Samsung Electronics Co., Ltd. (A005930) Earnings Call Transcript & Summary

Good morning, and good afternoon, everyone. My name is Jinman Han. I'm the Head of Samsung Memory Division of Samsung Electronics. Today, I'm going to talk about memory market outlook and some strategy of our products. This is the agenda: First part of my talk will be about era of COVID-19, how it's going to change the memory market in terms of DRAM demand and NAND flash; the second part of my talk is about strategies, what we have in our pipeline for DRAM and NAND flash products, and I'm going to talk a little bit about the Samsung strategy about geopolitical uncertainties, how we're going to deal with all those geopolitical uncertainties. First, I'm going to talk about the era of COVID-19. Well, we had data here that shows that people who are having online shopping twice a month, we asked them -- this is based on Gartner data. And on the left part of the foil shows that -- the online shopping trend, as you can see, comparison between pre-COVID-19 and COVID, you can see that there is a huge jump in the demand for education and online courses. And this is partly because of the work from home and shop from home. And another thing that we can notice here is that people buy more electronic goods. And as for myself, I just bought a lot of notebooks and TVs. And my daughter is now talking to her teacher across the Pacific, and it's really amazing to see that how things have changed. But -- although this COVID-19 thing is ravaging the people on earth, but I really appreciate the technological progress, how technology allow us to prepare for this pandemic. And it's really amazing to see how people are getting along with this amazing technology -- with this technology benefits. And also, from the enterprise point of view, Gartner data shows that more than 86% of enterprise customers are willing to invest more on digital equipment and infrastructure. That is -- that shows that this COVID-19, in some way, positively introduced the paradigm shift about people's view on the technology and people realize that technology has to be ready for any uncertainties that may happen in the future. This foil shows the DRAM demand. It shows until 2024, we believe that CAGR will be around mid-teen -- mid 10s and 20%. And this is very solid demand. And most of the key drivers of DRAM demand is obviously server and mobile. And you can see that the mobile demand is pretty solid as well as server. Although PC and consumer products -- the portion of PC and consumer products are lower than mobile and server, but the growth is pretty solid. Especially this year, we see -- we have seen very solid demand from PC side, especially very thin notebooks, such as Chromebooks and ultra notebooks because of the work from home and study from home. We believe that, that trend may not disappear. Even though the COVID-19 pandemic is gone, we still believe that this trend will continue to be here. Okay. I'm going to talk a little bit about the mobile market. The main theme of mobile market these days is about the adoption of 5G. And you can see that -- on the left lower side, you can see that about 250 million 5G smart phone has been deployed. And we believe that annual growth rate through 2025 will be about 35%, which is amazing because how this 5G penetration rate is accelerating. And another good thing about mobile demand is that we are seeing mobile demand not just from the industrialized countries, but we also see huge demand rising in emerging markets, such as India and Middle East and Africa. And the average content -- average density of DRAM for mobile is right now a little bit about half of PC density, PC consumes about 8 gigabyte. But right now, mobile is about 4 gigabytes, so -- which is pretty solid. But we believe that in 2025, the average density of mobile DRAM will be close to 70% of those PCs. And so every phone will be -- in terms of density of DRAM, it will be very comparable to PCs. And the middle of this foil shows that there is a very solid demand from the emerging markets, especially from middle -- the high portion of handset is coming from Middle East and Africa region. And especially when you see the India, the demand uptick is pretty strong actually. And more and more people are starting to use smart phone as their main digital equipment. And we believe that trend will continue to be in the future. And on the far right side, as I said, the smart phone gigabyte per system is increasing with the annual rate of 13%. It will be close to 8 gigabyte when we reach 2025. And another equation of DRAM demand is coming from servers. And we all know that we are now watching a lot of streaming videos and movies and sports. And most of the consumption will be coming from entertainment. And at the same time, it's not just from the entertainment. It's also the data demand is coming from non-entertainment sectors, such as medical imaging and video surveillance, security and telemedicines. I believe that in the future, there may be more killer application for this data demand, especially from non-entertainment images. Okay. I'm going to talk about NAND demand. And the storage demand this year has been phenomenal because a lot of work-from-home activities create more and more contents, and it has to be stored somewhere. And these days, SSD is replacing hard disk storage devices. And we are -- and this year, we have seen those trends pretty clearly. And most of the servers SSDs demand is actually coming from cloud computing. When people buy more and more smart phones, for example, I remember the figure, such as that, when people buy about 100 smart phone, you need to have a new server installed. And that interaction between mobile phones and server SSDs is very imminent from this year-round. And you can see that both SSD and mobile demand is pretty solid and average CAGR is well above 30%. And combine that with the average density of DRAM, you can see that smart phone in the future will have a higher density storage. These days, it is about -- I think it's about a little bit over 200 gigabyte, but you may see eventually one terabyte smart phones in the near future. Okay. This is my strategies. I'm going to talk about, first, about the DRAM products. And as you can see, a lot of people are saying that DRAM is a commodity. That's true in some way. But these days, DRAM industries are experiencing huge transition from all new technology. And on this screen, you can see that there are 4 major products that Samsung is now producing. On the left top side, you can see the LPDDR5. LP stands for Low Power, DDR stands for Double Data Rate. The 5 means it has a new interface. Its speed right now up to 6.4 gigabits and which is very, very fast. And we can find those mobile LPDDR5 product in the flagship devices, such as the Android phones. And on the right side, we have DDR5. It has no LP. This is -- DDR5 is mainly for software applications, and it can right now support up to 4.8 gigabits. This is the real workforce behind server computation. And eventually, we're going to -- these days, the main product is DDR4, but with the new CPU online in next 1 or 2 years, we're going to see more and more adoption of DDR5. And on the lower left side, you can see there is a device called GDDR6. The G stands for Graphics. And as you know that we have right now new consoles, game consoles, coming into the market. And those 2 consoles are right now adopting GDDR6. So when people say that DRAM is commodity, it is true in some way, but it is not true in some sense because DRAM industry has been working very hard to provide the perfect solution for any new applications coming to the market. And like I said, GDDR6 is indispensable to make sure that next-generation console is meeting all the people's requirements and -- including new ray tracing and all those new features. At the same time, it's really about giving semi-custom product for the new IT devices. And for example, on the right lower side, you can see that we have a device called HBM that stands for High Bandwidth Memory. And the main application for this product is for high-performance computing. You cannot buy this -- you cannot find this device in your PC, but almost all the hyper cloud computers -- computing companies and high bandwidth, high AI server are right now adopting HBM. So DRAM is now transitioning into new era of next-generation interface, and Samsung is right now ready with all those lineups. So to provide a new interface and new breakthrough to this -- to our customers, not only we have to work on defining new interface, we have to come up with new design techniques and architecture changes. For example, DVFS, Dynamic Voltage and Frequency Rate -- Scaling, that has been used by CPU companies, but right now, we are adopting those technologies, including ABB and HKMG. It's a little bit about the process and design but I'm not going to go into detail about that. But, the problem is, to meet the future demands, that is not sufficient, we believe. And we have to come up with a new way of continuing scaling. And one of the main topics of today's talk is about EUV. EUV stands for Extreme Ultra Violet. And it -- without the EUV technologies, meeting the demands from customer cannot be addressed just by coming up with architectural or design changes. It has to eventually come down to -- come from process innovations. And one of the key technology solutions for process innovation, we believe, is EUV. I'm going to talk a little bit more about EUVs. This is a little bit complex, but on the left side, that's the conventional ArF-based machine. On the right side, it shows a lot of -- a little bit of mirrors, but that's the basic diagram for EUV. And one main difference between ArF and EUV is wavelength. ArF has 193 nanometer. EUV is 13.5 nanometer, about -- so ArF has wavelength 14x longer than EUV. When you have shorter wavelength, you can have more ability to finally define the pattern, otherwise -- because you have to have a very sharp tool to have a very sharp lines. It's that analogy. And there's a drawback of shorter wavelength light source. That is, it can be absorbed by [indiscernible]. Even the EUV can be absorbed easily by air or even mirrors. So you have to make sure that you have to have a very strong power source to make sure that all those light source can reach down to the wafer level. That's the main technological challenges that EUV companies have to solve. And -- so because the EUV can be absorbed by even air, the chamber has to be in vacuum state. And also, it cannot go through the mass, so it has to be processed by reflection techniques. And the result, you can see that -- on the right side of EUV, you can see very finely detained pattern. But it comes from -- it has its own price tag. Its footprint of EUV machine is more than 3x larger and a number of components it has is more than 2x. And it's also very, very expensive. You can believe how expensive that is. So for the last 10 years, we have been using this ArF pretty well. And right now, we can produce our DRAM chips based on 1z nanometer. 