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

My name is Shawn Kim from Morgan Stanley. I guess we're here 2 years ago in this exact room and it's really good to see you in person and everyone attending. We have a great lineup today. The format will be 40 minutes presentation and then we'll take 10 minutes for questions after that. And without further ado, I would like to introduce. And so please join me in providing you a very warm welcome to Ben Suh.

Good afternoon. As Shawn just introduced, I'm Ben Suh. I'm Head of Investor Relations at Samsung Electronics. First of all, I'd like to thank all of you, including those participating online for our first ever live streaming for joining this year's investor forum. It's -- actually, many of you probably know, the reason we do the Investor Forum is that we try to address topics that are of high investor interest. But also, we try to pick some topics that we feel that we would like investors to know better of so to enhance your understanding of Samsung Electronics. And I think this year is especially meaningful because as Shawn mentioned, we're together, for the first time in 3 years, it's been a long period of a lot of Webex and Zoom calls. Those are very efficient. But I think at the end of the day, it is quite meaningful to meet face-to-face. And we look forward to some very good discussions today. It's great to be back in Singapore to be meeting with all of you. But now these days, as you're probably well aware, there's a lot of concern in the markets about the slowdown in demand due to interest rates, global inflation, recession concerns and even lockdowns in China. So while we have all these challenges, I mean, it certainly is not the best of times. I would also like to point out that in the past, when we had such big global macro challenges, Samsung has always emerged much stronger. So today, we would like to share with you some of the areas we're focusing on for continued growth in Samsung Electronics in the fields of Memory, Foundry and our DX businesses. So first of all, we have, as a presenter, EVP Jin Man Han, who is the Head of Global Sales and Marketing in our Memory business. And he will address the changing dynamics of the future memory industry. He will share his views of the longer-term market outlooks as well as key differentiations to address new opportunities. Mr. Han graduated from Seoul National University with a degree in electrical engineering. And over the years, he has been a key contributor in the company to areas such as both DRAM and NAND development as well as flash solutions and SSD development. Currently, he oversees the global sales, marketing and business development of the Memory business. Our next presenter will be EVP, Sang-Pil Sim. And he is the Head of Corporate Planning in the Foundry business. He will present our foundry's technology leadership and customer strategy as a trusted supplier. He's going to cover the key pillars of Samsung Foundry and what makes it competitive. Dr. Sim earned his Ph.D. in Electrical Engineering at Korea Advanced Institute of Science and Technology, and he has played key roles in the company, including in the development of advanced logic processes and also as Head of Samsung Austin Semiconductor. Today, he is leading the sales and marketing activities of the Foundry business. And last but not least, we have EVP, Seline Han from the DX division. And she will provide insights on the services business. The services businesses, which is based on the huge Samsung ecosystem of products, is still evolving. And Ms. Han will help you understand its full potential. Ms. Han received her master's degree in integrated marketing communications at Northwestern University. And since training Samsung Electronics, she has been devoted to establishing the smart TV ecosystem and also in developing numerous services, including Samsung TV Plus and Samsung gaming hub. She is currently the Deputy Head of the content services and platform business. I'm confident that our speakers will deliver interesting perspectives on our strategies for the continued growth of Samsung Electronics. So please give a warm welcome to our first speaker, EVP, Jin Man Han of the Memory business.

