Good morning and good evening. First of all, thank you all for joining this conference call. And now we'll begin the conference of the Fiscal Year 2019 First Quarter Earnings Results by Samsung Electronics. This conference will start with a presentation followed by a Q&A session. [Operator Instructions]. Now we shall commence the presentation on the fiscal year 2019 first quarter earnings results by Samsung Electronics.

Good morning. This is Robert Yi from Investor Relations. Thank you for joining our earnings call for the first quarter 2019. With me representing each business units are Mr. SeWon Chun, Executive VP of Memory Marketing; Mr. Hur Gok, Senior VP of System LSI; Mr. SangHyun, VP of Foundry; KwonYoung, VP of Samsung Display; Lee JongMin, VP of IT and Mobile Business; and Kim Seog-gi, VP of Visual Display. And we also have Mr. Ben Suh and Mr. TaeGyu Kang, who are both with the Investor Relations. I would like to remind you that some of the statements will 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 the first quarter dividend. The Board of Directors today approved the first quarter dividend of KRW354 per share to be paid in May, for both common and preferred stocks. As we announced, in 2017, our shareholder return policy covering 2018 to 2020 promises the annual dividend of KRW9.6 trillion. Accordingly, the payout for the first quarter is KRW2.4 trillion in total or one fourth of the annual total. With that I would like to move on to our results. During our fourth quarter last year earnings call and in our March earnings disclosure, we shared our concerns regarding unfavorable memory market conditions and display business challenging our businesses in 2019. These concerns are the main cause for the weak performance in the earnings results that I am presenting today. The total revenue in the first quarter decreased 14% year-on-year KRW254 trillion declined primarily to weaker demand and prices for memory and display products. Gross profit contracted approximately KRW9 trillion year-on-year KRW19.6 trillion, with corresponding decrease in gross margin. SG&A expenses remained similar compared to the same quarter last year. The operating profit in the first quarter was KRW66.2 trillion, a significant year-on-year decrease, mainly due to challenges in the memory business. The operating margin decreased to 11.9%. The financial impact from foreign currency exchange movements were minimal, as weakness in the U.S. dollar and euro were mainly offset by strength in emerging market currencies. I'll now briefly review the performance of each business units. In the semiconductor business, memory prices declined considerably to weak demand caused by continuation of inventory adjustments at major data centers, which began in Q4 last year. On the mobile memory side, we actively responded to increase demand for high density products in new flagship smartphones. In the System LSI and foundry businesses, earnings improved quarter-on-quarter, as we addressed demand for application processes using flexible smartphone products. The display business recorded a loss, due to low utilization and price decline for flexible products in the mobile display segment, as well as unfavorable supply demand conditions in the large display business. In the IM division, despite solid sales of Galaxy S10, profitability in the mobile business declined year-on-year as competition intensified in the low to mid-range segments. In addition, the process of revamping of our mass market lineup, amid softer over a smartphone demand led to a year-on-year decrease in sales volume. In the network business, earnings grew due to accelerated commercialization of 5G network in Korea. For The Consumer Electronics division, sales growth of premium TVs which included our QLED and ultra large screen models resulted in year-on-year earnings improvements. Now I would like to share our second quarter business outlook. In the component business, even though memory demand from major applications such as mobile may start to recover, such improvements are likely to be dampened by continued price decline and weak seasonality. In the System LSI, we expect application processors and CIS demand to continue to improve. For the OLED business, increased demand of our infinity display widget panels is expected to help improve the results. In the set business, we introduce the world's - we will introduce the world's first 5G smartphones. And in the mass market, we will continue to enhance specs in areas such as camera and display to differentiate our lineup in an extremely competitive environment. The network business will keep growing his presence in global 5G and LTE network installations. In The Consumer Electronics division, we expect earnings improvements, due to strong seasonality for products such as air conditioners, as well as positive response to our new premium TV lineups. In the second half of this year, demand for high density memory products is expected to increase in most market segments, barring global macro-economic uncertainties. In the display business, earnings are expected to improve as multiple companies release new smartphones utilizing flexible OLED displays, including flagship products by our major customers. In the set business, we will focus on maintaining our leadership by increasing sales of premium products, meet challenging environment caused by growing competition in stagnant market for TVs and smartphones. In mid to long term, we aim to strengthen competitiveness for our key businesses by diversifying applications and continuously delivering innovations in component technology and set form factor. We also continue to enhance the capabilities of our emerging business areas for automotive solutions by expanding the synergies between our component technologies and Harman's capabilities, and for artificial intelligence by expanding the Bixby-based service platforms to solidify his foundation. Now, I'll address capital expenditures. Capital expenditure in the first quarter was approximately KRW4.5 trillion with KRW3.6 trillion allocated to semiconductors and KRW0.3 trillion to display. We will continue our capital expenditure strategy of investing flexibly with the changes in the market conditions. As we previously mentioned, we expect our investments in memory equipment to decline significantly in 2019. However, we will continue to make infrastructure investments to address meet long term demand. Before we move on to presentation from these businesses units, I'll share several data points for your reference. Q1, our DRAM bit growth was flat Q-on-Q with about mid-20% ASP decline. And for the second quarter, we expect the market demand grow low teens and we expect our bit growth to be similar. For 2019, annual demand the DRAM bit growth is expected to be roughly mid-teens and we may come in slightly over that. For NAND flash, in Q1, our bit growth was mid-single-digit with about mid-20% ASP decline. For the second quarter, we expect the market demand NAND bit growth to be mid-teens and we will grow our bits in line with the market. For 2019 annually, we expect NAND demand bit growth to be low 30% and we expect out bit growth to be slightly over that. For display panel business, the revenue mix pertaining to OLED was about mid-70%. For our mobile business, our total handset sales in Q1 was 78 million units and we sold about 5 million tablets. The blended ASP for our handset division was about high $240 and the mix of smartphone within our total handset was low 90%. For second quarter, for total handset shipment, we expect a slight increase over first quarter. We expect a similar level of shipments for tablets in second quarter. We expect slight decline in blended ASP for our handsets in second quarter. And the mix of smartphone within total handset will remain at though 90%. In Q1 this year, our TV set sales declined about mid-20% and we expect mid-single-digit decline in second quarter, but for the year, we expect mid-single-digit increase of TV shipments this year. Now I'll turn the call over to gentleman from each business units starting with memory.

