Robert Yi - Senior VP, Investor Relations SeWon Chun - Senior VP, Semiconductor Business (Memory) ChangHoon Lee - VP, Samsung Display KyeongTae Lee - VP, Mobile Communications business Yoon Lee - Senior VP, Visual Display Business

Peter Seicheol - NH Investment Securities Yoo Jong Woo - Korea Investment and Securities Marcus Shin - Goldman Sachs Mark Newman - Bernstein Lee Seung-Hyuk - Korea Investment and Securities Ricky Seo - HSBC Claire Kyung Min Kim - Daishin Securities Nicholas Gaudois - UBS JJ Park - JPMorgan Peter Yu - BNP Paribas Mehdi Hosseini - SIG Hwang Min-Sung - Samsung Securities Do Hyun-Woo - Mirae Asset Securities

Good morning and good evening. First of all, thank you all for joining this conference call. And now we will begin the conference of the Fiscal Year 2016 Second Quarter Earning Results by Samsung Electronics. This conference will start with a presentation, followed by divisional Q&A session. [Operator Instructions] Now we shall commence the presentation on the fiscal year 2016 second quarter earning results by Samsung Electronics.

Good morning. This is Robert Yi from Investor Relations. Thanks for joining our call. With me representing the business units are Changsae Won [ph], who's a Senior VP of Memory; Ho Buk [ph], VP of System LSI; Lee ChangHoon, VP of Samsung Display; Lee KyeongTae, also VP of IT and Mobile Business; and Lee Yoon, Senior VP of Visual Display. And we also have Mr. Kim YiTae and Kim SangHyo, both from the IR group. I would like to remind you that some of the statements we'll be making today are forward-looking based on the environment as we currently see it. And all such statements are subject to certain risks and uncertainties that could cause our actual results to be materially different from those expressed in today's discussion. First, I will take you through our second quarter results. In the second quarter, the total revenue was KRW50.9 trillion, a 4.9% year-on-year increase. This increase was mainly driven by strong sales of OLED panels for mobile applications and premium products on our set business. The gross profit was KRW21.3 trilion, a KRW1.7 trillion year-on-year increase. And the gross profit margin improved by 1.6 percentage points. Our set business saw a strong recovery as the earnings improved significantly year on year. The improvement came from the increased sales of Galaxy S7 and efficient mid to low-end lineups in the IM business, as well as the strong sales of premium products such as SUHD TV, refrigerators and air-conditioning in our consumer electronics business. Although the earnings of the component business decreased year on year due to an overall decline in ASP, the decline in DRAM ASP slowed down compared to the last quarter and the profitability of the NAND product improved. Also our display business recorded improved earnings led by increased OLED earnings due to high utilization and stabilizing yield on LCD panel production. Our SG&A expenditures increased by KRW0.5 trillion due to the top line growth. However, the expenditure to revenue ratio decreased slightly as we managed our expenses efficiently, including the advertising and promotion expenses. The operating profit increased by KRW1.2 trillion year on year to KRW8.1 trillion and the operating profit margin also increased by 1.8 percentage points. In the second quarter, the strengthening of the Korean won against the major currencies such as U.S. dollar and euro had a negative impact on the operating profit by approximately KRW300 billion, mostly for the component businesses. Now I would like to address the business outlook. We expect strong performance to continue in the second half. Earnings in our component business is expected to increase compared to the first half, led by sales growth of high value-added products under improved supply/demand dynamics. In the set business, earnings in the IM business is expected to slow down compared to the first half, but we still expect to generate continuous earnings growth year on year. In the third quarter, for the set business, consumer electronics is entering into traditional low season while the advertising and promotion expenses are expected to increase for the IM division due to the new model launches and intensifying competition within the industry. However, we expect to maintain relatively stable earnings as we expect improved supply/demand conditions for the memory and LCD panels and stable earnings for OLED. I would like to comment on our capital expenditure plan. During the second quarter we invested KRW4.2 trillion in CapEx, including KRW2 trillion for the semiconductor and KRW1.6 trillion for the display panel business. This brings the total capital expenditure for the first half to KRW8.8 trillion. We have not yet finalized the annual plan for 2016 but we anticipate the annual expenditure to increase slightly compared to last year. This year's capital expenditure will be concentrated in OLED and vertical NAND capacity as the demand for the mobile application of OLED and V-NAND, SSD are expected to increase significantly in 2017. Now I'd like -- I would like to update you on our share buyback program. The share buyback program we announced last October is progressing as planned. First, we completed the third phase this month. We invested approximately KRW9.5 trillion during these three phases and we were able to repurchase and cancel 5.6 million common shares and a little more than 2 million preferred shares. Today the Board of Directors approved fourth and final phase of the buyback program. The total amount is approximately KRW1.8 trillion with 990,000 common shares and 230,000 preferred shares. We'll start the buyback tomorrow and it will take roughly three months to complete this final phase of the special buyback program. The management wants to assure you that we are committed to the shareholder return policy that we implemented last year and we will update you on how we plan to utilize the remaining allocated capital from 2015 free cash flow at the third quarter earnings release time. Samsung Electronics has been focused on staying on the top of technological and product competitiveness to respond to rapid changes in the IT industry, in order to lead the development of the new technologies and establish a foundation for stable growth in the future. 2016 is a very meaningful year for the Company as we are seeing these efforts come into fruition. First, with regard to our memory business, we have widened the quality and performance gap against our competitors with the industry's first and only mass production of the vertical NAND, and the expanding 20nm process migration. As a result, we established a solid profit platform to maximize our profitability. As we progress, we will solidify even further our technology leadership by focusing on the development of next-generation high-value-added and differentiated products. To this end, we will push forward the mass production of the 10nm class DRAM and develop the next generation of V-NAND technologies, while further strengthening the high-value, differentiated products such as high-density SSD solution. With regard to OLED, we have cultivated the market with our strong R&D and early CapEx commitments. We also expanded the market to the next level of technology competitiveness through the mass production of flexible panels. As we expected demand for mid to small-sized OLED panels to increase significantly, we will focus on expanding sales from external customers through actively securing capacity and strengthening our competitiveness -- competitive advantage. At the same time, with a clear technology leadership, we will also develop innovative next-generation products in order to meet ever more sophisticated customer demand. For the IM business, despite the stagnant growth of the smartphone market, we achieved solid earnings due to our constant efforts to differentiate our products and bringing efficiency to our product lineup strategy since 2015. We'll strive to deliver growth of stable earnings by continuously strengthening our product leadership and enhancing solution capability, including KNOX, Samsung Pay and cloud systems. Regarding our TV business, again in spite of the saturated demand in global market, we continue to reinforce our competitiveness and maintain solid earnings. Quantum Dot technology was applied to SUHD TV and this has been well-received by the market. We'll continue to strengthen our leadership in the premium market by focusing on how to differentiate on resolution based on eco-friendly, cadmium-free Quantum Dot technology and by promoting innovative designs such as Serif TV. Before presentation of each business unit, I would like to share with you several data points of the key business areas. For the second quarter this year, the DRAM, our bit growth came in at high teens, and we saw high single-digit ASP decline. For the third quarter, we expect the DRAM market bit growth to be mid-teens and we will grow along with the market. And at this point, we expect 2016 DRAM market bit growth to be mid-20%, and we will grow in line with the market. NAND Flash, in second quarter our bit growth was mid-teens increase and we saw mid-single-digit ASP decline. And for the third quarter we expect the market NAND bit growth to be low-teens and we will outgrow the market. And at this point we expect the NAND 2016 annual market growth to be roughly 40%, and we will outgrow that of the market growth. For mobile business, our total handset shipment in the second quarter was roughly 90 million units and tablet sales came in at around 6 million. Our blended ASP was about $210 range and the mix of the smartphone within our total handset was about mid-80%. For the third quarter we expect our total shipment of the handset to be similar to that of the second quarter and small increase is expected for the tablet. We do expect to see our blended ASP to improve quarter on quarter into third quarter, and the mix of the smartphone within total handset to increase to high 80%. For TV, our LCD TV sales in the second quarter was roughly 10 million units, and we expect to see about 10% increase into the third quarter. With that, I will turn the conference call over to the gentlemen from our business units to give their views.

