Good morning. This is Robert Yi from Investor Relations. Thank you for joining our earnings call for the fourth quarter 2018. With me representing each of the business units are Mr. Chun SeWon, Executive VP of Memory Marketing; Mr. Hur Gok, Senior VP of System LSI; and Mr. [indiscernible], VP of Foundry Marketing; [Yun Nam], VP of Samsung Display; [Lee Min], VP of IT & Mobile Business; and [Kim Won Lee] from VP of Visual Display. I want to make a special welcome to [indiscernible] also known as [Benjamin Yo] who is -- who joined the IR as a Senior VP in December and also Kang Tae-Gyu is a VP of IR as well. 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 may cause our actual results to be materially different from those expressed in today's discussion. Before we go over the results, I would like to address shareholder returns. The Board of Directors today approved the year-end per share dividend of KRW354 per common share and KRW355 for preferred. The total fourth quarter dividend payout is KRW2.41 trillion, which brings the annual total dividend to KRW9.6 trillion, an annual increase of 66%. Regarding treasury shares, we completed the cancellation of all remaining treasury holdings on December 4, following a board resolution in November. In total, in 2017 and '18, we retired the equivalent of approximately 13% of common stock issued and 16% of preferred stock issued. As we shared during the third quarter earnings call, we plan to review free cash flow for the 3-year period of our current return program and update the 3-year total shareholder return in our second quarter 2019 earnings call in July. With that, I would like to move on to the fourth quarter results. In our previous earnings call, we shared our view that fourth quarter results were likely to decrease due to weak seasonality in the memory market. The decline, however, was greater than we had anticipated due to a sharp drop in memory demand and a decline in smartphone sales amid a sluggish yet very competitive market. The total revenue in the quarter decreased 10% year-on-year to KRW59.3 trillion, and the decline was primarily due to performance of our Component business. The gross profit slipped approximately KRW5 trillion year-on-year to KRW25.2 trillion, and gross margin also decreased compared to the previous year, as G&A expenses in Q4 fell slightly due to a reduction in advertising activities but increased as a percent of revenue. Annual SG&A expenses decreased KRW4 trillion, 2 percentage points as a percentage of revenue on a year-on-year basis due to more efficient expenditure, especially in the set business. The operating profit was KRW10.8 trillion, down KRW4.3 trillion year-on-year, mainly due to a weaker performance by the Memory business. The operating margin for the quarter decreased to 18.2%. Except for a special bonus, which we announced in December, there were no other significant onetime expenses. In the fourth quarter, financial impact from foreign currency exchange movement was minimal. Even though various macroeconomic and business factors pushed our fourth quarter earnings below market consensus, we did achieve record high annual results for the seventh straight year and solidified our foundation for growth by reaching key milestones in major businesses. Throughout our Component and set business, we continued to innovate and deliver industry first and meaningful differentiations. These include world-leading memory and logic semiconductor solutions as well as processing technology, form factors and lifestyle innovations in our mobile and Consumer Electronic products as well. Now I would like to share our business outlook. In the first quarter, we expect demand in the Memory business to remain weak due to seasonality and macro uncertainties, as well as inventory adjustments by major customers. In the OLED business, profitability is likely to decline sizably, weighed on by slow sales of premium smartphones and rising competition with the LTPS LCD products for rigid OLED. In the LCD business, earnings are expected to decline as a result of large scale capacity expansion by overseas suppliers. For the set business, we anticipate earnings in the IM division will improve on the back of global launch of Galaxy S10 and the commercialization of 5G in Korea. The Consumer Electronics Division, on the weak seasonality, will focus on profitability via overall sales mix improvements, early launches of new TV models and the increased cost efficiency in the Home Appliance business. For 2019, we forecast our earnings to decline on a full year basis due to a weaker performance by the Memory business. From the second half, however, demand for memory products and OLED panels are expected to pick up. The represented -- representative from each business unit will provide a detailed outlook. For secure, sustainable growth in the mid- to long term, we continuously strive to enhance competitiveness of our key business as well as develop new emerging business areas. To accomplish our goals, we plan to boost R&D activities, expand external technology collaboration and actively invest in expanding our core capabilities. For the Component business, in addition to enhancing our technology leadership in established areas, we will continue to develop new technologies and next-generation packaging solutions to address future needs in automotive and artificial intelligence applications. We'll also strengthen capabilities in the OLED business by new innovative technologies for smartphones while also expanding our coverage into IT and automotive applications. To meet new generation large panel requirement, we'll continue to advance micro LED as well as QD-OLED technologies. In set business, we'll continue to push hardware innovations, which include foldable smartphones and MicroLED TVs, while also bolstering leadership in the 5G market by providing total solutions based on our leading infrastructure, handset and chipset capabilities. For artificial intelligence, Bixby will be enhanced to increase device connectivity and expanded to create an ecosystem supporting a broad family of applications. We'll also work to create an artificial intelligence-enhanced service platform. Now I'll address the capital expenditures. The total CapEx in 2018 was approximately KRW29.4 trillion, with KRW23.7 trillion allocated to Semiconductor and KRW2.9 trillion for display. In Memory business, CapEx increased slightly year-on-year due to expansion at the Pyeongtaek campus. CapEx in Foundry business, however, returned to prior levels as the 10-nano line expansion was completed in 2017. In the OLED business, CapEx of flexible panels was significantly lower than it was in the previous year. As we have been doing over past few years, we'll manage our annual CapEx expenditure plan flexibly and respond to changes in the market. However, we'll proactively invest in memory infrastructure and EUV capability to address mid- to long-term demand. Before we move on to presentations from each business unit, I would like to share several key data points. First, DRAM. In Q4, our bit growth came in high single-digit negative growth, and our ASP for the Q4 declined high single digit. For NAND flash, our Q4 bit growth came in high single-digit minus, and ASP declined low 20% Q-on-Q. For Q1, we expect the DRAM demand growth to decline high single digit. We expect our bit growth of DRAM in Q1 to be slightly higher than of the market supply. And for NAND flash, the demand in Q1 is expected to decline mid-single digit, and our bit growth will be similar to that of the market. For 2019, in total, the DRAM demand growth is expected to be high teens, and we anticipate that our bit growth will be similar to the market. And for NAND flash, the annual demand growth is expected to be mid-30s. And again, our bit growth will be in line with that of the market. Within display, revenue in Q4 OLED sales represented about high-70%. And for Mobile division, the total handset sales for Q4 was 78 million units, and we had 7 million of tablet sales. The blended ASP was slightly higher than $200, and the smartphone mix within total handset was high-80%. And in Q1, we expect the total handset sales to decline slightly Q-on-Q as well as the tablet is expected to decline slightly. The blended ASP, however, will increase over Q1, and the mix of the smartphone within total handset will also improve to reach low-90%. And in Q4, our TV sales increased about mid-30%. But because of seasonality, we do expect the TV sales in Q1 to decline to about 20% range. And we expect to see about mid-single-digit volume increase on TVs sold in 2019. Now I'll turn the conference call over to gentlemen from each business units. Starting with Memory.

