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

Hello, everyone, and welcome to the Samsung Electronics 2026 Second Quarter Financial Results Conference Call. I will be your coordinator. [Operator Instructions] As a reminder, this call is being recorded. I would now like to turn the conference over to the Investor Relations team. Please go ahead.

Welcome, everyone, and thank you so much for taking time out of your busy schedules today to join our 2026 2nd quarter earnings call. We truly appreciate your continued interest in the company. I'm Daniel Oh, Head of Investor Relations at Samsung Electronics. And it is my pleasure to guide you through today's earnings call. For those joining us today, we kindly invite you to visit samsung.com\global\ir, where all materials from today's call, including the sliding deck, and webcast are available and will remain accessible after the call concludes. First, I would like to briefly mention our important legal disclaimer before we begin the session, as is our standard practice. We kindly ask you be aware that today's discussion may include forward-looking statements that could differ materially from the actual results. For your reference, our full disclaimer is provided on the associated slide. During today's call, EVP Soon-Cheol Park, our Chief Financial Officer and Head of Corporate Management Operations, will review our second quarter 2026 financial results, shareholder returns and business outlook. I will then follow up with updates on capital expenditures and our sustainability initiatives before handing the call to the business executive officers for details on their respective business performance and outlook. We will then wrap up the call with a Q&A session. We expect today's conference call to last approximately 1 hour. The executive officers joining us today include EVP Soon-Cheol Park, our Chief Financial Officer and Head of Corporate Management Operations; EVP Jaejune Kim, Head of the Global Sales and Marketing Office Representing Memory; EVP Jason Shin, Head of the Sales team for System LSI; EVP Sukchae Kang, Head of Sales and Marketing Office for Foundry; EVP Charles Hur, Head of the Corporate Strategy Team for Samsung Display Corporation; VP Daniel Araujo, Head of Strategic Marketing Office for Mobile Experience; and EVP Hun Lee, Head of the Sales and Marketing Team for Visual Display. Now I would like to turn the call over to our CFO, Soon-Cheol Park, for his comments on our second quarter financial performance.

Thank you, Daniel. Good morning, and thank you, our shareholders, investors and analysts for joining today's earnings call. I'm Soon-Cheol Park, CFO of Samsung Electronics. Building on our record first quarter performance, we delivered new highs in the second quarter for both revenue and operating profit driven by our continued technology leadership in AI and ability to navigate challenging market conditions. We achieved these results despite the ongoing macro and geopolitical uncertainty demonstrating the differentiated technology we have built across our core businesses. Looking ahead, we will keep strengthening our future growth engines through sustained technology innovation further expanding our leadership in the global market. Let me now review our financial results for the second quarter. Our total revenue reached KRW 171.5 trillion, up 28% quarter-on-quarter, while operating profit increased 56% to KRW 89.5 trillion, and the operating margin improved to 52% up from 43% in the previous quarter. We also continued to actively invest in future technology leadership with R&D expenses, reaching a new quarterly high of KRW 16 trillion from KRW 11 trillion in the previous quarter. On a quarter-on-quarter basis, net profit increased 52% to KRW 71.6 trillion and earnings per share for both common and preferred shares increased by 52% to KRW 10,849, which is, I believe, among the highest level of global tech companies. The DS division added to last quarter's record performance at the shipment of both DRAM and NAND semi all-time highs driven by robust market demand and the strength of our products. System LSI faced a headwind from the mobile market. On the other hand, Foundry gained from higher utilization rates and growing demand for our advanced node while continuing to expand orders from major customers for 2 nano HPC. The DX division achieved year-on-year revenue growth supported by strong sales of premium and AI product. However, operating profit declined as rising component costs low profitability. To minimize the decline in product profit, we will strengthen our portfolio with more high value-added products and continue to improve our cost structure, optimize our process and enhanced operational efficiency. On currency effects, the stronger U.S. dollar against the Korean won had a positive quarter-on-quarter impact of around KRW 3.1 trillion on operating profit, mainly in our component businesses. The executives with us today will share more detailed business updates shortly. Now I would like to discuss shareholder returns. The Board of Directors today approved our second quarter dividend of KRW 374 for both common and preferred shares. Under our 3-year shareholder return policy for 2024 to 2026, we have committed to on annual regular dividend of KRW 9.8 trillion distributed through quarterly payment of KRW 2.45 trillion. The second quarter dividend is scheduled to be paid in August. Our current shareholder return policy continues to be of great interest to our shareholders. Consistent with what we communicated in the previous earnings call, we remain fully committed to delivering on the program as promised and we'll provide further updates very soon. Let me now turn to our outlook for the second half of the year. We expect our growth momentum to continue building in the second half supported by sustained strength in semiconductor demand. For the DS division, despite the launches of new finished products, macro uncertainties, rising component and material cost pressures are likely to continue, and the division will remain focused on defending profitability. The DX division will strive to overcome profitability changes, challenges by strengthening its businesses and fundamentals. We are targeting leadership in the agentic AI market by delivering hyperpersonalized AI experiences with an open platform and sales expansion of premium products across our businesses. At the same time, we will improve our business fundamentals through AI driven innovation and better resource efficiency, while building a foundation to respond to market changes. For the DS division, we anticipate the division will continue delivering growth driven by strong demand, stemming from the rapid spread of agentic AI. In Memory, we will further strengthen our technology leadership and lead the market with expanded sales of high-performance products such as HBM4, including HBM4E, DDR5, SOCAMM2 and eSSD. System LSI will grow in high value-added business by advancing it to new custom SoC business while broadening applications for sensors and power ICs. Foundry will improve earnings through increased orders for products from advanced nodes as well as those tied to high-growth AI and HPC. In the display business, sales volume may decline due to higher set prices arising from memory supply constraints, yet we aim to grow revenue through expanded sales of premium products and full-scale mass production at our Gen 8.6 line. Finally, the DS division will continue to strengthen its core technology through both the optimized CapEx and productive R&D investments. The DX division will also continue to bolster our new growth business, including robotic HVAC, automotive electronics and medical technology to lay the groundwork for mid- to long-term growth. Thank you.