Good morning. This is SeWon Chun from the Memory Marketing Team. In the second quarter, the memory division achieved remarkable earnings growth, driven by cost reduction through continuous process migration and an upsurge in demand for mobile and SSD products. First, let me update you on our NAND business, which is receiving strong market attention these days. SD demand remained strong. Thanks to rising awareness of the TCO reduction effect, we have seen accelerated transition of 10K and 15K RTM HDD to enterprise SSD. Also demand for mobile storage such as eMCP and eMMC is surging, due to expanded adoption of high-density products over 32 gigabytes, especially from Chinese smartphone makers. We achieved outstanding improvement in earnings through our focus on demand for high-density products such as enterprise SSD over 4 terabytes and mobile products over 64 gigabytes, as well as expanding our soft line of 48-layer V-NAND. For DRAM, overall demand had a remarkable growth compared to the previous quarter. Chinese smartphone brand rapidly expanded the adoption of high-density mobile DRAM over 4 gigabytes, and high-density server demand increased, driven by the launch of the Broadwell [ph] platform. Meanwhile, overall supply and demand conditions, including pricing, started to stabilize. The channel marketplace increased due to concerns of decreasing supply of PC DRAM in the second half, thanks to a supply shift from PC to mobile. Due to the supply imbalance of some applications, market demand for 20nm high-density value-added mobile and server products was concentrated on Samsung. We focused on the area with increased demand and this hugely contributed to solid earnings of DRAM. Next I will comment on the memory market outlook and our strategy for the second half. In the second half, market conditions are expected to stabilize further, with increasing adoption of high-density products in every application as well as a strong seasonal uptick in demand. For NAND, as high-density value-added SSDs continue to expand and the transition of enterprise HDD to SSD accelerates, thanks to rising awareness of the TCO reduction effect, enterprise SSD is expected to become more than half of total SSD shipments in the second half. We expect outstanding growth in demand for PC SSD, along with increased attach ratios and high-density SSD over 256 gigabytes, led by expanded adoption of high-performance NVMe products. Also with new smartphone launches, we expect a strong demand for mobile, demand will increasingly shift to high-density products, flagship to 64 and 128 gigabytes and midrange growing into 16 and 32 gigabytes. Although overall demand is expected to increase, thanks to increased demand for high-density solution products in major SSD and mobile applications, supply and demand is expected to become much tighter in the second half due to supply restrictions caused by 3D NAND ramp-up delays in the market. We will focus on expanding supply of enterprise SAS [ph] SSD over 4 terabytes and client NVMe SSD based on Samsung-only 48-layer V-NAND. Renowned for excellent product competitiveness, profitability and high reliability. Moreover, we will start the V-NAND based high-density mobile storage. We believe our focus on high-density premium market will bring about even better earnings and profitability. For DRAM, mobile device [ph] is expected to lead demand growth, with launches of flagship smartphones and significant increase in adoption of 6 gigabyte products in high-end smartphones. Demand for high-density server products such as 32 and 64 gigabytes is expected to be very strong as well, led by transition to Broadwell [ph] mainly in datacenter PC demand is expected to have outstanding growth compared to the previous quarter due to strong seasonality and increasing portion of high-end products such as game in PC. Demand for graphics DRAM is also expected to be strong due to demand growth for console and high-end graphics hard [ph] DRAM. We will focus on improving earnings and maintain a profit-focused product mix by standing shares of our differentiated high-density value-added products such as mobile DRAM over 4 gigabytes, 64 gigabytes of server DRAM, and high-speed graphic DRAM based on the competitiveness of our unrivaled 20nm process. Our development plan for fourth-generation V-NAND and mass production of 18nm DRAM is progressing smoothly. Based on our industry-leading process development, we will continue secure our position at the top of the high-value-added solution market. And as always, we will focus on strengthening the foundation for long-term stable growth. Meanwhile, we will manage CapEx with a focus on V-NAND to respond to strong demand for high-density and value-added solution products. We will continue to focus on profit maximization through capacity and CapEx management, taking into account profitability as well as supply and demand for each product. Now, moving on the System LSI business. Second quarter earnings improved quarter on quarter due to stronger demand for 14nm mobile APs in premium smartphones and the increased sales of high megapixel [inaudible] megapixel and above CMOS Image Sensor in China. In the second half we will maintain a stable revenue stream through increasing sales of mid to low-end mobile AP and LSI products, while the demand for 14nm foundry will continue to be solid. In the third quarter, we expect the demand for mid to low-end 14nm mobile AP to take off and the sales of CMOS Image Sensor in China market to be stay solid. We are seeing good targeted [ph] result from our strategic decision which we have been pursuing for a while to diversify foundry customers and strengthen our mobile AP lineup. The 10nm development is also on track to achieve our target of mass production by the yearend for our [inaudible] and foundry customers. We will continuously strive for long-term growth by maintaining our leadership in 10nm cutting-edge process and by diversifying customer base for foundry and LSI. We will also strengthen our business development capabilities through supplying specialty technology or product and exploring new frontiers for continuous growth in revenue as well as in profit. Thank you.