Ladies and gentlemen, I'm Jin Man Han. So it's good to be here in this precious and very competitive market. So we'll [indiscernible] for me. And it's really good to see you face on face. It's -- nothing is better than facing each other. So today, I'm going to talk about the dynamics of Memory business. I'm not commenting on any market current situation. It's so hard to predict because any prediction is as well as good as your assumptions. But these days, making assumption is so tough. Everything changes. Every time it changes. So I'm going to talk a little more about the future, immediate future and the long-term view, how our business is evolving and how Samsung is going to address this evolving market. Okay. So one of my colleagues told me, this is his favorite slide. I don't know why. I have 3 agendas. One is memory at the center of digital life. Well, I know that every company is arguing that their product is the center of digital life. But I really believe that memory really is the center of digital life. And second item agenda I'm going to talk about is how future memory business is evolving. And then finally, I'll talk about how we can address those evolution by Samsung's point of view. So okay, first. So memory is at the center of digital life, digital life of both human and machine, I would say. In the old times, in the 1980s, it was really about PC market. PC was the king of the digital hill, if I will. And after that, we have a great growth coming from mobile space, 1.3 billion sets year, which is a huge market, comparing 50 million sets of silver, it's really huge. And every 3 years, people tend to change or replace their phones, which is amazingly good market for us. And these days, average content -- memory content for smartphone is about 5 gigabyte. So 1.3 billion times 5 gigabyte, which is, to me, huge. And then from 2020, we are starting to see that the mobile market is taken over by server markets, server from hyperscalers as well as OEMs, like HP and Dell and Lenovo. And when first hyperscaler idea was emerging, we had an internal discussion, whether it is good for our TAM growth, addressable market growth. The general consensus amongst ourselves is that, well, people might not to buy server as before because if you have a very efficient big data center, why would you want to buy a server? So we thought that market might not be growing as fast as before. But it turns out to be spectacularly well, right? We start -- we were starting to see various workloads and applications, small startups are using hyperscalers to start their own businesses, right? I just had a noodle ordering from Grab, right? That kind of business model might not be possible without the introduction of hyperscalers. So any new technologies, sometimes we may feel threatened, but it always turns out to be okay for us. And right now, we are starting to see new markets emerging from AR, VR and IoT. Even though there are some struggles among the companies who are trying to make this AR/VR business big. But eventually, those days will come. It will give us huge opportunity again. I'm truly believe so. So from our point of view, revenue point of view, right now, DRAM revenue overall in the world is about $100 billion. And according to our internal estimation, we didn't -- by 2035, it's going to be almost 3x as big as today, right? So any competition, you need memory. There's nothing you can replace that in technology. So a long time ago, when PC was introduced, it's really about CPU, central processing unit and your memory and sometimes hard disk, right? That architecture has been here for a long, long time. So when CPU companies, providers hit the wall of improving their performance, they decide to use more cores as possible, right, more cores instead of boosting their frequency. But it's still the fundamentally same architecture. You just have more cores, right? Each core needs its own memory content to make competition easy. It's about 6 or 7 gigabyte per core. That's the rooftop. But recently, we are starting to see accelerators, some people call it xPU, accelerator type of special function CPU like computing SoC. One of the example is GPU. And we believe that this evolution will be on the right side, that you have a single huge repository of memory, memory pool, and then every CPU or GPU or data processing unit or anything PU will access those big memory pool, sharing all the information without having to buy -- without having to have its own memory content, which will make a very efficient for them because they don't have to buy huge memories for each application. They can have 1 single pool of memory so that any CPU or GPU, DPU can access them, which is kind of like to me, like a hyperscaler idea, right? They're having this 1 big memory pool and then you don't really have to buy it. You just have 1 big pool of memory and then every CPU, GPU, DPU can access it. So that might limit the growth of memory content, right, from the intuition. But I bet to defer. This will create new opportunity for -- even for us and for our new customers that I'm going to talk about a little bit later. So currently, the bill of material for memory is about 30% to 40% for server. So if you buy server, substantial amount of bill is from memory, right? That's why our customer, hyperscale customer, OEM server customers are so keen about the price projection of memory. They have been showing concerns about the slow pace of node migration, and they are worrying about the slow pace of price reduction over the years, right? Because that -- because their account -- our memory BOM accounts for about 30% or 40%. And we believe it might be reached as high as 60% within 5 years, right? So in the long future, we might say, if you buy memory, you get everything else free. That -- the future might becoming. But I don't think this eventually like 89%. No, no way. The server companies have great engineers. They're trying to optimize their memory usage so that they can limit the content of memories, right? And in there, we will see a lot of great ideas, great architectural changes. Okay. So we have a PC era and mobile and server. What's the next? That's the big question from my boss, my CEO. Where do you think next big demand will come from? And one of the most probable candidates are automotive. So like I said, on the DRAM 6 gigabyte, that is for a smartphone, and then 152 gigabyte for smartphone, right? But a few companies in automotive industry are starting to use about 50x or more. Right now, they are using about 10x more of DRAM and NAND flash content than smartphone. Not every automotive companies, but very few of them. You know who I'm talking about, right? And imagine this, okay, so we have a 1.3 billion smartphones every year. And we have roughly like 100 million cars sold every year. Imagine what's going to happen. When those cars will have 10x more DRAM in the future, then we're going to see certainly that almost same market as smartphone industry coming, coming along, right? That's a huge market. But it may take some time. And everybody has its own answers when that era will come. But we believe that those days will come because we never expected this smartphone business is so big when Apple introduced their first smartphone. Some people say, it's storm in a teapot, but it turns out to be a huge market. Same thing might happen. Maybe not. But this is one of the candidates we believe that going to give us huge market for our memories and storages. And so around from 20 -- I think 2018, yes, 2018 on the left side. You can see that the data created by machine surpassed that of data created by human, right? It's -- the machine is producing more data than humans. It's going to be kind of a singularity, right? So when we draw the line, correlate that with our DRAM and NAND demand is perfectly matching. And we believe that data creation by machine will get accelerated. So you will see more and more demand for DRAM and NAND flash, right? So when you look at the CAGR for the last -- from now to the next 6 or 7 years, it's going to be 17% for DRAM and 24% for NAND flash. That's the kind of a rule of thumb number when we say, okay, what's going to be next year's demand for DRAM? About 20%, NAND about 30%. That's because based on this assumption. And we believe that even though we see some fluctuations in the near future, but that trend might be maintained a longer time. Some people say it's just the beginning. So my -- so I'm talking about the growth potential of DRAM, especially DRAM. I'm not talking about NAND flash today, but DRAM potential for growth is huge. Any competition, anybody introduced with their new architecture, [indiscernible] DRAM. And when I look at the architectural research ongoing around these days amongst the companies is that they're always trying to figure out how to access memory in a more efficient -- in more power efficient and how can they increase the bandwidth as much as possible. It's all about -- almost all about how to work with memories. So because they know that it is a very critical component, especially when you're starting -- when you're talking about AI or machine learning, it's all about how to access memory efficiently. So people come up with all different kinds of architecture just to make sure that they have the best memory management out with them in their chip. So it's going to be huge. And next, I'm going to talk about, so how is this going to evolve over the years. You know that memory is with the center of computing, both for human and machine life, but we want to see how it's going to evolve over the years. So memory business has not been so attractive to most of the investors because it is so cyclical and market is so capricious. And during the shortage, we tend to invest a lot of money to build more fabs and during the oversupply, we tend to stop investing, which makes all these typical cycles that make everybody frustrated. And my -- one of my sales VP complained to me that he really likes oversupply situation because during the shortage is so tough for him every day, customers calling him, visit us asking for more bits, which is so challenging and frustrating to me. But during this oversupply situation, I think some people prefer to have a shortage cycle. But usually, shortage is really painful time for suppliers like us. Anyway, so that CapEx volatility and oversupply situation has been not so attractive to most of the investors. We know that. The second characteristic of memory business is that people believe that memory is kind of a commodity like copper or rice or oil, right? What is the commodity. Well, it is easily producible and easily replaceable by other suppliers, and it has very high price elasticity. It doesn't require a huge technological improvement. You just do what you have been doing, right? It's all -- the market is dependent on the supply and demand. And people tend to believe the memory is like that, right? So easy to produce, anybody can make it, right? The third thing about memory business perception is it has very low profitability. And so operating cash flow is not predictable at all up and down, up and down, up and down. So you always know that next downturn, next bus cycle will come in, right? So how can we make sure that our stock price can go up because you never know what's going to happen next year. That's the perception. Some of them, I agree. We still have that, but it's starting to change. That's the point I'm trying to make. Let's talk about the CapEx volatility and oversupply. So in 1990s, we have more than 20, I think it's more than 20 suppliers, DRAM suppliers. So early 2000, number of players got shrunk and then 2010 is also shrunk again. Today, we have 3 major suppliers, which accounts for more than 94% of total DRAM market. And I didn't include any company who has less than 5% market share. So I think it's fair to say that we have 3 major suppliers. This has -- this is, I think, very nuanced than it appears at the first glance. It has huge implications in the DRAM market. Samsung is now accounting for about 43% in terms of revenue, not bids. So what's the effects of this so-called consolidation? Well, the CapEx divided by revenue is maintained around 30% for the last 10 years. And look at the 67% number. There was a 2007, we -- as a average, CapEx was 67% versus [indiscernible] revenue was amazing. Very competitive. But right now, we are not doing that anymore. We are very disciplined, and we know how to generate cash flow. We don't want to overinvest anymore. I think that is the general consensus that we have learned over the years, which is good for our customers as well as to us. Okay. This is -- this graph shows oversupply, undersupply situations. Each year, anything below the middle line is oversupply. And above that middle line is undersupply. So for the last 10 years, we kind of realized that it is about [ 0.7% ] undersupplied, well balanced, you can say. So the 3 major players of DRAM industry, make our investment very, very reasonable. And at the same time, market is pretty much well balanced although with some up and downs sometime, but it's quickly recovered and we are doing that. So that I don't think is the typical characteristics of commodity market. We might be able to see more stable supply-demand situation for the years to come. I truly believe that. Okay. So memory as a commodity, yes. Like I said before, PC was -- used to be the biggest market segment. And all the memory suppliers are trying to give one size fits all solution to PC makers. The only difference is package type, some speed differences, that kinds of thing. PC really was the king of the hill at the time. So there is no real way for us to differentiate from each other. It's just all about the supply ability and cost, price, a little bit different performances, right? I look at the market these days, DRAM addresses all these markets, you know centers, which require very high reliable very consistent supply. No surprises at all, right? And also it requires very thorough serviceability. When something happens during the field, we have to address the problem right away by sending our technicians and engineers. And mobile is all about low power. So mobile, the cycle of product -- DRAM product is about 1 year. Every year, we give them new products based on the latest and greatest technologies and also require a very small form factor because your phone is getting thinner and thinner. And they always keep asking, how can you make your package height as thin as possible. Gaming. Gaming is booming. Actually, gaming players, I think that demand is not as diminished as other rest of the industry. That's really good. I think they're trying to build more and more [ SaaS next year ] because that component shortages is getting better every day. The gaming industries want us to provide them with very high bandwidth, very high-performance components. It's like a graphics DDR. And automotive, okay, so they want to operate their car at a very high temperature, right? So hot, like 120 degrees, something like that. So we -- they want us to give them very reliable, resilient component. So this is totally different from conventional all-time PC market. Every segment requires its own solution, right? And there is customer who even said that, okay, I don't really mind having single-source supplier as long as we give them good solution. That mindset has not been here before. They always want to have a multi-source suppliers. But in this area, like gaming and data center. They sometimes want us to give them single source application, especially in [indiscernible] computer. Even automotive, they want the best-in-class component whether the other supplier have the same technology or not. I don't think that is not the characteristic of a commodity anymore. And technology itself is getting difficult. For example, look at the left side, it's a number of steps in DRAM manufacturing. So when we were producing 2x nanometer technology, assuming that as a 1, we need 50% more steps to produce the dye, right? I don't think oil refinery industry is trying to increase the staff to produce the oil, right? You don't do that. So I think they're using the same technologies, right? But us, on the right side, you can see that NAND is much worse in this sense. It needs more time for us to process the chip, right? More steps and more process mean you have to have more wafer fab equipments in your fab. That means you need bigger space whenever we change, whenever we migrate to the next node, right? So it's getting difficult as time goes on. Why are we doing this? Because we want to provide the cost effective -- the benefit of cost effective, cost reduction to our customers, right? And also at the same time, we want to increase the bid -- number of bids so that everybody can consume more bids without having to worry about BOM increase, although -- even though we are doing that, the BOM of server is getting bigger. We're trying our best, but it's very tough. Every time -- so the design we shrink has its diminishing returns as time goes on. A while ago, I remember that we sometimes have a 70% bid growth in DRAM, right? And more than 100% bid growth for DRAM. It is not happening anymore. Okay. And also, there is a revolution going on in packaging technologies. I don't know we have some background in analog design, but they don't want to use the most advanced technical node, right? Even though that doesn't make [indiscernible] happy. But for analog or I/O application, you need -- you want to have certain design law to make it very effective and power-efficient right, and reliable right? So CPU wants to have a state-of-the-art technologies, but some I/O chips, you don't need that technologies. Memory has its own pace of node migration, how we're going to do it, right? Well, people come to think of, hey, why don't we mix and match all those small chips together so that we can put it inside one single giant package and connect all of them together using the optimal processes for each component, right? That is happening right now. And one of the jargon for that technology is chiplet. So we want to have a various number of chiplets and we want to connect and stitch them together and put inside in a one single big giant chip and then make it to the market. That's a very good and a very subtle implication for us. It might give us a new chance of developing business model, new business models, right? We might -- as a DRAM provider, we might be able to provide our DRAM chiplets to our customers, fully customed DRAM chiplets to our customers. Or we can ask our customers to give them their chiplets and we're going to stitch them with our memory, and we're going to develop package technology for them. It's kind of a DRAM foundry-like model with package included. So it gives us a very nice chance of developing new business model. And it's going to be very interesting to see how that technology goes. Okay. So low profitability, DRAM and cash flow is up and down, hard to predict, right? The reason our cash flow is not as great as other software or pure foundry players is that because we have to maintain lots of, lots of fabs as on. Samsung is -- I think we are the one who really starting to see the benefit of depreciating fabs, right? We have a lot of fabs. And a lot of them is also getting depreciated pretty quickly, right?. When your fab is fully depreciated, whatever you do with your fab is just profit. At the same time, we have to build more fabs, right, maybe in the United States or in Korea. So when you look at this from a little bit distant point of view, then the assets that we have might be a huge, huge technological barrier for any new start-ups can challenge in the future because it may take enormous amount of capital to replicate that kind of depreciated fabs in your head. And some people might say, "Hey, you know what, I've been hearing about this MRAM, FeRAM or RRAM or PRAM obtain technologies. Those might take you guys over in a catch up with you." But you know what, those memories, they are called emerging memories. I've been watching that emerging memories emerge, starting to emerge for the last 30 years. I don't think it's going to be emerged at all, right? And I was -- as an engineer, I was in charge of developing PRAM myself. And at the time, PRAM was perfect. It sounds perfect. You can have a 10-year retention time. You have to refresh yourself every 30 millisecond, no way. You can retain your data for 10 years, more than 10 years. But the problem is you may not be able to write and erase that more than 10 million times. And imagine how many read and write cycle is happening inside the server with your DRAM. So DRAM-wise, from DRAM's point of view, the endures -- we call the endurance, is almost limitless, right? There's no way you can catch up with DRAM's inherent superiority of reliable operations, with the right operation, right? So when we chart that on this nice optimal comparison table, you see that DRAM has the most balanced characteristics or perfect for your computing memory. So I don't think you can count big on any emerging memory. It may have its own niche market, but it's going to be very far-fetched to say that any emerging memory can replace DRAM industry for a long, long time. Look at the memory operating margin. This is not [indiscernible] number. It's an average operating margin. It's about more than 35%, right, sometimes over 60%. Remember that the CapEx versus revenue ratio about 30-something percent. So the difference, that is operating profit. So for pure DRAM industry, for pure DRAM players operating margins pretty good actually, very good, and it will be [indiscernible] for a long, long time. So the green line in the middle is actually Philadelphia Semiconductor Index company's average operating margin. Oh by the way, there are no pure DRAM players in this market. The 3 major DRAM suppliers are also having NAND industry, right? That might hurt the operating margin. That's the reason. But for DRAM itself, operating margins is pretty good resulted. So for the last 10 years, there was no case when DRAM profitability is below SOX average profit margin. Okay. So what is Samsung going to do for these kinds of DRAM markets? Are we going to chasing the ball? Or are we going to chasing -- are you going to running where ball is going? So when people have this idea of having huge memory pool that can be accessed by any hosting CPU or GPU or DPU. We have to come up with a concrete engineering solution, which is called CXL DRAM, Compute Express Link. It is first initiated by Intel, and Samsung is one of the Board members for that consortium. And that allows us to make our DRAM to talk to CPU or different kinds of accelerators with the new interface definition, right? So any host SoC can access our DRAM as long as they adhere to the standard call CXL. Okay, then what's that different from conventional DERMS, right? So behind the CXL interface, you can put DRAM. So our host is only seeing CXL interface. They don't really care about what's happening behind that CXL interface. That gives us new freedom. So instead of CPU companies define and memory companies get together and then define this spec, this spec, so if you want to have this DDR5, you had to buy the CPU. Those era might be gone in the future. You are basically disaggregate your memory technology from the CPU and host. As long as you are adhering to the CXL interface standard, you can put any DRAM technology you want. You can have a very cost effective, but prone to errors, but you can put error-correction capability behind the CXL, then it's okay. Or you can put very high speed DRAM attach to the CXL, it doesn't matter, as long as you comply with that definition. So it's going to give us a huge freedom in terms of engineering. We are finally divorcing from the CPU. It's not really divorcing. It's -- we can have our own freedom of technology development, decoupled from the CPU technological progress. And that will give us a huge chance to have support this pool of memory that can be accessed from all different kinds of host. Another area we are thinking about is the packaging technologies, 3D IC DRAM technologies, using chiplets and 3-dimensional stacking memory on top of the CPU, that gives us another new chance of business model that we can provide to our customers. And the third thing we are talking about right now is, maybe with CXL technology, we can have our own as a service to our customers, right, instead of just selling upfront and then pay back the money, get the revenue done, no, we might be able to work with our customers so that as the usage changes, we can charge them as usage varies like hyperscaler, but it might be really tough because it has to be a win-win scenario. Win-win business model. So that make everybody happy, but we're trying to crack the code using this CXL technologies. So this CXL technology, this is our demo version of CXL technology. It looks like kind of an SSD. It has a bunch of DRAMs. But in front of that DRAM, you can see that the small chip, there's a CXL controller. You can put a lot of interesting ideas inside the chip, right? And depending on the feature of that chip, we can create new business model as well as putting a lot of -- all different kinds of DRAM behind that chip because host is talking with that chip only, not talking directly to DRAM as before. So we are one of the Board members, only Board member from the DRAM industry. Samsung is the only Board member of DRAM industry right now. Okay. So the last thing is 3D DRAM technologies. On the left side, you can see that 2.5D technologies. 2.5D means you put your Logic and DRAM at the same level, but your DRAM has a 3-dimensional stacked technologies, right? But if we put that 3-dimensional DRAM on top of Logic, you can start to call that 3 dimensional, right? Putting DRAM on top of CPU is not just mechanical variation. That means that your CPU can talk to our DRAM with a very short distance -- within a very short distance, which will give us huge bandwidth benefits with the low power consumption. And if Samsung can provide that DRAM IP as well as how to packaging them, it might be giving us a new business model, right? So we can be a player as a -- in foundry with the OSAT technical support. That's one of our vision in the future. So this is as a service. Our goal is that within, I think it's 5 years, we want to have -- it's a very challenging goal, but we want to have as much as 10% of our revenue coming from this as a service. It's very tough. But we want to crack the code, actually, really. So this is my -- this is the end of my presentation. So I'll talk -- to recapping, I've talked about how memory really is the center of this digital era, right? You need DRAM as a competition, essential competition of chip. And also at the same time, I talked about the characteristics of DRAM business has been changing. And it's going to evolve more like non-commodity, very specific full custom with the as a service and architectural change, all those kinds of things, which is not typical characteristics of a commodity market. And also, I say that the operating margin of DRAM industry is very healthy, right, compared to other Philadelphia Semiconductor Index. And finally, Samsung is working on 3 major directions. One is that you want to provide technology for kove memory with the CXL technology. And in addition to that, we're trying to provide memory service model, including packaging solutions with our DRAM IPs on this 3D IC era. And in addition to that, finally, we're trying to build a new business model called as a service with the benefit of the CXL and its packaging services, okay? So that's the end of my talk, and I think the floor is open for your questions.