Good morning. This is SeWon Chun from the memory marketing team. In the first quarter, demand from major applications weakened steadily on the high macro uncertainties. For NAND, overall demand was softer because of seasonality and inventory adjustment by several countries. However, demand for high density e-storage remained solid, thanks for the launching of a flagship smartphones, alongside server transition from HDD to SSD. However, increasing the supply of 64-layer OEM solution products and expanding supply in the channel market, blended NAND ASP to decline continuously, especially in the channel market. As a result, we proactively addressed demand for 128 gigabyte in higher e-storage that focused on us and the growing demand for high end high-density SSD. For DRAM, demand from overall applications weaken and ASP showed a sharp decline due to seasonal effects. For server, in particularly, inventory adjustment by datacenter forms, caused demand slow continuously while CPU shortage and seasonally weak set build reduced PC demand. For mobile, however, launches of new models growing adoption of high density products and a strengthening trend toward the high density memory from China's major customers, partially offset the decline in set demand similar to the case of for NAND. Our company actively addressed rising demand for high density mobile products, which led to beat our previous expectations. In the second quarter of 2019, the market is likely to remain slow, due to seasonality, yet we expect overall demand for applications to recover gradually. For NAND, the high density trend and HD replacement demand seems to be expanding continuously as price decrease. Demand for high density sub SSD is increasing in overall market and we expect the old rate replacement the trend to continue especially in the enterprise market. For client, we also expect the price declines to boost the attached ratio and to strengthen the trend toward high density. For mobile, we expect the high density trend to continue as prices softens also launches of high end smartphones that adopt more than two to six gigabytes of storage will keep demand steady. For each applications, our company will closely monitor demand changes triggered by price declines. And with our competitiveness in solution products, we will actively address demand for high value added products such as a sub SSD and high-density storage. Moreover, we are currently mass producing fifth-generation V-NAND for brand SSD as planned. By accelerating expansion deeper into server and mobile, we will continue to enhance our product competitiveness and strengthen market leadership. For DRAM, we expect the demanded recovery in server from the end of the second quarter, mainly from datacenter companies as their inventory adjustment process complete. Also we expect PC demand to grow, due to an increase in contents per box, while set build is likely to show a decline as a CPU shortage is expected to persistent in the second quarter. For mobile, we spent the overall high density trend along with a newly launched smartphones from Chinese companies will lead demand. We will actively address demand for high end differentiated products such as LPDDR4X. On the other hand, we will also focused on the transition to, 1y-nanometer in major applications based on our technology leadership. Now I am moving - I'm going to talk about the second half of 2019. For NAND, although the situation that the supply so first the demand is likely to continue throughout the. The demand for most applications is expected to increase as prices soften. For SSD, we expect to see increasing high density SAS portion in enterprise. And for client SSD, we expect rate to grow and steady demand grow mainly from NVMe. On mobile, although overall set demand is likely to be slow, launches of high density flagship models by major customers were driving demand growth. We will actively generate a new demand, while responding to high density memory demand based on our customers need to differentiate their products and services. At the same time, we will strengthen our cost of competitiveness by extending supply with fifth-generation V-NAND. For DRAM, the macro environment has created overall industry uncertainty, yet we expect demand to grow because of seasonality. For server, due to extend our new CPU our next generation new CPU datacenter companies, demand mainly for high density products is likely to be solid. For mobile, although set volume for smartphones is expected to be stagnant, we spent the demand to increase solidly across all segment. In the high end and above segment, adoption of over eight gigabyte high density mobile DRAM is expanding. And in the mid-range and below segment, the trend toward the high density is strengthening. We will continue to monitoring changes in market demand caused by uncertainties and flexibly manage our investment and take capacity. We will also actively react to rise demand, mainly for differentiated high density products and make every quarter to generate sustainable profit. Moreover, as a leader in technology, while enhancing the quality of cutting edge products, we will focus on ramping up production of 1y-nanometer products and mass production of 1g-nanometer products. Thank you.

