Robert Yi - SVP, Investor Relations SeWon Chun - SVP, Memory Marketing Chang Lee - VP, Samsung Display KyeongTae Lee - VP, IT and Mobile Business Yoon Lee - SVP, Visual Display Business

JJ Park - JP Morgan Peter Lee - NH Investment and Securities Claire Kyung Min Kim - Daishin Securities Nicholas Gaudois - UBS Simon Woo - Bank of America Merrill Lynch Ricky Seo - HSBC Mark Newman - Bernstein Yoo Jong Woo - Korea Investment and 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 2017 First Quarter Earnings 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 2017 first quarter earnings results by Samsung Electronics.

Good morning. This is Robert Yi. Thank you for joining our first quarter 2017 earnings call. With me representing each business units are Mr. SeWon Chun, Senior VP of Memory Marketing; Mr. Ho Buk [ph], VP of System LSI; Mr. Lee ChangHoon, Vice President of Samsung Display; Lee KyeongTae, Vice President of IT and Mobile Business; and Lee Yoon, Senior VP of Visual Display. And we also have Mr. Kim SangHyo, VP of IR. 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. I would like to take you through our first quarter results. The first quarter, the total revenue was KRW50.5 trillion. Revenues from the memory and display businesses increased driven by strong ASP and increased sales of premium products. However the company’s overall revenues only increased slightly year-on-year as revenue from IM business decreased due to delayed launch of Galaxy S8. The gross profit was KRW22.4 trillion, a KRW3 trillion year-on-year increase. And the gross profit margin improved by 5.3 percentage points. SG&A expenses decreased year-on-year on both absolute terms and as a percent of revenue mainly from the IM business. The operating profit was KRW9.9 trillion, an increase of KRW3.2 trillion year-on-year, driven by improved profitability of the component business. The operating profit margin also increased by 6.2 percentage point to 19.6%. In the first quarter the impact of exchange rate movements on the operating profit was minimum. The Korean Won strengthened against both the US Dollar and the Euro compared to the last quarter but weakened against other emerging market currencies such as the Brazilian Real and Russian Ruble. The company’s first quarter ROE improved significantly year-on-year from 11.8% to 16.1% which we attribute to the improved earnings and effects of continuation of share buyback in cancellation programs. We’ve completed the acquisition of Harman in March and consolidated its results into our financials as of March, 31. However the impact on the income statement was minimal as only transactions after March 11 were reflected. We will provide Harman’s revenue and operating profit as a separate line items starting from the second quarter. Few comments on the second quarter business outlook. For the component business, we expect semiconductor earnings to continue to grow driven by solid high density DRAM SSD demand in the server market, increased 10 nano application processor shipments and a continuation of strong CMOS Image sensor and driver IC demand. The OLED business will focus on fulfilling strong demand for flexible panels from our major customers and look to maintain profitability in the LCD business by reducing the cost. For the set business, we expect ASP and operating profit to improve in our mobile business following the global launch of Galaxy S8. We also expect earnings to improve in the consumer electronic business thanks to the launch of QLED TVs and strong seasonal demand for air conditioners. In 2017, we expect overall earnings to grow year-on-year mainly from the component businesses driven by favorable supply demand balances for the memory business and increasing the supply of OLED panels. The set business will focus on maintaining profitability by strengthening product leadership through expanding sales of flagship products. However, during the second half of this year we need to monitor the possibility of 3D NAND [ph] supply growth within the Memory industry and intensifies competition in smartphone market on launch of new smartphone products. Looking to the mid to long-term. Demand is expected to rise for high performance, low power consumption chipsets such as memory, SOCs and sensors as well as for flexible OLED products driven by form factor innovations. Amid rapid changes in IT industry with emergency of IoT, Artificial Intelligence in automotive business. Regarding the set business, we expect to see new solution based business opportunities with the developments in utilizing device software’s and connectivity to address emerging area such as cloud services, artificial intelligence in smart homes. In response to this paradigm shift in the IT industry, we need to strengthen our capabilities via strategic investments and M&A to secure cutting edge technologies and new growth drivers. However, the lingering uncertainties in political and business environments both at home and abroad may bring many challenges. I would like to comment on our capital expenditure plan. During the first quarter, we invested KRW9.8 trillion in capital expenditure which included KRW5 trillion for the semiconductor and KRW4.2 trillion for display division. The capital expenditure plan for 2017 has not yet been finalized but we expect annual capital expenditure to increase significantly year-on-year as we look to focus on vertical NAND, system LSI and OLED capacity expansions. Before the presentation of each business unit, I would like to share with you several data points from our key business areas. For DRAM in Q1, our big growth declined low teens while ASP increased low 20%. For second quarter, we expect DRAM market big growth to be mid single-digit increase and we expect our DRAM bit growth in second quarter to be high single-digit. And for the year we expect DRAM market bit growth to be high teens and we expect to grow aligned with the market. For NAND, Q1 our bit growth was low teens of decline while ASP increased low teens. In second quarter, we expect market bit growth for NAND flash to be mid single-digit and we will grow in line with the market. And for 2017, we expect NAND market bit growth to be about 30% and we expect our bit growth to be low 30% range. For display panel business, the mix of OLED in terms of the revenue was low 60% of total DP revenue. For mobile business our Q1 sales of total handsets was 93 million units and tablet sales was 6 million. Our blended ASP for our mobile products was about mid $170 and the mix of smartphone within our handset sales was about mid 80%. In Q2, we expect both handset sales as well as the tablet to be similar to Q1 and we expect our blended ASP to increase in Q2 and the mix of the smartphone within the handset sales in Q2 will be high 80%. The sales of our LCD TV in Q1 was roughly 10 million units and in Q2, we expect to see a small decline. For the year, we expect our TV shipment to be increasing by about low single-digit. Now I’ll turn the conference call over to gentlemen from the business units.

