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EDITED TRANSCRIPT005930.KS - Samsung Electronics 2016 Investors Forum

EVENT DATE/TIME: JUNE 20, 2016 / 4:20AM GMT

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C O R P O R A T E P A R T I C I P A N T S

Byungse So Samsung Electronics Co. Ltd. - EVP of Samsung Strategy & Innovation Center

Hyuk Chang Samsung Electronics Co. Ltd - EVP of Material Research Center at SAIT

Sayoon Kang Samsung Electronics Co. Ltd. - SVP, Semiconductor R&D Center

C O N F E R E N C E C A L L P A R T I C I P A N T S

Nick Gaudois UBS - Analyst

Peter Lee NH Investment & Securities - Analyst

Simon Woo BofA Merrill Lynch - Analyst

Claire Kyung Min Kim Daishin Securities - Analyst

Nicolas Gaudois UBS - Analyst

Mark Newman Sanford C. Bernstein - Analyst

Peter Yu BNP Paribas - Analyst

Bill Lu UBS - Analyst

P R E S E N T A T I O N

Byungse So - Samsung Electronics Co. Ltd. - EVP of Samsung Strategy & Innovation Center

Good afternoon. My name is Byungse So. I am going to present ARTIK IoT platform. After 20 years in memory I joined the innovation team aboutaround two years ago and my boss Dr. [Yuan], who is in charge of device solution, [means] semiconductors. So I belong to semiconductor group,so this one is to promote semiconductor for IoT.

Anyhow, whenever he meets me, he asks about what is our IoT strategy. But IoT in the semiconductor area is very hard to approach. The reason isthat typically semiconductor for IoT is a very small and relatively cheap component. Then in the value chain the semiconductor portion in IoT isvery small. So whenever I talk to my customers, they said: Samsung has everything, memory, LSI and so on. So if you bring me every componentand cheap, then I can make big money based on IoT service.

So it's very hard to promote semiconductor for IoT. Here is our answers. I think it's a platform to promote Samsung semiconductor for IoT. Let mestart with the other bit of high-level story about IoT. What is the IoT first, then talking about ARTIK?

We have a lot of products in the world. Samsung is number-one consumer electronics company so we have these kinds of products. ARTIK, itenables to make the products smarter. So using ARTIK, we think that our customers will be able to transform existing product into smarter productvery easily and conveniently. And I think is [what is] value, but more value to the end users. Our hope is that based on ARTIK, by 2020 more than100 million devices per year.

Let me start with a very small video clip.

(Video playing)

This video clip is very deliberately designed to deliver some message in here. We have four different kinds of products. The [individual] is IoTproduct. First one is very famous Amazon Echo, Alexa. Second one is the Samsung [Kies]. Third one is Legrand Switch. Legrand is one of our ARTIKcustomers who produce the lighting switch. Last one is the SmartThings, door open sensing kind of sensors.

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JUNE 20, 2016 / 4:20AM, 005930.KS - Samsung Electronics 2016 Investors Forum



Four different brands. Each one is not designed to work together. In ARTIK, it is our hope to -- IoT business is successful, all these four need to worktogether to create better experience, better value. So I am repeatedly emphasizing that, a turning on and off of light using your hand phone is notfun, just going to the wall and then on and off is maybe better, right? But everybody is talking about I have a connected switch. That's an IoTproduct. I think it's not much fun and not much of value.

But the issue is that further, suppose you have very good engineers in your home and they connected all these devices. Now you want to add onemore device. Later on you bring another IoT product, whatever you imagine, right, it's a doorbell. You buy a doorbell and then install it. Somehowyou need to make it connected to all these four. How do you make it happen?

That's the theme of ARTIK and then that's what we are trying to do in ARTIK. Through that ARTIK hardware and then ARTIK cloud, ARTIK software,our customers who are developers can generate very valuable IoT products. That's why we think that the ARTIK platform, not just selling connectivitychips, so we are trying to deliver more value in IoT world.

So if I make a summary, users' view is that in a building, typically around 100 different brands are inside it, how can you make all the 100 differentbrands work together? Second, privacy and security. There's a lot about issues in the news magazines about the security and privacy in IoT andthen it's not clear value.

Developers' point of view is very hard to make interoperable, because in IoT, as you know, that there's not so many standards existing in termseither in connectivity or operation. Also even though you have some product, it's hard to make it from POC to mass production.

How to make it ready for mass production? Even for some small startups or developers, it's extremely hard to engage in IoT business. The reasonis that they need to source many different kinds of parts. Some [MCU] or [AP], you need to have connectivity chips. You need to have operatingsystem. You need to collaborate with so many other partners. So it's not very easy to make money in IoT even though everybody is talking aboutIoT, it's the next growth. But reality is in [real] IoT revenue, this is relatively small at this moment.

So ARTIK, last May we announced the ARTIK module. And then this year in Samsung Developer Conference we announced ARTIK cloud. And thenwe have hardware and cloud. And then probably we can do a little bit more than just providing hardware or cloud. We are trying to connect cloudto hardware and then bring some additional value. I will give you a little bit more detailed description about end-to-end solutions, and thenecosystem.

Also here we have, even though small, I put some customer clouds. If you're talking about every company, they claim they have their own cloud.Every -- probably nowadays everybody is talking about the platform or cloud. So every IoT product company has its own cloud. They will not giveup.

The problem is you have many, many different kind of clouds. Now how can they work collaboratively and how can you make it easily connecteach other to produce higher value? So ARTIK cloud, I'll give you a little bit more detailed description later, is assuming there are many, manydifferent clouds in the industry.

First, ARTIK module. Samsung is a semiconductor company. We are trying sell ARTIK module. ARTIK module is a family of modules. It has from verylow end to high end. As an example, ARTIK 5 is designed for the ARTIK hub. It has [AP] [Actinos] and then it has connectivity chips, three connectivityWi-Fi, BT and ZigBee, because it's designed for hub so it needs to connect many different kinds of things.

And then it has a module and is mass production ready. So as soon as you make it as a device, you can ship it to your customers. At this momentit's a module format, means that it has a -- we get some off-the-shelf component and then as a module. Later on, probably in later part of thepresentations, Samsung is thinking about how can this kind of module have a little bit more competitive package rather than just assemble themodule?

Another thing is that Samsung has a very good brand of KNOX technology, about the security. How do you protect your data in your smartphone?In ARTIK we bring all of the KNOX technology into our module. So depending on your applications, you can leverage the KNOX technology.

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Also, as I said, in our module it has every possible connectivity, including IoTivity. In connectivity there was a standard kind of [organization]. Andthis year we have OCF, open connectivity foundation. That protocol is called IoTivity, and we are supporting IoTivity also. So Wi-Fi, Bluetooth,ZigBee, and then many different kinds of protocol we support, including IoTivity.

Cloud. As I emphasized, it's an individual IoT product is talking to cloud individually, we call it siloed device. So to create more value or providingsome rich experience for end users, we need to connect every kind of device, every different heterogeneous devices need to be connected andnot just connected, it has to be interoperable. ARTIK cloud is deliberately designed to make them interoperable possibility.

So cloud has many intentions. And ARTIK cloud is, starting from the beginning, it's designed for IoT. So how can all the heterogeneous devices,including feature device, this can make it data, this can be exchanged from each other?

Based on ARTIK cloud, I think if you are app developers then you can access very easily any kind of devices connected to ARTIK. And ARTIK cloudcan be connected to other clouds very easily. It has a very open API so that you can connect easily to the other clouds. Currently we have around700 different devices connected. As an example, as a reference, more and more devices are connected together.

End-to-end solutions. Thanks to Steve Jobs, no-one asked how to use smartphone. Right? You get -- you buy a smartphone and then use it. Youdon't need any kind of manual. That's the core mobile experience or out-of-box experience. Can you imagine that kind of IoT device, bring it homeand then, without any kind of engineering hassle, you can just turn on, connect it to any kind of device and use it. How can it happen?