1z is about 14 to 15 nanometer, that's give or take. But below 14.6 nanometer is going to be very, very hard, if not impossible, to process that 14.6 nanometer design rule. So for the next 10 years, we have to be ready for this EUV technologies. On the right side, there is a IRDS comment. IRDS is the semiconductor the technical community. And he says that no new lithographic technique will be needed for better resolution after EUV. It looks like EUV is the ultimate machine for us to be able to process DRAM below single-digit nanometer for the next 10 years. Samsung has been -- I think, it has been about 10 years when we started starting on this EUV technology. So far, we have been processing about 4 million wafers until now. And so the 4 million is -- there's a lots of lots of number of wafers. And imagine how many know-how -- how much know-how we have gathered by processing all those 4 million wafers. And -- okay. So if EUV is so powerful, then why don't we just buy EUV machine from companies like ASML? Well, it's not that simple. EUV is all about ecosystem. And as I said, EUVs can be easily absorbed by any medium, even the pellicle technology that has been used for memory, any semiconductor can absorb EUV light source pretty easily. So you have to come up with a lot of different technologies combining together. So the one thing is the mask technology. And you have to have your own mask technologies and also material and measuring technology. And -- so all those ecosystems, including mask and material and measuring technology has to be combined to have a holistic solution for this EUV technology. You just cannot just buy a machine from a company and deploy it into the fab. I believe that more than 10 years ago, we started building EUV clean rooms. And also, in addition to that, we have our internal organization structure that is optimized for this EUV ecosystem development and we have a designated EUV team. We called it as a Quantum TF. We also have a procurement strategy because Samsung is one of the companies -- IDM companies, who has huge economies of scale. We're fully exploiting that advantages. So one thing we realize by applying these EUV technologies for experimental purposes, we realize that it can easily reduce the number of defects. And for example, it can reduce the defect ratio by more than 20%. And on the right side, you can see that -- the 2 patterns -- on the left side, that sets the pattern with the ArF with multi-patterning technology. And multi-patterning technology, you have to be very careful about overlaying all those layers. And you can see that on the right side, EUV gives you very perfect pattern definition. And imagine how that can reduce the defects as well as the performance of transistors, even at cells. And the result is a very fine pattern with patterning precision and not comparable to ArF. And also, because EUV can reduce the number of steps, it can also reduce the cost. So it's [indiscernible] for the next future 10-year process technologies. Okay. So I'm going to talk about NAND flash. On the left side, that shows the concept of our approach for our sixth-generation NAND flash, which has 128-layer NAND flash. So right now, we are now transitioning from fifth-generation NAND flash, which has 92 layers and to the 128-layer-based sixth-generation NAND flash. And one unique thing about Samsung's technology is that we can etch 126 layer in a single time. So we call that as single-stack technology. And on the right side, you can see that 2-stack technologies that we've been internally working on. But -- so 120 layer with single-etching technology is very critical, because eventually, we have to stack more and more layers. And you cannot have 256 layers in a single-stack technology. It's extremely difficult, at the same time, very costly prohibited. So -- but before we are transitioning to 2-stack technologies, you have to have as many layers as possible with your single-stack technology. And then you can now -- if you can use that -- leverage that technology to have a multi-stack technology, then you can have more and more layers supported. And so we believe that Samsung is very well positioned to have 2-stack technologies with many more layers. For example, since we have now single-stack 128 layers, that means that if you can just simply doubling -- you can simply double the number of layers with 2-stack technology. That can give us 256 layers right away. But how we can -- how many layers we're going to adopt for the next generation? That depends on our internal strategies, such as customer demands, our big growth target and ramp up optimization. So it's not really about how many layers you can stack. It's really about what is the perfect optimized number of layers you can introduce to your market in a very timely manner. This one shows our best-in-class cost competitiveness because 3D NAND flash is not created equal. For example, when you see that on the left side, you see that we have a reference line of Samsung's 92-layer TLC. And there is another metric, which is called stack height. When you have a higher stack height, it takes more engineering resources and turnaround time to process those higher height stack. You can see that Samsung stack height is at least 15% lower than other suppliers. That's how we can achieve 128-layer 3D NAND flash with a single-stack technology. So on the right side, what's the result? Well, this data come from public data. So we can see that Samsung has the best-in-class cell engineering, and that gives us the best cost structure. And the best cost structure means that you can have a lot of return on investment so that you can put more energy and resources to have a better solution for the next time. So this is very positive cycle. And I believe that Samsung has the most cost-effective solutions, even though everybody is coming up with almost same layer of NAND flash or even higher number of layers, but this is the reality. Samsung is pursuing very cost-effective solution so that we can introduce to the market, very cost-effective evolutions. Okay. I'm going to talk about our strategies. As you all know that we have a lot of uncertainties regarding geopolitical issues. In the short term, we are now seeing unstable tariff risk. And also, we have a little bit of difficulty having sales channel partners. In the long term, it might be possible that technology might go into the era of de-globalization. Eventually, we may see different trade sphere separate from each other. And so not only just providing a solution to our customers we have to be worried about, we have to be ready for technology decoupling. And we believe that Samsung is ready for that trend. Because, for example, this shows the worldwide TAM portion. In America worldwide TAM portion is about 30%. And China and rest of Asia Pacific, it accounts for about 60%. And in America, you can see that server portion is way, way bigger than other application. But in comparison to that, China and Asia Pacific, most of the demand is coming from mobile applications. So not just only we're going to see the decoupling, we might see decoupling of technologies, but the product portfolio that our customers demand from each region might be vastly different. In that era, what can we do about that? Well, at Samsung, we have to come up with all different kinds of lineups ready, not just about lineup, but also about the standard and technological directions. It has to be optimized and developed for each region. And in that regard, I think Samsung is more than ready for that situation. Although we hope that technology decoupling is not going to happen, but we have to be ready for this future. And we believe that Samsung is very ready for that. So this is my summary. And as I said, this COVID-19, although it's a very painful experience, I myself want to meet my customers face-to-face. I don't want to see my customer through the online small video conference tools, but that's the reality. But at the same time, this gives us new chance of experimenting -- global experimentation about how we can cope with any worldwide issues with this technology. That gives us a huge insight about what you can do about in the future. And at the same time, we believe that, that will stock more demands from memory such as DRAM, NAND flash. And at the same time, as a market leader, Samsung has to be actively working on the future ecosystem, especially for EUV ecosystem so that we can provide solutions for the next 10 years. And we are very willing to share this knowledge with all industry. And also, at the same time, we see that not only just DRAM, but NAND demand will be pretty solid for the next 10 years. And at the same time, because we have a best-in-class cost structure and cell engineering, we are ready for any new demands coming from any new applications. And finally, as I said, Samsung has a huge coverage of worldwide customers, and we are already having a lot of complete lineups for our customers. So any geopolitical uncertainties, I think, I can say that Samsung is ready, more than anyone. So please have trust in Samsung, and we'll address all the issues and demand from you, and we'll do our best. Thank you.