Good morning. This is SeWon Chun from the Memory Marketing team. In the fourth quarter, due to uncertainties in the macro environment, customers adjusted their inventory levels, which lowered the demand for major applications such as server and mobile. For NAND, major customers delayed the purchasing due to expectation of further price declines. Moreover, decrease in smartphone shipments resulted in overall low demand, positively, a trend toward high-density in mobile persisted and all-flash array portion increased. On the supply side, the speed of qualification process for 64-layer 3D NAND has been accelerating. Supply of solution products expanded continuously. As a result, amid the fierce competition among suppliers, coupled with the recent price decline i NAND across all applications, we proactively addressed the growing high-density trend by focusing on high-end and high-density SSD products. For DRAM, inventory adjustment by data center companies resulted in a decline on server demand, while the CPU shortage decreased PC demand. For mobile, Q-o-Q set demand reduced due to relatively weak sales of new smartphones by major customers and slow demand in China. However, this trend were partly offset by growing demand for high-density products with more than 60 KB per box. Projected to a positive factor of macroeconomic issues, which were also behind the dramatic changes in consumption patterns, our earnings declined Q-o-Q yet we focus on strengthening our cost competitiveness by expanding 1x-nanometer transition and 1y-nanometer design-in to secure our technology leadership. In the first quarter of 2019, we are expecting slow overall memory demand, mainly because major data center customers are likely to continue adjusting inventory. For NAND, despite low seasonality, demand for high-density and high-performance SSD for data center will expand gradually. Also, for enterprise, we expect the demand to continue for all-flash array replacement. While mobile set demand is declining, we expect to continue to see expanded demand for high-density storage with more than 128 gigabyte, mainly from flagship and high-end smartphone models. On the supply side, while supply of 64-layer 3D NAND for solution products continues to increase, competition is likely to intensify, especially in client SSD as well as the channel market. Our company will closely monitor demand changes for each application. Moreover, we will actively address all-flash array replacement demand in the 10K HDD market as well as smartphone demand from flagships and in China, which are adapting high-density UFS. At the same time, we will differentiate our products and enhance our competitiveness through solution products based on fourth generation of V-NAND. Moreover, we are currently mass-producing fifth-generation V-NAND for brand SSD as planned. By accelerating expansion of -- expansion further into server and mobile, we will continue to enhance our product competitiveness and strengthen market leadership. For DRAM, inventory adjustments for server are likely to persist. And for mobile, on the low seasonal demand, contents per box is expected to keep rising mainly for new flash models. We will focus on enhancing our cost competitiveness by expanding the 1y-nanometer transition process and strengthening our technology leadership by increasing sales of differentiated products such as high-density server DRAM, HVM-2 and GDDR6, et cetera. Next, I am going to talk about our full year outlook. In 2019, we expected demand to increase gradually from the second quarter. Demand will continue to recover in the second half of this year as the high-density trend in major application continues amid the seasonal demand increase. For NAND, as prices soften, demand from all applications will increase backed by high-density trend. For servers, we expect to see solid demand as high-performance trend are likely to continue. For client SSD, due to a growing attach rate and adoption of high-density strategy, we expect steady demand growth. For mobile, the high-density trend is projected to continue because of lower volume cost burden at customers and the need to strengthen product competitiveness and differentiation at smartphone companies amid the mature market. On the supply side, although industry supply with 64-layer may keep rising, we think possibility of a rapid supply growth will be limited if price decrease continues. We will actively respond to high-density memory demand based on customer need to differentiate their product and services. At the same time, we will strengthen our cost competitiveness by expanding supply workforce and future generation of agreement. For DRAM, after inventory adjustment at our customers complete in the second quarter of this year, we expect demand to grow solidly due to step-build growth caused by positive seasonal effect in the second half. For server, as the trend towards high performance cloud service continues, we expect solid demand growth for high-density server DRAM, especially the launch of a new CPU in the second quarter is also likely to push the demand. For mobile, although set demand growth is likely in a mature stage, adoption of high-density mobile DRAM with more than 8 gigabyte has [indiscernible] spend in the high-end segment. Moreover, we anticipate the rise in contents per box for mass-market device will boost the memory demand. We will closely monitor change in market demand and continue to manage our investment and capacity with flexibility. Also, we will focus on ramping up production of our 1y-nanometer products and developing of 1g-nanometer products. As the leader in the memory market, we will enhance the competitiveness our differentiated product, which includes the 16-gigabit-based high-density server DRAM, uMCP with more than 8 gigabyte, HVM-2, et cetera. Overall, we will work to strengthen our technological leadership to meet our customer's growing need for more advanced technology. Thank you very much.