So if you have any questions, you can raise your hand and somebody will bring the microphone over to you. Okay, Nick.

Nick Gaudois, UBS. CXL DRAM, a lot of questions as to whether this is actually accretive to overall DRAM market, DRAM consumption or because effectively making DRAM usage more efficient that could actually be dilutive. What would be your perspective on this please? Thank you.

I mean the major business will take place -- will be taking place from 2025. That's what we expect to see, right? And then this is not just a new once -- a long time ago, we were so fascinated by this embedded DRAM market. And then when DRAMs got cheaper, people lost their interest because embedding DRAM is much more expensive than buying a DRAM -- quality DRAM from the market. So this CXL and some people might asked, CXL might be just kind of a passing technology that might loses [indiscernible] over the time, but we don't think so. Major pain points of our customers in DERMS industry, especially from silver is that our bid growth is not as high as before because it's going to be very challenging for us to transition to next node because of huge CapEx and the diminution return of design we shrink. So people want to have -- want to use DRAM as effective as possible, right? If you have your own DRAM for your CPU, have your own DRAM for your GPU, own DRAM for DPU, you might end up having lots of DRAM, right? So people come to think about why don't we use this DRAM as a pool and then everybody can access it. And the CXL is part of the essential technologies to implement that idea, that vision, right? So it might -- so I believe that, that will unleash the full potential of next engineering revolution in the future from the architecture point of view is the real transition from [ full NUMA architecture ] to the [ non full NUMA ] architecture, memory centric. Memory centric doesn't mean that you have to buy memory. But memory centric means that your whole architecture is well optimized so that you can have easy access without including huge cost and you can share all those information at the same level because you don't have to worry about cutting content between cases. You don't have to worry about that. It has to be maintained inside. You don't have to have a duplicate copy of same data anymore, right? So this is very essential. We believe that the market is real and all the major suppliers are developing prototype for their technologies. And we believe the real business we will take off from 2025.