Good morning. This is Ben Hur from the System LSI Business. In the first quarter despise flowing demand for image sensors related to the Chinese smartphone market entering weak seasonality, overall earnings improved, thanks to increased supply of APs and modem adopted by key customers the 2019 Flexi model. Notably, we secure the technological division by commercializing the world's first 5G chipset solution, offering more modem chips, radio frequency chips and power measurement chips. In the second quarter, our earnings that expected to improve slightly as demand for mobile image sensors and DDIs is expected to recover slightly, thanks to seasonality. In addition, demand for 5G chipsets solutions is also expected to rise on the back of increasing sales of the 5G enabled smartphone. In this quarter, we will seek to secure new multiple customers in the U.S. and China for 5G chipset solutions and commercialize them in a timely manner. We also concentrate on developing the next 5G chipset solution by integrating an application processor and 5G modem into one single chip. In the second half of this year, are even likely segment smartphone market, set makers are expected to continue to adopt the high spec components are made a shift toward 5G and increased adoption of the multiple cameras in higher resolution sensors. And we respect these environments had positive impact on our business. Looking ahead, we plan to expand our lineup of 5G chipset solutions in imaging sensors to address the demand for high specs in the smartphone market and we will also expand our mid to long term business scope by diversifying our product offering through the development of the 3D sensors and automotive IoT chips. Thank you.

Good morning. This is SangHyun Lee from the Foundry Business. In the first quarter, foundry earnings was stagnant quarter-on-quarter, due to sluggish global foundry market conditions, as well as slowing mobile demand related to the start of weak seasonality is the smartphone market in China. Positively, we first started mass production of mobile products for 5G and IoT products adopting EMM process. In addition, we secure the new orders for continuing chip sets from a major customer by promoting our FinFET based 8-nano process. By doing so, we have diversified our business areas into computing AR, VR, 5G and automotive. In the second quarter, even if mobile demand recovers slightly as expected, founder earnings are likely to remain mostly flat and the soft overall demand for semiconductors. However, in this quarter, we started shipping EUV 7-nano process based mobile products to major customers. In addition, we will continue to strengthen our process competitiveness through the tape out of EUV 6-nano process and by completing the development of 5-nano process. In the second half of this year based on our success from mass production of EUV 7-nano process, we will concentrate on developing the EUV 5-nano process and gate all around architecture, which is expect anticipated to overcome physical scaling and the performance limitations of impact architecture. By leverage our EUV process leadership, we will focus on increasing advanced nor the customer basis in mobile and high performance computing. In addition, we will use our specialty processes including FDSY and eight inch and advanced knows to take leadership in newly emerging areas such as 5G, AR and automotive technology. Thank you.

Good morning. This is KwonYoung Choi from the Planning Department of Samsung Display. In the first quarter, the display business recorded an overall operating loss, due to weaken the profitability in both the mobile business and Large Display business. Specifically earnings in the mobile display business fed into the red, due to slow demand from major customers. Alongside the continued declines in panel ASP caused by heightened competition with LTPS LCD. In addition, under week seasonality, the larger display business recorded a loss due to continue to slide in panel ASP caused by capacity expansion for 10.5 generation in China. Looking ahead to the second quarter, we expect any improvement in profitability in mobile business to be limited by soft demand for flexible display. Under these circumstances, we will focus on profitability by increasing sales of widget OLED products by leveraging our cutting edge technology with, which includes fingerprints on display and infinity display. In the larger display business, although we are concerned about the imbalance between supply and demand, we expect demand to keep growing for high value added products, such as once used in high resolution and with larger TVs. In preparation for such conditions, we will strive to improve profitability by actively addressing demand for core products. Alongside our efforts enhanced our cost structure and reinforce technical differentiation. Now I would like to present our display market outlook and core strategy for the second half of 2019. For the mobile display business, we expect demand for smartphone use OLED panels to rebound, bolstered by product launches at our major customers. At the same time, however, we are concerned about constant pressure OLED panel ASP caused by competition with LTPS LCD. Against this backdrop, we will work to enlarge the OLED panel market by actively addressing demand for new products at our major customers, as well as by launching products for new applications such as notebooks and foldable displays. For the large display business, we are concerned about with about mounting uncertainties caused by capacity expansion in HD industry. However, since we expect to see continued growth in demand for premium TV panels, including once used in UHD 8K, which are larger models. We will seek to improve profitability by focusing on high value added products. Thank you.