Before we move on to System LSI, I need to make one correction in the data point that I shared. I've been told that I said that the Q4 DRAM bit growth was high single-digit minus growth. Actually, it's high teens of minus growth. I stand to make that correction. My apologies. System LSI, please.

Good morning. This is Ben Hur from the System LSI business. The fourth quarter associated DDR earnings were solid, thanks to mass-production of new Mobile AP production and expanded OLED DDI supply to major customers. However, overall earnings declined due to slowing demand for image sensors as the Chinese smartphone market entered the weak seasonality. Notably, our efforts to expand into new applications are bearing fruit, added by the conformed adoption of the automotive processor, Exynos Auto V9, by Audi for a model in 2021. In the first quarter -- in the first quarter 2019, we will maximize supply of APs, image sensors and DDIs for use in our 2019 flagship model, pushing ahead with the earnings improvement. In addition, we plan to secure technological leadership by commercializing the world's first 5G modem and concentrate on securing customers for the product in the U.S. and China. On a full year basis, even amid a likely stagnate smartphone market, set makers will continue to require high-specification components [indiscernible] to the shift toward 5G and increased adoption of the multiple cameras and high-resolution sensors. Given the demand for high specifications in the smartphone market, we will leverage our commercially proven 5G modems to actively pursue new customers in the U.S. and China as those nations are prepared to launch 5G services. In response to demand for multiple cameras, we are expanding our sensor lineup to offer more choices for functions such as optical zoom, ultra-wide angle and [indiscernible]. On top of that, we have started mass-production -- of mass-producing 48 megapixel sensors to meet the strong demand for higher-resolution sensors and plan to launch a 64 megapixel sensors, a world's first, in the second quarter of this year. Finally, we will also expand our mid- to long-term businesses scope by diversifying our product offerings via development of 3D and 4D, which stands for finger-on-display sensors and automotive IoT chips. Thank you.

Good morning. This is Jason Shin from Foundry business. In the fourth quarter, Foundry earnings declined due to sluggish demand for mining chips as the cryptocurrency market continued to shrink, and as a result of slowing orders for AP as the Chinese smartphone market entered a slow season. Positively, our 7-nano EUV process won a new contract for next-generation CPU for IBM servers, demonstrating market acceptance of our achievement in EUV technology, leading-edge process competitiveness and foundry capabilities for high-performance server products. Throughout this, we are gradually expanding our current mobile-oriented business structure towards high-performance computing. In the first quarter of 2019, foundry demand, including that for mobile components and cryptocurrency mining chips, is likely to remain stagnant under sluggish overall demand for semiconductors. Despite the challenging environment, we will concentrate on preparation for full scale production of the 7-nano EUV process in the second half of the year, and we will endeavor to secure growth in the mid- to long-term by completing development of the 5-nano EUV process. In 2019, we will continue to expand our business structure for mobile towards HPC, automotive and network applications. And we will also expand our presence in 8-inch areas, which include AR, VR and discrete component. In addition to our mass-production effort of the EUV 7-nano process, we will also focus on establishing a more stable business structure by increasing our customer base by over 40% to levels in the previous year. Thank you very much.

