improved product mix by increasing sales of solution products (eMMC, SSD, etc.). Also, achieved cost reduction by increasing portions of 20nm-class process [System LSI] □ Earnings increased by expanding leading-edge process and high value-added product sales - With 32nm migration g gaining g g momentum,, sales for high g value-added products increased (32nm quad core AP, etc.) - CIS sales slightly decreased due to demand decline for low-pixel products - TV panel : Shipments increased steadily by 9%QoQ 9%QoQ, led by demand for Chinese National holiday season and demand growth in preparation for year-end peak season · Prices of some products rose slightly due to constrained supply ((mainlyy 32” & 40” TV panels) p ) - IT panel : Although demand for tablet panels continued to grow, overall IT panel demand declined 1%QoQ as demand for note PC/ monitor panels remained weak □ Samsung : Earnings momentum continued driven by strong growth in OLED segment and sales expansion of high value-added TV/tablet LCD panels - TV panel shipment : flat QoQ, mid-10% YoY growth g value-added p • Sales of high panels continued to increase (40”+ 3D/LED TV, tablet, etc.) - OLED : Strong growth momentum continued led by sales increase of OLED panels for high-end smartphones (due to new product launches, etc) 5 3Q results IM CE [Handset] [TV] □ Market : Solid demand growth QoQ backed by positive seasonality and new product launches □ Market : FPTV demand slowed down amid summer holiday season, etc., leading to intensified market competition - Smartphone p : Low-10% Q QoQ Qg growth - Feature phone : Around 10% QoQ growth □ Samsung : Substantial increase in revenue/profit QoQ driven by rising sales in high-end smartphones, enhanced p product mixes,, etc. - LED TV demand increased mid-30% mid 30% QoQ on expansion of mass-market products · LED TV portion : mid-60% in ’12.2Q → low-70% in ‘12.3Q □ Samsung : Secured solid earnings due to expanded portion of strategic LED TVs amid price competition - Smartphone : Shipments increased significantly due to global expansion of GalaxySⅢ and reinforced line-ups of mid/low-end products - Pursued sales expansion of large size premium LED TVs (7/8000, above 60” TVs etc.) in developed markets and regional strategic LED models (32”/40”) in emerging markets - Feature p phone : Shipments increased slightly QoQ p g yQ Q led byy seasonal effect - LED TV portion : mid-80% mid 80% in ‘12.2Q 12.2Q → around 90% in ‘12.3Q 12.3Q - ASP increased QoQ on product mix improvement [Network/IT] □ Network : LTE equipment sales increased. However, margins decreased amid price competition. [ Digital Appliances ] □ Earnings declined due to slowed demand in developed markets and weak seasonality for air conditioners - Sales portion of premium products and emerging markets increased on sales expansion efforts □ IT: Focused on securing earnings by increasing Note PC sales in emerging markets amid weak PC demand 6 Market outlook (4Q) Semiconductor □ Memory - DRAM : PC DRAM oversupply to continue due to weak year-end IM □ Handset - Demand to be led by smartphones and emerging markets amid demand; Mobile DRAM demand to increase with new mobile year-end seasonal effect and expanded new product competition device launches · Smartphone : Competition for new product launches to intensify in each OS and price range - NAND : Tight supply-demand conditions expected due to seasonal demand increase and new mobile product launches □ System LSI - Strong growth expected due to seasonal demand increase and growing i demand d d for f mobile bil AP and d CIS led l d by b new mobile bil devices d i · Feature phone : Demand to grow QoQ due to solid seasonality - Tablet : Market demand to increase due to new product launches, price competition, etc. □ Network/ IT - Network : LTE network to expand in overseas markets (US, Japan, etc.) - IT : Note PC demand to increase QoQ led by year-end promotions, etc. DP □ TV - Demand to increase led by year-end seasonality and Chinese New Year effect · Demand for LED/large size TVs to grow under China’s energy subsidy policy □ IT CE □ TV - Overall market demand to grow with intensified sales competition in the p peak season (mid-20% ( QoQ, Q Q, mid-single-digit% g g YoY)) · LED TV portion : low-70% in ‘12.3Q → around 80% in ‘12.4Q □ Digital Appliances - Demand growth to slow down because of developed market economy, - Tablet : Demand growth to continue with launch of new products, etc. however, overall market demand to increase slightly, led by emerging - NB/MNT : Weak demand to be persisted by seasonality markets 7 [Appendix 1] Statement of Financial Position (K-IFRS) (Unit : KRW 100 Million) 3Q '12 (A) Current Assets 2Q '12 (B) 3Q '11 (C) Q-on-Q (A - B) Y-on-Y (A - C) 820,774 734,602 672,143 86,172 148,631 - Cash ※ 303,366 238,042 217,509 65,324 85,857 - A/R 243,713 241,174 217,323 2,539 26,390 - Inventories 194,738 174,430 166,296 20,308 28,442 78,957 80,956 71,015 -1,999 7,942 946,497 928,398 809,516 18,099 136,981 - Investment 148,024 136,603 120,072 11,421 27,952 - PP&E 689,958 688,396 596,598 1,562 93,360 - Intangible Assets 36,977 36,729 34,082 248 2,895 - Other Non Current Assets 71,538 66,670 58,764 4,868 12,774 1,767,271 1,663,000 1,481,659 104,271 285,612 601,883 560,359 495,016 41,524 106,867 - Debts 153,448 144,717 121,522 8,731 31,926 - Trade Accounts and N/P 110,642 105,163 112,756 5,479 -2,114 - Other Accounts and N/P & Accrued Expenses 144,791 142,669 130,063 2,122 14,728 - Income Tax Payable 33,563 23,274 11,502 10,289 22,061 - Unearned Revenue & Other Advances 25,148 27,685 21,162 -2,537 3,986 134,291 116,851 98,011 17,440 36,280 1,165,388 1,102,641 986,643 62,747 178,745 8,975 8,975 8,975 0 0 1,767,271 1,663,000 1,481,659 104,271 285,612 - Other Current Assets Non Current Assets Total Assets Liabilities - Other Liabilities Shareholders' Equity - Capital Stock Total Liabilities & Shareholder's Equity ※ Cash = Cash + Cash equivalents + Short-term financial instruments + Short-term available-for-sale securities [Appendix 2] Income Statement (K-IFRS) (Unit : KRW 100 Million) 3Q '12 (A) Sales 2Q '12 % (B) 3Q '11 % (C) % Q-on-Q Y-on-Y (A - B) (A - C) 521,773 100% 475,970 100% 412,740 100% 45,803 109,033 319,896 61.3% 299,712 63.0% 277,542 67.2% 20,184 42,354 201,877 38.7% 176,258 37.0% 135,197 32.8% 25,619 66,680 R&D 29,756 5.7% 28,729 6.0% 24,292 5.9% 1,027 5,464 SG&A 92,187 17.7% 83,594 17.6% 67,992 16.5% 8,593 24,195 - Wages & Fee 21,131 4.0% 19,962 4.2% 16,489 4.0% 1,169 4,642 - Marketing Expenses 36,783 7.0% 31,257 6.6% 23,321 5.7% 5,526 13,462 1,313 0.3% 3,307 0.7% -384 -0.1% -1,994 1,697 81,247 15.6% 67,241 14.1% 42,529 10.3% 14,006 38,718 1,326 0.3% 2,688 0.6% 2,921 0.7% -1,362 -1,595 451 0.1% -2,628 -0.6% -4,127 -1.0% 3,079 4,578 756 0.1% 362 0.1% 96 0.0% 394 660 77 0.0% -3,688 -0.8% -5,565 -1.3% 3,765 5,642 Income Before Income Taxes 83,024 15.9% 67,301 14.1% 41,322 10.0% 15,723 41,702 - Income Taxes 17,375 3.3% 15,366 3.2% 6,906 1.7% 2,009 10,469 65,649 12.6% 51,934 10.9% 34,417 8.3% 13,715 31,232 Cost of Sales Gross Profit Other Operating Profits Operating Profits Gain(or Loss) on Equity Method Investment Finance Incomes / Expenses - Interest Gain (or Loss) - F/X Related Gain (or Loss) Net Income