Good morning. This is ChangHoon Lee from the Planning Department of Samsung Display. During the second quarter, our total earnings improved quarter on quarter, driven by increased shipments of OLED panels and increased fab utilization in large-sized LCD TV. For the OLED business, second quarter earnings improved Q-o-Q due to healthy flagship sales and increased demand for flexible panels, as well as high fab utilization rate with the health of an expanded mid to low-end product portfolio. For the LCD business, our second quarter earnings show resumed Q-o-Q growth under the gradual recovery in the supply/demand situation. We have improved the yield of the new TV panel production technology and also expanded the TV sales, especially from the large-sized UHD. In the second half of this year, the global smartphone market will continue to slow down and the polarization between high-end and low-end products will be intensified. However, we expect OLED demands to rise continuously as the set-makers recognize the need of differentiation to stay competitive in the market. Under these circumstances, we will actively address customer demand in the second half and reinforce profitability through expanding the portion of value-added products such as flexible and high-resolution displays. Also we'll make it sure to secure the capacity according to the market demand, while strengthening competitive advantage through expanding customer base and new applications. In the second half, the LCD industry is expected to slow [ph] some encouraging signs such as continuous UHD TV market growth and size migration towards larger screens. We expect earnings to increase with an improvement in supply and demand balance, as well as price stability. In response to such market conditions, we'll make the best effort to improve sales and profits by expanding our product portfolio to high-value-added ones such as ultra-large-sized, high-resolution and curved panels with lowering manufacturing costs. In the third quarter, for the OLED business, we'll achieve solid earnings through maximizing supply capacity according to the market demand, as well as expanding the portion of value-added products. For the LCD industry, we expect supply and demand to improve, thanks to increased demand and the strong seasonality, as well as continuous UHD TV market growth and size migration towards larger screens. Under this circumstance, we'll make the best effort to strengthen profitability by improving cost competitiveness as well as expanding our portfolio to value-added products, focusing on TV and maximizing the supply capacity. Thanks for listening.