We provide all the device management software in ARTIK so that based on our -- if you embedded ARTIK in your device and then leveraging ourend-to-end program, you can easily connect to the cloud. As soon as you turn on, this is automatically to the cloud. And then you can see many,many other devices at the same time so that you can create easily your own rule engine or rule settings or creates your own apps and so on. That'spossible.

Another problem, as I mentioned, we bring the KNOX technology in our ARTIK module, but KNOX is a technology to protect a smartphone. So isthis -- if I do some analogy, it's you have a city and then you want to protect the city with a castle; that's KNOX technology. But in IoT, this is fromcloud to hub and hub to things, it has some pipeline. We analogize it like oil pipeline. It has a different problem of protection.

So in ARTIK, we provide the end-to-end security solutions. It has different levels. So like lighting switch, how much money you want to put some-- protect lighting switch? Maybe nobody wants to spend their dollars to protect your lighting switch because, in worst case, you turn on or turnoff, right, and then you can do something else.

But doorbell, then it's a little bit serious, right? So if your doorbell is not -- I'm sorry, the door lock is not protected, then your home security isbecoming an issue. So you maybe want to spend a little bit more money to protect your door lock. So depending on your level of requirement andapplication, you may choose level of -- different level of security and then ARTIK provides cloud to things of security solutions.

Another one. The phone is on your hand, so sometimes if there's something wrong then you push the reset button and then it becoming resetand then it works okay. And worst case you bring it to service centers and then upgrade it all the software. But in IoT, everything is on the [mounted]in your house, let's say 200 devices on everywhere.

In the building, maybe several thousand devices in everywhere. Right? Something goes wrong, what will happen? You cannot dispatch engineers.It's extremely important to update software or feature set of devices through the air. So OTA capability is extremely important in IoT and ARTIKprovides OTA solution. So we cover hardware, cloud, and end-to-end solutions.

Still I bring it to our developers or customers, they need more tools. So we bring all the partners, including operating system partners or securitypartners or API, SDK, all these are partners. Even we bring the -- we call it CAPP partners, certified application program partners. So like sometimesyou have a good idea but you don't have enough engineering resource, then we bring our partners to help our developers or some people whohas great idea. Again, in IoT, collaboration is the key. No-one can success in IoT world without collaboration.

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One of the last feature set is [reference] design. I made a PowerPoint and then approached the customers and I made a pitch. What is the conclusion?Okay, you have good storyline, seems to be, but show me your capability. So we create reference design. This one of course is not for sale, it's notfor mass production, to show how ARTIK can capable. As an example, so lighting switch, we bring it to our partner -- our customer called Legrand.Last May we announced with Legrand about next program with the -- we have engagement.

You know that there are lots of semiconductor companies and then they are approaching --definitely approaching to Legrand. Then we arelatecomer and then Legrand decided to work with us. Why? Because individual component or connectivity chip is very hard to make it variableproduct.

In ARTIK, as I described, combining all those hardware modules to cloud and [to] solutions, they can easily connect this switch into Amazon Echoin maybe 10 minutes. So it's a very important tool to prove ARTIK's capability and the value of ARTIK. It has a modular design so it's not -- ourcustomers can take what they need.

In general, IT industry is saturated as the semiconductor is also about the same. It's 7% growth by up to 2020. But if you're looking for IoT, then it'sabout 25%. The definition of IoT, of course, is very broad. People to people, it has different definitions. But because it has a very high growth rate,everybody is focusing on IoT and the semiconductor industry is also -- IoT is very important.

In IoT, it has a very different verticals. And naturally we started from home. As I said, Samsung Electronics is the number-one consumer electronicscompany, so very important to start with the home. Then very similar to building, some lighting, transportation, retail and healthcare, that's coveringabout half of the IoT world.

Of course it has many different definitions, but based on our analysis, it's around half of the overall hardware value. With the ARTIK module, cloudand end-to-end solution, we think that we can bring a lot of the value, not just bring connectivity chips.

Let me reemphasize that in IoT, probably you may have different imaginations, but in my opinion seamless connections in a minute is extremelyimportant. Also many heterogeneous devices, and so how can we make them interoperate? Based on ARTIK, we can enable our customers anddevelopers to [excellent] devices for IoT world. Our customer success in IoT is our success. And in this way we sell our semiconductors.

Thank you, that's my presentation.

Q U E S T I O N S A N D A N S W E R S

Unidentified Company Representative

Thank you, Dr. So. Let's give him a big hand for the presentation. We'll now proceed with a Q&A session. So if you have any questions, please raiseyour hand and we will bring the microphone to you.

Nick Gaudois - UBS - Analyst

Thank you for the presentation. Nick Gaudois from UBS. You talked about 100 million units by 2020 as a target. Any idea we should split this betweenthe low, mid and high-end segments you talked about? If you could maybe frame a little bit what kind of value you would get in the low, mid andhigh end in that context. Thank you.

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It's very subjective, right? It's our own analysis because in IoT there are so many different aspects and then broad spectrum. So in our target marketI mentioned about 100 million devices in 2020. That's around 5% of our target market, so very small. Still it's a very high value. And your questionis about the segmentation from low to -- I think it's around 55% is the low end and then 45% to 40% is the high end.

Like lighting switch or lightings, definitely you may need to have a low-end chip. But door lock, depending on your applications, you may want tohave some kind of image processing because you do not want to transmit all the image or information to somewhere else. It's the more longer-termpoint of view, it's more cost. Right? So it's a mix. But it's definitely 55% to 60% is low end. That's our estimation.


(Inaudible - microphone inaccessible).


You mean the price low end? Okay. Very difficult question, but let me try and answer. So less than $10 we define as low end. And then above $10we define the mid and high end.

Next question?

Peter Lee - NH Investment & Securities - Analyst

Thank you for taking my question. This is Peter Lee from NH Investment & Securities. Can you tell us how many percentages of in-house semiconductorchips are in ARTIK platform? Can you tell us overall?


I think it's varying depending on a timeframe. We start ARTIK without any preparation. And in semiconductors this requires at least one and a halfyears of preparation to define any kind of product. So we start ARTIK and then defining chips.

So at this moment, as of today, we are bringing an off-the-shelf component. So high-end chip as our sister division's chip, the low-end chip, ourpartners and we have a collaboration with other partners so we are using some other chips.

But over time we have a plan to develop additional chips for IoT. And then we realize that most of the semiconductors are very mobile phone-centric.So it's very optimized for phone or phone-centric applications. For IoT purpose, we think its optimization has to be shifted a little bit. So I think itwould be a year or two years maybe required to best optimize for IoT product is ready.

No question? Probably my presentation is so great.

Bill Lu - UBS - Analyst

Hi. This is Bill Lu from UBS. If I was, for example, a company that makes lights. I have no experience with IoT. I come to you and I don't know howto integrate your hardware or the software. Are you providing consultants to help this customer? And besides charging for the hardware, are youcharging for the services longer term? If this company wants to use the Samsung cloud, are you charging a monthly fee? Can you just talk monetizationoutside of the hardware? Thank you?

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So we have a partnership with a couple of companies and we train them how to use ARTIK and the ARTIK cloud. So we call it CAPP partnership.And then if you approached us, then probably we will not provide educational service, but we bring our partners to you. So our partners and youmay have a contract and then get some engineering service. So that's the first answer.

Then for business-wise, for cloud, definitely we have a business model for cloud because it's -- cloud itself is a cost center. Right? Somebody hasto pay for it. So depending on data storage and then transactions, either our customers or end user has to pay. It's a new business model. And thenevery IoT devices need to think about those kinds of new business model. And from ARTIK cloud's point of view, we will get some good moneybased on the transactions.

One last question.