Yes. Shawn here from Morgan Stanley. Just a question on this era of deglobalization. We have a trend towards onshoring back from China. So maybe 2 questions. One is that in the short term, it may bring some excess type of cost. So it may not be as great. But could you expand on that, the impact of what happens on cost if you reshore back to Korea? And then long term, is that going to be more sustainable? And therefore, is that something that's better for the long term?

Okay. So right now, we don't feel any impact of deglobalization, right? There's a concern, but it has not been realized yet. But at the same time, if that really happens, but when everybody is on the same situation, when we are playing at the same level, it should be okay, right? Because everybody will be cut, will be affected by that deglobalization. And our customers might have to pay premium when the situation happens. But I don't think they disagree with that premium.

So actually, the question was more on if you have to no longer manufacture from China and have to come back to Korea, how does that impact the overall cost?

I mean having fab outside Korea or China is very expensive in terms of operation, in addition to yielding, materials, labors, right, everything is expensive. So it will cause the price reduction, not as fast as before. That's for sure. But for China fab, we are -- I believe we can sell all the bids coming from China for the Chinese market. We are not sure what's going to happen, if we can sell their bids outside China. But one thing we is for sure that we can sell our bids to Chinese market.

Thank you very much for this opportunity today. Just wanted to ask another question related to CXL. It sounds that we agree with what you said that the memory-centric architecture the emergence of that could help our industry a lot more and they commoditize our industry. But at the same time, in order for that to happen, the CPU players also have to work with the memory players. And once the memory-centric architecture becomes mainstream product, then in a sense that the, I guess, the hegemony will switch to from the CPU guys to memory in a sense or the CPU has to let go of some sort of power to memory players. So in that sense, are you seeing the CPU players becoming cooperative with development of this? Or are they still a bit more cautious in terms of developing this technology?

Well, actually, the idea -- the initiative was from one big CPU company. And the main reason behind that decision was that, that's the requirements from their customers. So we both have -- we have both the same customers, right? So it doesn't matter who's going to have hegemony or not. It's really about how to address the customer requirements, and that's the voice from our customers, give us the pool of memory technologies. CPU and memory companies has to work together, right? Just give us a solution, right? We cannot go against our -- what our customers want from us. So in that sense, we are all -- I believe, I truly believe we are on the same boat. And that's the reason we have a Board of Directors from CPU and GPU and memories from all different areas of semiconductor industry. So it's not really about hegemony. It's all about giving total solution to our common customers. So they are very active working with us. And we're also very active in working with them.

Hi, just a question on memory as a Service, which seems like quite an interesting business model, but it's still pretty much in its infancy. What are the barriers or the key barriers that you see? I mean, is it distribution? I mean, is it competing with your own customers? Because it seems like a very big change of a business model from just selling memory into selling, I guess, a service like [indiscernible], like AWS.

That's right. And the easier implementation is coming from NAND flash. Yes, because you can sell your storage not as a fixed rate, so you can ask your customers to give us usage level and then we can charge based on how much you used our storage. But DRAM is really tough, actually. Because DRAM is really hard, how many you use -- there's no way, right? They continue to use 24 hours a day, right? But there might be some possibility that we can give more value to our customers by signing with us, for example, signing with us a certain kind of technological contract like software companies are doing like if something happens, you have to address the problem within a few hours a day -- a few hours of the problem. Or we can give them -- so there's a lot of different kinds of ideas flying around right now. So like I said, there's no concrete conclusion yet. But NAND flash is for certain is pretty straight forward. But DRAM really have to think about the more value that we can give them through that CXL controllers.

And maybe just a follow-up on that. In terms of NAND flash, I mean, do you envisage that you would gain sufficient scale to be able to compete with the likes of AWS as you -- because obviously, cloud is a scale business, right, at the end of the day. And I mean, they have a lot of synergies by having CPU and then storage at the same time. So just really trying to understand and dig a little bit deeper on the...

It's a service, it's not to compete with our hyperscaler customers. It's about -- it's kind of a memory subsystem, right? So they have their own services. They may have to use storage boxes or storage box, they're consuming a lot some money, their CapEx is so huge. We just want them to want to convert that CapEx of buying storage into -- buying storage or DRAM into OpEx model. So it's part of their purchase plan. Well, thank you. Thank you. Thank you for this. [Break]

Good afternoon, everyone. I'm truly honored to be here to introduce you Samsung Foundry. I'll talk about the core values of Samsung Foundry, especially technology leadership and business strategy as a trusted supplier. As Ben Suh mentioned, I took most of my career at the development and some for manufacturing. And this photo was taken when I was in Austin. And 2 years ago, I moved to business side, sales and marketing. And at the time, my colleagues told me that welcome to dark side of old. So I never knew he really meant it. And last 2 years, it was like a roller coaster. Very, very difficult time. And I hope we are passing through a really bottom line of our economy. As a start, I'd love to talk about the 4 core pillars of Foundry. And they are innovative technology and diverse openings and tailored service and reliable capacity. In terms of technology, scaling over leading edge continues and stacking technology for heterogeneous integration will evolve even further as chief functionalities become diversified. As for the economy, high-tech industries that contribute to the improvement to human life, such as 5G, AI and HPC will continue its growth with diversification and expansion of applications. So diversity of foundry service is becoming more important. Today's foundry customers are facing fierce competition. They must overcome the challenges to optimization and differentiation of their hardware and software. So this leads to an increasing demand for a more tailored chip design service. Last but not least, the geopolitical situation has been very challenging. Localization of the semiconductor value chain has become a key one for many governments. Naturally, reliable capacity provision has become more crucial. So Samsung Foundry has long been preparing to realize these full values. Let me introduce some of our efforts and achievement. First, innovative technology. Samsung Foundry has been leading technology innovations for many generations. For example, Foundry first high-K metal gate was introduced for 28-nanometer. And the Foundry first 3D metal FinFET transistor was introduced at 14-nanometer. And then as you may know, we introduced the first EUV technology with our 7-nanometer. And this year, actually proudly, we introduced gate-all-around technology, and that has been started mass production from June of this year. As part of this advanced process, we opened many platform technologies from mobile to AI and automotive. And we are also adding value-added specialty technologies to our mature processes to realize products like RF, MCU and Display Driver and image sensor and so on. This process is applied to many product families and is already widely used in our everyday life. Our scaling continues and aims at extreme of technology. In the FinFET structure, we are opening 7 to 4-nanometer with EU patterning, and 3 to 1.4 nanometer are provided with the gate-all-around MBCFETs technology. The first introduction of 7-nanometer of EUV in process was an important milestone for Samsung Foundry. Since then, we have continued scaling by supporting smaller and smaller cells, moving 5-nanometer to 4-nanometer. For each node, we are always evolving technology in order to provide the optimal fit for mobile and then HPC and automotive applications. We do this by developing and delivering more performance improvement for HPC and high reliability for automotive process. And we -- for example, 4-nanometer, we have many deliberate nodes in the parenthesis. This is our official load name, which was announced at the Foundry Forum last month. So for example, SF4E means Samsung Foundry full length audio version, and then SF4P means more powerful boosted version. And 4X means HP version, with a high voltage capability and more reliability. And 4A means automotive burden with very consolidated liability. Device are becoming more and more scaled. So this makes it difficult to improve performance power area at 3-nanometer and beyond. So we have established new trends or structure gate all around ambition. And this is a significant step forward. MBCFET is a highly innovative trend structure and it help us have better performance, power area compared to the existing FinFET structure. Samsung Foundry will continue to innovate in gate-all-around and will develop a technology from 3-nanometer to 2-nanometer and 1.4-nanometer. Now let's talk more about gate-all-around technology. As you can see at the left-hand side, gate-all-around has superior characteristics inherently because of a structural difference compared to FinFET structure. The SF3E, first burden of 3-nanometer gate-all-around process started the mass production for the first time this year, as I mentioned, and it provides a significant improvement in performance power area compared to first generation of 5-nanometer. And gate-all-around provides another advantage to designers, as you can see on the right-hand side. The FinFET can only provide the effective risk proportional to the number of fins. But gate-all-around can provide various effective risk by patterning the size of nano chip, which provides flexibility and optimize performance for chip designers. So let's look at the short video, the introduction of gate-all-around MBCFET. [Presentation]