Good morning. This is Jeremy Yun from the Mobile Display Marketing of Samsung Display. First of all, I would like to inform you that we have reorganized into 2 business units, the Mobile Display business and the Large Display business, to strengthen our competitiveness across the entire product area. In the fourth quarter, Mobile Display earnings decreased slightly Q-over-Q due to weakened profitability in the Mobile Display business. Basically, sales in the Mobile Display business decline Q-o-Q due to heightened competition with LTPS LCD despite stable sales of flexible OLED panels. On the other hand, earnings in the Large Display business improved slightly Q-o-Q, bolstered by an expanded portion of value-added products such as high-resolution and ultra-large TV panels. Looking forward to the first quarter of 2019, the Mobile Display business is likely to experience unfavorable market conditions due to intensifying competition among panel makers and amid weak demand in the smartphone industry. We plan to focus on securing capability by expanding our customer base and actively addressing demand from major customers' flagship model. In the Large Display business, we are concerned about ASP pressure on LCD panels on the weak seasonality and amid ongoing capacity expansions by Chinese manufacturers. Thus, we will strive to improve profitability by focusing on reducing costs and enhancing the use of our core products. Now I would like to present our market outlook and core strategies for 2019. For the Mobile Display business, we expect flexible OLED panels for smartphones to enjoy a rebound in demand from the second half. Against this backdrop, we will work to enlarge the OLED panel market through technical innovations for new applications while also increasing the portion of smartphones featuring OLED displays, leveraging our cutting-edge technology, which offers differentiated design capabilities and power efficiencies. For instance, we started providing high-contrast OLED displays to replace conventional side view mirrors for automobiles. And this year, we are planning to supply the very first OLED display to be used in notebook PC. For the Large Display business, we are concerned about growing uncertainties caused by capacity expansions in the LCD industry. However, since we expect to see continued growth in demand for premium TV panels such as UHD, 8K and ultra-large ones, we will strive to limit impacts on profitability by focusing on high value-added products. Thank you.

Good morning. I'm JongMin Lee from Mobile Communications business. I would like to present our fourth quarter results and share the outlook for the IM division. For the Mobile business, market demand for smartphone and tablets grew Q-on-Q as a result of year-end seasonality. Sales, however, continued to decline on a Y-o-Y basis. Smartphone. Despite strong seasonality, our operating profit decreased Q-on-Q. This was due to a decline for both shipment and revenue for smartphone in an overall sluggish market. In our Network business, our business performance improved Q-on-Q, thanks to supply of equipment to major overseas supplier for LTE expansion and the initial supplier of 5G equipment to South Korea and U.S. Next, I will share our outlook for the first quarter this year. For the Mobile business, marketing for smartphone and tablets is expected to decrease Q-on-Q as we move into a weak season. Next is at the Unpacked event in San Francisco, we will unveil that Galaxy S10. S10 is the culmination of the last 10 years of innovation while also being the starting point of innovation for the next 10 years and beyond. Based on the cutting-edge technology in display and commerce that we've been accumulating, S10 will offer a differentiated design with battery respect for an improved user experience. With these efforts, we will realize meaningful value and positive changes in our customer's lifestyle and strengthen our leadership in the premium market. We expect our business performance to improve in the first quarter resulting from sales growth of our flagship model, thanks to the launch of S10. However, mobile smartphone shipments are likely to remain at a similar level Q-on-Q as the supply of mass models has been temporarily reduced due to a change in our lineup. For the Network business, we will actually respond to 5G commercialization in South Korea and chip supply equipment for LTE expansion. Finally, let me move on to our outlook for this year. We forecast that market demand for smartphones will be flat Y-on-Y. Overall smartphone ASP is expected to increase as a result of spec towards adopting high-end specs such as large display, higher memory capacity and multi-camera. We expect business conditions to remain challenging due to stagnant smartphone market and mature cost burden. However, we will increase the smartphone sales and achieve solid results by executing a strong go-to-market strategy, which includes differentiated product launch and strengthened target margins. For our flagship models, we will provide the best performance and user experience with design innovations and highly sophisticated technologies. Furthermore, we are preparing our lineup by addressing the diverse needs of users so that more customers will choose our products. In terms of mass models, we are changing our lineup to quickly respond to rapidly changing market with diverse customer needs while also improving the competitiveness of individual models. Outcome of this lineup change is expected to come out after the first quarter. With further competitiveness enhancement, we will try to secure profitability by improving cost structures, which includes component standardization and executing effective marketing campaigns. Lastly, we will strive to reinforce the core competencies in new businesses to ensure sustainable growth. We will lead technology trends by introducing foldable and 5G phones at the right time. Moreover, we are planning to develop new business areas by building our ecosystem with strategic partnerships. We will increase user retention by enhancing connectivity among devices, expanding Bixby to be more products and services while also improving AI. Through these efforts, we will provide individually optimized services on our diverse devices, which, in turn, will allow us to keep strengthening our AI and IoT platform. For the Network business, we will take a global leadership role by expansion of the 5G equipments for the initial market such as South Korea and the U.S. and lay the foundation for further global business growth. Thank you.