Simon Woo - BofA Merrill Lynch - Analyst

Thank you very much, Dr. So. My name is Simon Woo from Bank of America-Merrill Lynch. For me, ARTIK is pretty new technology, but still I haveto understand for this area. But my first impression on this, it seems to be something like lots of different chips integration, which already areavailable from a lot of the packaging companies, memory chip, logic together.

It is sometimes called SIP chips integrated. So how ARTIK can be different versus multichip packaging solutions which already all provide theformula of different hardware/software function to cover most of the IoT functions? So how -- why [would we use] Samsung's value-added functionversus already integrated in a chip, so SOC type of functions? Thank you.


So probably I should answer in two different ways. Providing just SOC or connected chip, depending on, [you name it], is the same. We are just oneof the many semiconductor provider players. So in that sense we are the same, no differentiation. Probably we need to compete with die size orperformance, whatever, in the package cost.

So -- but in IoT is that if you have a very integrated chip, that would be one of the competency. And if you have a very good package technology,that would be another competency and so on. So as a traditional semiconductor producer, you can imagine what would be the competencycompared to other semiconductor providers.

In Samsung I think it's not much of a question to -- can compare with many other players. The problem with the IoT is that it's so much fragmented,so much different kind of product and optimization points, it's extremely hard to get large volume. In semiconductors, large volume is extremelyimportant. Probably you will well understand in terms of economics.

So we need to have some kind of a common foundation, otherwise you need to optimize everywhere, then you are losing the game. So you needto compete with the basic fundamental competency and then, at the same time, you need to get some -- same kind of foundations.

Now, in our ARTIK approach is that our chip is not 100% optimized. Maybe 97% optimized. Probably our competitors are a little bit better than --in terms of 2% to 3%. But if we bring some additional value than our competitors, probably then those 2% to 3% may be compensated. And theneventually we get large volume. Then it's a much better position than our competitors. That's our strategy definitely.

And what kind of value you can bring to your customers is the story that I'm trying to tell today. So we are talking about the cloud. So ARTIK hardwareand cloud is easily connected. And then as long as you have ARTIK cloud and hardware, then you can bring the secret solution very easily.

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You can bring device management solutions very easily. Those things are not easy in general. So providing just the connectivity chip, okay, we aresaying. But can you bring additional value? Can you -- okay, let's forget about IoT; just talking about silicon. So sometimes engineers choose somespecific venders because their toolset, their compilers, engineering tools are better than the others. So it's not a silicon game, in my opinion.

So if I make a summary, a little bit long, but core competency is definitely there. We need to work on there. But with only silicon competency, Ithink it's very hard to win. That's our ability.

Okay. Thank you. Thank you very much.


Hyuk Chang - Samsung Electronics Co. Ltd - EVP of Material Research Center at SAIT

Good afternoon, can you hear me? Okay, today I'd like to introduce about new material, so called quantum dot. So maybe I'm going to tell youhow did we realize this new material into the set and made a real product to the market and what's the potential of this material and what's thenext plan based on these quantum dot materials.

Before I go into the story about the quantum dots, I'd like to show you about the material innovation. This view shows how does the materialsinnovation make the device creation historically and technically. We are now talking about the LCD TV space but, excuse me, the material for liquidcrystal has been discovered in 1888.

It's been a while to realize this material into the device. RCA made our first product out of this liquid crystal material after several decades of theyears and then the device has been [evolved] by the chart to the first product is in the market. And since the LCD was realized, in 2005 Samsungmade a very large LCD, mass production was successful.

The reason I'm telling you this way is in the past materials have been discovered and principle has been defined and then they had a lot of experienceto build the extra synthesis of these materials. And then the device was developed based on that materials and finally eventually made a product.It takes a while.

It has the same story. You all know about the lithium ion battery, everybody in this room has the cell phone, smartphone and it has the powerinside, the lithium ion battery inside. The basic concept, how does -- the lithium ion is stored in the material has been discovered in 1946 and thenit took another 30 years, they rethink about by this kind of a principle we can make a battery. It took 30 years.

In another 20 years Sony made our first lithium ion battery product. After that, that has been evolved to many applications in the cell phone, laptop,even these days many of the smartphones and electric vehicles. The material was first before we realized the device out of that.

So in terms of the display materials, you can compare how does the materials and device has been combined. You can see here at the very earlyof the 1950s, CRT was the first TV product. Inside of this CRT we had cathodoluminescent inorganic materials was in there to produce the light outof the electricity. After that, by utilizing that liquid crystal materials, flat display was enabled by utilizing this liquid crystal.

From this time TV was going to the era of the digital, then we made -- tried to have a very high color, a slim design and thin, even larger paneldisplays, so we could develop the LCD. Still we are using the LED as a backlight, from (inaudible) cathode to the LED for the backlight and still youare using liquid crystal. And at the same time we've developed OLED materials to having on other display devices.

At this time these two technologies are kind of competing in each field. For the small and medium size of the display we utilize OLED material. Forthe larger panels we utilize LCD by LED backlight.

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Today I'm going to talk about how this LED, LCD TV material has been evolved to the LED quantum dot LCD device. This is so called SUHD TV thatSamsung now has the product. We are using quantum dot materials for having three different colors out of the blue LED backlight.

But we are kind of [assembling] the device and the customers are required better product in a very short time period, but material developmentis kind of slow, kind of behind from the device requirement from the market. So that's why we are doing the novel method to do the research onthe materials.

Another example of the batteries, from the OLED acid battery nickel cadmium, lithium ion. By utilizing different electrolyte materials we couldhave, the energy density and the mobility has been increased. Now we are about here, so this lithium ion battery goes into the electric vehicle andthe smartphones.

Now we are heading to another device by new materials, which is electrolyte is not liquid; it can be a solid polymer or a ceramic. Then we can makeit more thinner and more safer, even into the wearable devices. So that is the evolution of the battery and the materials. Still the market requireslonger time of the battery, but the material is not ready, it's kind of a little bit below, behind the device roadmap.

I'm going to tell you this, you know the Moore's Law, memory density and the [cost fees] increases twice by year, still going on. But if you see thestory about the battery it's kind of a shame that the research developer of the material [science], but we only could have three times of the increaseduring the last 10 years.

As you can see here, 200 [weight] per liter, about 600 weight per liter these days. But still new materials are kind of competing with each other tohave a better energy density of the battery. And so we need another new chemistry other than lithium ion battery.

We are kind of at the limit of the lithium ion batteries, so maybe even for the higher than 800 weight per liter we need to develop the new chemistry.It's already going on in the laboratory. We will see it within two years, I guess.

But I'm going to tell you about the device. As I told you, the materials development is kind of behind of the device roadmap, but you can see thismarket of the smartphone. We had a lot of increase at this time by utilizing 3G to 4G and the media, not just only the video telephony, to the DMBand high speed internet, we had a lot of increasing of the market size.

And also for the display, at the very beginning mono, colors LCD, color LCD, now the Samsung smartphone is in color OLED and now even utilizingcurved flexible OLED in its device. So that kind of a material and the wireless communication technology made a market increase dramatically, butyou see here the kind of slope is not that high as these days.

Many -- everybody or many people say well what's the next of the smartphone? The market increase slope is kind of slowing down nowadays. Sowhat's going to be the next? The flexible phone, the foldable phone, or even long lasting smartphones or wearable phones?

Every function of those new smartphones is coming from the novel materials, that's what I'd like to tell you today. I'm going to tell that kind of astory into the quantum dot story again. So based on that kind of a learning curve, I'm going to start about the quantum dot story.

Same (inaudible) about the content and history. It's (inaudible) years ago we discovered the quantum dot confined -- quantum confinement effectof the new material. When we have a -- materials -- has less than five nanometer size, we can have a quantum confinement effect and that particlegives to start of semiconductor properties.