Good morning I'm JongMin Lee from the Mobile Communications Business. I would like to share our first quarter results and outlook for the IM division. For the mobile business, overall market demand for smartphone decreased quarter-on-quarter as we moved into a seasonally weak period. Demand also decreased year-on-year, due to stagnant market trend. We released the new Galaxy 10 Series, which is celebrate the 10th anniversary of a Galaxy innovation. The S10 Series is designed to deliver a practical and perfect mobile experience, leveraging our accumulated innovations in technology, including Infinity-O display with ultrasonic fingerprint scanner, a camera that captures professional grade looking images and wireless power share. Revenue in the first quarter increased cost quarter-on-quarter, thanks to the sales performance with the S10, which outperformed is predecessor S9 back by high interest and a patch to market response from this launch. However, our shipments increased modestly quarter-on-quarter, due to a decrease in sales of a legacy models. As a result of our lineup, the organizations have a mid to low end model. Moreover, profitability improvement was limited, due to the trend of offering higher specs for new models, brand marketing for the new flagship models and expenses related to changing the mass market lineup. Now, let me address the outlook for the second quarter of this year. Under continuing weaker seasonality, market demand for smartphones is expected to increase slightly quarter-on-quarter, but is likely to continue - this declining trend on year-on-year basis. For our mobile business with the healthy sales trend of the S10 Series, we expect our smartphones shipment to grow slightly quarter-on-quarter as the newly launch A Series is getting a positive effect from the market, particularly response to diverse customer needs in a rapidly changing market, we replaced the lineup by integrating the J Series into the A Series and introduced a number of new A Series, which adopted innovative technology. For the A Series in particular along with its stylish design, we upgraded essential features that are frequently used by our customers offering an enhanced camera experience, a powerful battery with super-fast charging and on screen fingerprint scanner. Now new models post stronger initial sales than is predecessor of that. In the second quarter, we will not only strive to drive a solid sales of poster S10 and new A Series, but also to enhance competitiveness of our overall portfolio by expanding adaption of cutting edge technology, as demonstrated by the S10, 5G and A 80. For our network business, we will do our best to maintain our strong performance through 5G commercialization and LTE expansion. Finally, we share I will share our outlook for the second half of this year. We forecast the market demand for smartphones in the second quarter - second half will be flat year-on-year. As we entered the period of a strong seasonality, each competitor will expand launch of new smartphone. Market competition is expected to intensify amid such conditions, we will strongly push sales growth by launch competitive new models in all segments from the A Series to Galaxy Note. First, we aim to strengthen our premium leadership and gain growth momentum. For the new Galaxy Note, we will build on its own strength which is a larger display and pen, while also increasing series of innovative products, such as 5G models and foldable devices. For the A Series, we will actively response to market competition and drive this growth by introducing cutting edge technologies then miss customer needs. Furthermore, we will strive to secure profitability through improving efficiency over our operations as well as expenses. For the network business, we will maintain our leadership role by strengthening our business foundation through continuing to expand LTE networks into the overseas market and 5G acumen for initial markets, such as South Korea and U.S. as well. Thank you. Seog-gi Kim: Good morning, I'm Kim Seog-gi, VP Sales and Marketing Visual Display Business. Let me start with the current market conditions and our result for the first quarter 2019. The overall TV market in Q1 declined quarter-on-quarter as it entered a slow season after end year peak seasonality and year-on-year, due to weak demand mainly in emerging markets. For Samsung, sales in premium products increased, backed by ongoing product mix improvements through expanded sales portion of strategic products. In addition, all the adoption of new models let profits improve year-on-year. In particular, boosted by an increase in the sales of premium models like QLED and super large products, Samsung expanded its market share year-on-year and maintained the number one position in the super large screen and 2,500 U.S dollars in above segment, solidifying leadership in premium markets. In addition, Samsung released its full QLED 8K TV lineup globally, offering models ranging in size from 65 to 98 inches, pioneer the market for ultra-high picture quality. QLED 8TV is receiving favorable responses from the market, thanks to our proprietary picture quality processing engine, and up scaling technologies. For the digital appliances marketing Q1, market demand decreased slightly year-on-year, due to the spread of conservative consumer sentiment caused by the slowing U.S. housing market and Brexit effects in Europe. We improved our sales and profitability through all the adoption of new models with strengthened product competitiveness. In particular, growth in the domestic market is trending up solidly centering on new lifestyle home appliances such as air dresser, dryers and air purifiers. Now, I will share market prospects for the 2019 second quarter and the second half. For the TV market in Q2, market demand is projected to weaken slightly post quarter-on-quarter and year-on-year, due to an ongoing decrease of consumption caused by unfavorable exchange rates in emerging markets. While sales are projected to decrease year-on-year because of a lack of global sporting events this year, Samsung will seek to improve results through expanding its high value added portion of products, including QLED and super large screen TVs, and increasing sales of new models such as QLED 8K TVs. In particular, we shorten the schedule for new model releases this year by more than one month compared to last year schedule. Through this, we will focus on further strengthening our leadership in a premium market, as well as securing profitability. For digital appliances in Q2, we will seek improvements by strengthening sales of air conditioners, which are entering peak seasonality and continuously increasing sales of new premium products. In the second half of 2019, the TV market is projected to grow slightly year-on-year, despite negatives such as economic slowdown and favorable exchange rates in some emerging markets. Under these market conditions, Samsung will keep increasing sales of its high value added product lineup, which include QLED and super large screen TVs, further enhancing our leadership in premium products and generating continuous growth and profits. In addition, through modular micro LED products, which have no limits in size, resolution or shape, as well as lifestyle products that add value to our consumers lives, like to Frame TV. Samsung will continue to lead product innovation as a leader of the market. For the digital appliances market in a second half, demand for appliances is projected to recover half and half, amid easing the trade conflict between the U.S. and China and despite concerns over Brexit. While improving profitability through an increase in sales of new lifestyle appliances, and premium products, Samsung will further strengthen its B2B business, which includes built-in appliances and system air conditioners, as well as its online channels to secure future growth engines. Thank you.