Good morning. I am [Kim Won-Hee,] VP, Sales and Marketing, Visual Display business. Let me start with current market conditions and our result for 2018 Q4. The overall TV market in Q4 expanded by double digits quarter-on-quarter, thanks to year-end peak season. On a yearly -- year-on-year basis, however, the market stayed similar due to a decrease in consumption caused by unfavorable exchange rate in emerging markets. For Samsung, sales increased quarter-on-quarter, backed by our successful year-end peak season promotions and ongoing product mix improvement. In addition, an increase in the sales of high value-added products such as QLED and super big screen TVs led profits to improve both quarter-on-quarter and year-on-year. In particular, our QLED TVs were recognized as the leader in the premium segment for the super picture quality and differentiated features for consumer usability, roughly tripled their sales on a quarter-on-quarter basis, leading profitability to improve. In addition, Samsung released QLED 8K models, pioneering the ultra-high picture quality market and strengthening our tech leadership in the process. As for super big screen TVs of 75 inches and above, Samsung has continued to lead the market with its high market share and solidifying the link between super big TVs and the Samsung brand. For the Digital Appliance market in Q4, demand growth slowed due to a sluggish U.S. housing market and price increases in emerging markets caused by exchange rate movements. Despite slow growth in emerging markets, we improved our results slightly both quarter-on-quarter and year-on-year through strong sales of premium products such as Family Hub refrigerators, large capacity dryers and cube air purifiers. Now I will share market prospects for 2019 Q1 and the full year. The TV market, entering a slow season in Q1, is projected to weaken slightly year-on-year due to declining demand in emerging markets. Samsung will continue to strengthen sales, focusing on QLED, super big screen TVs and will globally release the QLED 8K TV, a next-generation premium product. We will meet consumer needs for ultra-high picture quality in a full range of sizes while providing AI upscaling technology through our quantum processor. In addition, Samsung will proactively expand its market share in 8K TV market, which is expected to grow constantly. In Q1, the market for Digital Appliances is expected to grow with gains coming mainly from North America, Europe and Korea. Samsung will expand sales of new lifestyle home appliances such as a clothes refresher and dryer and as well as launch new products in the quarter via our strong partnership with distributors. In addition, we will keep reinforcing our B2B business, which includes building home appliances and system air conditioners. In 2019, the TV market is projected to stay similar year-on-year despite negatives such as economic slowdowns in emerging markets and the lack of global sporting events. Under these market conditions, Samsung will keep enhancing our leadership in premium products, which includes QLED and super big screen TVs in our focus on securing profitability and growth. Samsung will also lead industry trends with MicroLED products, our modular technology that we'll showcase at CES 2019 and new lifestyle products that add significant value to our consumers' lives. The Digital Appliances market in 2019 is projected to grow slightly led by advanced markets. Samsung will continue to increase sales of premium products and secure future growth engines by strengthening our online and B2B businesses. Thank you.

Thank you. This completes the management's presentation. Now we'll turn the call over to the Q&A.

Now, Q&A session will begin. [Operator Instructions] The first questions will be presented by Mr. SK Kim from Daiwa Capital Markets. Please go ahead.

My first question is about the Memory business. As you mentioned during the data point, actually during fourth quarter, your shipments were very week. And it's assumed that you have lost the market share in DRAM. Has that motivated the Company to shift more towards, for example, regaining market share by running through its inventory than focusing on profitability? And does the Company have an appropriate level of market share that it is operating against?

First, you've asked whether we have an appropriate target market share. Actually, we don't. As we have mentioned, rather than operating against a size or a market share, we focus on maintaining a sustainable profitability of the overall business, so we do not have an appropriate market share target that we operate within mind. As we mentioned though, we focus on leveraging our high-density and high-performance products so that we are able to satisfy the needs of our customers, who need to differentiate their product as, for example, cloud service, and the high-performance and high-end mobile and PCs are becoming more widely adopted, and therefore, we will be focusing on our high-performance and high-density products as we go forward.

The next questions will be presented by Mr. Doh Hyunwoo from NH Investment & Securities.

I have one question, the first towards the memory side. Your fourth quarter memory shipment actually fell below guidance quite significantly. Is it correct to assume that your inventory levels would have increased? Can you update us on your current inventory levels and also your future inventory management plans? The second question is towards the IM division. Overall, there is weaker demand for smartphones, and this has resulted in greater price competitive -- competition. And given this situation, what is the Company's strategy in terms of price competition? Also, do you think given this situation in the industry, would it -- it will be possible for the Company to achieve both increase in sales volume as well as improvement in its profitability? Also on that context, we noticed that there is a North American competitor that recently has been experiencing difficulties because of its excessively high pricing strategy. In that context, what does the Company have in mind in terms of a strategy and pricing for the new upcoming flagship?

Regarding your first question about our inventory, our inventory has increased due to lower shipments in fourth quarter, but it is still as manageable levels, and we will use the current inventory to respond to the demand that we're expecting after the second quarter. As we mentioned before, there will be greater demand as cloud service becomes more advanced and greater or higher-end PCs -- or PCs and smartphones require more density, and therefore, we will continue to respond to this market demand at a stable trend. And in terms of our mid- to long-term inventory management, we will also flexibly respond to the market demand as it unfolds.