Thank you, CFO Park. Let me now share an update on our capital expenditures. Second quarter was KRW 16.8 trillion, representing a sequential increase of KRW 5.5 trillion. Of this quarterly quarter, KRW 15.4 trillion was allocated to DS division, while KRW 0.7 trillion was invested in display business. By business segment, CapEx for Memory increased quarter-on-quarter as we expanded investments in the new fab in Pyeongtaek and other infrastructure projects on expectations of continued strength in AI demand. We also continue to invest in advanced R&D to extend our technology leadership. CapEx for the Foundry business also increased quarter-on-quarter as investments were expanded to support the Taylor fab ramp-up in the United States, which remains on track. In the display business, capital expenditure increased sequentially due to ongoing supplementary investments in the Gen 8.6 line. Now briefly, I would like to highlight our key sustainability achievements. In June, we published our 2026 sustainability report, which contains our full account of our progress. On the environmental front, we continued to secure renewable energy by signing on several key PPAs for major global sites. Consequently, the company's renewable energy transition rate reached 32.5% in 2025, an increase of 1.1 percentage points from the previous year. We have also increased the proportion of recycled plastics in our products to 33.7%, representing a 2.7 percentage point increase year-on-year, thereby advancing our commitment to a circular economy. On the social front, we have achieved 4 consecutive years without any serious workplace accidents, a track record that reflects our steadfast commitment to workplace safety. For more details regarding our sustainability progress, please refer to our 2026 Sustainability Report, which is available on our website. We remain committed to further enhancing these efforts moving forward. Now I would like to invite our executive officers to provide updates on their respective business units. We will begin with Jaejune Kim, EVP of the Memory business.