Thank you. This concludes our presentation and we'll move on to Q&A sessions.

[Interpreted] [Operator Instructions]. The first question will be presented by Mr. Yoo JongWoo from Korea Investment and Securities. Please go ahead, sir.

[Interpreted] I have two questions about the semiconductor. The first question is about the 1x-nano defect that was talked about in the market quite a lot. Can you share us - share with us some details about the cause, as well as the current status of that defect? And if there was, what was the impact? How much was the impact to your first quarter results, due to this 1x-nano defect? Also would there be any implications or changes to your DRAM ramp up schedule as a result of this defect? Second question is about the bit growth. Actually, you are above guidance for both DRAM and NAND in the first quarter, can you give us some background to why you were able to be above guidance? On the other hand, we noticed that you've actually sort of decreased the full year guidance for a bit growth. Can you also share some background on that?

[Interpreted] To answer your first question about the 1x-nano issue, the cause and the current update, we will like to also then explain the impact that would have on the company, as well as how we plan to respond. The issue itself is actually a quality issue that we found in some of the one 1x-nano DRAM products that were delivered to some of our server customers. It was a temporary quality issue that occurred in a process of ramping up our 1x-nano product. We've already found the technical solution, it's been adopted to our mass production, and currently our 1x-nano is in normal operation. The provisioning for this quality was quality issue was taken in the first quarter results. We cannot share with you the specific size, but it was not large. And therefore, the - any impact to our profit and loss for the second quarter as a part of handling this quality issue would be minimized. Also, regardless of this quality issue, our 1y ramp up is going ahead as scheduled. As we move up the with the process migration, the technical difficulties are becoming more sophisticated. Actually we've learned valuable lessons from this experience. So we are focused even more on quality control and we will be able to therefore deliver even more perfect quality as we ramp up to 1y-nano and the other processes and we will maintain a very strong position as the technology leader in the industry. About your second question on the bit growth, first about the reason why we were able to overachieve the guidance in terms of the first quarter shipment, even though the overall market demand we remained weak. We were fortunate to have a high share, especially at the high density mobile products that the new - for the new smartphones, and that has helped us overachieve on the guidance as well as the market growth. In terms of the reason why we where we are downward adjusting our full year guidance is explained by several factors, such as the fact that actually the market demand for first quarter was weaker than what we had expected. Also, actually, the timing when major customers are expected to complete their inventory adjustment and come back to buying, that timing is actually being pushed back to closer to the end of the second quarter. Also, we're noticing that as prices decline, the customers are actually operating on a leaner inventory than what they used to. So considering all of these factors, we have decided to a downward adjust the full year bit guidance to mid-teens. Now about how we expect our - because to be a slightly above market for the full year to give you some background, our basic start strategically direction of focusing more on a profit based growth, mid to long term sustainable growth has not changed. We will focus on sustainable profitable growth rather than focusing on for example, short term growth in scale. However, the reason why we're expecting to be slightly above market is number one, because we have grown above market in terms of first quarter shipments. So that has been counted in also we believe that out the application markets, the mobile where we have a large share is going to be relatively the more stronger application market and that's why we are expecting our full year bit growth to be slightly above the market.