In terms of your second question about the handset business. Basically, our strategy is to both pursue increase in sales and improve profitability by adopting a product portfolio optimized by each market. Even though it's a bit too early in the year to talk about full year shipments, our goal is to year-on-year basis, increase our overall smartphone shipments. Even though the more competitive products entail greater margin pressure, we will secure profitability by increasing our overall sales. Also, more -- adopting more standardized components and also increasing operational efficiency. And in particular in the case of mass products, we will actively leverage the economies of scale that we can from the mass products segment. Also, you've asked about our pricing policy and our strategy for our new flagship. In the case of the flagship, given that customers actually consider a variety of factors, including size, design, specifications and price when they choose a phone, well, we are considering the adoption of a wider price range that we flag such diverse needs. So together with the adoption of more competitive features such as displays, cameras and AP, we will offer a more detail-segmented lineup so that customers can actually choose what they feel is the most optimized product for themselves. With regards to the details of the upcoming S10, please turn into the Unpacked event that's planned in February.

The next questions will be presented by Mr. Hwang Min Seong from Samsung Securities.

Our question is about the DRAM business. Your DRAM sales in the fourth quarter actually declined quite rapidly even compared to the competitors. Is there a reason why your DRAM sales were particularly weak in fourth quarter? During your outlook, you shared that you're expecting demand to improve from second quarter and onwards. But frankly, from the market, the visibility of demand improvement from second quarter doesn't look very clear. Can you share with us in that context any specific moves or signs from the customers that you're reading?

To answer your first question, we -- as we entered into the fourth quarter, we did expect demand to slow down due to seasonality. But at as we passed about the mid-point of fourth quarter due to various negative external factors, demand started to decline even faster than originally expected, especially we're attributing the decline to the inventory adjustments that are being carried out by the data center customers. And because the major customers where we have large market share such as servers and other major applications, because these customers' demand declined, that had a negative impact on our shipment. To answer your question about our outlook for demand improving after the second quarter, we expect, especially around servers and mobiles, there will be a demand improvement after the second quarter. To share a bit more detail, in the case of mobile DRAMs, as price stabilizes, we think that there will be an increase in high-density memory adoption on smartphones high-density, for example, 8-gigabyte plus high-density uMCPs. Also, flagship smartphones that will be LPDDR4X-based can actually adopt up to 12 gigabytes, so that would also drive greater demand from the mobile side. Actually, we are hearing of many mobile companies, device makers are preparing to launch new models that have high-density products adopted. In the case of the server side, I think the critical factor there will be the time when customers' inventory would meet -- would hit a stabilizing point. Currently, we're seeing that, that stabilizing point of inventory will come sometime during the second quarter. And especially once the new CPUs are rolled out during the second quarter, this will also help drive up demand for servers in the second half. And that's why we're expecting overall demand to improve as we approach the later half of this year.

The next questions will be presented by Mr. Kim Dongwon from KB Securities.

I have one question -- two questions. The first question is for the display side. We're hearing in the media a lot of media coverage regarding investments to convert to QD-OLED. And in that context, can you share the Company's strategy in terms of its next-generation, large-size display? Second question is to the VD division. It seems that in terms of the premium products segment, is the 8K QLED as well as the MicroLED that's currently being -- receiving the spotlight. So in that context, would you agree that the QD TV would be the main technology for the VD division from its premium segment going forward?

To answer your question, as you mentioned, as the TV market growth levels off and especially because of the Chinese companies also increasing their production, we believe that we need to focus on higher efficiency as well as focusing on the differentiated and high-end product segments. And so immediately for 2019, our focus is to achieve quality growth by focusing on the ultra large-sized frameless as well as 8K technology. And in the mid- to long-term, our strategy is to secure the winning next-generation technology so that we will be able to continue to meet the diverse needs of our customers who also need to find differentiation points. And so regarding the technologies that we're considering for next-generation, QD-OLED is included, but we are also considering at the same time various other technology options and also collaborating with our customers. The timing and detailed plans, including mass-production timing, has not yet been decided.

Well, our strategy in the premium segment is to -- is a 2-track strategy, where we will, on one hand, continue to focus on our QLED, which has already secured a very firm foundation in the premium segment. And also on the other hand, push MicroLED, which has various advantages, for example, our self-light-emitting, also in terms of black recreation, contrast and also view angle. And so actually, we introduced the 8K TV, QLED TV last October, which once again demonstrated our technology leadership and also our strong position in the ultra-high picture quality TV segment. This year, we're planning to roll this out globally. Actually -- and with a full line up covering from 65-inch to up to 98 inches, which will continue to help us meet the consumer needs in the ultra-high picture quality TV segment by expanding our 8K offering. Also, at the same time, we will focus on building a very strong ecosystem around the 8K technology, including participation in the 8K Association. Also, at the same time, as we mentioned, our second strategy -- our second plan in the strategy is the MicroLED, which offers the advantage that the users can select the size as well as the ratio and the resolution that's optimized for each use, and therefore, the MicroLED will enable of these customized screen experience for the users. Our plans in terms of the MicroLED business is our first start with ultra-large size MicroLED product for commercial as well as high-end residential and to have a residential application -- residential large size products rolled out by 2020.