This is SeWon Chun from the Memory Marketing team. In the first quarter although overall demand is slow down compared to the previous quarter due to weak seasonality. Supply and demand continue to be solid and price rose strongly due to restrictions of industry supply. We improved earnings through product mix focused on high profitability and differentiated products. On NAND, even though there was partial inventory readjustment by some set companies demand for high value added PC and sub SSD and high density mobile products continue to be solid and supply remained insufficient due to delayed transition from [indiscernible] to 3D NAND. We continue to drive solid earnings by actively responding to demand for high density sub SSD over 4 terabyte and mobile products over 64 gigabyte and by extending 48 layer V-NAND supply. For DRAM, although there was a set and component inventory adjustment by some mobile companies along with weak seasonality. Overall supply and demand continue to be solid and price remained strong. Due to solid demand for server DRAM for data center and customer [indiscernible] due to supply uncertainty in the second half. We achieved outstanding earnings growth following the last quarter. We expanded a supply of differentiated high density and high speed products by expanding LPDDR 4 and LPDDR 4x for flagship smartphones and high density server products for data center. Also we concentrated on improving profitability by continuously securing cost competitiveness through 1X nanometer process expansion. Next I will comment on the memory market and our strategy for the second quarter and year 2017. In the second quarter for NAND, demand for high density sub SSD is factored to increase driven by solid demand for high value added solution products such as high density data centers storage and by expansion of high density enterprise SSD as well as replacement of 15K RPM HDD. Also overall demand is factored to be solid driven by completion of inventory adjustment by some mobile companies along with new product launches and content growth. However, supply is impacted to remain tight due to continuous constraints on industry 3D NAND supply. We will continue to improve profitability by secure product competitiveness by focusing on expanding the sub SSD-centric high density and value added solution market and by expanding supply of 48 layer V-NAND as soon as mass producing 54 layer of V-NAND. For DRAM, demand for high density server DRAM over 64 gigabyte is impacted to increase with the expansion of new server platforms and demand for PC is factored to be solid. As larger OEMs prepare for second half sell out, also mobile demand is impacted to be remained solid thanks to new product launches and continuous contents growth. We will maintain a solid quality base by expanding supply of differentiated and high value added products such as high density server products and LPDDR 4x and by meeting customers increasing demand as much as possible through flexible product mix between applications. In the second half from every market is impacted to have favorable market conditions due to peak seasonality as well as new mobile product launches. By tighter supply and demand conditions may become alleviated due to possible expansion of the industry 3D NAND and sub 20 nanometer DRAM product supply. For NAND, overall supply and demand is practically to be solid smartphone trend toward the high density is factored to continue led by expansion of high density content services and by increasing adoption of higher specifications. Demand for high density sub SSD is impacted to be strong driven by increasing adoption of high density products and all [indiscernible] due to the expansion of cloud services. However supply and demand may vary according to each application depending on the industry’s 3D NAND ramp up and capacity tailors [ph]. We will continue to seek a high profitability by actively responding to demand for high value added solution products and by focusing on 3D NAND transition while closely monitoring the industry supply status. For DRAM, stable supply and demand conditions are expected to continue while demand for all applications continuous to be solid due to increase set demand on the peak seasonality as well as increased DRAM contents in each application. We will maintain strong technology leadership and a focused product mix by strengthening cost competitiveness through expansion of 1x nanometer process migration and increasing sales of high density low powered products. In order to respond to continuous strong demand for high density storage products. We were concentrating on V-NAND investment mainly at the Towntech [ph] campus. For DRAM, while taking market conditions into account for investment and capacity management. We are continuously focusing on improving profitability. We will concentrate on secure and stable profitability while leading the high density and value added memory market with the basis of scaling down our process along with providing differentiated solution such as high density HDM 2 over 64 gigabyte register bin [ph] and over 8 terabyte SAS SSD. Now moving onto System LSI business. In the first quarter, we have achieved a favorable result due to an increased sales of APs, DDIs, image sensors for flagship smartphone and steady sales of the 14 nanometer mobile APs for with the low tier. Similar to that of 14 nanometer process, we continue to maintain our technology leadership with the mass production of industry first 10 nanometer processors. In the second quarter, we will continue to improve the earnings by addressing in increasing demand for 10 nanometer APs and expanding the sales of high profitability LSI products including image sensors and DDIs. In 2017, we will strive to ensure continuous growth through sustainable supply of 10 nanometer base products and securing stable demand from diversified customers. In addition, to strengthen the base for mid to long-term growth, we will diversify 14 nanometer based product line up to automotive, wearable and IoT and deliver differentiated LSI products such as image sensors and OLED DDIs with innovative technologies. Thank you.