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

[Interpreted] I have two questions about the DRAM inventory, it seems the DRAM suppliers their inventory is rapidly increasing. Can you give us some color in terms of your inventory how high it is right now? And is it high enough to call for flexible adjustment of your production for example, have you been considering ways of adjusting your production by for example, reducing the wafer feeder input? Second question is that we're also noticing that the data center customers data centers are just not buying anymore. Do you notice from your customer and whether the inventory is just has - inventory has been run through? Do you see signs of your customers, demand improving? And if you see that can you compare that to the amount of demand improvement you saw this time last year?

[Interpreted] To answer your question, even though we can't share you with the details of our inventory levels, we can say that our inventory has definitely increased quarter-on-quarter, mainly due to the fact that we're in the week season of the year and also the fact that we went through expansion of the capacity second half of last year. But as we mentioned always during our calls, we have continued to maintain flexible capacity considering the market demand. And then because we've downward adjusted our overall market demand for this year, we are currently in the process of undergoing line optimization to respond to the decrease in demand and also to stabilize our future inventory. About the line optimization, as you know, because there was such a rapid increasing market demand over those several past years, we've been increasing our production through not only facility expansions, but also by converting some of our production capacity. And in this process, there were actually many areas that needed to have some automation work done. And this time, we have decided to optimize and reduce the efficiency of our overall semiconductor line through for example relocating some of the equipment. Of course line optimization is something that goes on routinely in a fab, but this time we will be able to take on a more aggressive scope and this may have some impact on the production volume. However the actual and detailed scale of the production that will be affected by our line optimization has not been determined and we plan to review and adjust this level depending on market demand in the future. About your second question of the customer demand and their inventory. Even though it's difficult for us to share the details of customers inventory levels, we do presume that their inventory levels would have decreased at least compared to the end of last year, given the fact that they've been going through inventory adjustments since fourth quarter of last year. However, it seems that the timing when the server customers will start back purchases have been pushed back to closer to the end of the second quarter. But we think that from the second half of this year, as inventory levels stabilize and also the seasonality kicks in, there would be an increase in demand.

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

Good morning. Thanks for taking my questions. The first one relates to memory. So several of your peers have implemented production cuts or idling for NAND flash and to a lesser extent DRAM. Beyond what's described today, in terms of probably more in a larger impact of line optimization, do you consider potentially implementing similar measures or not going forward and why? And what would be the considerations in doing so including profitability, pricing, and also risk for DRAM of potential price collusion? And number two, related to mobile. Last week, you issued a press release indicating you are delaying the launch of a Galaxy phone. Could you summarize for us the key issues, how you intend to address them, and weather and how this is changing your outlook for foldable devices into a mid to long term? Thank you.

[Interpreted] To answer your first question, as we've always done, when it comes to our decisions of investment, supply or price energy, we've always done a decisions based on our own market analysis and our own market outlook regardless of what peers or other suppliers have been doing. And in terms of the line optimization, it's being done for two main purposes. One is of course the fact that this will help us optimize the lines in a mid to long term perspective, but also because we adjusted down the full year demand growth. And based on this adjustment, the inventory would have gone above the appropriate level that we believed and therefore the line optimizations would also achieve that purpose. To answer your second question about the Galaxy Fold, we have received as a review sample. And according to what we've analyzed, there were some display damages in the interview sample, due to force applied to the part of the display that's exposed on the top and bottom part of the hinge. And also there was some foreign substances that were discovered in the display. The reason why we announced to delay the launch was because we wanted to thoroughly analyze these issues to find a fundamental solution and to supply and deliver a product that meets our very high standard of completeness. The updated launch schedule will be announced within the next few weeks. Also, we have realized that we need to provide and prepare even better communication with our customers in terms of how to use the Galaxy Fold. Regarding the Galaxy Fold itself, as you know, we have invested quite a long time and effort in order to develop the Galaxy Fold. We believe that it is going to be the product that provides a differentiated premium experience to customers who want to have the latest technology and innovative experiences and that the Galaxy Fold will create a new category in smartphones. And our conviction and commitment behind that has not changed. We will continue to exert our efforts to innovate new form factors and also actively respond and reflect the voices of our customers and the market.

[Interpreted] The next questions will be presented by Mr. SK Kim from Daiwa Capital Markets. Please go ahead, Sir.