So that means if we give the electron we can produce the light, even if we give the light we can produce the electrons. That compares tosemiconductor effect. The first effect was discovered here and many researchers do the study, how do we give the efficiency over that kind of aconcept.

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In the meantime, many researchers are working to think about a device, what we can do out of this fancy material. Surely some kind of a laserdevice, even TFT and color converting, even the memory, photovoltaics, electroluminescence. Many of the concepts of the device out of thequantum dot materials has been suggested but not has been realized as a commercial product.

But in 2013 our researchers at Samsung made some kind of a modification and it gave a new concept to matching multi-share quantum dotmaterials. Made a success in the materials level and we start to utilize that material into the device, the first target was a TV.

At the same time Sony made a TV, but they utilized cadmium based quantum dots, so -- but we decided we cannot use the cadmium into ourproduct because that product is used by the customers and even during the process many employees in the factory, they have to use cadmiummaterials during the process. So we don't allow that kind of things by our policy, so we focused on cadmium-free quantum dot materials andeventually we made a success in 2015, the first cadmium-free quantum dot LCD was developed and introduced in the market.

But you see here another curve, compared to some kind of similar curve as the smartphone. From the beginning of the CRT and the projection TVs,PDP and first the LCD TV, at that time the market is kind of slow, the market increase is slow.

But from here to here, when we go into the digital technology going into the TV business tremendous increase was from here to -- 2003 to 2010.At that time the TV market was more than $100 billion, but somehow from that time it's kind of saturated and even last year the TV market is startto decrease near to just $90 billion.

But if you see here, resolution's dramatically increasing from HD, full HD, now we are talking about ultra high definition and color gamut are almostup to 100%. That means that we are seeing the -- almost the correct colors, as you can see in the light, you can see it's actually the same in the TV.Even though we have this kind of struggling to increase this color gamut, the market is not growing as we expected.

You see the design, so slimness is getting thinner and thinner, even curved design, but still the market is not increasing as we give the newtechnology inside. And the display materials, as I told you, now we are up to here, LED light based, cadmium-free quantum dot LCD is here, torealize almost 97% of the color gamut.

So what do we have to do in the next? Many talking about quantum dot LED, QLED, or holographic display or 3D display. All these new TV sets canbe realized by novel materials and quantum dot is in the center of that kind of a device, because we already have the success out of the cadmium-freequantum dot is on the LCD. We can even go further to the more brightness of the LCD and even for the QLED that we can go to the so calledultimate display devices.

So I'm going to tell you how do we come up to here. Maybe some technical point of -- but here I'm going to skip the details about the technology,but you can just follow the storyline, how do we develop the materials.

Before I tell you about our technology, this is the baseline. At Samsung Electronics every business unit has their development team. They are talkingabout and dealing about three to six months ahead, just three to six months ahead they are doing the development.

And that business unit has R&D center, they're talking about one to one and a half years ahead to the market. SAIT, where I belong to, is a kind ofa Samsung electronics corporate R&D center, we are dealing with five years or even further; five to 10 years ahead. That's why we could developthe quantum dot materials, start from the 10 years ago we focused on quantum dot materials and 10 years later, by today, we made a product outof that novel materials which has not been realized in any other university, any other research institute or any other companies.

So this kind of a three tier R&D structure's made that kind of innovation from the material to the device level. I have a five core technology, inorganicnanomaterials is the part for the quantum dot materials. Other than that we have organic semiconductor, optical film and battery kind of things.

I'm going to tell you about what we do in this inorganic nanomaterials lab to realize the quantum dot materials. Here is another of the advantagesthat our system. When we started to design the material, we made a very tight communication with the device team, which is the business unitdevelopment team.

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So when we first designed the material, the device team is part design (inaudible). When we have a lab sample we give the sample to the set leveland may get feedback to the material development and we start to synthesize the material in the lab scale and also that material to the prototypingof the set. Then get the feedback, the data.

So by this kind of a circulation, when we are ready to mass produce the materials, at the very same time the set products -- set can be produced atthe same time of the materials mass production. So that's the view of our materials and device development.

So this is my motto, that in the past materials development in the first device was followed by, but now the device evolution is much faster thanmaterials. But if we follow this kind of synchronized roadmap circulation, maybe those two markets can be increased together. We do that kind ofthing in the quantum dot development.

So at the very beginning we do the design of the materials. I just want to tell you this; in the theory, in the 1980s, as I showed you the viewgraph,at the very beginning of the content history, in the many research papers talk about quantum dot is perfect and wavelength is tunable and it canmake the pure color. There is no scattering and because it has a meta structure, we can control any kind of device.

That was the theory in the research papers. But in practical there was a lot of difficulties, actual design. Crystal was not perfectly crystalline andthere is a limitation of the tuning the wavelength and when we make the powders it is not uniform, they make some kind of aggregations. Thatwas a very hard part, so we do a lot of experiments to this protocol status to the theoretical level.

One example, by the simulation of the materials by using the computing power, we developed, designed the crystal structure of the quantum dotmaterials. We found out if we controlled this defect by novel materials, we can make the passivation. So that means we can control the crystallinity.So this kind of a material design is one of the hardest part of my research centers.

By this kind of modeling and design materials we could solve many problems and then we have to synthesize by this kind of lab scale synthesisequipment. We control the precursors, additives, solvents. By the theory only one quantum dot can do everything, but in practical we have tocontrol many of the precursors and additives and solvents by combining all materials and made optimization, we made a success the high efficiencyquantum dot materials which doesn't have the cadmium.

We are utilizing a lot of analytical methods. You see here we do the very high resolution transmission electron microscopy to see the atomic levelof the quantum dot materials. Even we do the 3D tomography of the quantum dots.

If we do the electron we can see only the surface in the two dimension, but if we utilize this technology we can -- the tomography, the morphologyof the quantum dot materials and many of the high level, the analysis technology can control and analyze the phenomena of the materials. I'mgoing to skip about the details, but this is just a few of the many examples.

So finally, we could develop the cadmium-free quantum dot. We do a lot of (inaudible) engineering by indium phosphide quantum dot, whichdoesn't have the cadmium. As you can see here, the black dots are the simulation data, the red dots are the experimental data, so you can see theyare kind of a very well fit by the design and the actual.

And also we do the -- this is an actual view of the cadmium-free quantum dot in the [TM]. You can see here, you can see the colors are differentfrom here to the edge, that means we have -- red is the core, indium phosphide, and three layers of some materials and zinc selenide, zinc sulfide,so called multi-share structures.

So that material made the very high efficiency out of the cadmium-free quantum dot materials. Then we can see the colors of the RGB, so you cansee the color change out of those materials. So that is the lab scale.

To make this novel technology into the market we have to do the mass production. As I showed you here, I'm sorry, this is the lab scale syntheticdesign, but I showed you over here is the 500 liter. There was a 10 liter jar at the previous [POF], this is a 500 [weight of] design and one step -- I

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told you have a multilayer design, so we developed one-step multilayer shell coating technology from here to here and continues the separationrecovery.

This reactor can produce enough amount of the quantum dot materials for 800 sets of 65 inches quantum dot TV in one day. And we have 10 ofthese lines, so you can imagine how many quantum dot materials can be produced in one day and you can imagine how many quantum dots canbe available, by the yearly product can be available. So that was a very hard part, when we start a study about the 10 liter jar to the 500 liter jar inthe mass production with a very high recovery rate in the one-step multilayer shell coating technologies.

So after that powdering is not the final end; by utilizing the powder we have to make a film out of them. This is a kind of very conventional coatingtechnology. We put QD powders that have been previous from the jar reactor and then utilizing these raw colors, followed by barrier coating tocover these films and then hardening and then rewinding.

Then we made this kind of role is in the mass production level. We can control the uniformity and those resin formulations are very -- highlyoptimized.