Good morning, this is Chang Lee from the planning department of Samsung Display. During the first quarter, we achieved solid earnings as we did last quarter. This was driven by a rise in sales of OLED panels as well as an increased portion of value added LCD products. For the OLED business, our first quarter earnings improved Q-o-Q through increased shipments of flexible displays led by rise in sales of new products as well as strong demand for redid [ph] OLED panels. For the LCD business in the first quarter, although our capacity decreased due to strategic decisions to close on LCD production line, is still managed to bring solid earnings on the stabilized ASPs led by favorable supply demand conditions. Also we have strengthened profitability with an extended portion of value added products especially from large size UHDs. Looking ahead to the second quarter, we expect demand for OLED from major set markers to rise continuously from last year under these circumstance, we plan to focus on producing solid earnings through actively addressing customers demand for flexible display as well as by increasing demand from our customers. In the second quarter although we expect a capacity expansion of LCD industry market demand for UHD TVs and size migration towards to larger screen is expected to continue with favorable supply demand conditions. In preparation for these market condition, we will make every effort to secure our profits by focusing on cost reduction and yield to improvement as well as expansion of value added products such as ultra large size, higher resolution and curved panels. Now I would like to present the outlook for the display market and our core strategies for this year overall. For the OLED business, while we expect our sales improve Y-o-Y through increased supply of flexible displays. Intensified competitiveness for LTPS LCD panels in the middle to low end market will present continuous challenges. Although we expect competition to intensify in the LCD industry on the capacity expansion, we also expect that the market for premium TV panels such as UHD and the ultra large size TV panels will continue to grow and these circumstance we will make every effort to strengthen profitability by improving competitiveness of value address products focusing on UHDs and large size TVs as well as expanding the portion of differentiated products such as frameless and curved TVs. Thanks for listening.

Good morning, everyone. I’m KyeongTae Lee from the Mobile Communication business. I would like to present the first quarter business result and future outlook for IM division. For the first quarter of the Mobile Communication business, market demand for smartphone and tablet decreased Q-on-Q as a result of weak seasonality. Our smartphone shipment slightly increased Q-on-Q. Thanks to the newly released Galaxy 8 2017 Series and solid sales of mass smartphones in emerging markets. However, our revenue and profit decreased Q-on-Q due to price adjustment of Galaxy S7 Edge and S7. The natural business maintained its solid revenue and profit led by LTE expansion of our major overseas partners and supply of equipment for newly added frequency band in the domestic market. Next, let me move on to the outlook for the second quarter of 2017. In the second quarter, market demand for smartphone and tablet is focused to remain at similar level as the first quarter. [Indiscernible] our revenue and profit increased Q-on-Q following the global release of the Galaxy S8 and S8 +. However, our smartphone shipment is expected to remain at similar level Q-on-Q due to decreased sales of smartphone including Galaxy A and J series. However, we recently launched our flagship smartphones Galaxy S8 and S8 + on April 21. The Galaxy S8 and S8 + will redefine smartphone going beyond the current boundaries of mobile devices. With immersive screen of Infinity display and curved glass in both front and back. We redesigned the smartphone from inside out. The new release of flagship will provide an entire new experience for our customers including specialized services such as Spay, Samsung Tab and Samsung Connect. Ever since we opened the Galaxy S8 and S8 + to the public, they are aware and associated credibility in the market and highly praised for their superiority. They are also showing logos to initial stage. But accordingly, we will achieve our full effort for the new flagship sales record set by Galaxy S8 and S8 +. Now let me address the outlook for 2017. In 2017, market demand for smartphones is expected to slightly increase Y-on-Y with solid growth from mid to high end smartphone replacement demand. However, competition within the market also intensifies with newly launched smartphones in the market at the second half of 2017. In this part, we aim to increase our shipment and revenue Y-on-Y and improve our profit Y-on-Y. By maximizing sales of the Galaxy S8 and S8 + by successfully launching a new flagship smartphone in the second half of 2017 and by maintaining the flagship stability of mass smartphone. Added to the network business, we will increase our revenue Y-on-Y with new business opportunity in growing LTE market with full scale next generation network business including IoT and LTE April [ph] and with the preparation for the 5G wireless broadband services. Thank you.