[Interpreted] I have two questions about memory. First of all, it seems that listening to the message, you're expecting the recovery of DRAM demand to be delayed than what we originally thought. And under that assumption, do you still think that you'll be able to meet this growth guidance that you provided for second quarter? Also, it seems that the price pressure is going to continue into the second half. Given that can you give us an outlook for the overall market, as well as how you plan to respond to it in terms of strategy? The second question is about the NAND industry. Inventory seems to be running quite high. But if the SSD demand doesn't recover as people are expecting, probably this oversupply may even continue until the end of this year. If this happens, if oversupply continues in the second half, how will you respond? Are you for example considering ways of responding by using this as an opportunity to gain market share by actually increasing your investments?

[Interpreted] To answer your first question, first of all, in terms of the bit shipment for second quarter DRAM, we expect to actually meet the guidance for second quarter by increasing shipments for not only the mobile but also for server DRAM in the second quarter. Regarding recovery of the data center demand, even though there will be differences in inventory levels from server customer to customer, we think that overall as inventory stabilizes for servers, there will be recovery gradually of demand are starting from second quarter. Regarding price outlook, fundamentally, price, of course is determined by the demand and supply situation of the market. But more recently, I think the visibility has even become lower. So it's very difficult to predict where the price will go. But just looking at the market situation, even though there are external variables in terms of environment, we think that in the second half, with the seasonality kicking in and also the server customer inventory stabilizing, there will be solid demand in the second half. And that's why we would leverage our technology leadership, especially strengthening our cost competitiveness around our cutting our advanced notes, and also actively respond to the high density and differentiated demand in order to gain a stable profitability. Regarding your second question on NAND, NAND price there are many complex dynamics in play for example, in some customers, actually they're hesitant in increasing the memory content because they thought, they started to buy again. This may actually rebound the prices. On the other hand from the suppliers' perspective because of the impact of the inventory that they're carrying, even though demand was growing, supply also grew and this also resulted in continued to week prices. That was the past. However, we think that there is actually a recovery in demand in all applications, including e-storage and SSD driven by the lower prices. And as an example, for example, in mobile, the adoption of e-storage of high density of 256 gigabyte and more is expanding, and actually the demand from HDD to SSD that conversion demand is also accelerating. That's why from the second half, we expect both the market situation and also prices to stabilize. Regarding our investment plans, as we've always mentioned, we do not pursue just a short term growth in size and scale, but we've always emphasized the stable profitability as the priority of our strategy and that remains valid. So in the short term, we will very closely sense changes in the market to flexibly manage both our investments and supply, but at the same time focus on the mental long term perspective so that we're able to analyze and better understand the overall mid to long term trends of the IT industry, so that we are well prepared to maintain our position as the industry leader.

[Interpreted] The next questions will be presented by Mr. J.J. Park from JPMorgan. Please go ahead, sir. J.J. Park: [Interpreted] I have two questions. The first is about the semiconductor. Can you give us the current status of the second floor of phase one, what an implants of using the remaining space and also can you give us when you expect to, to operate the second phase of context? Second question is about the IM. It seems that the S10 has actually done even better than expected, but compared to that, the improvement in your profitability for first quarter seems to be limited. Assuming that S10 would sell even more in the second quarter, accounting for that, can you give us your overall outlook for mobile results in the second quarter?

[Interpreted] To answer your first question, as we mentioned during the last call, this year we'll be focusing more on migration rather than new expansions. That's why the remaining capacity on the second level of contact phase one that will be operated flexibly according to market demand and we have not reached any specific decisions or regarding operation of a new fab. Regarding your second question about the S10 and the IM performance outlook, as we mentioned during the speech, in the first quarter, the improvement and profitability was limited. For example, there was the new model unpack for both S10, brand marketing, and also there were some costs associated with a revamp of our mass lines. But the S10 margin itself is maintaining healthy second or two digit level similar to its predecessor. And looking forward to even though the BUM cost burden continues as products become more a high spec and market competition is expected to become more fierce and so overall it's not an easy competitive situation. We will try to improve our profitability incrementally by gaining a stronger economies of scale by increasing our sales and also by cost efficiency and more effective marketing efforts.

[Interpreted] The next question will be presented by Mr. Mehdi Hosseini from SIG. Please go ahead, sir.

Yes, sir. Thanks. Thanks for taking my question. On the smartphone guide for the second half, you said that you should be able to show year-over-year growth. Can you share with me some of the factors that give you the confidence that the unit shipment in the second half of '19 would actually grow on a year-over-year basis? And I have a follow-up.

[Interpreted] The reason why we're projecting that that will be able to grow in terms of shipments year-on-year. Number one is, is the A Series, which actually was announced at a very competitive prices compared to the product itself. The shipments the sales volume we're expecting will increase throughout the year. The E Series that was launched last year has had very positive responses from the market. Also on top of that, there's the S10, which has shown very strong performance in the first quarter. That will continue in the second quarter and thereafter. And also towards the second half, there's always the launch of a Note which will also help increase our overall shipments.