And then this is the design where the quantum dot films are inside. Over here we are using, as I told you, the LED is still the backlight. We (inaudible)LED and then by this quantum dot radiant green colors we can produce red, green, blue perfectly and then making the liquid crystal out of that,we made the quantum dot based LCD TV can be produced. And this one shows very high efficient and full color gamut can be realized.

So here is the SUHD TV in the market now. You can see here this is so called color gamut and this is a standout of the DCI so called color gamutstandardization. They are saying this is about exactly the same as the cinema that you can see in the theatre and now this SUHD TV can producealmost 97% of the color gamut available.

Actually now is 100% in the lab now, so there's a third generation of the color gamut quantum dot TV, but last year's version is 97% over here. Andvery low power consumption because this is very highly efficient and brightness about 1000 nit.

Based on that kind of development, we proudly introduced this into the CES show in 2015 in Las Vegas. As a person like me, as a material scientist,that was kind of a great time when we do study the materials in the lab, after 10 years of the research and we made some kind of a challenge notto use the cadmium.

Actually even five years ago, which is 2010, we could have the same property of the cadmium material for TV with cadmium, but we deny to producethat because of the reason that I told you. And then another five years of effort we could launch at the CES show this quantum dot TV into themarket. So we started to sell the TV from that year.

And this year again second generation of the quantum dot TV was introduced again in the CES show 2016. The efficiency has been even increasedand this color gamut has been another increase at the time.

So this is the TV commercial, as you've seen many times in (inaudible) and everybody can find this in any store nearby your house, near your home.So quantum dot TV in the market these days.

So this is not the end, we are going to solve the very last problems of the quantum dot TV. We'd like to increase the brightness a little bit more andwe also increased the viewing angle performance by utilizing these quantum dot materials. That is the final of the quantum dot LCD, it can be inthe market soon, that's the third generation, this is the second generation and third, that will be the third generation of the quantum dot TV.

And again that is not the end, as I told you, because of the novel functionality of the quantum (inaudible), quantum dot materials, we can havemany potential of the new device. As I told you, high efficiency quantum dot LCD, that's one that we are now working on. We are going to increasethe efficiency again and again for the second generation, third generation, which is we are getting the light from the backlight and give the colors,so called I just summarized opto and optic.

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This material can be utilized opto and electric, get the light and give the electricity, representative with photovoltaics. Solar cell is one exampleand photo detectors, this is the -- you can -- if we have the light, if we give the electric signals, then we have a lot of applications.

So when you imagine the autonomous driving, we need to have sensors for autonomous driving, even at night, or very low light. By quantum dotwe can have -- if we have a very low light sign from the road, we can change it to the electronic signal, then we can utilize that as our sensors andmemory is another example.

Over here, QLED is another final destination of the quantum dot so called give electricity to the quantum dot and giving the color directly, thenwe can call it QD LED. That is, I can say is the ultimate display devices in the near future. And QD laser is also available, if you give the electricity tothe QD materials, we can produce the confined lasers out of that.

And there are other many examples of the chemistry and bio devices. And many patent and research papers are all over the place these days. Sowho will be the person or organization or university who can realize these novel devices out of the quantum dot materials?

I can say Samsung has the success story out of the quantum dot materials and device. Even without the cadmium materials, we are kind of oneand a half and two years ahead in terms of the cadmium-free quantum dot in the same research groups in the world. To do that we have a lot ofchallenges in the materials, another challenge for the device design.

So that will be the summary of the potential of the quantum dot materials and hopefully you fully understood the storyline of the quantum dotmaterials development and device and commercializing in the real market. Thank you very much.



If there are any questions, I would be happy to answer, okay, please.

Claire Kyung Min Kim - Daishin Securities - Analyst

Thank you for your presentations and your teams' effort on mass production of quantum dot. My name is Claire Kyung Min Kim from DaishinSecurities in Seoul. I believe there are still challenges of making blue QD and I understand one of the reasons is that blue QD is easily oxidized. Socan you tell us how your team works on those challenges?


Blue QD is not in these QD LCD devices. Blue QD is the main technology for the QLED device and red and green are under the development, butblue is not ready yet. You were saying that oxidization is the problem, but I'd better say oxidization is not a problem, because this is inorganicmaterials, which is different from organic OLED materials.

So by the chemically or by the ultraviolet tech or by the (inaudible) tech, inorganic materials, the quantum dot is very stable, even the oxidizationis stable. But only the problem is when we get the electrons going to the quantum dot materials, the energy level is not stable. So that is the mainreason that blue is not ready yet.

Even the red and greens are not easy to control, but we've already had some data, not only with us but in the many university has some data onthe red and green, but blue has some problem on that matter. But I'd better say when this can be ready, I don't know.

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Because of this quantum dot has been in the market recently, the researchers -- number of the researchers in the world regarding quantum dotare increasing very much during the last one year. So I believe many people are working on the same problem to see the -- to understand thestability of the quantum dot and it can be sooner than expected, that can be my answer.

Nicolas Gaudois - UBS - Analyst

Hi, Nic Gaudois from UBS. Just on the manufacturing process for QLED, I understand this is a printing process.


You mean QD LCD or QLED?


QLED specifically, so if you can clarify the manufacturing process, the challenges on that process and again similar question, this plus when wediscussed on materials what actually is the timeline more or less for commercialized devices eventually.


Definitely the QLED has to be produced by inkjet processor. If we are talking about the larger panel size, we have to utilize the inkjet processing,which is different from currently available evaporation technology for LED.

You many know that there is another research going on for a -- soluble OLED devices, but struggling a little bit more. But QLED is also adoptingthe soluble processing.


So the timeline therefore? Because by definition if you're using a printing process, the (inaudible) of existing manufacturing at Samsung display isnot really useable, right? (inaudible).


Our business unit for Samsung display device as they see and also the (inaudible) Samsung Electrics 3D division has their roadmap on those devices.But I'm not the one that can announce that at this moment, but which is not in the ready position yet. Not only by us, but in the world, material isnot available.

I should have brought my -- the learning curve of the blue QD materials, but as you see that in many research papers, the efficiency of the blue QD,the best performance in the university now is less than 2%. To have the commercial level, at least we have to have 20%, so it's one other different.

But because of that story and the background of our research activities, the speed of the evolution will be increased, I believe.

Mark Newman - Sanford C. Bernstein - Analyst

Hi, Mark Newman from Bernstein, thanks for the presentation. Could you talk a little bit about the difference between advantages and disadvantagesof QD LCD versus OLED? So talking about the technologies that are available today, OLED clearly adoption is happening quite aggressively inmobile.

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One of the competitors in Korea, LG, is pushing OLED for their TVs and I want to just see if you can talk about the advantages of quantum dot LCDversus OLED for now and going forward for the next few years, thanks.


Okay, the main advantage of the QD LCD over OLED -- and technically, I'm not talking about a project, I'm talking about technology and principle.QD LCD, the materials and all the components can be made by the wet process and continuous coating process. So there is no limitation of thesize in terms of the producibility.

As you know, the OLED -- you know the Samsung smartphone is utilizing OLED, pure RGB OLED, which is [not white] OLED, pure RGB, the real OLEDdevices. But we are focusing on the OLED in the smartphone, or the laptop, or the pad size. The reason is if we are talking about 85 inches, even65 to 85 inches of the evaporation and patterning, the producibility is not complete to the quantum dot materials and quantum dot films in termsof the size.

So that's why we are focusing on OLED, pure RGB OLED into the smartphone and the pad device applications. So I can say the preciseness and sizeand the producibility in those three words, QD LCD has the competitive to the OLED production.

Another beauty of the quantum dot has, as you can see in my viewgraph, color gamuts are superior to the OLED materials. So in terms of the TVapplications, the QD LCD has the better potential than OLED. But there are two disadvantages in technology, the viewing angle, because we are-- the color filters of the LCD is in the mid-range of the panel, so if you see the TV from the very wide angled views, like this, you can see somedifferent from the front of you.