Good morning and good evening, everyone. I'm KyeongTae Lee from the IT and Mobile Communication Business. In the second quarter, our mobile communication business achieved robust performance compared to last quarter, mainly driven by strong sales of the Galaxy S7 and S7 edge. In particular, greater sales proportion of S7 edge exceeding 50%, the overall product mix was improved and the profitability of our mid to low-end models, such as the Galaxy A and J series, remained strong in the second quarter as a result of streamlined product portfolio. All of these factors had a positive impact on the second quarter earning. In the second half of 2016, market demand for both smartphone and tablet is forecasted to increase compared to the first half, while the market competition is expected to intensify with the new smartphone model launches from our competitors. In response to such conditions, we will maintain our strong sales trend of high-end smartphones and continue to optimize our product portfolio to sustain solid earnings compared to last year. Next, I would like to address the outlook for the third quarter. In the third quarter, the demand for smartphone and tablet is expected to increase Q-o-Q on the strong seasonality. As for the mobile communication business, we will maintain our positive sales momentum of premium smartphones by launching the new large-screen flagship model and sustaining the current sales trend of the Galaxy S7 and S7 edge. We believe that the new large-screen flagship will also meet our customers' expectation just as the Galaxy S7 received positive response from the market by reflecting the voice of our customer. In addition, we will expand the sales volume of the Galaxy A and J series, mainly with the 2016 addition, and introduce localized smartphone for China, the Galaxy C series, to increase smartphone shipment from the previous quarter. However, our flagship in the third quarter will be somewhat impact by intensifying competition in the market and seasonal increase in marketing expenses. Despite the earlier concern in the market, our continuous efforts to enhance our product competitiveness and streamline the product portfolio in 2015 have turned out to be successful from the beginning of this year. Accordingly, our mobile communication business has shown Y-on-Y earning improvement for two consecutive quarters. With the reinforced business capability, we will strive to maintain the current solid earnings in the future. As for the networks business, the business outcome was improved in the second quarter and has contributed to the profit increase of the IM division. In the third quarter we will focus on revenue growth by leveraging the LTE expansion of our major partners and expand this flyover [ph] product for [inaudible]. Thank you for listening.

Good morning. I'm Yoon Lee, Senior Vice President of Visual Display Sales and Marketing Team. For the TV business, in the second quarter 2016, in spite of demand growth in developed markets such as North America and Europe, global TV demand stayed flat compared to the same period of last year, due to economic downturn in major emerging markets. In the midst of stagnant market condition, we managed to achieve solid earnings year on year by successfully launching new products including SH [ph] TV and increasing premium product sales through the global sports events such as Euro Cup. For the digital appliance business, although North American market continued its growth momentum, global demand of digital appliance declined year on year, due to the slower market growth in China and the impact from economic slowdown from emerging markets following raw material price decline. Despite these circumstances, our earnings largely improved from the same period of the previous year, led by increasing sales of premium products such as Chef Collection refrigerator, AddWash and ActiveWash washing machine, while the North America, Korea and Europe market led by - led our sales growth, strong sales of newly-launched air-conditioner also contributed to improving our earnings during the peak season. In the digital appliance business, we continue to drive growth in earnings by continuously introducing innovative products which reflect various consumer needs and carrying out effective marketing activities at the point of sales. For the market outlook of the second half, TV demand is expected to decrease year on year due to the weakening consumer confidence in Europe and prolonged economic slowdown in the emerging markets. In response to these market conditions, as competition in the second half is expected to be intense on the strong seasonality, we will focus on increasing sales and improving profitability by collaborating by major on and offline channel partners in each region and introducing local friendly promotion programs based on our global number one brand status and distribution coverage. In order to solidify our leadership in the premium TV market, we will continuously expand global marketing campaign in the second half with a strong focus on our premium lineup of SUHD [ph] TV by enhancing consumer understanding of Quantum Dot and by positioning it as a representative next-generation premium TV technology. Moreover, we will not only generate new brands -- new demands through our product breakthrough, which reflects latest consumer lifestyle design and consumer experience perspectives, but also diversify sales structure to establish and solid ground for further growth by expanding our sales in high-value B2B products such as professional curved monitors, digital signage, and video walls. As for the digital appliance business, we forecast this appliance market growth to be limited due to the uncertainty in Europe and the economic downturn from emerging markets. In response to these market circumstances, we will actively seek opportunities to turn around the market dynamics by launching innovative products to offer superior consumer experience. Last but not least, we will enhance competency of B2B business, including built-in kitchen and system air-conditioner to achieve further growth. Thank you.