As a next step, we are preparing our 2-nanometer, SF2 and SF2P as the enhanced version of 3 nanometer gate-all-around. We have asset that boost performance, power earlier when compared to SF3 process. We accomplished this through capacity reduction and more performance boosting and additional low check cell. This SF2 processes in line for mass production from 2025. At the same time, we are preparing SF2P process. SF2P further improves performance, earlier power to SF2 by plugging in backside PDM. We will mass-produce this in 2026. Based on 2-nanometer process, we are developing 1.4 nanometer process as the advanced version of MBCFET. By using full stack nanochip and advanced backside PDM process and retro scaling, area will be reduced by more than 30% compared to SF2 process. This 1.4 nanometer process, we see performance power area improvement at full scale compared to 2-nanometer process following the existing trend of node migration. And its mass production will be smoothly migrate through backside PDM-based SF2P process learning curve. And we are preparing for the post 1.4 nanometer technologies. We are working on a new trend structure that can sustain scaling through vertical stack structure and 2D material for channel engineering in a scale device. And as you can see here. And novel materials to improve metal line resistance is also now under development. This slide shows the special technologies Samsung Foundry offers. For specialty technologies, on [ mature node ], Samsung Foundry's focal point has moved from Planer to FinFET process. By now, we have a great deal of FinFET process experience. That is, we have done mass production at the FinFET process more than 9 years. We believe that this record of mass production is the best proof of our capability and potential. Based on this experience and chain record, we are continuously improving the performance and cost of mature node and adding special technologies like CIS, RF and DDI and eMRAM showing here. Especially our 8-nanometer has a very unique value positioning here. There is -- the other foundry company was not able to provide 10- and 8-nanometer, except Samsung Foundry. And as you may know, 8-nanometer is the most advanced non-EUV based cost-effective node. We have a high competence on competitive power of RF and eMRAM. 14 RF is now under mass production, and 8-nanometer is about to start mass production in 2023. 14 eMRAM is being developed for automotive and industrial application and can be easily migrated to 8-nanometer eMRAM. Let me explain eMRAM and RF a little bit more detail on my next slide. First, our eMRAM has unique advantages. First one is, Samsung Foundry started 28 eMRAM manufacturing for the first time from March 2019. So it's been already 3.5 years. The other one is 28 eMRAM business is the world's smallest one. From the customer point of view, there are several benefits using our 14 eMRAM process. For example, it is easy to later transport to 8-nanometer eMRAM. And the other benefit is we can easily scale down the eMRAM business because MTJ model can be implemented into the baseline process simply by program play. Regarding RF, recently, we achieved meaningful results to our RF baseline. That is, we will be delivering the world's first RF product under 10-nanometer to a customer by next year. This would be second worldwide first since our 49th RF. As you may know, node scaling inherently degrade RF performance. Our 8-nanometer RF is a breakthrough technology with effort to overcome the paradox of node scaling for RF performance. 8-nanometer RF is a great example of how with the innovative methods we can overcome the negative impacts of device scaling for other devices. So our RF process is very competitive, and it will become the market leader. Okay. Now let's take a look at advanced packaging, so-called beyond more. We have been working hard developing heterogeneous integration technologies. And this is the history and the future of our progress. Millions of HBM with 3D stacking have been shipped already by Samsung Memory division. And we are expanding this proven technology to Logic 3D IC for both Mobile and HPC applications. This is called X-Cube. We plan to start mass production of this X-Cube technology with micro bump type in 2024 and bumbles type called hybrid copper bonding in 2026. As a horizontal packaging technology, Samsung is developing 2.5 the I-Cube that integrates logic tied and multiple HBM interposer. IQS, which packaged 1 logic die and 2 HBM on a silicon interposer began mass production in 2020. And IQS, which integrates 4 HBMs, has also been developed and ready for mass production. On top of that, we are developing IQE shown here. So which has an embedded silicon breach die in RDL Interposer. In 2024, we are going to manufacture an even larger I-Cube product with 8 HBMs and 2 logic type. Okay. Now let's talk about the next value, diverse openings. Foundry applications are expanding to various product lines such as HPC and automotive. In order to meet these diverseness Samsung Foundry provides special technologies optimized for each platform. More specifically, this includes HPC platforms with advanced 2.5D and 3D packages and automotive platforms with advanced RF technologies. And IoT and 5G platforms with eMRAM, RP and chimney technologies. Through this, Samsung Foundry will actively support customers to create their business opportunities and unique value. Currently, Samsung Foundry is already growing in nonmobile phase, such as HPC and automotive and 5G. And we plan to expand share of nonmobile sales to more than 50%, aggressively targeting high performance and low power market by 2027. So let's take a look at a -- closer look at the HPC and automotive market. HPC is expected to see higher growth than any other application and will become a key driver for the Foundry industry. In particular, CPUs, GPUs and AI accelerators are expected to grow by roughly 20%. Samsung has advanced process technologies used by industry-leading customers for each of these categories. Moving forward, we will use our experience on high-performance IPs and design methodology for a big tie to strengthen the ecosystem and infrastructure. In the automotive sector, we are using our experts in mobile application process to extend our infrastructure from IVI to ADAS. Growth in the sector is focused on SoC, ADAS, MSU, infotainment and XEV. In line with that growth, we have secured everything from processes to fab and design infrastructure for each auto grade. As you can see on the right hand side -- in the right hand side, we have a very strong history of the automotive business with the first mass product of our -- some of our products dating back to 2018. Our [ lack over ] the general field failures over the last 4 years in the 14-nanometer automotive process demonstrates how prepared we are. In order to maintain our competitive edge, we are also working on a process that utilized eMRAM from 14-nanometer. Many Tier 1 customers of automotive MCU earlier are working with us for this 14-nanometer eMRAM. For the third value tailored service, I'd like to talk about Samsung Foundry's differentiation, synergy and one-stop shop solution. Memory capacity latency and power efficiency are becoming very critical for HPC products. Samsung Foundry is collaborating with Samsung Memory division to develop highly integrated system in packaging for the next generation of HPC products. For example, implementing 3D stat DRAM on powerful logic die and moving [indiscernible] from DRAM chip to logic chip can enable high capacity and low power consumption. To realize such an idea, we are designing a customer test chip with memory load stating capability called [ send T ]. First, we designed a customized logic die that includes the functions of DRAM purple and validate functionality of HBMs co die stacked on top as Phase 1. Then validate customized last level cash DRAM on top as Phase 2. We are expecting that the Phase I product will consume 40% less power, and Phase II product will consume 60% less power with 2x faster latency compared to conventional 2.5 solutions. So no other Foundry can oppose this kind of product as effectively. And we believe these new technologies and solutions will open a new era of high-performance computing. Samsung Foundry has been working relentlessly to create a strong and sustainable ecosystem. Thanks to ecosystem called SAFE, Samsung Advanced Foundry Ecosystem and close collaboration with our best partners from DSP, IP, EDA, OSAT and PCV partners. We are now capable of opening total solutions for the advanced and special technologies. SAFE has been growing year by year with new partners joining our open ecosystem. We are currently engaged with 22 EDA partners, 9 DSP partners, 10 OSAT partners, 9 Cloud partners, plus 56 IP partners who provide more than 4,000 IP titles. Now let's talk about the last value, the reliable capacity. The capability to produce advanced technologies are being expanded rapidly, and we plan to continue this trend in the future. The expansion of the new [ contact fab ] in 2023 is expected to increase advanced capabilities by 1.6x. And new fab in tailor is on schedule to launch in 2024. By 2027, we are expected to expand our advanced technology capabilities by 3.3x. In order to maintain a stable yield with rapid expansion, our new product development will take place at the Hwaseong S3 R-line and safely transfer to Pyeongtaek and Taylor fab. In terms of fab site in South Korea, Samsung Foundry currently operate 3 sites near Seoul. Giheung and Hwaseong fabs are locally 5 minutes away from each other, and Pyeongtaek is 30 minutes away from the 2. So it makes easy to transport wafers and other components, important components between the fabs. Our fab in Giheung started mass production in 1983, mainly producing mature products. Now the production of new mature 8-nanometer are underway at this site. Hwaseong began mass production in 2000, and that's where you can find the S3 line, the EUV R&D fab. Advanced products are developed in S3 and then transfer to Pyeongtaek or to the U.S. S3 line has a long history of experience, making it highly effective, efficient and transporting products safely. With this experience, the S5 line in Pyeongtaek has succeeded in transferring 5 line process with the shortest time. Pyeongtaek is planning to continue to expand its new fab, including Phase II of S5 line and which is scheduled to start mass production in 2023. In the United States, we have been operating the Austin fab for more than 26 years since 1996. So we are now building the third fab in Taylor, which is located about half-an-hour from Austin and which is scheduled to start mass production in 2024. We successfully transferred our 14-nanometer process with a stable digital level from our S1-line in Korea to our S2-line in Austin. Therefore, we have the capability to execute stable production at the Taylor fab through this experience and the know-how of S2. Let's switch gear to the business side. Step by step, we have been adapting technologies for each application sector and made constant investment in infrastructure to support such technologies. We continue to make great strides in building our capacity through massive investment and are constructing new fabs in both Korea and the U.S. every year. We have secured the IPs required to support our technologies, and we will continue to work with full dedication. At the end of the day, the combination of all these efforts will ensure that we'll be thoroughly prepared within the Foundry industry. On the customer side, our global customers has more than doubled since 2019. And we are focusing our business worldwide to reach more than 5x the number by 2027. Recently, we secured many first-tier customers in the HPC network and automotive segment. As a result, we now lead several sectors in the world's 5G and automotive market. We have the tough market share in the global 5G RF sector and a strong sector in 5G-model. We are also competing for the biggest market share in the ADAS sector by cooperating with the top automotive customers. And we will continue to spread our sales coverage across all applications by expanding our global client in the U.S., Asia and Europe. Samsung Foundries were prepared for each application, actively making necessary investment in a timely manner to support the success for our customers. By 2027, we expect to grow 3x. By expanding from the mobile centric to HPC and automotive areas, we are building a healthy and diverse portfolio. Samsung Foundry pursues realizing our customers every innovation with various partners who build the Foundry ecosystem. Going forward, Samsung Foundry will become a most reliable company focusing on the 4 values: Innovative technology and diverse offering, tailored service and reliable capacity. Thank you.