But that can be solved by another component in the quantum dot materials, so that is the one disadvantage from the OLED devices. But otherthan that, by the color gamut, efficiency, power, cost, producibility and everything, QD LCD is superior to OLED. That's what I think.


But do you think in the near future that these problems on the producibility of large OLED can be fixed, such as some other kind of white OLEDoxide-based version? Do you think that could be a direction that Samsung might take instead to fix these problems?


Well, internally we have the technology that you are mentioning, but we didn't decide to use that technology as a product because we have thebetter design by the -- better performance by the quantum dot LCD, so there is no reason that we go for that. But surely we have the technology,but we just don't use it into the actual product.


Thank you very much.

Peter Yu - BNP Paribas - Analyst

Thank you, this is Peter Yu from BNP Paribas. On the technology side, can you explain a bit on your argument that you are about one and a half totwo years ahead of the competition? And perhaps on the IP issues, I understand that your acquired analysis (inaudible) years ago, what does theanalysis play in your IP portfolio and does that effectively block your competition from using a cadmium-free quantum dot? Or is there other bypassway that other -- your competition can produce this quantum dot product?

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So one is our patent portfolio and what was the other one that you mentioned?

Peter Yu - BNP Paribas - Analyst

What technology gap --


Okay. For the patent portfolio, the cadmium-free that I showed you about multi-share coating and the controlled effect, I think I showed you onepoint, so called (inaudible) on our crystal structures, remember that my viewgraph. That material is the key material for having cadmium-freequantum dot has the same performance as the cadmium quantum dot. So we have that patent in terms of the materials and based on that, wehave a multi-share design, all the [ligand] chemistry and also the optimized solvent, additives, turnover, precursors, all the compositions, we haveour own patent.

And very original patent, quantum dot the core and share design we acquired from analysis. So in terms of the QD materials to the device forcadmium-free design, we have the fully live -- is our patent portfolio is fully ready and now we are using that now, so there is no problem.

And the technology gap that I told you, one and one and a half years, the reason that I can tell you that is we have announced quantum dot --cadmium-free quantum dot in the TV as a market two years ago. But now if we see the report from the other companies or other even universities,we still see the same numbers, the same number as we had three years ago, even today.

So I can say we are at least one and one and a half years ahead of the other organizations, that's what we have analyzed. It's kind of a little bitconservative, I can see one or one and a half years, maybe longer term.

Unidentified Audience Member

(inaudible) thank you very much, [Simon] from Bank of America Merrill Lynch. I have two questions, number 1, yes QD sounds a great technologybut we do care -- consumers do care that maybe (inaudible). So why would there be the overall increment of cost to deploy for the (inaudible)technologies?

Secondly, sorry, maybe a little bit different question, but we've been seeing great evolution of the TV technologies. We have already 4K resolutionand 8K may come soon. So quantum dot can really help to make the TV better resolution? And also whether the consumers really do care, 8K oreven 10K. Thank you.


That is also my question and also we do that kind of discussion in our lab and with our strategic divisions all the time, whether the customers requirethat much of the high definition in their house, in their home. We don't know for sure, but once the customer is acquainted to the current availabletechnology, then they will see the difference. So we don't want to be behind to that next level of advancement, so that's why we do all focus onthe new materials.

Maybe 4K will be the final requirement for the customers, but we don't -- I don't believe. The customers will require even higher and even the lowcost, better design. So that's why the researchers are working on the next generation of the quantum dot materials.

And I'm sorry, another question on --

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The question was incremental cost of the (multiple speakers) --


Okay, as you know the QD LCD TV is about, I don't know about the market price right now, but as I understood, always about 30% less than OLEDTVs. Even is it cheaper than OLED devices, because you know this wet process, the producibility is very good. And there is another room for evenreducing the cost out of the quantum dot LCD TV.

I don't want to say -- I maybe don't say the quantum dot itself price can be reduced dramatically from now on, but I can say there is anothercompartment which covers the quantum dot films, the [substrate building] materials and some kind of encapsulation materials. There is manyroom to reduce the cost for the total of the quantum dot films, so there should be another reduction of the cost and it's going on now.

I don't want to say quantum dot itself, but the cost can be reduced dramatically. You know, this product is in the market just two years old. Youcan imagine, how many other parts of the compartment cost can be reduced from two years old new technology.

Any other comments or questions? If not, thank you very much.


Sayoon Kang - Samsung Electronics Co. Ltd. - SVP, Semiconductor R&D Center

Okay. Are you ready for enjoying Samsung packaging world? Okay. Let's go.

My topic is composed of a total three parts. The first one is IT industry and semiconductor and next is the Samsung Packaging capability. And thirdone is what kind of competitiveness we have. Then last, finally you will get what and how you achieve from Samsung packaging. Part One; ITindustry and semiconductor. Let's watch short video about how semiconductor works in smartphone.

(Video playing)

(Technical difficulty)

Why semiconductor for our future? As semiconductor are advancing much more, IT technology can be able to -- is able to change the activitiesthat human can do, such as memory and decision making, [information], perception. Therefore people want to change their lives with moresemiconductor. The good example will be, as you know, that artificial intelligence.

A few months ago a very exciting battle happened in Korea between AlphaGo from Google and humankind [in Padu]. Many people imagine orsay should be humankind, human being will be -- will win the game. However, the reality is changed. That means this IT technology will be -- replacethe human activities.

Future of semiconductor industry. This slide shows some interconnection device -- number of the interconnection device with respect to thetimeframe. Up to 2010, let me call this the PC, personal computer, era. Only 3 billion interconnection is available. However, the current should bethat this is a mobile era. More than 18 billion device interconnection is available through the smartphone.

How about the future? I don't know name of the era. Okay, let me say this is a complex or diverse era. More than -- over [15 billion] interconnectionswill be available. That means this huge explosion of the usage guarantee we need some semiconductor.

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Okay. Let's get in more deeply for the future semiconductor, future IT application. There are several categories in future application, out of themmostly these four categories will be dominating. Probably the industrial; second is wearable, memory medical. The last one is automotive.

Among them, the industrial and automotive will be very dominating for the semiconductor market. Definitely the self-driving car is not included.Therefore, self-driving car is included in this market, the usage of the semiconductor is a huge one. Therefore the usage of the semiconductor willbe expanded. So future IT industry will continue to drive the semiconductor market tremendously. This is end of the first part. It's very important.

Okay. What kind of demands will -- was required from the personal computer in general? Right, the cost [to our colleagues]. How about smartphone?Smartphone honors some demand [tirelessly] or low power. How about the future IT? Several different applications honor various demands, forexample, slim, security, high reliable and low cost and high performance, etc.

How to deliver these kind of demands, do you think? Using silicone technology or using one packaging technology? No way. Therefore in thefuture how to combine well the silicone and packaging technology? That will be the key point in the future. That is today's major topic.

Part two, Samsung packaging capabilities. What is strong point of Samsung Electronics, do you think? Yes, definitely Samsung has device andpackaging and [sets] all of them, especially DRAM and logic. Therefore we have several experience -- some experience the integrated packagingsolution through the memory and logic. Also this kind of expansion can be available to the LCD and LED too.

Samsung has started the development -- packaging development from 1985, 31 years. Actually I joined Samsung 1995 after I graduated in theUnited States. My pitch, the degree, the title should be also packaging. So in my case the packaging experience is more than 25 years. So two-thirdsshould be the [override] for this packaging. Therefore Samsung can handle full complete packaging solution, not only conventional, but veryhigh-tech advanced such as PoP testing. Especially PoP stands for the package on package and TSV, Through Silicon Via, technology will be very,very outstanding in the whole world.