Good morning. This is Jaejune Kim from Memory Global Sales and Marketing. In the second quarter, our demand was clearly strong in the memory market, primarily driven by AI applications. In particular, with the spread of agentic AI, additional supply request based on AI-driven demand are mainly from major hyperscaler customers continued for both DRAM and NAND. As the demand for AI remained robust, we expanded sales focused on server applications, where demand momentum was strong under the given production capacity. As a result, our memory business in the second quarter achieved a record high bit shipment for both DRAM and NAND, while the bit sale portion of some applications also reached an all-time high. Moreover, for HBM, we expanded the supply of HBM4 with differentiated performance and strengthened our technology competitiveness by shipping the industry-first HBM4E samples to major customers. Thus, in the second quarter, our DRAM bit shipment increased by the low teens percentage compared to the previous quarter, exceeding our guidance. For NAND, bit shipment increased by low single-digit percentage in line with our guidance. In addition, our ASP in the second quarter rose by mid-40% for DRAM and high 60% for NAND compared to the previous quarter. As a result, based on strong market demand and our product competitiveness, we have once again broken our record for the highest quarterly results following the previous quarter. For the second half of the year, while hyperscalers continue to expand infrastructure investments to establish early dominance in the AI market and the spread of agentic AI accelerates, we have witnessed robust demand and not only for AI servers, but also for general computing servers. Looking forward, we expect this trend will accelerate further. As for mobile and PC applications, although we are observing some demand moderation as customers increase their end product prices, the pace of additional demand for server DRAM, SSD and HBM, thereby exceeding such moderation. Therefore, it seems evident that the gap between supply and demand in the following year will become much wider. Despite our efforts to increase production, our customers' demand is outgrowing our supply. Thus, we plan to preemptively optimize our product mix for both DRAM and NAND, considering the changes in demand by applications and the voice of customers. Regarding the third quarter bit growth outlook, as inventory levels for DRAM and NAND are significantly low, we expect Q-o-Q bit growth to be in the mid-single digit for DRAM and high single-digit for NAND. We plan to proactively address AI-related demand across all product segments and continue to lead the market. by leveraging our industry-leading technology competitiveness and broadly diversified product lineups. Thank you.

Good morning. This is Jason Shin from System LSI business. In the second quarter, our overall demand softened due to flagship smartphone seasonality and weakness in the Chinese mobile market. However, we sustained our quarterly revenue by driving sales of SoC and imaging sensors in the high-volume mobile segment, achieving a record high first half revenue. We also secured our next-generation flagship SoC and continue to build momentum with new awards from major customers across multiple categories such as SoC, image sensor and LSI product. In the second half, amid persistent cost pressures stemming from rising component prices, overall consumer market demand is expecting to soften. Even in such adverse market conditions, we will strengthen the competitiveness of our core business and further expand into high-value segments. For SoC, we are securing next-generation flagship orders and driving stable sales and also developing more new business opportunities in custom SOC. For image sensor, we are strengthening our competitiveness in the 200-megapixel sensor and expanding to other applications -- various applications. For LSI, we will continue to reinforce our high-end DDI leadership and grow our IC business. Thank you.

Hello, everyone. This is Sukchae Kang from the Foundry business. In the second quarter, revenue increased driven by growing demand for Memory HBM-based type products as well as product demand centered on customers in the U.S. Earnings also showed significant improvement before incentive-related charges. From an order perspective, we continued to expand our order pipeline centered on major HPC customers, including cloud service providers for our 2-nano process. In the second half, we will commence mass production of new mobile-oriented products based on the second-generation 2-nano process while ramping up volume production of LPU products for major 4-nano customers and scaling up sales of memory-based die products. Combined with revenue growth across key customers in both the U.S. and China at all nodes, we expect to achieve double-digit or higher year-on-year revenue growth. Notably, the revenue contribution from advanced nodes is projected to exceed 50%, while the share of AI/HPC applications is anticipated to expand significantly from the high-teens percentage in 2025 to over 30% in 2026. Against this backdrop, we expect profitability improvement to gain full momentum through our strategic shift of our business towards high-growth segments. Furthermore, we will continue to strengthen our mid- to long-term growth foundation by expanding orders for advanced node and AI/HPC oriented products. Thank you.

Good morning. This is Charles Hur from Samsung Display. I will now brief you on our results for the second quarter. For the mobile display business, our performance improved quarter-on-quarter, thanks to solid demand of high-end mobile products. For the large display business, both sales volume and revenue increased quarter-on-quarter driven by the growth of gaming monitor market. Next, I share our outlook for the second half. Market uncertainty is expected to continue in the second half due to tight memory supply and demand conditions. However, we aim to maintain profitability through a high value-added product and operational efficiency supported by major customer's new product launches. In the smartphone market, we will focus on the premium segment based on our competitive technology in low power consumption and diverse form factors. For IT, we plan to expand our revenue through the ramp-up of our new 8.6 generation IT OLED line, ensuring timely panel supply. QD-OLED products will increase sales by broadening our customer base in the gaming monitor market and strengthening our product lineups. We'll also expand differentiated OLED products to the tablet, gaming and automotive market. In the second half, we continue to strengthen our cost competitiveness and accelerate the development of differentiated technologies to solidify our leadership in high-end market and strive to achieve stable performance. Thank you.