So we'll take 10 minutes for questions. As you, the audience, starts to think about the next question, maybe I can start with my first question. There is this clash of chips that will happen sometimes in the next 2 to 5 years. So in your opinion, how do you see this 3-way competition evolving between yourself, TSMC and Intel over the midterm?

When I meet many customers these days, they think the current geopolitical risk is really serious. So many customers wanted to have a second source. So from a business point of view, Samsung Foundry has less opportunity to have many customers who wanted to have a second source. So industry-wide, many EDA vendors are preparing for more easier and efficient migration from founder to foundry. And Samsung Foundry was a little behind compared to TSMC for 4-nanometer, 5-nanometer. But I believe that 3-nanometer were really important game changer. So Samsung, Intel and TSMC are all working on gate-all-around. And then Samsung is the first company we introduced earlier gate-all-around this year and main production for mobile from '24. And then Intel also announced today they start gate-all-around '24 and TSMC from '25. So as I mentioned, gate-all-around is really efficient technology for more performance and power. So from '24-'25 timeframe, we are really focusing on this 3-nanometer maturity and power performance area of competitiveness. So that will be really important better ground. So yes.

So if you have any questions, raise your hand.

Staying with 3-nanometer gate-all-around, I mean, I kind have noticed but you don't really have HPC flavor yet for 3-nanometer. And yet, you seem to expect that HPC customers will grow significantly important. So how do you get there? And if mobile mass production is 2024, when you actually expect mass production for HPC for 3-nano? And secondly, 1 of the feedbacks I'm hearing from your customers is while they're impressed with your -- what out of GA now where, at times, find you maybe a little bit slow in bringing library IP to them to help 14 designs to the process. In other words, you may at times I would like the library IP offering that TSMC has or perhaps you don't really service it as quickly. So how could you improve on that front, please?

The first question. Recently, many customers actually, they wanted to have a more earlier HPC product launching compared to previous times. Previously, usually, they are like starting launching 2 years later than mobile or 3 years later then. But because of higher competition recently, many Tier 1 HPC customers, they ask us to provide the GAA even at the same time on mobile. So that's our homework. So now we are working on how we can provide the earlier HPC, so more reliability and high volt operation. So currently, many of our HPC customers expect the launching of our product in 2025 timeframe, '25, '26. So even though I didn't include SF3X here, but we are working with our customer. What is the cast and how we can prepare? So my expectation is some customers start in '25 or '26 timeframe. And then second question, yes, that's really -- has been our weakness because TSMC has a more wider ecosystem because they have more customers, like 500 customers and many products. So the ecosystem is self boosting, right. Well, Samsung Foundry has less customers. But as I mentioned, right now, our customers increased twice in 2 years. So we are really focusing on this IP and liable ecosystem. So recently, we are working with many rivalry partners, not only the American company, but other Asia company also. So really we are focusing on this rivalry and IP -- this ecosystem. And then maybe we can also provide some incentive because we cannot expect TSMC model, right? Voluntarily they cannot start this investment. So we are working in the various aspects to motivate the partners. Yes. So for 3-nanometer and I believe we'll be in a better position than the previous node.

So maybe I'll ask another question. So this is in relation to your future CapEx. [ Moore's Law ] is very expensive. The capital is rising, you're going to use probably high-end eventually. So how can you justify return that invested capital in the future? And will there be enough customers to pay that premium?

Yes. That's really an important one. And similar, not only Foundry, but [Technical Difficulty]. So the CapEx is increasing rapidly. So we believe that the long-term partnership between Foundry and customers are becoming more and more important. So one of the way is, we are now discussing how we can have this long-term partner commitment between Foundry and customer. So some customers willing to pay some investment and pretty project to bind our capacity and their demand together following years. That's one year -- one way. And the other one is Foundry is a different business model compared to memory. So for example, 14-nanometer is almost 10 years on the business. And then we expect more than 10 years -- 15 years, still, we have a very good visibility to our business. So after depreciation and then right now 49 days, cash count, actually. So we have to think about long-term business, not just 5 years, for 10 years and 15 years. So best to deepen the way of thinking. And then another way is just -- semiconductor is becoming more and more important strategically for many government. So also, we expect to have some incentive from many government -- current countries. So for example, our Taylor fab, we are working closely with the United States to have some support over this chiplet.

I think at this time, I think we can end it here. We'll take a 10-minute break. Thank you very much for this presentation.

Okay. Thank you. [Break]

Thank you very much for preparing this nice stuff -- story, especially for me. I hope services business where I am devoted for contribute to elevate our set business as well. So it's very honored to be here to presenting DX new business here. As I introduced, I'm Seline Han, leading service business in visual display division. Today, I will be speaking on behalf of the broader services business within DX Division. If you have any questions, I will be happy to take at the end. So let's begin with the device that Samsung is well known for. On average, Samsung launched over 400 million consumer product every year. More than 50 million home appliance, 40 million in TV and monitors, more than 300 million mobile devices. Even as you expect, there are 13 Samsung device release on air every second. If you account to 8 seconds, we have 100 devices somewhere in the world. In addition, more than 1.5 billion devices are connected, which brings a huge potential to go further. I would say this is one of the largest device ecosystem in the world. What makes Samsung's device ecosystem so unique? It has been a part of consumers' daily lives for a long time. Most platform ecosystem make tremendous efforts together users and build a relationship with them, we, Samsung have direct access to various consumers due to its nature as consumer electronics and connectivity technology with services. As a manufacturer, longer life span, our home appliance is perceived as a weakness because we want to sell more device more frequently. Refrigerator has life span about 10 years, TV for 7 years, even mobile is up to 3 years. However, if you wear ecosystem lens, it could be turned into whether strength or opportunity. Lastly, you can easily imagine that those devices are occupying users family and personal spaces. Before going to shift to my discussion from device to business directly, let me spend more time to share what consumers want today. In the past, key buying factors of consumers were a set of feature and specifications. Therefore, marketing and sales message were mostly on what's new or spec comparison with competitors. Now consumers are asking, what can I do with it? What value can I expect? How does it reflect to my lifestyle? So the value proposition of a product has been evolving to focus on expected outcome out of hoisted offerings composed with feature and services together. This tendency is not only for single choice of product. Consumers' expectation level on user experience is getting higher and more complex. According to a study, U.S. households have 22 devices at home on average, which has been doubled compared to in 2019. However, we have all faced challenges, making our homes a smart and simple as we want. Making seamless connectivity across devices requires continuing investment and technology customization. Up to now, I have been going through what consumers want at the section of so-called experience. Now let me move on to service section where experience is completed and generate more business opportunity at the end. Each service plays a different role by proposed and its development stage from experience enhancement to monetization. There are many services to enhance optimal device experience within Samsung. Samsung has collaborated with various strategic partners for open innovation and enriched experience. For example, Netflix, Spotify, business for optimized content experience on our new foldable screen, Prime Video for HDR 10 plus or 8K resolution, Xbox for perfect gaming experience. I couldn't imagine Galaxy Watch without Samsung [ Hands ]. Monitoring health condition, key activity metrics recommending fitness and nutrition program and helping management. Samsung Wallet is replacing digital wallet at this now. Also, it will be a critical component of future lifestyle in virtual and decentralized world in near future. Discovery and distribution services are typical ecosystem services. You can easily imagine 1 looks like. Those services offer more choices to consumers and open new business opportunity for partners and developers. Ecosystem provided distribution and promotion weaker to partners, and partners provide the commercial value to Samsung in return. A commercial [ com-like ] a revenue share is a common business model behind. This kind of a business model is a hygiene factor for platform business for Samsung to operate and invest for further and better performing platform. Samsung Smart Hub with the home screen and App Store are example of TV business. On mobile side, Galaxy Store provides a variety of apps, themes and phones to maximize Galaxy specialized experience. And key vertical service provided by industry-leading partners are prominently placed for users to discover and enjoy best-in-class TV and mobile experience. Some services are designed to perfectly match the device. I call it device native experience. By combining hardware characteristics and its competencies, we do software service, Samsung can deliver truly native experience to consumers. Also, these services are operated with a self-sustained business model, either advertising or subscription. Some of them are significant enough in monetization now. Some are in good pace to the destination and some are still exploring new opportunities. Let me introduce the Samsung TV Plus, a free and supported streaming TV, literally, TV contributed TV. Samsung TV Plus now reached 24 countries and 465 million devices globally across the TV and mobile. Since the last 4 in 2021, it has been 100% growth in consumer viewing. And this year, we project nearly 3 billion hours stream by highly engaged consumers across the globe. This is the TV Plus. [Presentation]