Good morning, I’m Yoon Lee from Visual Display Sales and Marketing team. I would like to present the market conditions and our results for the first quarter 2017. As for the TV market in Q1 this year, as we entered into slow season, market demand decreased quarter-on-quarter and due to decreased demand in European and Latin American markets. The driven market is projected to have weakened compared to the same period of last year. Under these market circumstances, we have achieved sales growth and maintained our leading position in the premium market by improving our product mix expanded premium products, line ups including Quantum Dot TV and curved TV. However, affected by increased panel prices and currency fluctuations our performance was weaker compared to the same period of last year. As for the digital appliances with continued growth in North American market an economic recovery of emerging countries such as Southwest Asia and CIS, this market demand slightly increased. By boosting sales of innovative premium products including shelf [ph] collections, refrigerator, kitchen appliances, and washing machine and strengthening promotions for each local market we have achieved sales growth higher than the same period last year. Despite such outcomes however with additional expenditure on continued investment in North American B2B market. Since the last quarter, our overall earnings remained flat year-on-year. Next let me brief the market prospects for Q2, 2017. The TV market in Q2 is projected to show a modest growth from the previous quarter driven by a full fledge release of new products in TV industry. But the market is expected to show a slight decrease when compared to the same period of last year due to sluggish demand mostly facing Europe. Under these prospects we will focus on securing our profitability and achieving growth by expanding high value product line ups including UHD curved TVs and ultra large inch TVs as well as starting to sell new models led by QLED TV. As a new category of TVs, QLED TV is the only TV in the market that can reproduce 100% color volume render HDL 1,500 to 2,000 units of brightness almost matching natural light, deeper blacks and an ultimate level of contrast ratio. Only with these features [indiscernible] put an end to an aged long controversy over bad picture quality. Not only that, QLED TV also features no gap wall mount and invisible connection for better space, digitalization and harmony with the home décor as well as one remote that addressed pain points felt by consumers. All these features upgrade the value of QLED TV and is superior ROT [ph] is gaining recognition from numerous media and the market. Besides QLED TV, we also have a premium UHD TV wall enhanced color reproduction than the traditional UHD TV and innovative products. The frame is one of the innovative products that consider consumers lifestyle and we know over the best innovation award, at 2017 Consumer Electronics Show in January. By promoting these products, we will strengthen our leadership in the premium market. As for the digital plans business, we will strengthen our corporation with retailers and expand sales of peak seasonal products including air conditioner. As well as focus on improving our performance with successful launch of new products such as Family Hub 2.0 and FlexWash. To share our market prospects for 2017, as recovery of demand in the emerging markets especially in Asia, Latin America, Middle East and fast shift to UHD TV would drive up demand. The global TV market will be back on slight growth track. However there are slow down risks including bit currency in major markets. In order to overcome this potential risks, we will continue to expand sales of premium product line ups such as QLED TV and Ultra large inch TVs. Thereby solidifying our leadership in the premium market and ensuring constant growth and profitability. In the meantime, as for the digital plans business we will strengthen our B2B business by making full scale advancement into builders market in North America with online sales through distribution channels and expand sales of innovative premium products so as to achieve strong performance. Thank you.

Thank you, gentlemen. Before beginning the Q&A session. I would like to update you on the progress of the shareholder value enhancement program announced last November. As we announced in our 2016 fourth quarter earnings call in January. We are in the midst of carrying out KRW9.3 trillion share repurchase program. The first phase was completed on April 12, we invested approximately KRW2.45 trillion to be purchased and then cancel little more than 1 million common shares and 255,000 preferred shares. Today the Board of Directors approved the second phase of the program that calls for the repurchase of 900,000 common shares and 225,000 preferred shares. It will start on April 28 and take approximately three months to complete. The Board of Directors also approved the first quarter dividend of 7,001 per share for both common and preferred shares. Quarterly dividend will enable us to provide more evenly distributed dividends to our shareholders throughout the year. The board established a new governors committee in order to improve corporate governance further. The new committee will consists of all five independent directors. In addition to merging the current CSR committee, the governor’s committee will review basic directions of the company’s shareholder return policy and address all issues relating to enhancing shareholder value and interests. Now I’d like to update you on the results of the review on conversion to holding company structure. Samsung Electronics has established well balanced business structure between its component business with semiconductors in display and set businesses mainly consisting of TVs and smartphones. Based on the structure we have been able to minimize earnings volatility during economic downturns and maintain stable growth through a decisive and strategic investments in new technologies and the related capacity required to dominate. In addition, our structure allowed us to invest in new growth engines with the earnings generated from high profitable businesses. This model serves as a platform for sustainable growth and gives us a unique edge among global IT companies. As a part of efforts to enhance shareholder value, we have been reviewing various business structures that could strengthen our competitive edge including a holding company structure. However as we have been unable to find any significant benefits from changing our corporate structure including adopting a whole co-op format, we have held a negative view on the shift to the holding company. Under these circumstances and as requested by investors the company has reviewed the conversion to holding company structure with the assistance of independent experts for an unbiased perspective in areas such as operations, finance, legal, taxation and accounting. After completing the review, we have concluded that it will not strengthen our business competitiveness. On the contrary it may in fact burden our operations as we disperse management and financial assets into two entities. In addition we came across number of issues during the review. In order to comply with the holding company regulations in Korea, it would be necessary for Samsung Electronics and its affiliates to diverse shares of affiliates which may increase volatility of affected shares. And create uncertainties as implementation may require separate approvals from the board and the shareholders of those entities. In addition according to the separation of Banking and Commerce Act and the Insurance Business Act. Our financial affiliates may need to liquidate either a portion of their entire state in the newly created holding company which may cause a volatility in the holding company valuation. We also face growing legal uncertainties as several amendments to laws and regulations that may negatively impact the establishment of holding company structure are being pushed forward simultaneously. As such the management has decided not to convert to holding company structure as such change would not only fail to improve our current corporate structure but also create risk that would not be beneficial to either shareholder value or company’s growth. Finally I would like to comment on company’s treasury stock. We previously help treasury shares to utilize them for M&A’s or securing talented professionals from overseas. However as the financial structure has stabilized over past few years through earnings growth the need to hold treasury shares has gradually decreased. Accordingly the Board of Directors decide to cancel treasury shares as way of enhancing shareholder value. Concerning the market value of the treasury shares which exceeds KWR40 trillion as of today, we plan to carry out the cancelation over two phases in order to minimize the impact. Today the Board of Directors have resolved to cancel 50% of common and preferred shares held in treasury and to maintain the remaining shares to be cancelled by resolution of the Board of Directors in 2018. This completes the management’s presentation and we will now turn to Q&A. just wanted to remind you that we would be conducting Q&A in consecutive interpretation for clarification and to make sure that all Q&A’s are communicated properly. I know it’s going to take a little bit of time but we ask for your patience. Thank you.