We will now begin the Q&A session. [Operator Instructions] The first question is raised by Dong Zheng from Ariel Investments. What is the cost scaling factor from 64-layer to 128-layer single stack versus 64-layer single stack to 128-layer double stack?

That's a very good question. How scaling factor from 64-layer to 128 single stack versus 64 single stack to 128 2 stack. We believe that at least lower 10%. We can -- I'm not sure about the exact number, but the reason why you have to think about cost increase with double stack is that you have to process 2x, right? And at the same time, it's not just about the increasing number of stacks. It's also between those 2 stacks, for example, 64 and 64, there is interface we have to deal with. And it may also affect some yield drops and that -- so combining that, I cannot tell you exactly what exact number that is, but think about increased number of stacks as well as dealing with those intermediate boundaries between 2 stack. That will affect your yield. But eventually, the industry will figure it out. But I believe right now, that is truly affecting yields, so that it can increase the cost.

The second question is raised by Nicolas Gaudois from UBS. As you move to double-stack NAND with Phase 7, can you still realize a cost advantage versus other double stack apart from the scale?

Of course, of course. Because, as I said, number of -- the height of our stack mold is way, way lower than other suppliers. And it gives us better TAT. And also, you can -- so it's not really about height itself. It's also about the space, the pitch between cells. And I believe that Samsung has the most -- much tighter pitch between cells. Combining that with the lower stack height, that gives better turnaround time. At the same time, that will give us much better yield. So we believe that by even going into 2-stack technology, Samsung can still maintain the cost advantages over other suppliers.

The next question is raised by SK Kim from Daiwa Capital Markets. Given current outlook of future demand, what's Samsung's investment strategy?