Also we have the full wide range of packaging service, from [pack], bumping fabrication, bumping and test. This bumping and packaging is highlyrelated with fabrication, the material and structure. Therefore if we don't know the structure and material in fab, the good quality of the packagingcannot be guaranteed.

Also in the beginning development stage of the packaging, Samsung package team cooperate with the customer to create new novel solution,communicate very well and collaborate very well. Also during development some outstanding activities, such as mechanical and electrical andsome simulation, also some reliability and troubleshooting will be available. What that means, using this kind of supporting, we'll be able to reducesome trial and error. Therefore perfect and fast delivery will be available from Samsung package team.

Many people ask me what is the major strongpoint of Samsung package team. There are several and I think about -- I summarize the four categories.The first one is the collaboration with device handset. And second is through various packaging platform I will show later. Not one or two, huge.

Third one is really highly skilled are our engineer. And the last one is, I already mentioned, huge experience. These kind of -- the engineer andexperience cannot be got within a few or two or three years. Based on this core technology we cooperate customer and guarantee to give perfectand optimized packaging solution to the customer. That is only Samsung can do, I guarantee.

This is some -- the history, development history. There are some several good, excellent packaging for memory and logic. Some MCP we start firstfrom 2004 and TSV we developed 2006, and PoP that is very excellent for the AP and memory device, we master the first from 2007. So far 1b unitis made. And evolving PIP or PoP, we call the ePoP, and COF, some slide there.

Based on these 30 years' experience and technology, we have 1,900 US patents so far. So when we prepare these patents with all [these], wepre-develop this kind of technology and IP, we pass this well technology to the customer on time. Out of 1,900, around more than one-third willbe the 3D. That means TSV, PoP and wafer stacking technology related.

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This is the full lineup. So AP and modem device, we have some PoP and SiP and nano server conventional flip chip plastic (inaudible). Also wedeveloped a high-tech 2.5 [exposure] technology and display driver IC. We developed the chip on flex. That means very flexible packaging. So weput several different IC and packaging on the flex packaging. Flex film is good for some wearable or bendable products.

The last one, Samsung packaging competitiveness. Okay, this is a very interesting page to introduce. What is the major concern for packaging sofar? Gentlemen, right, cost. Many customers request me always, Dr. Kang, low cost, low cost always for packaging. How about the future? You areprobably correct, the cost is basic. That's it, do you think?

There are two different -- two major item is existing. The first one is this. There are some challenges or hurdles to be overcome in chip size and [sys]size. In the device chip side, for example, the design low saturation is critical, so fabrication guy always is happy to pay out tons of money, as youknow.

[In that area, what is that] will be? The critical issue should be the battery size, how to extend the battery life. That means how to make a small orthin or low-power solution. Take that first. And second item will be the value. What is the meaning of the value -- package value?

At the end of the first part, I already mentioned even for PC era the value from the packaging is a cost. However, currently the future IT, there areso many demands and various value will be available, for example, thin, small, low power and low thermos-conductivity, a high thermo-conductivitythere, low [resistance], high density, high quality and, finally, cost.

Do you think only silicon technology can do that? In PC era, silicon technology can do that. For example, 64 micron and the nano, and one morethat we've got right now is 10 nano. Memory is around 20 nano, whatever it is, it will be available.

However, the silicone technology can create that thin value, do you think, small value? No way. How can you solve this one? There is a reason Iintroduce a new concept, device package integration. What is device package integration? Using the silicon and packaging technology to createthe new value, that is DPI.

This DPI cannot deliver silicon only for one or two package type. For example, (inaudible) package. There are so many different packaging technologiesand experience. In order to meet this DPI, combine silicon and existing packaging technology is very, very critical. Therefore only Samsung canhandle this DPI solution. Let me show just some example of the DPI.

The left-hand side is conventional discrete packaging for the logic and DRAM. If I use HBM, high-bandwidth memory, with the [TS] -- the interposer,the value we call the memory bandwidth will be increased from 50 gigabytes per second to more than 500 gigabytes per second. Also the valuehigh density and low power, small size can be expected. Therefore this kind of DPI will be the future for semiconductor companies.

That is the roadmap of some example of roadmap of the DPI. The package on packaging can reduce the thickness from around 40%. With thenarrow pitch, the size will be reduced around 25%. And high bandwidth using the SUBM and [2.5B] will be that -- 1 terabyte can be available. Letme explain in more detail this number in four items.

First, PoP. I think that this package on package, PoP is very, very excellent for development and mass production. That means equipment point ofview, material point of view, structure point of view is well equipped, except thickness. How to meet the thickness? How to reduce the thickness?The current thickness of PoP is 1.1 millimeter, not centimeter, 1.1 millimeter, very thin.

Samsung is long developed the 0.9 millimeter and we already mass produced. The thinnest packaging of PoP thickness is 0.8 millimeter will beready at the end of this year. As you know, the thinner the package, the higher thermal [resistance]. How to solve this problem?

Samsung has a very -- various novel thermal solutions. For example, thermal interface material, TIM. If I feel that this TIM, that is a Samsung IP --Samsung patent material -- Samsung patent, if we fill up this TIM between the gap bottom and top packaging, heat will be -- the heat pad goesup. So without this gap -- if there is some gap, 80% of heat will be -- come down. So if I feel there is some TIM material around -- more than 40%

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will -- goes up. So heat [dispersion] will be the both direction. Using this kind of technology, definitely more than 10% thermal improvement canbe guaranteed.

This is hottest topic in my presentation today, that's the fan-out PLP, panel level package. As the name implies, PLP is progressed the wide logicpanel level instead of small wafer level. Therefore PLP has a very good motivation to move for the cost. This is the old report. I make a copy fromthe old report about the area of advantage from the 200 millimeter, 300 millimeter and PLP. A cost reduction will be expected.

Second part is the area [use degeneration]. In wafer, do you see the same red line? In wafer level they cannot use this area, so that means it's a deadspace. However, panel level the area usage is around 95%. Therefore two points of view, area and usage reduction, PLP is good for the cost.

And next, Europe is more exciting also. If in the future several devices will be put under one package, [that is a multi-die] SiP or something like that,that means package size will be increased. The current AP sizing is 15 by 15. Okay, let me assume the panel size is 400 millimeter by 500 millimeter.The output from both of them should be almost 3.25 times.

If package sizes increase, their output will be -- the different output will be the larger and larger and larger. Therefore PLP is a better cost performerin productivity than wafer level in the case of the large body.

Next thing is a very good. The example for the future IT is evolving PoP. What is the major interesting item for the wearable guy -- wearable IT guy,do you think? For example, this kind of smart watch. It works, yes. The major concern should be battery life, as you know, right. How to increasethe battery life? That means how to make a small and thin package, that is this. System in package PoP, I call it SiP PoP. Put several devices in onepackage.

There is one example, for bottom -- for top package, the NAND and DRAM and controller is one package. At the bottom is [AP], [PMS], PMIC andseveral (inaudible). We put the one package with the same thickness. Therefore area is reduced around 40%.

Additional value, for example, simple both the design and simple supply chain management and [higher drop] and electrical performance can beexpected using this SiP PoP. Samsung right now is expanding, thus several different type of SiP PoP for the several different devices.

In the first session of this forum should be the IoT. We [cooperate] IoT team to give a very excellent packaging solution using this technology.

And 2.5-inch project is a very unfamiliar to [gentleman]. This is conventional packaging. It's a flip chip, plastic ball grid array with a heat sink. Thisis very tough. The bandwidth is around 128. How to increase bandwidth? With the conventional package I already mentioned, no way, no way.Therefore Samsung developed and mass produced using the logic and HBM with a silicone interposer with one HBM -- [one cube], we call it onecube -- has a full height.

Also Samsung developed four cube, four different HBM, four cube using the silicon interposer technology. The speed will be up to one terabyteper second.