Hi, everyone. This is Daniel Araujo from the MX division. Let me share our Q2 results and future outlook. Due to memory shortages, the smartphone market volume declined year-on-year, primarily in the price-sensitive mass segment, while value increased driven by higher ASP and an expanded share of premium products. For the MX business, Q2 revenue reached KRW 32.3 trillion, and our combined operating profits across the MX and Network businesses turned to a loss of KRW 0.7 trillion. With the solid flagship sales led by the S26 family as well as strong A-Series momentum, our smartphone sales volume increased quarter-on-quarter with revenue also growing year-on-year. However, profit declined due to industry-wide factors, including rising component costs. In the second half of the year, annual smartphone shipments are expected to decline as demand softens amid macroeconomic uncertainty and rising memory prices. Nevertheless, demand in the premium segment is projected to remain resilient supported by the expansion of AI-enabled features and innovation in form factors. As a result, both full year sales volume and ASP are expected to increase. While the current business environment is exceptionally challenging, we remain committed to strengthening AI leadership through personalized and intuitive experiences. With this, we are prioritizing 2 strategic pillars: First, we will drive overall market share growth through a flagship first expansion strategy. Within our flagship lineup, we are increasing the sales mix of high value-added products, including our top-tier ultra model, and the newly launched foldable Z8 Series, which offers an optimized mobile experience built on 7 years of innovation and form factors tailored to users' diverse lifestyles. We will maintain S26 momentum through sustained marketing and the launch of a new S26 FE, while expanding upselling in the mid- to high-end segments by bringing our core AI experiences to the A Series. We aim to capture market opportunities resulting from component supply shortages and drive volume market share growth. Across the broader Galaxy ecosystem, we will focus on increasing the premium product mix while bringing a new form factor experience for the AI era with the launch of Intelligent eyewear later this year. Second, we will continue driving end-to-end efficiency initiatives while staying agile in response to market shifts, including dynamically adjusting our sales mix and channel operations based on profitability. Thank you.

Hello, everyone. I'm Hun Lee, Head of the Global Sales and Marketing team of Visual Display. I'll briefly explain the market conditions and share our second quarter results, along with the outlook for the second half. In the second quarter, overall TV demand demonstrated modest growth versus last year driven by a major global sporting event, but declined versus previous quarter. Under these circumstances, we were able to increase both sales and profitability compared to last year, mainly by preemptively capturing demand for the major sporting event and successfully launching our new product categories. However, profitability displayed a marginal drop quarter-on-quarter due to raw more material costs such as memory. Now let me go over the outlook for the second half of 2026. In the second half, TV market demand is expected to slow down following the end of the sporting event and macroeconomic and geopolitical uncertainties are likely to persist. Against this backdrop, we will expand sales of new categories by leveraging our product competitiveness and highlighting the differentiated experience. Building on this, we aim to strengthen strategic partnerships with key channel partners and capture peak season demand. Furthermore, we will pioneer the AI TV market by delivering the differentiated viewing experience powered by Vision AI and continue to advance our AI features to reinforce our sales leadership in the face of intensifying competition. At the same time, we will secure future growth engines and elevate profitability by expanding our advertising service business while also strengthening OS competitiveness to further broaden our licensing business. This is end of my speech, and thank you for your attention.

Thank you, all speakers. That brings us to the conclusion of our second quarter performance review, and now we will proceed with the Q&A, which will be conducted in Korean. Our CFO, Soon-Cheol Park, will address any company-wide questions, while questions regarding the business segments will be answered by respective business representatives. Thank you for your attention.

[Interpreted] [Operator Instructions] The first question will be made by Dongwon Kim from KB Securities.

I am Kim Dongwon from KB Securities. Congratulations on your record high results. I have 2 questions. And first of all, as you are now halfway through the final year of your 3-year shareholder return policy, could you update us on shareholder returns and your direction for the next policy? And the other one is on memory. The supply shortage in the memory market has continued? And do you expect the supply shortage to continue into next year? Also, if possible, could you share your mid- to long-term outlook for memory demand?

[Interpreted] I will answer the question on shareholder returns. As mentioned during the previous earnings call, we remain committed to implementing our current 3-year shareholder return policy as promised. The Board and management are actively discussing the specific implementation plan for the current shareholder return policy, including this year's special dividend. At the same time, they're also engaged in in-depth discussions on the next shareholder return policy. Regarding our current policy of returning 50% of free cash flow, I would like to note that customer prepayments under LTAs for our memory business as well as share repurchases for employee compensation may affect FCF. We will continue providing details going forward. For our next shareholder return policy, we are working to drive shareholder value while maintaining on optimal equilibrium between reinvesting for future growth and delivering long-term value to shareholders. We look forward to sharing the details with our shareholders soon.