Well, our investment -- CapEx investment strategy is based on our internal demand modeling. And based on that, we plan our investment. But one thing we have to think about is that next year's bit growth will be mostly determined by this current year's investment. And the investment has been done already. It's almost December. So our investment today will determine the bit growth of next year. And we believe that DRAM bit growth will be mid-high 10s to 20% next year. And I believe that Samsung has invested according to that demand. And for NAND flash, although the bit demand growth is about -- a little bit above 30%, but we still believe that NAND demand can be very, very flexible, depending on the average selling price. So we believe that Samsung investment for NAND flash will be a little bit -- assuming a little bit higher than what market thinks. So -- but we believe that with the cost benefits that Samsung has, we believe that more demand will be coming online next year because this COVID-19 can be gone, I hope. So Samsung is ready for any new demand uptick next year. So based on that, we determine our CapEx scale. So bottom line is, we have our internal model forecasting -- demand forecasting model, and we are aligned with that demand forecasting. But at the same time, we are strategically thinking about how bit growth will be like in the future, based on the cost benefits that all the suppliers can make next year. So for DRAM, we will be based on the DRAM market demand. But for NAND flash, we will be more actively preparing for the demand increase next year.

The next question is from J.J. Park from JPMorgan. Can you share your view on threats from China memory makers in both DRAM and NAND? And what the major hurdles for China memory to compete with mainstream players and potential threats?

I don't think it's really a threat. Any companies who have a willingness and capital can join the market. That's not a really bad thing. But I myself started my career as a development engineer. And I know how many hours we have spent time developing all those technologies. So memory and NAND flash as a whole are not that easy to ramp up in a timely manner. You have to invest your time and money and some patience, a lots and lots of patience. So it may take a little while before any newcomer into the market will hone that scale. So we believe that any huge impact on the market will not be felt for the -- in the foreseeable future. And at the same time, the suppliers, including Samsung, are working very hard to have a technological breakthrough. And it turns out that it is getting difficult every year. So any newcomer has to catch up with that technological advancement of other suppliers. So I think it's not really a threat, but it's a very welcoming sign from our point of view. Yes. So we'll continue to do our best. And I think same will be true for any other suppliers. Yes. And at the same time, the memory industry is kind of like working as a single community. We are actually exchanging a lot of ideas in terms of development through the publication of papers and in forums. And so I think this -- the ecosystem of memory industry as a whole is going to be very, very, how do I say, is going to be very, very full of ideas and breakthroughs, I hope, in the future. Yes. In that sense, I really welcome any newcomers.

The next question is from SK Kim from Daiwa Capital Markets. There are concerns over Samsung's technology leadership, as one of our competitors recently announced the release of 176-layer NAND. In response to that, what is Samsung's stance and the strategy regarding technology leadership?

Okay. Yes, that's -- it's really exciting for us to see new technologies coming online. As I said, we welcome newcomers and new technologies because as a whole, we are in a single community. But the NAND flash technology is based on the cell types. It used to be floating gate. And Samsung has been researching early on the CTF-based technologies. And so we have almost mastered those charge-trap technologies long, long time ago. And other suppliers, I believe, are working to transition from conventional floating gate-based cell technology to the cell -- CTF, so-called cell -- charge-trap technology, such as Samsung and some of other suppliers are using. And in that regard, I believe that we are very confident about CTF maturity from our point of view and for some suppliers that may renew technologies. So they are -- I think other suppliers are working very hard to catch up with what we have right now. And as I said -- also, as I said, the 128-layer with single stack, we can go immediately, for example, 256 double-stack technologies. But we have our own products in our pipeline and determining the number of stacks to be introduced into the market will be determined by the maturity of the product, the yield of the product, and all at the same time, the requirements of the customer. So in a timely manner, we will introduce more and more layer-based technologies. But for us, we believe that for next year, our 128 technology will be the most cost competitive, at the same time, very high-performance technology. So yes, okay.

This is the end of the Q&A session. Thank you for all the participants.

Well, thank you. Thank you for hearing my speech. Thank you.

Welcome to Samsung Electronics Investor Forum. Before we start the presentation, please be informed that we'll have a Q&A session after the presentation. [Operator Instructions] This session will be presented by Mr. Shawn Han from the Head of the Foundry marketing team.