The major hurdle for this 2.5 silicon interposer is cost. They are a bit expensive right now. Therefore Samsung is considering a low-cost solutionabout using the PCV or (inaudible) to reduce the cost. The solution will be already around after 2018.

Okay, 25, around 30 minute, showed my presentation for the 30 minutes, 30 years' long development action. I explained that one. It's well matched,a 30-minute presentation, 30 years of development.

Samsung Packaging offer customers optimized turnkey solutions. What is the meaning of turnkey? Customer does not worry about the from A toZ. I guarantee the customer [closely]. We have some design. We have fabrications, packaging, test, and some fault isolation -- find a fault andrearrangement of the quality, everything.

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In the whole world, who can handle that? Samsung is number one in the PoP and TSV. And we will find more value for customers and extend thevalue. And [DPI] will be the future promised solution, definitely, I guarantee it. That means how to combine silicon and packaging is a very, verycritical issue for future semiconductor company.

Who will be the best for this DPI? Only one packaging solution [will] dominate in the silicon technology, okay. If you have the money, please, goahead.

And last, Samsung will deliver, I promise you. I will provide best PLP and DPI for our customers. Okay. Thank you very much.

Okay, please do not give a tough time. Okay? There is some simple element (inaudible) will be ready. Okay, are there any comments and questions,please? That means well explanation or you do not know my presentation, both of them. Okay, sure. Yes.



Hi, thank you very much. This is Bill Lu from UBS. I have two questions.


Sure.


You showed us a lot of different package types. And I think it's pretty clear that Samsung is ahead in terms of PoP, in terms of TSV. If you look at allthese other packages, can you tell us where you think the gap is the biggest between Samsung and your competitors and what are the key -- whereyou have advantages?


Yes. But I don't [know] detail of the quality of the [T]. However already mentioned, to meet the future direction, that means a DPI. I define the DPI.To meet that DPI, to deliver the DPI, one package solution cannot be available; that is my point. Okay, that's enough? That's okay?


Sure. Second question, in Taiwan a lot of talk on apps processors using a fan-out package, versus if I look at your slides it seems like the implicationhere is that you think PoP is a better solution, at least for now. But the talk on fan-out seems to be that it's good in terms of performance but it'sexpensive. I'm just wondering if you can give us your thoughts on that type of fan-out package and just the pros and cons.

But secondly, in terms of the size of the market, does it stay one customer or do you see it broadening out? Thank you.


But I don't know detail of the [TS] condition and the cost of that or something like that, but I can just imagine. Also, for example, what is the bestpackage type in AP? So that depends on the customer. For example, customer A, I need high speed, for example. In that case, different type of the

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package will be available. It's good. It's doable. And second customer wants to -- I need a low cost, definitely low cost, with a largest [size], it doesn'tmatter.

And wire bonding, for example, wire bonding PoP should be (inaudible). Then customer C want -- I need some high thermal characteristic and Ipropose [TRM] PoP or something like that. So that is a various IT, one of several different types of packaging, demands or values. So in the PC era,only one package type dominates. However, in the future that will not be. So who is better is a very tough to ask -- to answer.


But given that the (multiple speakers).


You asked two questions. Go ahead.


Given that different customers have different requirements, are you going to offer a fan-out package as well for the apps processor market?


Sure, definitely.


Can you tell us what the timeframe might be?


We -- right now we developed that one, therefore the -- is not -- I cannot say the exact number of the period. Okay?

And next, please? Sure.


Sorry, it's UBS again. It's Nick Gaudois. You talked about SiP a little bit. Could you frame where you think Samsung will focus the SiP solutions you(multiple speakers).


SiP?

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Yes, system-in-package, by market or application. So if you look at however using SiPs effectively in the application processor type combinationor for more sensor-centric solution, etc., considering that so far SiP has been used more as a sensor hub or sensor-centric solutions. Thank you.


Yes. SiP is [rather more than ] -- the history is a long time is developed. But problem is at the time is (inaudible) [die] is a critical issue, is put theseveral devices in one package, no test, we cannot guarantee the quality of that one package.

However, in SiP is a very [excellent] solution to make a small and thin solution. Therefore, we put recently, with high quality of the fabrication, wecan guarantee there. We (inaudible) [die] solution. We can put the several devices in the one package.

There's a reason. We put the SiP solution for the wearable, only wearable. Should be some [data] for the smartphone maker want that one, but Ialready mentioned that most of the wearable company, (inaudible) maker, wearable (inaudible) maker, they want this kind of SiP PoP solution.Okay?


Sure.


The mic, please. Over there, over there.

Simon Woo - BofA Merrill Lynch - Analyst

Thank you very much. Simon Woo from Merill -- Bank of America-Merrill Lynch. Maybe two questions. Number one, over the timeline, say whenSamsung will be ready for the mass production for the wafer-level packaging. So far I'm hearing only the PoP solutions who are multi-packaging.But let me say directly, TSMC seems to be ready to provide a wafer-level packaging solution for Apple.

But when the Samsung [is] ready, fan-out technologies. And then the -- it's a very interesting point is the panel-level packaging, because all thechips coming from the rounded shape of the silicon wafers, but this type of the rectangular type seems to be -- yes, I fully agree -- theoreticallyseems to be working. But how are you going to convert the wafer, 12-inch wafer into the -- in a panel level? That's kind of still -- I'm not engineer(multiple speakers).


Okay, okay. Sure, sure. Okay, let me explain there. In the wafer-level and panel-level, that is not one wafer. The both case is -- okay, the secondquestion first, I will answer that one.

In the wafer-level, in panel-level, in the wafer, 12-inch wafer, you have a test, and you select a good wafer, good chip, from the 12-inch wafer andput it under wafer or panel. That is a major difference. Can you understand what I'm talking about? Okay. So [basic] -- with basic devices coming,original 12-inch wafer, and wafer-level is the base -- base carrier is shape is a wafer. Panel is the basic shape is a panel, the rectangle. This is different.Therefore, in wafer-level, they do -- will not do there in actual original wafer, okay?

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That is the reason they had some problem, and that's production. Yes, only PLPs developed in Samsung, it's very tough to answer that one. But theSamsung has cooperated with many OSAT company also. If you have some good solution, we will cooperate right now and even we are doingsome cooperation. So as you know, in OSAT company has a very good wafer-level packaging solution. So if we need wafer-level packaging, wecan cooperate with them. And PLP is one of our OSAT, I think, so we can use the good solutions from the OSAT. Okay?

Okay, so one more, one more. Go ahead.


If I could just follow on Simon's questions. So panel-level fan-out is your decision, so you will not be doing wafer-level fan-out? Your focus is todevelop panel level. So it's not going to be both; you're just going to do one.

And the cost of panel-level versus wafer-level fan-out, you talk about the usage being 95% for panel-level, which is more efficient usage of the areacompared to wafer-level. Is there any other cost advantage to panel-level other than usage?


Productivity.


Productivity?


Yes, productivity.


[Product grade] or --?


Yes. For example, one [shot of] -- for example, one process is a 12-inch, one process for the large-size panel. So one -- or for example, coating, forexample. For example, some coating of the [polyamide] material is 12-inch, is a -- as you already see, the 260 or something like that. But one coatingprocess in the panel-level is around 700. One process, one -- productivity is a huge change, right. So there's the reason [of course] is better than[WLP], I think.


So you won't be developing wafer-level fan-out. Your decision is to focus on panel.

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I don't know yet. So far I opened many excellent packaging solution, inside and outside. If my customer wants to, if I can give the good value forcustomer, I can do something. But this is my thinking. Okay, this is my thought. The head of the package development, this is my though. But thatis not good, well-matched with the company policy in general, right. So it's open, the technology we will [build].



Okay? And I thank you very much. It is almost end. In the beginning of my presentation I'm very nervous, but (inaudible) well [posed] or somethinglike that, I'm very happy to enjoy also my presentation.

Okay. Thank you very much.

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