[Interpreted] Now Q&A session will begin [Operator Instructions] the first question will be presented by Mr. JJ Park from JP Morgan. Please go ahead sir.

[Interpreted] My first question is regarding the talk of the red tinge of the S8 that we’re seeing in the market. How many cases have been reported to the company? And are all of these cases that you’ve heard mainly setting issue as you’ve been explaining or have you also seen any cases that are more technical for example having issues in the OLED quality or in the assembly process?

[Interpreted] The red tinge or the reddish that’s been reported in the media is not a product defect and therefore we don’t have data officially because we’re not treating this as a product defect. As you know, all of our Galaxy S8 as well as S8 pluses undergo very thorough inspection to guarantee the highest level of quality. [Interpreted] The S8 and S8 + uses the Super OMOLED which actually has a natural variance in color expression. Consumers have wanted to adjust the color expression while to meet their personal preferences and we have been supporting this in the form of software update which also was provided as part of the Galaxy S8 and S8 +. [Interpreted] But it seems that since the launch of S8 and the S8 + there were some consumers who felt about this - the optimizing or personal adjustments were inconvenient and or planning to have an additional feature added so that there is more detail adjustment of the color is possible, with the upcoming software update. [Interpreted] And we will continue to exert our best to provide the best customer satisfaction as well as customer convenience.

[Interpreted] The second question is related with your decision today to not convert to a holding company structure. I’m wondering whether this is a tentative decision not to go or that means that the company may come back to revisit this. If there are any changes in the related regulations or is this is a final conclusive decision not to convert to a holding company structure and if it’s the second, if the company is not deciding to go then how are you going address other related issues for example of the circular shareholding between the related companies?

[Interpreted] I think what I can say today is that, Samsung Electronics has no plans of converting to a holding company structure in the feature. Regarding the circular shareholder issue that is something that has to be resolved together not only Samsung Electronics but with other Samsung affiliated companies, it may take some time but we will find the way and the timing to undo that, that will have minimum impact on the market.

[Interpreted] The next question will be presented by Mr. Peter Lee from NH Investment and Securities. Please go ahead sir.

[Interpreted] My question is about your investment plans for the DRAM business and your future capacity operations plans for DRAM as you know recently the DRAM industry has been seeing a very tight supply and demand situation and not only something electronics but overall the DRAM industry is seeing an uplift in its performance. Many people looking into the market are very interested in Samsung Electronics DRAM investment plans because it has an large impact on forecasting the industry outlook for the second half of this year as well as first half of next year. There is also talk of Samsung Electronics for example shifting it’s 911 to another product. So in that context, can you give us a bit more detail of how you plan to operate your DRAM capacity?

[Interpreted] As you know we as a company try to manage our capacity at an optimal level for the entire semiconductor business so that we’re able to flexibly respond to different applications. As you mentioned, we’re planning to convert 911 to CIS given the fact that strong image sensor demand. In the DRAM, we will continue to invest supplementary and also investing capacity to make up for the loss that happens as we migrate to the 1X, but other than this we have no plans of additional capacity. [Interpreted] In order to leverage this as much as possible, we’ve always had a very flexible capacity operations that optimizes the capacity for each product depending on the market situation that unfolds. That is why we optimize our equipment allocation or line allocation and also we move bottleneck as we [technical difficulty] capacity. We have worked out various ways of optimizing our line and also we’ll be investing flexibly to maximize the efficiency of overall portfolio. [Interpreted] And to give thorough detail about the CMOS image sensor CIS that we’ll be using part of 911 to produce as you know with the increased adoption of dual camera, the application has itself been growing and also in addition to these mobile cameras we’re also trying to expand the applications to VR automotive as well as 360 degree cameras. So to respond to market demand as well as customer request, we will be converting part of 911 for our CIS production. Our target is to start mass production first half of 2018 but that is subject to market demand as well as customer request.