Good morning, good afternoon, everyone. My name is Shawn Han, and I'm the Head of Foundry marketing team at Samsung Electronics. Due to the COVID-19, this investor forum this year will be held as a virtual event. Thanks to the nature of a virtual event, there will be no limitation to the number of attendees we can have which will give me the opportunity to talk about Samsung Foundry's growth strategy in front of a larger audience. During my presentation, I'm going to show you foundry market opportunities, business updates and our strategy. Also, I explain how Samsung Foundry can support our customers and create success together in the industry. Today, semiconductors allow us to create everything we can imagine, and it is also taking a key role in the electronic devices. All over the semiconductor industry, the responsibility for foundry is getting bigger. As you can see on the chart, as the number of connected devices increases rapidly compared to the population increase, the demand for semiconductor is also expected to increase, causing explosive data generation. The foundry market has grown along with the innovations of the devices and now even has been accelerated with the data transformation as more and more devices are connected together. We have found that foundry market opportunities are moving into a direction in 2 critical fronts. First, the customers' need on advanced node, especially under 7 nano, drive the growth of the foundry market. Based on Gartner's market report, the foundry market is expected to grow at a CAGR of more than 9% from 2020 to 2025 and to reach a scale over $130 billion in 2025. Moreover, the number of foundries capable of supporting leading etch process is getting smaller. Now there are only 2 companies that can support 7 nano and further advanced process technologies. Now I'll discuss our business updates. Samsung Foundry's vision, in one word, is trust. Since we became an independent business unit 3 years ago, we consistently had the vision and stroke to be the most trusted foundry in the world with emphasis on service of technology, service of operation and service for customers' success. In terms of service of technology, we develop innovative solutions like new other foundries can. And in terms of service of operation, we strive to provide a seamless supply chain experience for our customers. In overall service, we always put on -- put our customers' needs at the center of our focus. By successfully executing these tasks, we believe that we can become the foundry to reap the customer innovation in the total service. I would like to point out some of the major achievements of Samsung Foundry as follows: with launching Foundry business in 2005, we have started high-k metal gate volume production in 2011 for the first time and FinFET technology in 2015. Samsung Foundry was the industry's first company on the 10 nano volume production in 2016. Together with advanced technology leadership, Samsung unveiled 7-nano EUV production and S3 line ramp-up in 2018 and completed V1 line construction in 2019. As I mentioned in the previous page, Samsung started Foundry business approximately 15 years ago as an IDM business model and became an independent business unit in 2017 as Samsung Foundry. Since then, we have worked very hard to provide leading-edge technology, while we announced -- while building a business-friendly ecosystem, we announced a Vision 2030 last year, and we are committed to investing more than KRW 130 trillion until 2030. Our business will continue to expand with large investment so that we will diversify our applications and extend our customer base. Please find Samsung Foundry's global manufacturing sites for more information. Samsung Foundry has continually expanded our manufacturing capacity. Today, we have total 7 global fabs, 6 for advanced 12-inch fabs, one for mature 8-inch fab and test package facilities in 3 locations, including Korea, China and the U.S. Our most recent fab is now being built in Pyeongtaek, Korea, which will focus on 5 nano and below processes. Now I'll show you Samsung Foundry's progress, strategy and technology leadership. Samsung Foundry's process technology path devised into 2 parts. The mainstream path includes our advanced technology leadership with the first 10-nano volume production, EUV adoption and, of course, FinFET architectural adoption. The other path covers our specialty technologies, such as FD-SOI and embedded MRAM, expanding differentiated offerings for 28/18-nano FDS solutions for IoT, security, industrial and automotive. With this concept, we will keep providing customers with value-added services in our technology offerings. We strive to maintain firm technology leadership through continuous node scaling. As you know, process technology continues to innovate through new structures, new materials, leading to intrinsic scale down and transistor enhancement. In addition, process technology has been evolving from optimization and adoption of next-generation process modules. What is important from this is that note in the same branch, share the IPs as they share design rules. For example, first, take a look at -- let's take a look at the 14-nano family on the top. The latest evolution is 11LPP that provide new ultra high-density cell library by employing tighter matter pitch and layout optimization, thanks to the maturity of the process. Same goes with the 10-nano family. As you look downwards like [indiscernible] from 10LPE down to 8LPA. We apply the same development principles, starting from 14 down to 3 in the horizonal direction, is we call it innovation. In vertical direction, we call it evolution. We modify the process technology to have better performance, better power as well as the density shrink. For the 7 nano evolution, we have 5LPE, providing UHD cells that is density optimized by providing the contact process -- improving the contract process. We also added 4LPE and 4LPP that is based on the new process, the process nodes marked with the new fracs are fully newly introduced, for example, 5 -- 8LPA, 5LPP and 4LPP. With this concept, we will continue to provide our customers with value-added services in our technology portfolio. As addressed before, we have solidified a foot forward for growth by providing competitiveness of our advanced process technology with the start of shipments of 5-nano mobile products. In addition, we will continue our efforts to widen our lead in advanced technology process by completing the design of second-generation 4 nano process technology. Let's take a look at on this 7LPP. This will give you more information on some of LPE capabilities. [Presentation]

Our current age value-added offerings with various portfolios start from embedded flash, power IC, display driver IC, CMOS image sensor, analog to power discrete. We provide diverse processes down to the design level of 65 nano and low 40s of 1.2 volts. Technologies extensively optimized through many years of product manufacturing. Other than process technology, package platform becomes very important in meeting the increased demand for more functionality. The performance platform comes with packaged solutions based on heterogeneous integration package platform specifications and OSAT partners qualify their package solutions with Samsung wafers. There are various kinds of package solutions to choose from based on customers' needs. For example, 2.5D RDR packaging is a low-cost high bandwidth solution, I-Cube is very high bandwidth solution. X-Cube is a solution to enable short memory access latency and small form factor based on 3D PSV. And X/I-Cube is the integration of X-Cube and I-Cube to provide short memory access latency and high DRAM bandwidth. 2.5D RDR and X-Cube are already in production and I-Cube and X/I-Cube will be ready for mass production by the end of next year. Please take a look at the video, which has received a lot of attention from customers recently. [Presentation]

Foundry business will not be a viable solution without partners. Samsung Foundry consistently works with partners to build an ecosystem that can support all of the customers' needs. We transform customers' idea into silicon with EDA, IP, design service partners, cloud, process technology and fab as well as packing solutions as a one-stop solution. To actively respond to the latest technology trend and lower the design barrier for developing competitive SoCs, we launched SAFE, that stands for Samsung Advanced Foundry Ecosystem, program in early 2018 and held an annual SAFE Forum since 2019. In order to build grand ecosystem alliances with EDA, IP, DSP, cloud and OSAT partners, Samsung Foundry continues to maintain and solidify its partnerships. Now It's almost time to wrap up my presentation. To sum up my talk today, there are 4 key takeaways: First, we will continue to maintain from leadership in the advanced node technologies for the digital transformation and for the future needs. Second, Samsung will continue to expand differentiated offerings and solutions for various applications with SAFE, again, SAFE. Third, Samsung Foundry will enhance our supply chain through continuous investment. Lastly, we will provide the highest quality of service to enable our customers faster time to market to ultimately grow together with our customers. Thank you very much for your attention.

We will now begin the Q&A session. The first question is raised by [ Dong Chang ] on [ Aerial Investments ]. On a scale of 1 to 10 for the degree of synergy as 1 being no synergy, while 10 being the full synergy. So what's the level of synergy on EV -- EUV between Foundry and DRAM? And how is that ramp-up cost and cost from learning curve allocated?