[Interpreted] Yes. Let me answer your question on the supply-demand dynamics for memory. So amid the accelerated adoption of agentic AI, the amount of tokens being consumed has also grown exponentially. This is driving unprecedented rise in demand, not only for AI servers, but also for broader computing service as well. As many AI frontier model developers struggle to secure sufficient cloud capacity from the hyperscalers, they are increasingly turning to the neo cloud providers for additional service capacity. And as neo cloud providers emerge as major buyers for server OEMs, the OEMs are continuing to seek significant supplies of memory to meet growth -- growing demand. Nonetheless, as memory supply constraints limit expansion of AI infrastructure capacity at hyperscalers and at the neo cloud providers, the AI frontier model developers increasingly approaching us directly to secure their memory supply. These customers are sharing their mid- to long-term demand forecasting and requesting multiyear supply agreements to ensure access to sufficient capacity. So even as proliferation of agentic AI is accelerating memory demand growth, available supply in the industry again remains significantly limited relative to the requirements. Moreover, despite industry-wide increases in CapEx, considering the lead time from new fab construction to actual wafer production, which exceeds 3 years, this means that any meaningful increase in supply capacity will take considerable time. So we believe it will be unlikely to see any significant increase in incremental supply through 2028. Based on the incoming requests that we have been seeing from the customers, unmet demand from this year is likely to carry over into the following year, contributing to tight -- tighter supply conditions going forward. The supply constraints are expected to become even more severe in 2027 than 2026, reinforcing our view that the supply shortage will persist through 2028. Beyond 2029, it is hard to say because of more limited visibility. However, with the surge in AI tokens, expected to drive exponential demand over the mid- to long term. Customers who want to secure substantial AI service infrastructure are increasingly approaching us for multiyear supply. These multiyear arrangements actually are aligned with our objective of hedging our mid- to long-term risk. And so we have been engaging in discussions with customers, prioritizing those who can guarantee committed future captive demand. Through this kind of approach, we expect to transition our business structure from one that was previously overexposed to supply-demand cycles to a more stable and predictable model. Multiyear supply agreements will provide greater visibility into mid- to longer-term demand, allowing us to execute on our investments with greater flexibility. Under these improved conditions, we'll continue our disciplined supply management approach, deploying clean room capacity first through preemptive investments and then equipment installations, flexibly depending on changes in demand conditions.

[Interpreted] the next question will be by Mr. Ricky Seo from HSBC Securities.

[Interpreted] Congratulations on the good performance. I had one question on the DRAM supply mix. I believe at the last earnings call, you explained that between HBM and conventional DRAM, you wanted to maintain a balanced product mix. So is that stance still valid today? Also, I heard some good news about your HBM4 performance. So could you provide us an update, a little bit more detail on the status of your HBM business?

Yes, let me take that question. So during our last call, we did explain that to support sustained AI-driven demand, independent of the profitability difference between HBM and conventional DRAM, we intended to maintain a balanced supply mix. And as an extension to that, we continue to maintain the same approach amid rapid growth in HBM demand. For HBM4, which is drawing a lot of market attention customer qualifications for individual projects are being wound down smoothly. And we are seeing a rapid increase in demand, in line with the ramp-up schedules of customer projects in the second half, supported by the expansion of our 1Z-nano process capacity and yield improvements, which are progressing as planned. We continue to expand our HBM supply capacity. Consequently, we expect HBM4 sales increased by more than 3 full Q-on-Q in the third quarter. Based on our outlook for the second half, HBM4 is expected to account for well over 60% of our total HBM revenue mix. So in the second half, we believe we will be able to achieve HBM market share broadly in line with our overall DRAM market share, resulting in a more balanced business portfolio. Looking to next year, based on the HBM supply agreements that we have already signed with our customers for 2027, together with the technological leadership of our HBM4E product, which we were the first in the industry to sample, we believe we have established sufficient product competitive to commercialize with our major customers as planned. That said, alongside the spread of agentic AI, we're also seeing exponential growth in general purpose computing demand. We're closely monitoring the relative pace of demand growth for HBM and server DRAM, while maintaining optimal product mix to support long-term AI demand momentum. Looking to next year, we expect industry supply to remain constrained, and we'll manage our HBM and conventional DRAM business in a balanced manner, achieving HBM market share in line with conventional DRAM share.