Art Store is another good example. The Frame TV is one of the most famous Samsung's lifestyle screens. The idea of this unique product has been initiated to extend the screen value of TV, which remains as an ugly black screen for 18 hours a day. Art store service concept was designed as a native experience to the frame. When we have come up with the idea is that you stream music -- you stream music every day. Right now with our tool, that's the starting point. Now Samsung Art Store is a digital art subscription service with the largest market and audience in the world. Over 2,400 artworks are available through partnership with famous medium, galleries and artists as well as a new artist who don't have enough channel to be exposed to the people in the world. Since this is our service, so we can provide revenue share to our partners according to their consumption. And another case is even more interesting. A device called Qooker, so named to mean quick Qooker was launched in Korea last summer. This is a very stylish all-in-one union with a one-stop platform from chopping to cooking. Hardware itself is equipped with 4 different cooking functions, air fry, grill, toast and microwave, at a time for efficient preparation. Users can have the product for free with the subscribing meal plan provided by our partners in HRMs or home replacement meal and meal kit industry. Qooker is a cooking platform with smart things and provide integrated experience. From shopping at Samsung's online food mall, scanning bar code, selecting cooking mode of device automatically and to having a recommendation for next to use. Then we have, I say, another good example, demonstrating Samsung's continued effort to innovation. It is a smart free chip with various smart features combined with again, hardware and services, collectively, it has uplifted the free chip value from a refrigerator in the kitchen to kitchen and home management hub. Samsung continue to explore and elaborate the various opportunities with the services, and I hope for us to deliver another success story for the market within near future. I have mentioned the customers are getting more conscious on seamless experience across their all home devices. I think services to connect to all the dots is the one that Samsung can do better than any others. And this is a fundamental part for Samsung device to be transformed into actual ecosystem. And that's why Samsung DX division is redefining, striving Samsung SmartThings strategy with more priority. Smart Home journey needs to be silently orchestrated from finding the right device, setting it up and to doing more with it. Cam technology is centered on smart things to make this happen silently. Frictionless experience without hassle, intelligent experience to manage home and extended experience with other services. Let's see a short video clip on what's Samsung Smart TV. [Presentation]

I hope you enjoyed the video because it's a little bit kind of at this time, so it can wake up your brain. So as you may remember, the title of my presentation today is Device Ecosystem, Gears to a New Growth Engine. So -- and I have explained how services contribute to make the experience that consumers want and viable ecosystem so far. Now it's time to talk about new growth engine based on device ecosystem under DX umbrella. If I make my point simple, there are 2 components to drive post-sale revenue stream. First one is Samsung's global distribution platform. We have a highly engaged audience in more than 200 territories in the world with direct accessibility. The power and reach of our platform continue to attract our many partners, and they are choosing Samsung as a major distribution channel of their content and services. My previous slides on Samsung Services have briefly illustrated how service on Samsung to provide mutual benefit to both users and partners. Also, how they can be operated and monetized for both partners and Samsung. Second one is unique user and -- unique user data and insights generated by various devices and services. Let me explain further in the coming slides. As you can see, building blocks from the slides, Samsung is able to have invaluable user data and insights through services offered on the top of the device ecosystem. Given proper user consent and data security protocols, we can collect the data to understand them better and deeper knowing what device they can use in, they are using, when, where and how it drives the value of user insight, eventually. The economist has [ core ] the data as the new oil of this century, and other industry export called it the new water. Whatever you carry, it's the important and unlimited value to business has not been changed even it's been increased. Search data from [ Potter ] opened up data business with a material impact to digital economy, followed by social data coming from social network services. And evolution of data business, it is still ongoing. So why not buy Samsung? Even though I limited data's value to manufacturer's standpoint, we utilize the data for hardware business immediately. Data enables a more personalized experience for usual lacking and provide actionable insight for new and innovative products. As an ecosystem owner perspective, we certainly leverage the data for new business opportunity like advertising. Let me go deeper into actual business case of visual display where I come from. No matter how big your data ecosystem is -- device ecosystem is, it is less valuable if neither being aligned with the market trend, nor being prepared for capturing them. Back in 2016, half of U.S. household were already watching a connected TV. Connected TV includes smart TV and streaming video device, like a stick and box. It has been continuously increased. By this year, more than 70% of U.S. home own a smart TV, which is excluding any other device that are the streaming media devices. The reason I have a call to U.S. data is too frequently is, U.S. is the single market with the most advanced platform business. Samsung's business are sold as U.S. market as the #1 and followed by European market and other emerging countries. Indeed, 90% of Samsung TV sorted up globally are all smart TVs. What do you use also watch with Smart TV? OTT streaming services? Or it may be fair to say the rise of OTT services make people to choose more connectivity TV. As you can see from the graph, global OTT services such as SVOD -- SVOD as a subscription-based video-on-demand service and AVOD, ad-supported video-on-demand service to grow. Based on other survey by J.D. Power last year, the average consumer in States had 4.5 paid streaming services. Also in order to win this competitive market, OTT companies continue to invest multi-billion dollars to generate new content. Also, legacy TV advertising business has been shifted to connected TV advertising more and more. The market trend has been validating actual TV data that I have. So share of viewing time of linear versus streaming, linear means legacy live TV; streaming means OTT watch, has flipped from 70% to 30% in 2019 to 30% to 70% in 2021. Live TV still resume within TV, has been remained for several decade. However, it has been taken by OTT recently. Samsung has 16 consecutive years of #1 market share, never stopped to pause innovation in software area. Finally, we also have a substantially paid [ tuition ] fee for various trial and errors. We had introduced the world first TV app store in 2010 in the bottom, the left side, you might not be aware of, not surprising. And we launched officially the Smart TV in 2011. There were market doubt and criticism on Smart TV itself and its usability for a long time. Samsung was not an exception in the mood and criticism. In 2015, we daily transitioned existing platform operation system to Tizen for better platform usability and expandability to other CE devices. It was painful, but it paid off. Then we introduced the whole new Smart Hub experience with codename Eden in 2016. The reason of codename as Eden was rethink TV going back to the 0 point. It provides a single access point for live OTT and external sources by treating all media content equally, which was not normal because 2016 still live TV experience was dominant to all the TV watching time, and no one think about OTT and external sources should be treated with the live TV experience. And single remote control supports the single experience. So we introduced a single remote control, so there was fascinated feedback from the market with a single experience and single access point. The result, well accepted by customers and our partners, well appreciated by media and market luckily. Those momentum let Samsung embrace the market evolution into the business, and really services business went into full swing from then. In 2019 -- 2018, we renewed Samsung TV Plus that I have introduced a few minutes before and began to monetize it meaningfully. We also introduced the Art Store at that time. And in 2022, this year, we have introduced the first screen home experience, it's already grabbing all media consumption. At the same time, we are taking another wave beyond the media experience from now on. There is a small slide and looks very similar in bottom line. However, this journey clearly reflects how Samsung TV has captured the market trend and transformed the opportunity to service the business in the past decade. With the largest TV scale in the market and key services and solid business platform to address the opportunity, video display service business has grown up 86% on average per year in the past 6 years. Our business can be more about the ecosystem play. As I explained before, this was a platform business. The platform business is one part of our services business, and the other area is advertising business. Advertising is based on Samsung as a platform supported by unique audience base Samsung has, differentiated data generated by the service end users and added technology capability to target audience and serve to advertisers on the top of the Tizen platform. As we have grown by taking dynamic market transitioned on time, the service business needs to be agile for further growth without rest. Samsung has announced the Tizen platform licensing program to non-Samsung branded TVs last year at Samsung Developer Conference. This year, we confirmed onboarding partners at the same conference. This is an initiative to scale out our Tizen platform as a backbone of independent service business. This year, we have launched Gaming Hub. Gaming Hub is all-in one cloud gaming services. You don't need a console to enjoy cloud gaming on your TV. Proposal of this service is not only to expand the TV user base to younger demographics. Those peoples' interest in TV is not as high as we want, so we would like to expand our audience base to those gamers as well. At the same time, so we would like to prepare next growth drivers of service business with this gaming service. Like any other services at the beginning, we are focusing on right experience to target right audience and now. The value of device ecosystem and recurring revenue is rather simple and basic. Great product and services gives for consumers for more reasons to buy and stick with us. As a result, more scale and data you will have. Larger scale and audience base will help expand your partnership, generate further revenue with them and even identify new services and business opportunity of our own. Platform monetization will enhance the data-driven business structure. After all, recurring revenue will be reinvested for experience, innovation and financial soundings of business. There is no reason for Samsung not to get into the great value chain. I have mentioned about the DX device ecosystem. Let me go back to the first starting point. If Samsung device comes into viable and fully functionable ecosystem, there are much more things to do, and this division has all blocks and dots in action. That's why we believe Samsung device ecosystem will become one of the largest audience platform to drive a new growth engine. I have no doubt with solid market leadership of each business unit and continued efforts to create new experience across the business unit and corporate initiative within DX division, we'll unlock even greater business opportunity in near future, I'm sure. So am I so fast? I would like to end my presentation with other key agenda in Samsung, which is not the least, we can never emphasize too much on the importance of privacy and security. Our new business relies on user data of device and services connected to each other. In order to maintain the momentum to grow further safely, we need to take good care of them by following the principle, where we put our customer first. Our privacy principle, unwavering transparency choices and protection. Protection is also the foundation of everything we do in security, all are protected by Samsung Knox security platform, which is certified for use by the top government agencies around the world. Thank you very much for listening to my presentation, and now it's time for your question.