The next questions will be presented by Mr. JJ Park from JP Morgan.

I have 2 questions. First is about the CapEx for -- it seems that the -- with the weak demand for the semiconductor will continue during the first half. In that context, what are your CapEx plans for 2019? And can you break that down into CapEx spend for equipment versus infrastructure? Second question is to the System LSI division. It seems that compared to the LTE modems, your 5G modem is up and supplied earlier than the usual LTE modems. Do you think this will bring about a change in the AP supplier landscape? And how much revenue contribution are you expecting from your 5G modems this year?

To answer your question about our CapEx plans. Actually, there is no change for basic plan in that we will operate and manage both our capacity and CapEx flexibly in line to the customer demand and also optimize our lines for both memory and foundry. To -- so even though our CapEx plans, investment plans for each product segment has not yet been decided for 2019, as we mentioned during the last conference call, given the uncertainty in the external environment, we will not be increasing our facilities. But most of our -- in that our investment will be focused on new fab capacity, targeting the mid- to long-term demand that will come down the road. And so this year, the share within our CapEx facility increase will decrease -- investment will decrease, and the share of infrastructure investment will increase.

To answer your question about our 5G modem business. Even though 5G modems require a different level of technology, a much more sophisticated level of technology versus LTE, we have been able to achieve meaningful technology innovations in 5G as well. For example, last August, we were able to, well, first succeed on the OTA, over-the-air call on 5G. Also last December, we were able to, first in the world, commercialize the 5G modem. In terms of the landscape, different from the LTE, modem landscape, we expect that the 5G modem landscape will start with a 2 major players landscape including us. We are expecting revenue from 5G to start this year even though that revenue itself will depend on, for example, the 5G adoption rate and the adoption timing of both the handset makers and the carriers. In terms of -- but we believe that because we already have a commercially proven 5G modem throughout 2019 and 2020, we will leverage this proven modem to add on new OEM customers, especially in China and the U.S.

The next questions will be presented by Mr. Nicolas Gaudois from UBS.

Yes. The first one is on DRAM. Can you update us on the pace of capacity conversion to 1y-nanometer? How much of it was out, where 1y-nanometer is at the end of 2018 and where do you expect this to be by the end of '19? And where are you in the process of qualification of 1y-nanometer with key mobile and server customers? And second question is for networks. Samsung appears to be remaining probably only alternative to Huawei and ZTE as a first source to 5G -- for 5G base stations outside of Ericsson and Nokia. Some countries and telecom operators are probably at the stage sort of at reviewing the use of Huawei and ZTE for 5G. Can you quantify for us how much are you benefiting from this and, more generally, what revenue growth you expect from Samsung networks over the next couple of years?

To answer your question, first of all, even though it's difficult for us to share with you the detailed production share of the specific products, as of 2018, the wafers share for the 10-nano class products, including 1y was above 70%, which means our ramp-up is moving smoothly according to plan. Regarding the qualification process, we are continuing the qualification process for servers as well as mobile customers, and we expect that the share of 1y in both mobile and server applications will increase throughout 2019. Based on our technology leadership, we will continue to offer our cutting-edge process technology advantages, not only to our major customers but new customers overall.

To answer your second question about the 5G equipment business, even though we can't comment on competitor issues as for our own Network business because we have been focusing early on preemptively to the 5G wave. We have been leading the standardization process for 5G, and we have secured many 5G-related patents as well. And that's why now we have the technology as well as the equipment to cover most of the 5G spectrum band. Our aim is to leverage this to actively increase our market share in 5G even compared to our LTE market share. As 5G is rolled out and the pace of 5G rollout picks up, we will leverage the technology that we have to capture more market opportunity. And actually, many major carriers are already showing great interest in working with us. And so we do expect to see high growth in this business going forward. 5G, as a technology, will lead industry change. And also, actually, it is going to bring about a technology revolution and make the Fourth Industrial Revolution a reality by providing a high-quality of service to individuals as well. Given the importance of this 5G, we emphasize the fact that we have a complete end-to-end solution starting from equipment but also handsets as well as chipsets. And based on our commercialization experience, we will lead the 5G market in all of these fronts.

We will take about 2 more people for questions before we end the call.

The next questions will be presented by Mr. Peter Li from Citigroup Global Market Securities.

I have one question for the memory, the other for the foundry. For the Memory business is that as the DRAM technology become more difficult, it also seems that the cost reduction, the cost reduction -- pace of cost reduction isn't as fast as the previous generation technologies. Do you think that this time it will be different from previous cycles? Or do you think that the pace of cost decline will pick up as we move forward in this current cycle? Also in that context, can you share with us the overall DRAM strategy direction that you have? The second question for foundry is about your 7-nano EUV. We do notice that there were some significant achievements including winning the contract -- the IBM contract. But can you share with us your current customer status for 7-nano EUV?