Thank you. On the foundry side, as your 7 and 6 nanometers ramps, how should we think about the margin profile for that specific sub-segment relative to the operating profit for the entire semiconductor business unit?

[Interpreted] Regarding the profitability the margins of our advanced knows, having done advanced notes before. We do know that 6-nano and 7-nano these advanced notes do require initial investment. But once we have the volume ramp up, the margins actually quite improved to cover for example the depreciation. And on top of the 7-nano and 6-nano, we have the roadmap of five and four following and so we are confident that in the long term margins will be secured.

Thank you.

[Interpreted] The next questions will be presented by Ms. Kim Kyung-min from Hana Financial Investment. Please go ahead, ma'am. Kim Kyung-min: [Interpreted] I have two questions. The first question is about the foundry business. You've announced plans of investing KRW133 trillion in system semiconductors by year 2030. Also you're planning expansions for both 8-inch and 12-inch. Can you share with us the insight yet you have in terms of your downstream demand to justify the sort of expansions and investments? Second question is about the System LSI business. Mobile still accounts for a large share, which may have actually dragged down the business in the second half of 2018, but especially with a rollout of 5G, this may actually become an opportunity for you. And so in terms of that context, what kind of product portfolio are you preparing?

[Interpreted] Regarding the 12-inch, actually it is the demand from applications such as mobile network, 5G, HPC and auto. That's driving and justifying the investments and expansions that we're doing, including the EUV exclusive line 5 and below - excuse me - 7-nano and below. Also for the existing 65-nanos, we have demand coming for example from the high pixel and multi-camera image sensors, and that is why we're planning to expand the S4 line. Regarding the 8-inch, that is focused for example for the power or DDI are sensors, discreet fingerprint recognition and the discreet sensors, even the discrete products. Also, that's the current demand in the future. We're expecting more demand to build for example in the automotive and IoT, and that's why even for the 8-inch, we are making investments to expand production. Regarding your second question, yes even though the smartphone handset market itself decrease contracted between 18 and 19 and expected to only grew about 1%. Actually from the semiconductor business side of with the adoption of 5G, this is actually an opportunity to see increase in both a market revenue as well as market size. Given the fact that we were the first to commercialize the 5G, we think that this is a great opportunity for us to strengthen our position as a mobile SOC company. We were the first to develop and supply the chipset solution for 5G for the flagship handsets. On top of that we are currently working on creating a one chip solution that combines the AP and the modem. In addition to the mobile demand, there will be 5G solutions demand from the auto as well as IoT which we are preparing and we will continue to expand our business in the 5G area by signing on new customers. We will take one last question before ending the call.

[Interpreted] The last questions will be presented by Mr. Marcus Shin from Mizuho Securities. Please go ahead, sir.

[Interpreted] I have two questions. First question is about the display business. We're noticing that the first half is always weak, first half last year was a week period. And also, you're recording and operating loss first half of this year. Do you know why the reason why this is repeating? Would you think that the same pattern would repeat next year? Or do you have strategies and plans of countering this repeated seasonality and the business? Second question is about the network, the 5G network equipment business, which many people are expecting to be the next driver for the company overall. Compare to the expectations that the market has about the 5G equipment business, I think there's relatively less known about specifically what Samsung is targeting in terms of 5G equipment. What's the size? What kind of markets are you targeting? And so can you share with us the target market size and the description of the 5G equipped market that you'll will be focusing on? And can you give us some guidance in terms of the 2019 and 2020 revenue that you're expecting from the equipment 5G?

[Interpreted] Regarding your first question about the low utilization of capacity in the first half that is actually caused by our high dependency on a specific customer in a specific part of the smartphone industry. So it will be difficult to fundamentally remove that effect in the short term, but we are countering this for example by developing new solutions such as FoD fingerprint sensors or SoDs, speaker on display and also we're increasing our supply of flexible LED to Chinese handset makers. Even though we can't disclose the exact scale, we do expect therefore the supply volume to increase in the second half. And this will continue to have a positive effect until the first half of next year. In the mid to long term, the way of us countering the seasonality of the business will be to diversify our applications to beyond the mobile to look at for example, laptop computers, in IT, automotive or foldable. Regarding your second question, actually when it comes to our 5G network equipment business, there's the equipment business itself consisting of the radio access network or core. But also there's - we're also focusing on the service business for example on equipment deployment and optimization. We are working with the major carriers in markets such as Korea, U.S., Japan and India. We were able to complete 5G commercialization first in the world successfully early April in Korea. We will leverage this to maintain a strong leadership in 5G in countries such as Korea and the U.S. and also continue to roll out our base to new areas. Even though it's difficult to give you details of the results, business results we're expecting, we are expecting to have solid results on because not only the 5G network business, but also that we will continue to supply the 4G LTE equipment.

[Interpreted] Thank you very much. That completes this quarter's conference call.