Thank you. This concludes the management's part of the presentation and we'll turn to questions and answers. Again to ensure clear communications, we'll conduct Q&A with consecutive interpretation. In order to ensure the efficient use of time and also ensure that we have more participants within the Q&A, we'll only be taking one question per person and would be grateful if you can make them as concise as possible. And we would also like to ask you to refrain from asking questions on ones involving data points or other subjects which were already provided during the conference call. Let's see if we can finish the Q&A session in one hour. Let's take the first question please.

[Interpreted] Now Q&A session will begin. [Operator Instructions] The first question will be provided by Peter Seicheol from NH Investment and Securities. Please go ahead, sir. Peter Seicheol - NH Investment Securities: [Interpreted] Yes. My question, regards the main reasons why you were able to outperform the weak guidance in terms of bit growth in both DRAM and NAND in the second quarter.

[Interpreted] To answer your question, to give you the overall business perspective, in terms of bit growth, first of all, because we were the leader in terms of the high-density, high-value products, especially the 20nm DRAM as well as the third-generation V-NAND products, which leveraged the cutting-edge process technology, we were able to deliver, especially the strong mobile as well as server demand, and during the second quarter we saw market demand being concentrated to our business. Also the fact that there was -- the increase in high-density storage, for example, 64-gig and plus for the mobile side, as well as the 4-gig plus DRAM on the mobile side, was another reason why we saw a strong demand for our products, and especially -- and the same happened on the server side as well. Especially we're noticing that, for the enterprise servers, there is a greater awareness of additional [ph] benefit of SSDs, and therefore there has been an acceleration in the conversion of HDDs to SDD solutions, and that has also driven up the demand for our high-density solutions. In the -- and we -- in response to such demand in the market, we were able to effectively manage our semiconductor capacity overall to maximize our productivity to meet the demand, and that's why we were able to outperform the expectations that we had in terms of bit growth for Q2. And as of end of Q2, our inventory is rather on a tight situation. Our plans for the second half, given that second half is the high season and we also think that demand will maintain -- remain strong, we will respond effectively in terms of our product mix.

[Interpreted] The following question will be presented by Yoo Jong Woo from Korea Investment and Securities. Please go ahead, sir. Yoo Jong Woo - Korea Investment and Securities: [Interpreted] I have a question regarding NAND. You've just, through the previous answer, gave us some details about the background of the strong demand for V-NAND as well as your expectations for supply and demand situation in the second half of this year. In such -- given such strong demand for V-NAND Korean competitors have also announced plans of 3D V-NAND mass production plans. Some are saying that they will go mass production next year, and this has caused some concern in the market, of a possible oversupply of NAND next year. So in that context, could you give us your overall capacity operation plan for second half as well as next year, which I assume will include also your plans for 4G V-NAND mass production plan? And overall, what is your view about NAND supply and demand situation going forward?

[Interpreted] As we have mentioned on the demand side, there is, first of all, increase in the attach ratio of SSDs on PCs, also there is a very rapid conversion towards SSD on the enterprise server side related with 15K and 10K RPM. Also we're seeing a very rapid increase in SSD usage in overall server platforms. And this especially has created a concentration of much of this demand to be based on our product, our V-NAND products. In response to such increased demand, we are using our available capacity. We're also using part of Line 17 to meet this demand. And in the future, depending on how demand plays out, we will be effectively using our capacity to respond. Regarding our 4G V-NAND plans, our current plans are moving smoothly as we have expected and our goal is to mass-produce SSDs that use our 4G V-NAND within the year. Overall our direction is to continue to maintain our product competitiveness so that we will be leading the market and demand changes. Regarding 2017 outlook on demand and supply, it is a bit early to give you a very detailed outlook. But at least on the supply side, we think that there's still uncertainties remaining regarding increase of 3D NAND or a ramp-up speed of alternative 3D NAND supply given the technology difficulty and also the initial investments that are required to actually supply 3D NAND. And therefore we don't think it will be easy to see any dramatic increase in 3D NAND next year in terms of the supply side. Also, on the demand side, however, there is increase in the content on all mobile platforms. Also there is a rapid increase for SSD demand on server platforms including the rapid adoption of SSDs, especially on the enterprise server side, due to the TCO benefit. So overall, given this outlook, we think that even if there is some increase in 3D NAND supply in the market next year, given the very strong demand side, the demand and supply situation overall will remain stable next year, and especially we will be -- most of the demand for the high-value solutions such as SAS and NVME [ph] will be concentrated towards us.

[Interpreted] The following question will be presented by Marcus Shin from Goldman Sachs. Please go ahead, sir. Marcus Shin - Goldman Sachs: [Interpreted] There was a press report about acquisition by the IM division of a cloud company, and I'm wondering, could you explain to us one of the technologies or the competitive advantage that Joyent, the company has? And if possible, could you also elaborate a bit more about the expected synergy effects from this acquisition? And what will be the overall strategical direction related with cloud services for Samsung?