[Interpreted] The next question will be presented by SK Kee [ph] from Taiwan Capital Market.

[Interpreted] First I have a question about the NAND capacity plans. In Towntech, my understanding is that you’re preparing Towntech with a target of starting operation mid this year, are there any changes to this plan or how do you change for example your ramp up schedule. Also regarding Haison [ph] there is still quite a lot of planning capacity left in Haison [ph], do you have any plans of converting any of that to V-NAND and in terms of V-NAND do you have plans of adding additional lines in Suwon?

[Interpreted] Regarding Towntech, it’s difficult to give you the details, but we are on schedule. We’re planning to start operation mid this year and to gradually scale that up as we approach the end of this year. Regarding our planning capacity, we’re planning to gradually convert that to V-NAND as there is more demand for example on the high density SSD for servers. Regarding [indiscernible] we are planning to add but we have not decided the details yet.

[Interpreted] My second question is regarding the decision to not go to a holding company, as you mentioned there are currently laws or amendments to laws that are being pursued that will make it difficult for a holding company to be established. Is it not possible to consider converting to a holding company before these amendments are passed?

[Interpreted] As you know converting to a holding company is not done in a short period of time, even if the BOD does resolve on it, it would usually take five months to up to a year for the actual conversion to happen, while as an, a legal amendment can be passed anytime. Especially there is also the possibility that if Samsung decides to convert to a holding company these amendments could be passed faster, so that we would be subjected to these legal amendments anyway.

[Interpreted] The next question will be presented by Miss. Claire Kyung Min Kim from Daishin Securities. Please go ahead ma’am.

[Interpreted] I’ve a question for the System LSI. You’ve completed the second generation 10 nano, do you have plans of adding capacity there and also can you give us details of how you plan to manage your 14 nano processes in terms of capacity?

[Interpreted] Regarding the second generation 10 nano process that we’ve completed. Yes we are expecting there to be more demand especially from customers that meet these leading edge processors and that’s why we’re planning to add a 10 nano equipment additionally in S3 fourth quarter of 2017, so that we have a more stable mass production base for our cutting edge processes. Regarding 14 nano, we also expect there to be still very strong demand for 14 nano especially from the mid to low price APs as well as other logic devices and so without additional expansions we will use the capacity in S1 and S2 flexibly between 10 nano and 14 nano.

[Interpreted] And my second question is regarding your decision not to go to a holding company structure. Was the detention of Vice Chairman Lee a part of this decision, was that a factor in deciding not to convert to a holding company and was he personally involved in this decision?

[Interpreted] regarding the holding company structure and this whole study on whether we should go to a holding company or not. You will recall that this study started from the request of the investor that was made last year, which is not the usual case. Also unlike the usual case, we actually executed quite an in depth study as to not only opposing cons of this structure, but also what would happen when we actually do go to a holding company in terms of operations, finance, legal and tax issues. So this is a decision that was reached after quite an in depth study that also involves outside experts who also participated to provide their insight. As you know Vice Chairman Lee is a member of our registered Director and as member of the board he was informed. However my information is that, he did not have a particular opinion regarding this.

[Interpreted] The next question will be presented by Mr. Nicholas Gaudois from UBS. Please go ahead sir.

Yes good morning, thanks for taking my questions. The first one is on NAND flash, could you update us on how your 96 layers sector redevelopment is progressing and could you confirm - however you’re using a full 96 -layer continuous stack or actually if you have a dual structure and more importantly when do we expect to see mass production ramps and have a follow-up after this? Thank you. [Interpreted]

[Interpreted] You’re asking about our fifth generation V-NAND product which is currently under development and because it’s still under development, we cannot give you the details of it. But our process as we’ve always done the fifth generation V-NAND we will also develop as schedule without disruptions so that we can maintain our technology leadership.

Okay, thanks and another roadmap question, if I may for LSI. I think there was an announcement recently that you may have an 8 nanometer technology node after the 10 nanometer plus you will do next year, so effectively in 2019. Whether this imply, if this is a case for the 7 nanometer wall of timeline which I think you mentioned you expect it to be 2019 as well before and also, the use of UV [indiscernible] in mass production for the 7 nanometer node. I’m assuming 8 may not [indiscernible]. Thank you. [Interpreted]

[Interpreted]. As you know as we migrate from 14 nano, 10 nano to 7 nano. The amount of development difficulty as well as the amount of investments that are necessary each step increases quite significantly and that is why, except for the very large customers those customers feel difficulties in terms of taking on that additional investments and development difficulty. We’ve taken the approach. First of all developing the leading processes ahead of time and then following that up a year later with derivative processes so that customers can take advantage of the capacity investments twice and we will continue to do that, so that we’re able to first to leading investments and then a follow-up with derivative processes, so customers can take advantage of this derivative nodes as well. [Interpreted] Regarding 7 nano in the last conference call. We mentioned that we will start the risk production of 7 nano in 2018 and mass production in 2019, which of course is always subject to changes due to customer demand or market situation. [Interpreted] And 7 nano will be maximizing the advantages UV so that the processes have the best benefit.

