CEO Message

Dear Shareholders,

I wish you and your family good health and prosperity in the year of 2016.

The global economic environment was challenging throughout 2015 due to the changes in the monetary policy of the U.S., an increase in volatility of emerging stock markets and exchange rates, and a sharp fall in the global oil prices. Amid global uncertainties, South Korea's economy also remained weak. For Samsung Electronics, we continued to face a challenging business environment as the growth of smartphone market slowed down and competition of major products intensified.

However, despite these challenging circumstances, we maintained solid earnings thanks to the ceaseless effort and devotion of all executives and employees. We also continued to make an effort to enhance shareholder value through our proactive shareholder return policy, including the special buyback program.

We believe it was all possible thanks to the support and interest that you have shown to the company throughout the year, so we would like to extend our deepest gratitude and share our performances and the key progresses we made in 2015 with you.

First, despite a slowdown in smartphone demand, we achieved solid earnings based on improved earnings of the component businesses, including semiconductor and display.

In 2015, the total revenue slightly declined from the previous year to KRW 201 trillion, but our operating profit and net profit were solid at KRW 26 trillion and KRW 19 trillion, respectively.

For the memory business, despite a slowdown of the global economy and the IT industry, we continued to improve earnings by reinforcing cost competitiveness through expansion of leading-edge processes such as 20nm DRAM and V-NAND and by increasing sales of high value-added products such as DDR4/SSD.

In the System LSI business, we improved earnings compared to the previous year by reinforcing competitiveness of the mobile AP and foundry businesses based on our 14nm process competitiveness.

For our display business, despite a decline in ASP due to the imbalance between LCD industry supply and demand, we maintained solid earnings by improving cost efficiency. We also enhanced the foundation for revenue growth by expanding the OLED customer base.

For our IM business, revenue and profit declined compared to the previous year due to weak sales from intensified competitions amid slowing market demand. But we enhanced competitiveness of our line-ups by differentiating design, for example Galaxy S6 Edge, and by expanding competitive new mid-range products including Galaxy A and J series.

In the TV business, despite difficulties in the first half of the year such as weak demand in Europe due to the exchange rate impact, we maintained No.1 in market share for the tenth consecutive year since 2006 by reinforcing our premium product competencies through the launch of SUHD TV with the Quantum Dot technology. Also, in the digital appliances business, we further enhanced our competitiveness in the premium market by introducing innovative products such as the Chef Collection kitchenware and Active/Add Wash washing machine.

Second, we focused on strengthening core competencies with our high-quality technologies, and solidified our technological leadership through continuous investments.

In the current IT industry, the boundary between hardware and software companies is becoming blurred. Companies armed with contents, services, and the internet are creating new businesses and emerging as strong competitors.

To cope with such changes in the market, we focused on securing software specialists and R&D manpower, as well as outstanding talents who will be the source of our competitiveness in the future. In addition, we operated the Global Innovation Center and the Samsung Strategy and Innovation Center at Silicon Valley to respond to the changes in the IT industry in a timely manner, and opened the R&D center in Umyeon-dong, Seoul, to reinforce our software competitiveness. Moreover, we invested approximately KRW 14 trillion in R&D to create new technologies and values.

As a result, we were able to widen the gap of technological competitiveness with others as we led the 3D memory era by mass producing the world's first ultra-high density 128GB DRAM module with 3D TSV additive manufacturing technology as well as the 3rd generation V-NAND. And for our S.LSI business, we commercialize 14nm process as the first in the industry, strengthening SoC and foundry business competitiveness. As for the IM business, we improved usability of smartphones through the release of Galaxy S6 Edge with flexible OLED and the successful launch of Samsung Pay. Also, we solidified our business foundation in the wearable market by launching round design Gear S2 and follow-up models of Gear VR.

As of 2015, we registered 5,072 U.S. patents (No.2 in the world), securing future growth engines. We received eight 'IDEA 2015'(design) awards and 38 Innovation Awards at 'CES 2016', including the Best Innovation Award for our smart TV.

Our brand value in 2015 reached $45.3 billion (InterBrand), maintaining global No.7 for the second consecutive year.

Third, we implemented proactive shareholder return policies to enhance shareholder value.

Despite the challenging business circumstances in 2015, we announced various shareholder return policies, including the KRW 11.3 trillion of special buyback and cancellation program and the shareholder return plan for the next three years, as a part of our shareholder-friendly management.

Of the total KRW 11.3 trillion special buyback program, we repurchased and cancelled KRW 4.25 trillion so far in the first phase. Currently, we are in the second phase of the program. The remaining amount will also be repurchased and cancelled in the following phases. And along with this large-scale buyback, we increased dividend per share from the previous year to KRW 21,000 per common share and KRW 21,050 per preferred share, clearly demonstrating our commitment to enhance shareholder value even under the tough business circumstances.

Meanwhile, we successfully held two Investor Forum events of 2015 in Seoul and Singapore to enhance investors' understanding of our outstanding technologies and to strengthen communication.


Dear Shareholders,

In 2016, the overall global economy may slow down, and uncertainties such as financial risks in emerging markets are expected to increase. The IT industry will change in an unprecedented speed, and competitions will intensify further.

We expect core products of our company, such as smartphone, TV, and memory, will face oversupply issues and intensified price competition. Our competitors will follow close behind our leading position in the global IT industry with aggressive investments and innovations. Moreover, innovative business models such as O2O(Online to Offline) and sharing economy are undermining the importance of hardware, which is our strength, and shifting the core competitiveness to software platform.

To cope with these changes in the business environment, we will continue to implement groundbreaking changes and innovations, and strive to secure differentiated competitiveness.

We will secure differentiated competitiveness and become the first mover.

Even under the challenging circumstances, we will renew everything from our product development and management to the organizational culture in order to lead the new era and become a true first mover.

We will better sense the trends of consumer lifestyle and behavior patterns to secure competencies and a system that can lead a new competitive market. To do so, we will ensure internal stability by enhancing efficiency and create synergy among all divisions of the company based on active open innovation, trust, and communication.

We will again strive for shareholder-friendly management this year.

We will continue to remind ourselves that even under uncertainties of the capital markets and the difficult business circumstances, generating solid earnings contributes greatly to shareholder return. As such, we will focus all our efforts on achieving solid results this year.

We will of course carry out the mid to long-term shareholder return policy that we announced in 2015 without any delays.

In addition, as we have done in 2015, we will share with you our company's value and vision through diverse IR activities and continue to strengthen communication with shareholders.


Dear Shareholders,

Samsung Electronics went through many difficulties last year, such as intensified competitions over our core products amid global economic recession. We expect that 2016 will also be a tough year.

However, since the foundation of the company in 1969, we have many times turned crises into opportunities by overcoming difficulties such as the Asian financial crisis and the global financial crisis through changes and innovation. Therefore, we promise you that we will again overcome the crisis based on what we have accumulated so far.

I would like to once again wish all of you and your family the best of health and happiness in 2016.
Thank you.

Respectfully yours,

Oh-Hyun Kwon
Vice Chairman & CEO
Samsung Electronics Co., Ltd