[Interpreted] Yes, the IM division last month acquired Joyent, which is a company that has knowhow in operating cloud server systems and storage. It has also technologies in efficiently operating cloud servers and storage. And by integrating their knowhow and technology, we believe that we will be able to strengthen our cloud service capabilities, especially by leveraging their technology with our wide range of devices as well as our cloud platform, we will be able to provide consistent user experience throughout this cloud platform. Also we will be able to use this to develop Samsung Pay or Samsung Health or KNOX and other services into a more cloud-based service offering, and we also expect that, through this acquisition, we will be able to use this to increase our competitiveness in terms of future content service and software.

[Interpreted] The following question will be presented by Mark Newman from Bernstein. Please go ahead, sir. Mark Newman - Bernstein: Hi, thanks for taking my question. I wanted to ask a little bit more about the 3D NAND or V-NAND roadmap. So, Toshiba has announced 64-layer just a day or so ago, and Micron is planning to ramp 64 layers next year. And I wonder if you could update us on the exact schedule for 64 layers. Is that what you're referring to as fourth-generation V-NAND perhaps? What is the schedule for that, for ramping that? Again my understanding is you're now mass production 48-layer. When is 64-layer shipping in mass production and then what is beyond 64 layers? Anything you can explain about how many layers you will stack in the future versus potentially a geometry shrink at some point in the future. Any kind of clarity on the future roadmap will be appreciated. Thanks very much.

[Interpreted] To answer your question, yes, our 4G V-NAND is the 64-layer. And as we have mentioned, it is -- the development is progressing as planned. And our plan is to mass-produce SSDs using our 4G V-NAND within the year. In terms of layering, I think it's a bit too early for us to talk a limit of how many layers can be made. We are currently planning out our mid to long-term generations and at the same time considering other new memory technologies.

[Interpreted] The following question will be presented by Lee Seung-Hyuk from Korea Investment and Securities. Please go ahead, sir. Lee Seung-Hyuk - Korea Investment and Securities: [Interpreted] Yes. My question, regards, what you see in terms of TV demand globally. In July there was a Euro Cup, in August there's the Olympic Games coming up. Do you continue to see any positive effects on demand from these sports events? And in terms of region, do you see demand in Europe sagging since the announcement of Brexit? And also, do you see signs of demand turning around in Latin America which has seen a weak demand recently?

[Interpreted] As we mentioned previously, in the second quarter, the TV market, despite sports events such as the Euro Cup, did similar -- remained similar to the previous year, mainly because of the economic recession, especially in the emerging markets, the economic recession has had an impact on TV demand, especially Latin America which has been going through economic recession, has a large impact on overall TV demand globally. We were able to preempt the sports events such as the Euro Cup with promotions, and we're able to occupy the demand earlier on, and that is why, despite overall market remaining similar to previous year's level, we were able to improve our profitability in Q2. Regarding Latin America TV demand, we think that it's difficult to expect Latin America TV market to turn around within this year. However, aside from that market situation, in terms of our Company, last year we had difficulties, especially related with exchange rate, and that was an opportunity for us to increase the efficiency of our operation and also to create a collaborative system with the channels in Latin America, and that is why, despite the overall market situation, if you look at Q2 and our overall emerging market TV business, Latin America actually recorded the highest growth rate in Q2 for us, and we expect this improvement to continue in the second half. Regarding the impact of Brexit, yes, we have also been talking to our channels and other sources to get a feel of impact that would have. But in the short term we don't think Brexit would have a negative impact, or at least any impact on TV demand will be minimal. However, we have already prepared our strategy in terms of, for example, exchange rate fluctuations against the pound as well as the euro, and we will be effectively responding to any impact there may be from Brexit.

[Interpreted] The following question will be presented by Ricky Seo from HSBC. Please go ahead, sir. Ricky Seo - HSBC: [Interpreted] I have questions regarding your foundry roadmap. First of all, even though your timing in terms of the 10nm processes are similar to those of your competitors, when we look at your roadmap for 7nm, it is a bit behind the timing of our competitors. Is there a special reason why? And will that pose any risk, especially for example in terms of signing up customers for the 7nm technology? Also, could you give us the timing as to when you plan to adopt EUV?

[Interpreted] Well, regarding the migration towards 10nm class and below processes, I think we have a different approach or philosophy versus the competitors. We believe, considering various factors, including the importance of developing 10nm on time and also whether the customers will be willing to accept the design difficulty as well as the cost with 10nm, and also the specifications that will come with future premium mobile products, for the time being, 10nm is the most effective and most optimally commerciable solution at this point, and that is why we are focusing on 10nm class. In terms of 7nm sampling, we are able to sample at any time, but we think that when it comes to commercialization, 7nm commercialization will happen when that becomes the most cost optimal solution and choice. And that is our approach. In terms when will we be adopting EUV, that will be in line or synched with when we start 7nm.