[Interpreted] The next question will be presented by Mr. Simon Woo from Bank of America Merrill Lynch. Please go ahead sir.

[Interpreted] My question is about the OLED panels, you’ve been making large investments in OLED for last year as well as this year. It seems that you A3 fab is probably [indiscernible]. The Clean Room seems to be all used, also there are talks of changing the seventh generation fab a part of that for OLED, so in that context given the future amounts of investments and the importance of OLED business, can you give us a bit more detail of the current status of your capacity operation and also looking forward, current investments that are going in are more sixth generation. But even the LCD sides have already moved over the 10 G glasses, so in terms of long-term investments what are you plans in terms of moving over to the later generation glass sizes such as 7, 8 or 10?

[Interpreted] Regarding the LCD 7/19 we’ve already closed that down and it’s currently being refitted to OLED capacity. The A3 that is being carried out according to plan so that is on schedule and regarding our basic approach to OLED investments, we will continue to make timely investments depending on the market and customer needs, so that we continue to maintain market competitiveness.

[Interpreted] Second question is about the QLED TV business and how you plan to respond to competition that we’re seeing in the market, we’re hearing of a crystal OLED and some of the Japanese makers are introducing OLEDs that includes sound. So compared to these OLED TVs how do you differentiate and respond your QLED TVs?

[Interpreted] Well the QLED TV is next generation display solution or TV solution that overcomes the shortcomings to the weaknesses of the existing LED as well as OLED TVs, not only provides the best picture quality but also in terms of design and usability, it is totally new dimension from the users. [Interpreted] Well as you know in terms of picture quality the metal base quantum plasma material has various advantages. For example, it has 100% color creation so that the color actually does not change depending on the brightness also in terms of the picture brightness as well as visible angle. It has advantages over other displays, also it provides a very high yet consistent viewing experience regardless of content or the view environment to the users. Also because it’s based on an inorganic material, it does not have for example burning that would occur in other display technologies and therefore has a longer user life and a stronger durability. [Interpreted] We’ve backed such strong picture quality with unique design feature such as the invisible connection, the no gap wall mount and the one remote which provides a very exceptional user experience to our consumers. Even though it’s still initial in its introduction we’ve received very strong reviews from global and European industry media, we’ve received the highest point ever from major European media in the industry and have received very strong reviews that we have been receiving very strong reviews from overall media.

[Interpreted] The next question will be presented by Mr. [indiscernible] from Mirae Securities. Please go ahead sir.

[Interpreted] I have a question regarding the memory business as well as the company’s strategies responding to this big picture where we see a lot of demand being driven up for the data center servers that’s what you mentioned from the semiconductor side. But if you look at this from a bigger picture perspective, the reason why there will be more demand from data center servers is probably because there will be a lot of devices out there, whether it’s AI, AR, VR or even self-driving vehicles that would all have to be connected at the back and through these servers that are in the data center and many people are expecting a lot of value to be created as this big picture unfolds. In that context, what is the relevance of the memory business to this new frontier and in second, from the company’s perspective how is it planning to strategically respond to this new change?

[Interpreted] As you mentioned in addition to the mid to long-term growth in servers, mobile devices and SSDs, we’re also seeing that AI or automotive, AR and VR these trends would have direct and indirect impact on a memory business in the mid to long-term especially because they will be driving up server demand, more devices will be connected to the server, these devices will be continuously generating and using data, which will again need more servers to back them up and so we’re thinking that with this, the overall [indiscernible] changes in the server demand will continue to increase. [Interpreted] As these new applications will also start to grow more vigorously as ecosystem start to form around them and as a response we’re preparing with a greater focus on the high density, high performance low power memory, also we’re seeing a rise in HPC with the increase of deep learning or AI applications and actually you will remember that we launched high density HPM 2 in 2016 and last year we actually saw a greater quite a significant growth of sales versus the year before and we are expecting this to happen. We’re expecting this to continue in the memory business.

[Interpreted] The next question will be presented by Mr. Ricky Seo from HSBC. Please go ahead sir.

[Interpreted] My question is for the memory business which is entering peak season and as we enter the peak season it’s difficult to expect the strong prices to weaken, but if prices remain strong that would increase the cost burden of the set makers which will level off the growth in content which may in the end result in a decrease or contraction of demand. How do you think that such scenario may play out? How do you think? It’s a possibility that this scenario may play out and the second question. Do you see any supply side risk that we need to watch out for?