To answer your first question about DRAM. I'll answer first the change of DRAM prices before moving on to our strategy for DRAM. Even though it's difficult for us to predict about price changes because price is also determined by the market demand and supply situation, what we can say about the current cycle is that, as you mentioned, because the level of technology that we're working with has become much more difficult than before, the rapid increase in supply has become much more difficult than before as well. And also, what's different from the previous cycle is that there was a wider application, whereas before, it was mainly PC-driven. Now the applications have diversified for servers and mobile which has also eased some of the seasonality in the demand that was traditional in the industry. Also, if you look towards mid- to long term, there's the expansion of 5G and AI. And therefore, we're expecting there to be solid demand growth in new applications also around servers. And to compare to previous cycles, we think that it won't be easy or it will be difficult for the same long-term and excessive supply or demand change or imbalance to continue. And in terms of our strategy, we will continue to increase the share of our 10-nano class process products, also enhance our product competitiveness through the 10-nano class technology. And in the mid- to long term, we will actively respond to the demand of customers that need high-performance and high-quality memory, such as 16 GB-based high-density server DRAMs and LPDDR4x-based mobile DRAMs.

Regarding your second question about the Foundry business. Yes, as we -- you mentioned, we won the contract for the IBM CPUs on our 7-nano technology, which is a sign once again that, not only our EUV technology but also our 7 nano process technology as well as our service, quality and service, has been recognized by the market. We have already started production of our EUV 7 nano and are planning to go into mass production in the second half of this year, targeting applications, such as HPCs and network products.

The last questions will be presented by Mr. Yoo Jong Woo from Korea Investment & Securities.

I have one question for the semiconductor side, the other question for the mobile side. My question is, first, the DRAM side. I think the -- there is a greater-than-expected decline in the server DRAM demand, and much of this is being explained due to the slowdown of data center facility investments by the hyperscalers. There could be many reasons explaining this slowdown in facility investments by data centers. It could be economic recession outlook or excessive investments already put in as well as greater efficiency in the existing hardware. But if -- assuming that the data center investment will recover, what do you think will be the signal to such investments recovery? This is my first question. Second question is about the 5G handsets. 5G handsets, I believe, can be a great opportunity for the Company. But on the other hand, 5G handsets would need to have higher or pricier components also would have higher costs. Also, we're hearing that it would require greater battery capacity. So first of all, the question is how does the Company plan to go about resolving these issues about 5G handsets? And also, some are concerned that as 5G is expected to rise, many of the consumers will actually postpone their handset replacements until 5G comes about. What do you think about that?

To answer your question, I think the better way would be to explain the reason we see as the reason for the short-term demand adjustment in the server market and then to share our views about a rebound of investment demand for the data center market. And so first of all, we think that this current short-term adjustments in the server market is not actually a decline in the speed of facility investments by data centers. But actually, it's a combination of, number one, weaker demand due to hyperscalers already having secured inventory. Also, the customers themselves postponing their purchases expecting there to be additional price declines in the future. And so what we see is that because there was -- there's actually a supply shortage that continued for the past 2 years. And on one hand, the hyperscaler customers did need to have a stable memory supply in order to handle the rapidly increasing data traffic. They had a strong demand, but they've already secured what they feel to be stable memory inventory. And we think that this was the major reason for the short-term demand adjustments in server DRAM recently. And so in terms of what will be the signal of data center investment recovery, we think that given the fact that the server fundamental demand still remains very solid and strong, the signal won't be an external factor but actually would depend on when the customers feel that their inventory has stabilized. That would signal market demand recovery. In terms of timing, we're expecting this decline in demand to stabilize after the second quarter. Also, in the second half of this year, we are expecting there to be a server DRAM demand recovery, together with the introduction of the new CPU. Also, we're seeing that there will be a strong server memory demand because there are companies that are preparing to adopt Edge servers in advance to prepare for the 5G network rollout after year 2020. And so given all of these factors, we're expecting server memory demand to maintain solid levels.

Regarding the 5G smartphone, the handset question. As you mentioned, yes, the 5G phones will have the top line specifications, large screens, high-performance APs, high capacity -- high-density memory as well as high-capacity batteries. In order to maximize the advantages of the 5G network which is ultra high speed and ultra low latency. And so it will provide an innovative multimedia experience. And as we mentioned, as these new features are added on to the handset, the importance of battery performance, it is that much more critical. And we're going to approach this not only by securing greater battery capacity but also applying algorithms to optimize battery performance so that users will have no inconvenience in terms of using the 5G handset. And as you mentioned, even though the price point of the 5G handset will probably be higher than what we're currently seeing in existing handsets, because pricier components, including 5G chipsets are going to be used, we will prepare a product that customers will feel is sufficiently worth what they're paying for. About the second part of your question, about whether this anticipation of 5G would rather delay replacement, actually, we think that as 5G is introduced not only starting from Korea and the U.S. but also to major markets such as China, Europe and Japan, there will actually be a stimulated smartphone replacement demand, especially around the premium segment. Even though each country will have a different speed of 5G network rollout, we expect penetration of 5G handsets to increase quite rapidly within the next several years, and this will not only increase the sales of 5G smartphones but also will help increase demand for peripherals, such as IoT devices.

And that completes today's conference call. Thank you very much.