[Interpreted] The following question will be presented by Claire Kyung Min Kim from Daishin Securities. Please go ahead, ma'am. Claire Kyung Min Kim - Daishin Securities: [Interpreted] My question, in regards to display side and the capacity plans. It seems that you're going through one of the major changes in terms of the display capacity in recent years given how you have been turning off some of the mid, small, for example, 8G lines, but also been increasing the OLED mid to small-sized panel lines. And given this, could you give us the future direction in terms of how you will build or add on new OLED or LCD capacity? And what is your outlook in terms of the large-sized 8G panel capacities?

[Interpreted] First, I'd like to answer your question about the mid to small-sized displays and then address the 8-generation or the larger-sized panels. First, when we look at the mid to small-sized main demand being smartphones. At the handset level, there is very fierce competition among handset companies, they need to find a way of differentiating their products, and that is driving demand for our OLED panels, which provides not only excellent product characteristics but also differentiating form factors for handset makers. Of course, this demand for our OLED panels is explained by the fact that we have been able to gain technology leadership as well as business competitiveness through continued R&D as well as active investments as a market leader. There are areas where demand may -- demand is surpassing our capacity in certain areas, but we think that overall our capacity is at healthy levels compared to the demand. And in the future we will be expanding our capacity at the right time to meet the demand. Regarding the large-sized TV panels, our basic direction is to continue to maintain our leadership in terms of the business capabilities, also to maintain our dominance over the market, and also to increase and improve our customer responsiveness. We will continue to develop the LCD technologies to further increase our competitiveness in terms of the technology side and to differentiate our LCD offerings, and also to increase the competitive edge we have also in terms of performance and price.

[Interpreted] The following question will be presented by Nicolas Gaudois from UBS. Please go ahead, sir. Nicholas Gaudois - UBS: Yes, good morning. Thanks for taking my questions. So far it does not seem as if you have lowered the channel pricing for the Galaxy S7 and Galaxy S7 edge. Would that be the case when you launch node 7 next month? And if that is so, what does this imply for total smartphone average selling prices in the fourth quarter? Thank you.

[Interpreted] First of all, to answer your question about our plans to S7, S7 edge prices in the third quarter and future. In the second half we plan to maintain the S7, S7 edge prices continuously. We think that by maintaining a consistent price policy we are able to better maintain the trust of the channel and the overall market. On the other hand, we will also be implementing very active marketing activities in the second half to drive up actual purchases, and by this, we plan to continue to maintain the overall sales trend of our premium handsets. In terms of third quarter ASP, given the fact that we're planning to launch a new large-screen flagship and given the plan to maintain our prices for the S7, we expect the ASP in the third quarter to improve due to the improved product mix.

[Interpreted] The following question will be provided by JJ Park from JPMorgan. Please go ahead, sir. JJ Park - JPMorgan: [Interpreted] I have another question related to V-NAND, in terms of productivity comparison versus a planar NAND. For example, if your third-generation 48-layer V-NAND, given the same wafer capacity, how much of a productivity increase do you see versus, for example, a 40nm planar NAND. I'm assuming that V-NAND versus the 2D NAND would have some sacrifices in terms of yield or processing time will take longer. Considering all of these factors, how much of a productivity gain do you experience?

[Interpreted] It's difficult to compare the productivity apple to apple between V-NAND and planar NAND because of various factors, but we just look at the output-based productivity. There is an advantage and we think that this advantage versus planar NAND would actually widen as we migrate from generation to generation on V-NAND. Also when it comes to V-NAND, in addition to productivity, we believe that other values such as performance, density, as well as reliability, is very important for the customers.

[Interpreted] The following question will be presented by Peter Yu from BNP Paribas. Please go ahead, sir. Peter Yu - BNP Paribas: [Interpreted] Could you give us some more color and direction towards your QLED progress? There has been press reports that Samsung has decided to skip WLED and go direct to QLED. And so in that sense, what is your current situation in terms of technology? Also, how well is the ecosystem, for example, the equipment vendors formed? I think the major concern in the market is, if you're not able to commercialize QLED within, for example, a three to five-year timeframe, much of the high-end display market will be taken up by WLED. Given that risk, could you give us a bit more detail about when you plan to, for example, QLED and what is your current technology situation?

[Interpreted] Well, to answer your question, we are already adopting Quantum Dot technology on our SUHD TV. QLED or Quantum Dot is currently the key of next-generation TV display technology given the brightness as well as the color generation and the durability and the fact that it is an inorganic material. So it is a key material for future TVs. The -- we are already using, referring to this QLED technology as our SUHD Quantum Dot technology. The technology continues to evolve. According to some market survey agencies, they expect Quantum Dot TV to be three times OLED TV size by year 2020. And so we believe that Quantum Dot will continue to play a major role in the premium TV segment.