[Interpreted] Given the fact that smartphones have become very high spec and also the expansion of data centers as well as the increase of memory content in all of the applications, I think the possibility of what rapid slowdown in demand, this is relatively low. Also, as we move onto the second half of this year, the supply demand situation may ease in some components and that may alleviate some of the bump or BOM burden of the customers and - but we think that as there will be differences of the supply and demand situation depending on whether you’re on a leading head of the process or not as well as depending on which applications they are and from our perspective we will continue to very closely watch the demand and supply situation for each application and respectively [ph] respond.

The next question will be presented by Mr. Mark Newman from Bernstein. Please go ahead sir.

Hi, thanks for taking my question. I wanted to ask about the shareholder returns policy you have, in light of the announcement that Samsung is not going to go ahead with the restructuring proposal and considering the cash balance, I recall in the statement you’d made that Samsung will try to maintain a net cash balance of KRW65 trillion to KRW70 trillion going forward and considering even with the Harman acquisition. I believe are going to get outside that range by the end of this year and so does that mean, especially in light of the no restructuring couldn’t we, be talking about expecting further additional shareholder returns at some point in the future. [Interpreted]

[Interpreted] Well regarding the first, I’ll answer that in two points. If we at the end of this year have a net cash that goes beyond the level that you’ve mentioned, yes we will then use that additional cash for shareholder return as we had promised previously. We have announced the shareholder return policy to cover until end of this year. Currently we’re in the process of studying the shareholder return policy to cover 2018 to 2020 which we plan to communicate to shareholders and the market before the end of this year.

Great, that’s good. Great news. I’ve one quick follow-up or further question. It’s about China memory, so lots of bold ambitions from the Chinese players. Could we get some comments from the Memory division on how you’re thinking about the threat from China in the memory industry with all this huge capacity plans they’re talking about and plus related to that, we’re also hearing that they’re poaching a lot of employees not just from Micron and competitors but also from Samsung as well. How is Samsung going to prevent that type of situation? [Interpreted]

[Interpreted] It is true that the Chinese companies recently have been trying to break into the memory market but the memory market itself has evolved during the past and is now protected by quite a high entry barrier because memory business today requires not only the very cutting edge processes migrated but also needs to have various high value absolutions to go with the products and so not only the DRAM or the NAND to place pieces but also controllers and other solutions have to be offered to the customer as a multiple high quality solution, which is the approach that we’ve been taking. Regarding the second part of the questions, it’s difficult to give you details, but we can say that we’re doing our best to prevent and to keep our talent internally. [Interpreted] we will take two more questions before ending or questions from two more people before ending the conference call.

[Interpreted] The next question will be presented by Yoo Jong Woo from Korea Investment and Securities. Please go ahead sir.

[Interpreted] I’ve two questions about the S8. You said the initial response is quite good, can you give us for example some guidance so that we have a better sense of how good the initial response is. Also there are talk that especially for the S8 + there is a bit of delay in supply but maybe because of the very strong demand but can you tell us a bit more detail for example, whether there are any supply bottlenecks regarding the S8 and S8 +. My second part of the question is how you plan to maintain profitability in the new flagship given increase in the material cost memory prices have gone up, [indiscernible] prices have been going up too and we’re expecting you to spend a bit more marketing on the S8. So regarding the higher cost base, how are you planning to maintain the profitability?

[Interpreted] The S8 and S8 + has received a very strong responses from carriers as well as our partners even before it was launched and has been showing very strong pre-orders as well as initial sales. Even though it’s difficult for us to give you for example a total sales target, we will exerting our best effort to record the best sales because we have a product that has differentiated design as well as stronger performance. [Interpreted] You may see to have hinted on any part supply disruptions with the S8 or S8 + which is not the case. Especially some are concerned that because of the Edge display is being used on both the S8 and S8 + that this may have some additional burden on getting the supply, but actually we have been talking with the supplier so that we are able to have a supply ably with a full year volume. So we have not seen any disruptions in terms of the display supply, other components also as well as we have prepared very well and also we have prepared dual sources to eliminate any further risk. [Interpreted] Regarding the profitability of S8 and S8 + because both S8 and S8 + have these large edge screens have Iris recognition and have very high spec components, all of that has ended up in providing a product that is very competitive which will be used to drive up the sales and also internally optimize the way we use our resources to support that sales and by doing this, we are thinking that we will be able to defend the profitability that we had in our previous models.

[Interpreted] The last question will be presented by Mr. [indiscernible] Research. Please go ahead sir.

[Interpreted] And my question goes to the DP business about the plans that you have or results that you have of the OLED panels for TV, even though I understand that currently your focused in terms of resources and investments will be on the mobile side. Have you given up for example the TV applications because of the technical difficulties or do you have plans of eventually moving onto OLED panels for TV?

[Interpreted] In the OLED space we have been the market leader and we will continue to maintain our position as the market leader also in terms of technology. In the TV area, we’re actually in the process of developing various technologies including quantum dot and for the TV, in addition to OLED we believe that we need to develop various new technologies to support for example the ultra large size and high value ad solutions and with these TV technologies supported we will maintain our leadership in not only profitability but also in terms of the technology positioning.

[Interpreted] Thank you very much. This completes our conference call.