[Interpreted] The next question will be made by Sei Cheol from Citigroup.

[Interpreted] I'm Sei Cheol from Citigroup. I have 2 questions regarding company-wide matters. First is about bonus accrual. I remember that the bonus accrual was not recognized in the first quarter. Could you comment on the amount of the second quarter bonus accrual and your plan going forward? And also, the second question is about the U.S. ADR. Following a competitor's U.S. listing, there has been growing market interest and the possibility of a Samsung ADR. Also, there have been recent media reports that the company is in the early stages of reviewing a U.S. listing. Could you comment on the possibility of an ADR listing?

[Interpreted] First, I will answer the question on the bonus accrual. To provide reasonable compensation aligned with business performance and secure top talent, the company operates a performance-based incentive program. As negotiations were still underway and the incentive details were not yet finalized. No incentive accrual was recognized in the first quarter. In the second quarter, we recognized a cumulative accrual for the first half reflecting a special performance incentive equivalent to around 10.5% of cumulative first half operating profit. To help with understanding, it's important to note that there is a timing difference under accounting standards between recording a bonus accrual in the financial statements and recognizing the related expense in the income statement. A portion of the second quarter bonus accrual was included in the cost of work in progress inventory as manufacturing labor costs in accordance with labor -- in accordance with accounting standards. Thus, the recognized expense amount in the 2Q income statement is lower than the total bonus accrual. The remaining capitalized amounts will be recognized as cost of sales when the related inventory is sold to customers. This is standard accounting treatment. Accordingly, the bonus accrual amounts recorded in a given quarter will not necessarily match the recognized expense in that quarter's income statement. Beginning in 3Q, the expense will be recognized in line with sales of the related inventory. Thus, the second quarter earnings reflect this accounting specific characteristic. Next, I will answer the question on the ADR. An ADR listing involves more than simply listing overseas. It requires careful consideration of fundraising needs, the effect of expanding the global investor base and the additional disclosure and operational burden. In addition, an ADR is a structure where a limited portion of shares is treated in a separate market. So liquidity and supply-demand conditions in the overseas market may create a value gap between the ADR and the domestic underlying shares. We thus need to carefully review whether it would provide tangible benefits to all shareholders, including domestic shareholders who have long trusted and invested in the company. Since the company provides stable cash generation based on its diversified business portfolio, the need for an ADR as a means of raising new capital is not high. While recent media reports have suggested the possibility of a U.S. listing, we're not currently reviewing an ADR issuance. That said, from a mid- to long-term shareholder value enhancement perspective, we view it as one of several possible options that could be open for consideration.

[Interpreted] Yes, the next question will be by Mr. Dong Hee Han from SK Securities.

[Interpreted] Yes, this is Dong Hee Han from SK Securities. Thank you for the opportunity to ask 2 questions, one on Foundry and one on MX. First, could you provide an update on some order awards from major customers for advanced process nodes? And how do you intend to improve the profitability of the MX business and also monetization plans for your service offerings as well?

[Interpreted] Yes, let me cover the answer for foundry as well. I will update you on the advanced node customer order wins for the second quarter. We have secured 2-nano projects from major CSPs and AI/HPC customers and have commenced the project design phase on those projects. We're also in talks with Broadcom and other major customers on diverse other projects as we continue to broaden our design win portfolio across advanced process nodes. Building on this order momentum, we expect our 2-nano project wins to increase by more than double year-over-year in 2026.

So for MX. Right now, the massive demand for AI servers is creating a shortage and driving up prices for mobile memory. We already saw this in Q2 as memory prices rose quarter-on-quarter, leading to pressure on our profitability, and we expect that soft burden to continue through the second half of the year. To manage this, we are focused on maintaining strong sales momentum of the S26 series while ensuring the successful launch of new premium products coming out in the second half, such as the new foldable series Tab S12 and Watch Ultra 2. We're also putting a lot of effort into upselling within the A Series, specifically with the A57 and A37. And on top of that, we are tightening up how we allocate resources across areas like procurement, sales and R&D to minimize the impact on earnings. We absolutely recognize the importance of expanding value creation beyond selling devices. So we're looking into various ways to generate revenue, leveraging our global installed base. But rather than just chasing short-term profits, we are focused on a premium value approach, providing meaningful value and real convenience like hyper-personalized services tailored to each user's specific situation and context, all without compromising the user experience. That said, we're taking a phased approach, considering factors such as service maturity and how our global customers are responding.