Well, it's very hard to quantify the scale about that synergy between Foundry and Memory division. What I can tell you is since EUV technology is top-of-the-line module process and still under improvement in many ways, we are still working together with the [ Taman ] company. But compared to the other companies, certainly, we have more learnings from 2 different divisions. Some of the advantages of this synergy or mutual learning would be -- we can share the new learnings from Memory as well as Foundry because both divisions are dealing with almost limited physical patternings. Usually, our Memory divisions are running a lot more wafers, so then they can pick up more data from the rear silicons, especially how to control the regular patterning and Foundry also can learn many different aspects for the random patternings. So the basic knowledge can be shared between those 2 divisions. So there must be a synergy, but it's hard to quantify the level. But we certainly have the advantages.

The second question is raised by S.K. Kim from Daiwa Capital Markets (sic) [ Daiwa Securities ]. How will Samsung close the gap with TSMC regarding 5-nanometer process?

Well, we started our production of 5-nano process, and the 4-nano process has been under development. In addition, through the launch of the development, second-generation 5-nano and 4-nano processes with improved PPA. PPA stands for power, performance and area. We are providing a wider process portfolio and striving to maintain process leadership. And as you know, furthermore, in order to respond to an increase in the future demand for cutting-edge products based on EUV, we strengthened the foundation for expansion by starting investment in production lines in complex.

The next question is raised by J.J. Park from JPMorgan. One of the issues for Samsung Foundry is the limited customer base relative to TSMC. So what's your strategy to expand the customer base? And what's your advantages over your competitors from customers' perspective?

It's difficult to mention anything about customers. What I can tell you is, although we started -- our vision is based on the mobile products where we have the strength now we are moving into different applications, including network, data center and other HPC applications as well. And we are also working with many different companies in different segments such as consumer products as well as automotive. So we are in the middle of moving into other segments and applications.

We will take pone last question from Daiwa, S.K. Kim. So what is the general expectation for the second half 2020 and the outlook for early 2021?

Well, there are many uncertainties because of this COVID-19 and geopolitical situations. So what I can tell you is that we are trying to overcome this situation through our product mix and developing new technologies focusing on high-performance computing applications as well as the new mobile applications coming from this 5G era. We are also trying to diversify the applications, as I mentioned, and expanding global customer base. So again, the outlook is not that clear. There will be a lot of uncertainties ahead of us, but we will try our best to overcome the barriers ahead of us.

Okay. That's it for the Q&A session as due to the time constraints. I apologize that we should now wrap up the Q&A session. Thank you for all attendees, who has participated, for your time today.

Thank you very much for listening and your attention.

Welcome to Samsung Electronics' Investors Forum. Before we start the session, please be informed that we'll have Q&A session after the presentation. You can type your questions to the Q&A box at any time during the presentation. Please clarify your name and company when you type your question. This presentation will be presented by Mr. JinYoung Park, the Head of Senior Business team. Please go ahead for your presentation, sir.

Hello, everyone. Welcome to Samsung CMOS image sensor ISOCELL. I'm Chan, JinYoung Park, General Major of sensor business. It's a great pleasure to reveal ISOCELL at this conference. I think everyone used smart phone camera. So through these components, I expect you can understand about CMOS image sensor technology and it's a huge business opportunity. It will be great if this conference was held face-to-face. But COVID-19 has changed many aspects of our lives. I want to ask you a question. I think you use many video conference. Do you like the video conference's image quality compared face-to-face meeting? My dream is to provide the sensor like it's the real human in the short future. Let's talk about how image sensor can help. Today, I want to share with you our clear vision of ISOCELL. More pixel, more camera. It will bring us [indiscernible] live. CMOS image sensor, CIS means, CMOS image sensor. ISOCELL is our trademark. Pixel converts light signals to electrical signals. So pixel is the key technology for the image sensor. Pixel is a composed of color filter, photodiode and circuit. It is the most important to bring [indiscernible] different color pixels. Each pixel should be isolated to prevent the other color signals bleeding in. It will make sense. To name, ISOCELL is, isolate and cell. ISOCELL stand for, capture pure light and keep the image very well. Before you understand, let's start with a short video clip, how exactly ISOCELL achieve us and provide the best image quality, especially in smaller and more pixel. [Presentation]

