investment in R&D

Success today is just that. Global competition ensures that there is always something better coming tomorrow. At SAMSUNG, we have thrived where others have faltered by using creative and innovative technology to create new lifestyles and markets. We believe that continuous innovation is the only way companies can achieve a sustainable competitive advantage going forward. That is why nearly one out of four of our 123,000 employees is directly involved in developing tomorrow’s products at our growing network of 17 R&D centers on almost every continent of the globe.

In 2004, we invested roughly $4.6 billion representing 8.3% of total sales in R&D and our hard work on the technologies of tomorrow was recognized with over 1,600 US patents. The payoff was -- as you have already discovered throughout this report -- an impressive list of global awards and world firsts like a 102-inch plasma TV, a mobile phone that takes 7-megapixel photos, and memory chips fabricated with sub-90-nanometer process technology.

In 2005, we will be initiating a broad range of strategic initiatives designed to drive future growth. We continue to identify, develop, and acquire the core technologies that will enable us to consistently be first-to-market with innovative products as we establish ourselves as an active participant in the global standardization process. Our recent cross-licensing agreement with Sony is just the start as we step up our patent registration and licensing efforts and enhance our global sensing and sourcing capabilities.

We are also well on the way to completing a next-generation collaborative network that will leverage the full potential of our global R&D resources to dramatically accelerate time-to-market. Using Six Sigma projects as a catalyst for innovation, we continue to benchmark other leading manufacturers as we strive to measure up to the standards set by the world’s best firms. And since our continued success ultimately depends on the vision and quality of our people, we are now developing a top-notch personnel system to attract and retain the world’s top talent. We believe our future is in very good hands.