[Interpreted] The following question will be provided by Mehdi Hosseini from SIG. Please go ahead, sir. Mehdi Hosseini - SIG: Thanks for taking my question. I have a follow-up on System LSI, specifically on foundry. How should we think about the mix of customers or the diversity of customers as you transition from 14nm to 10nm and eventually to 7nm?

[Interpreted] Even though it's difficult for us to go into detailed customers, our overall customer diversification strategy at System LSI is to diversify from currently more concentrated mobile applications to other application areas such as computing, network and automotive. So we will first use the most stable technology that we have, the 14nm process, to diversify our customers/applications into computing, network and automotive. And when we start commercializing 10nm end of this year or next year, we will be using the 10nm technology to further diversify our customer base. So our basic overall direction is to diversify the customer base as well as the application from the current mobile-centric to other areas.

[Interpreted] The following question will be presented by Hwang Min-Sung from Samsung Securities. Please go ahead. Hwang Min-Sung - Samsung Securities: [Interpreted] I have some questions regarding the IM business. First of all, was there any one-off factors in the second quarter performance of the IM division? And if so, how much were these one-off factors? Second question is, can you compare the first half Galaxy S7 sell-out and sell-through rates? The third question is a technology question. In the past investor forum you mentioned the fan-out PLP. Also today I've noticed that there were emphasis on high-density DRAM. Given that technology strategy, what will be the impact in terms of Samsung's mobile software? What kind of software changes do you anticipate? And in that context, why have not dual cameras been adopted in your products?

[Interpreted] To answer your first question about any one-offs in the second quarter. There were but they were all very minimal in Q2. Regarding your second question about our sell-out of the flagship model in Q2, because we were able to deliver a product that meets the market as well as the customer needs, and also supported by effective sales and marketing activities, the sell-out rate of our current flagship has been higher than its previous model or previous product, previous flagship model, especially in areas such as North America, Europe, Latin America and Southeast Asia.

[Interpreted] Given the very strong performance of the Galaxy S7 in the first half, we plan to continue this trend, supported by effective sales and marketing in the second half. And so overall we believe that, versus the S6, the S7 will considerably be higher in terms of shipment and play an important role as the engine of our overall performance. Hwang Min-Sung - Samsung Securities: [Interpreted] To elaborate on my second question, what I was trying to ask is that, given the improvements that you would have in terms of your hardware capacity, for example, with fan-out PLP, I'm assuming the I/O would get wider, which will improve the graphics environment on the handset, and also with high-density DRAMs being used on the handset, this would all provide much better capacity, capabilities on the handset level. So my question was, how does Samsung plan to leverage this in terms of software directions?

[Interpreted] Of course, as you mentioned, with, for example, high-density DRAMs being used on handsets, this gives us more opportunity to offer a wider variety of services in software, and this again drives more demand for high-density DRAM on handsets. Regarding dual camera, even though it's difficult for us to mention exactly when we will be adopting a certain new component, this would be in line with our overall policy of continuously studying and considering various opportunities to provide better customer satisfaction and to differentiate our products from those of competitors.

[Interpreted] The last question will be presented by Do Hyun-Woo from Mirae Asset Securities. Please go ahead. Do Hyun-Woo - Mirae Asset Securities: [Interpreted] My question is once again about the DRAM market. There is a rapid change, especially on the server architecture side. Looking at the new CPU that was announced, it actually has embedded 16 gig of DRAM in the CPU, and there's also new memory approaches, for example, cross-point that's being announced. Given all of this change on the technology side, what is Samsung's strategy for its DRAM business? Also in terms of investments, do you expect to have increase in DRAM-related CapEx investments next year?

[Interpreted] Well, overall, we do notice that there is a greater DRAM capacity demand on the server side, this mainly being driven by the fact that data traffic is also increasing and therefore the servers are also demanding higher-capacity, higher-density DRAM. And that is why we are mainly planning to respond with 64 or even up to 128-gig products. That is our basic direction, that we will continue to focus on the higher-density, higher-end server market. Given that in terms of the longer-term direction, we think that there will be a lot of new demand being generated, directly and indirectly, because of new applications for DRAM and NAND, for example, mobile, as well as this conversion towards SSDs will also drive up demand. In terms of applications, we think that VR as well as automotive will be some of the major new applications that drive up demand. So we in the long term see not only increases of demand for DRAM but also related with the NAND market as well. Regarding the 3D cross-point technology that you mentioned, I think that was mainly catching interest from the demand in terms of the higher-end platforms, and it's being proposed as an alternative solution to lower DRAM costs. But we don't think that this will take up a significant share of the overall market. We also think that there will be some time required until it becomes a market. And also I think that there is a restriction in the fact that 3D cross-point is not a standard technology. So our basic response to this technology is to maintain our focus on DRAM and NAND and also at the same time, as we mentioned, we are looking into new memory technology as well. Your last question was about our DRAM investment plans. As we do our investments, are flexibly adjusted depending on market situation for both DRAM and NAND.

Thank you very much. We will end the conference call here and we will look forward to meeting you again next quarter.