Before we dive into the details of our business, lets leave the camera system by comparing to UIs. Our mobile camera is composed of lens, actuator, image sensor and image signal processor, like human eyes sensing system work, lens, [indiscernible] muscle, retina and brain. Let's look at these human eyes. Oh man, this is a very beautiful eye. You can see very good lens. It's only single lens. Also, very beautiful iris. If I look at from the camera module point of view, we use about 5 to 7 lenses. Also iris is short term, is still a lot of a get to the near to human eye. Also regulation-wise, now last year, we announced 108 megapixel is [indiscernible] for most CIS on board. According to the scientists, for human eye resolution is about 576 megapixels. So ISOCELL's vision is to implement 600-megapixel sensors [indiscernible] human eye resolution into mobile phone. More pixel is the first key strategy for ISOCELL. We are now pushing forward to implement [ TSCR ] camera into the smart point through ISOCELL. Usually, [TSCR] camera interchanged 5 lenses for better shot and special effect. Smartphones instead switch multi cameras 13, high timing range video without immediate lag is also the key factor. More camera solution is the second key strategy in ISOCELL. Just 3 years ago, more than 32 megapixel smartphone camera was very rare. ISOCELL opened the new era of more pixel. ISOCELL's started to provide 32 megapixel and 48-megapixel CIS in 2018 and changed the trend of a smartphone camera by provided 64 megapixel and 108 megapixel last year. More resolution is better. Let's look at the main camera adoption ratio. This year, 35% of smartphone choose more than 32 megapixel and expect 56% in 2024. But I think more because more resolution is better. I want to make it more than 80% in 2024, providing performance and price-balanced ISOCELL product. Front camera has also have similar trend. Please remember more resolution is better. Now let's look at the more camera. Although smartphone volume may saturate at around 1.4 billion units. Total cameras in smartphone will continue to grow. Why? Because dual camera, triple camera and the quad camera adoption rate will be increased. Also triple camera and quad camera's ratio is more and more. It means each smartphone use more cameras. For total resolution of all the cameras in our smartphone you saw around 23 megapixel 3 years ago and 59 megapixel this year. And this is expected to double to 108 megapixel by 2024 for the ice more. Anyway either results in many wafers will be needed, that means, more revenue opportunities in CIS market will drive there. ISOCELL has created for more pixels and more camera trends by providing timing and excellent performance of ISOCELL technology and camera solution. Samsung started CMOS image sensor 20 years ago. 2013 is the very historic year for ISOCELL. Samsung CIS platform, describe that the ISOCELL is the reference platform for the Samsung CMOS image sensor. ISOCELL launched the world first 1.0 gene micron 60-megapixel CIS in 2015. There are many, many problems in those kind of technical barrier but ISOCELL has removed the total technical limitation every year, every year. And this is 2.7 micron portfolio lineups this year. Now let's talk about ISOCELL technology in more detail. This is kind of a training session. For accurate color, it is a crucial for each pixel to receive and contain or large amount of correct light information, [indiscernible] full-rate capacity and minimize cross-talk each others. Photodiode is usually defined under the color filter with a limited area because technical limitation. It means smaller pixels photodiode area is more limited and visited to full-rate capacity becomes smaller. Full-rate capacity means as you see in the picture per biome order photodiode. If the full capacity is small, let's look at what problem will be happen? At the bright condition, when strong light signal came in, to limited for a capacity over the container will be over fluid. It means, you lost some signals. Next, let's look at leakage. Some over signals will be mix to the neighboring pixels, we call them as crosstalk. Crosstalk is critical parameter in image sense of [indiscernible]. Each [indiscernible] is higher with the smaller pixel. You will get full color. So it is very difficult to make a smaller pixel because of smaller means more crystal. ISOCELL, you saw deep trend isolation, which is physically separate between the pixels. So you can implement photodiode in whole volume over this container and enlarged by [ Pollo ] when pixel becomes smaller. So full ray capacity maintain even though pixel smaller. Capture those signal is also profitably staid in their pixel by isolated world. To implement this unique solution, ISOCELL reuse for well-proven Samsung's DRAM Technology to implement this isolation very stable and cheaper, I think for the business cheaper is very important to provide worldwide mass volume. Samsung DRAM technical space is the foundation of ISOCELLs deep than isolation technology. Other DRAM technology allows ISOCELL to reuse the lease facility from DRAM. Handle well-proven equipment and shortening the set of time. [indiscernible] to increase profit and first respond to the dynamic market requests. Let's look at the aspect ratio, aspected ratio [indiscernible] use and [indiscernible] is 55 in DRAM and 53 in ISOCELL is very similar. We are using very similar technology. Yes. For example, the highest building in Dubai has 163 floors on 140-meter foundation and aspect ratio is about [ 6% ]. You preapply aspect ratio of 53 to the building. It becomes 1,460 floors [indiscernible] . Not only that, if you make 100-megapixel ISOCELL, ISOCELL should build 100 millions of buildings on a single chip. You can ask the fourth challenge. I think you can build it. But the should not destroy or hit each other by strong wind, earthquake, vibration or at any situation. The second challenge is even more difficult. There are very competitive buildings next to next. [Person ] from the top, should reach it to the first floor of the all the buildings need to be very stable. [indiscernible], how much to be called we can make it. But my engineers doing the kind of very [indiscernible]. Now you may wonder why we go so far to develop such a smaller pixels. The probably is those sensor size is limited in smartphone due to camera model height, the model height is proportional to the sensor size. If you see the diagram at the middle. For camera model in smartphone is composable 5 to 6 piece of lens, even 8 piece of lens. So at the bottom there, [indiscernible] in the theory the center lens, if you use larger sensor needs longer collens. So if you increase the sensor size, per camera [indiscernible] , for exmple, if you build up a point [ 8 ] micron 600 megapixel camera. For camera height it will be [ EUR 22 million ], even current smartphone there is only 8-millimeter or less. So you make smart from big bump and ugly to develop on ultra-high regulation CIS, it is mandatory to develop ultra small pixels. But you helped maintain same performance, not lose any performance, even smaller pixels. There is a trade-off and physical limitation. ISOCELL technology enables further pixel size reduction and contain more light signal. ISOCELL is a highly competitive especially in the more pixel market. So if you make pixel smaller and digital pixel dimension is smaller. So very many problems in low light condition at that. So at the low light condition, how we can take a right picture image. The first 1 device innovation, how we correct to more light signal and not losing anything. I already explained, ISOCELL technology can improve by capturing solid light signal and hold it. Secondly, pixel operation and algorithm innovation. ISOCELL introduced tetra and nona technology. Tetra means 4, nona means 9. At the dark condition sensor received the signal [ 2/4 ] module pixels, which is tetra. [ 3/3 ] is nona pixel. At the bright condition, ISOCELL automatically convert tetra or nona into higher resolution signal. Nona technology was implemented in our 100 a megapixel of HM1 and HM2 product. ISOCELL offers highly detailed pictures with natural and PBT colors in all properties lighting conditions. This year, 0.8 micron is the major. Next year, it will be a big year for 0.7 micron image sensor. ISOCELL already manufacturing 0.7 micron portofolio family from 32 megapixel to 108 megapixel. ISOCELL technology is continuously improving to capture more like with the smaller pixels to deliver better image quality each generation. As you've seen in some sensitivity and technology history, Samsung is good at making smaller and better. We reduce their auto lens technology to ISOCELL. Let's move to more camera Core Photonics joined ISOCELL last year from Israel. Core Photonics has many innovative camera solution IPs. [indiscernible] telecamera was already adopted in smartphones. Core Photonics is adding valuable IPs every year and objecting customers with solutions that leverage ISOCELL. Due to COVID-19, smartphone market was a decrease in fourth and second quarter this year. Let's leave the main camera resolution trend, 20 megapixel and lower rejection are rapidly decreased this year. However, here shown in blue, more than 48-megapixel sensor showed steady growth even crashed period this year. So [indiscernible] year-to-year more than 48 megapixel camera, creates about 125%, not 25%. Why? More regulation is better. Camera depreciation is more important because more [indiscernible] can show more detail image, and people want to get it. Samsung's ISOCELL created this market over more pixel and prominent major provider or only provider for the 100 A megapixel. ISOCELL has 100 market share. More pixel trend will accelerate next year [indiscernible]. ISOCELL has prepared this opportunity, and we are very, very busy now. Most of our smart phone manufacturer are using ISOCELL. We do a wide range of product offering from premium smartphone to less volume smartphones. ISOCELL has a solid customer relationship and a well-balanced customer portfolio. We work with them closely to provide the best ISOCELL and camera solution. As a business partner, we create and grow the market together. Now let's talk about some of our new technology in addition to CMOS image sensors, we are working on our ISOCELL vision lineup that can capture things beyond human eye. Time over flight sensors can capture the 3-dimensional object information. Dynamic Piton sensor can detect very fast movement even in an extreme dark or bright environment. We are exploring and researching sensor technologies that came beyond visible light. If you share light side to visible like a rainbow, it's a very narrow compared to the whole solar spectrum. It means ISOCELL has still lots of opportunity to iterate new camera and new area. For example, High detecting ultraviolet and employee led right, you can easily identify supported or even see object bad weather. If you see the right side over imaging, vision is some normal camera in the dark condition or short-wave IR camera you can see them like as day time. ISOCELL technology is also compatible and competitive in other applications as well. For example, automotive application will use more image sensors than before. With more pixel and more camera, ISOCELL will surely capture and deliver [indiscernible] information in greater detail, improving accuracy. In addition, ISOCELL applicable market can be extended to area like AR/VR and drones. Last year, KPMG surveyed semiconductor growth opportunities. 72% of our CEOs declined that sensor prepared semiconductor industry in the future. Today, most of our sensor revenue comes from CMOS image sensor, and most of that is from the communication industry. CIS sales in market like automotive, industrial and health care are also expecting fast-growing by locate various survey and expect interviews. The whole sensor market you will see it $143 billion in 2030. I say it's very exciting and preparing these opportunities. To develop extreme technology and adapt to ISOCELL, I would like to make our world better. Totally will come through. We make sensors to help people and save lives. Thank you for your attention.