I can start the question first. It's 2 parts, my question. So you mentioned about the TV service business growth potential. Can you just quantify for us the actual results so far because it's something that's new? And then second part would be that you -- aside from the TV business, there's a lot of interest about the Samsung Mobile services. And what do you expect in returns and long-term strategy for that part of the business?

Very good question. Thank you. So I cannot share the exact numbers with you. However, the service business across the DX division are increasingly becoming material. And also, it is considered as one of the most profitable business within company. With TV business, the contribution to the overall financial performance is to increase given the nature of the business. I have explained the service is monetized over the life cycle of the product versus TV sales affect the financial performance of a single year. So -- and this has a huge potential to grow still. And in terms of mobile business and other business within DX, there is a little bit kind of different stage of service business by business unit. Mobile division is more focused on enhancing and optimizing user experience, as I mentioned earlier. So they are more focused on how they can resolve the consumers' pain point, how they can create a differentiated product with the services. However, it's the first phase of services to be developed more. Since I explained the Samsung TV business spend the 12 years to invest continuously, so which was adventure to resolve consumers' pain point thoroughly, and then we can find the business opportunity after that. What difference between the past and present is the company understand the services business in nature. So when we resolve the consumers' pain point, it's not a onetime one-off solution, they are more focused on the platform structured approach, which makes a huge difference in future when everything is ready, so the mobile could carry even greater potential because they have even greater addressable market. And DA business could be a little bit different because DA doesn't have any screens and other things, but they are connected to other devices within DX device ecosystem thoroughly. So it could not be generated individual service business by their own products. However, once we combined those device ecosystem together, the DA division will be benefited definitely. I hope this answers to your question. Please?

Yes, maybe a slightly different way to ask the question. If I look at MX and when I focus on the mobile portion, so excluding networks, about 20% of revenues, give or take, this year is non-smartphone, non-tablet, so effectively, wearables and services as well. Approximately how much of that would be services? And should we assume that gross margin there are comparable to the benchmark in the industry, which is Apple? And Apple obviously discloses that.

I'm sorry, I cannot be representing those questions and answering the questions. However, all the devices is going to be smart. That's the kind of destination we are looking for. So I believe MX is also looking for the same direction. So yes, please contact the IR team to get the detailed answers on that. Sorry about that. Please?

Just a couple of questions here. So in terms of kind of how you actually incentive -- as kind of headquarter, you incentivize your head of business units to actually contribute for the DX, given that there might be some conflicts of interest that the BU heads may want to sell as many as devices, while obviously headquarter wants to have a seamless experience for the users. So are you going to kind of allocate your profit, DX profit, with BUs so that you can actually incentivize them to be more integrated within the systems?

I think the profit of DX is including all the profit from the business units, so that's not a matter of financial benefit. So before, so we have support from the very independent approach and siloed approach by GBM because we are too much focused on their own device to sell in the market. But we have learned very painful lessons, those approach didn't work at all. So as I mentioned, the people's expectation is getting higher than we think. So we have to provide some connective experience across the device, which will increase actual value of individual product as well. So now there are good thing -- and the good thing is within DX or the leadership team, including Head of GBM, so they are all in consensus to make this experience as right for the further business profitability as well. So for service business, how we can return our business value to GBM, so we can contribute to its profitability hugely.

Sorry, just another question related to that. In terms of kind of seamless user experiences, I have lots of Samsung applications in my phone, and then doesn't necessarily that everything is very seamless. That's because, obviously, a lot of application of devices that you have. How do you -- I mean there might be some good benchmark for you. How are you encouraging again the BU heads to integrate into your kind of mother user experience side of the platforms that you may have?

Yes, sure. It's kind of a real found of market, I know. There is some pain points to still ingest. So -- and recently, during the last couple of years, we have the all the listed of the problem why we can't have seamless experience. So as I mentioned, it was because the siloed approach. So I mentioned about smart things as not only for the IoT platform, it's more the fundamental infra platform for -- across all the services. So we have several meetings and task force and working group to think about how we can make those infrastructure to be working. So that's our approach here at this moment. So I think within a couple of years, we can really make the seamless experience. And the other thing is when we discuss about the connectivity. So each person in each department is looking for their own job. They would like to increase, enhance the connectivity quality within that work. So it doesn't work. So -- and that's why we are, again, to focus on the DX level, corporate level initial table with the smart things.

Just one question on how do you see the competition coming from the Chinese, I guess, appliance producers? I think they're kind of adopting a similar strategy, platform, et cetera, and their quality is also improving. So what's Samsung's edge now? And how you build on it going ahead?

Yes. So we have suffered from the competition. There are some huge competition in the Western market like U.S. and European country, so where the services business has started earlier. And we also have very aggressive chasing from the Chinese manufacturers, so we are -- we care of that. But the Chinese manufacturers, although they have a good ecosystem within their devices in China, but it doesn't necessarily mean they can go to the global level of execution. So Samsung has a global footprint and global platform and operations system, and we have a strong presence in advanced market so that we can make ourselves to be distinguished from the competitors. And however, but the other difference is data usability. So -- and for other companies like Samsung in other words, except China, we have a strict regulation on the data itself. We have to protect our users. But in -- within domestic market of China, so there is more -- much more flexibility in utilizing data to make their business. That's the market difference. However, so we have to take those and the barriers to overcome in the near future. Thank you. [Foreign Language] [Presentation]

That wraps up all of our presentations for today. Once again, thank you very much for joining our investors conference -- investors forum. And also, I'd like to thank Morgan Stanley for hosting the event as well. Through these afternoon sessions, I hope you're able to see the basis for new growth opportunities in our Memory business, the strength of our 4 value pillars in our Foundry business and also the services growth opportunities in our DX division. Also, I look forward to separately meeting with many of you to have further discussions and also look forward to future events, where we can continue to share our growth strategies. And as always, I appreciate your interest and support of Samsung Electronics. And with that, I would like to now call it close to the 2022 Samsung Investors Forum, and I wish you all have a great rest of the week. Thank you very much.