[Operator Instructions] The first question is raised by Mr. Min Seong Hwang from Samsung Securities. How many wafers would you convert from memory to CIS in 2020 and '21, respectively?

Yes. It's also my expectation. We already have more than 100,000 of wafers per month now, but we plan to receive 1 fed from the DRAM next year. So now -- sorry, I can't tell you now to get the number. But we got our last order for more pixel CMOS image sensor, including 108 megapixels. So each wafer per CIS numbers are limited. So I need many, many more wafers. So we can transfer our one DRAM per to CMOS image sensor next year and to provide our valuable customer to satisfy to use it. So you can imagine how many wafers for each DRAM fab.

The next question is raised by Mr. Tong Zhang from Aerial Investment. I have a question on CMOS resolution increase. For the common users, it becomes very hard to differentiate 2 pictures beyond a certain resolution. So what has your study found that resolution threshold to be beyond what pixel level does ISOCELL technologies start having the biggest impact?

So if you just look at the default mode of camera capturing, it would be the same because, as I explained, ISOCELL also applied tetra or nona is a deeper mode. It's almost a [indiscernible] almost same. But actually, my wife [indiscernible] after we took the picture, she zoom in to focus then you can totally different. So if you zoom in, in more detail, 24 megapixel and 108 megapixel is about 9x difference. So you can take one picture, can cover most of area by using only one picture.

The next question is raised by Mr. Chris Chung from Pinebridge. Your competitor's strategy seems to focus on big pixel size instead of higher pixel resolution. Do you think Samsung's strategy to focus on more pixels will allow you to increase market share versus competitors in the mid- to long term?

Yes, excellent question. Actually, ISOCELL, more pixel, OLED, already contained the big pixel, for example, our 0.8 micron 108 nona. In nona mode is a 2.4 micron 20 megapixel, which is my competitors say it's a big pixel. So we already provided big pixel performance and function. In addition, is bonus, 100 -- 108 megapixel is something we can differentiate. Also people like it. So if you at the same price, one is to provide only 30 megapixel, the other one provide 30 megapixel and also 108 megapixel, which one you want to buy. Also, even in the -- some market trend this year. Thirty pixel around 10 megapixel, some deeply discrete both more pixel, especially 108 megapixel, it's a double, double, double. It's a huge increase. So I think if you see the verifying high resolution image once will hate back the blur image. If you see, you will believe, please try.

The next question is raised by J.J. Park from JPMorgan. You mentioned automotive is the new growth driver in CIS. So can you elaborate what's the major differences between mobile application and automotive? Any rough idea on ASP difference and product specifications, et cetera?

Yes. It's very similar about totally different area of the market. The first one is the temperature. Usually, the mobile phone is a commercial level of temperature, both automotive, CIS request very extremely high temperature. The second thing is the mobile camera. So snapshot is more important. But now adding the video, but automotive is -- video is more important because always the automotive is moving. Also, dynamic range. Now in smartphone, around [ AV/ DV ] over dynamic range is applied. But automotive area, like EPO pass the tunnel and go out, if tunnel range is lower, and you can see outside a very bright area because of remitted dynamic range because there isn't now the automotive CIS request about 120 DV, dynamic range and they expect 140 DV more and more. There is a kind of major difference. Also ASP sort of different. Usually, the smartphone use 2 or 3 years lifetime. For [indiscernible], the automotive area it should supply 5 years, 10 years longer time. Also the smartphone use only model but automotive area use package. So some ASPs, automotive is a little bit higher than smartphone.