SAMSUNG ELECTRONICS Co., Ltd. 2021 Half-year Business Report
SAMSUNG ELECTRONICS Co., Ltd.2021 Half-year Business ReportFor the quarter ended June 30, 2021Certain statements in the document, other than purely historical information, including estimates, projections, statements relating to our businessplans, objectives and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements.”Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actualresults to differ materially from the forward-looking statements. A detailed discussion of risks and uncertainties that could cause actual results andevents to differ materially from such forward-looking statements is included in our financial reports available on our website.See, also, 『Note on Forward-Looking Statements』 in preamble of 『II. Businesses Overview』.Samsung Electronics Business Report1 / 291
Table of ContentsCertification . 4I. Corporate Overview . 51. Overview. 52. Company history . 93. Changes in paid-in capital . 124. Stock information . 125. Changes to Articles of Incorporation . 14II. Businesses Overview . 151. Overview . 152. Key products and services . 163. Production materials and production facilities . 174. Sales and long-term contracts . 235. Risk management and derivative trading . 266. Major contracts and research and development activities . 297. Other information . 34III. Financial Affairs. 451. Financial statements . 452. Consolidated financial statements. 473. Notes to Consolidated Financial Statements . 584. Non-Consolidated financial statements . 1065. Notes to Non-Consolidated Financial Statements . 1176. Dividends . 1547. Matters about financing through the issuance of securities . 1568. Other financial information . 163IV. Management Discussion and Analysis. 172V. Auditor’s Report . 1731. Introduction. 1732. Change of Independent Auditor . 1753. Regarding Internal Control . 176VI. Corporate Governance . 1771. Board of Directors . 1772. Audit System . 1883. General Meeting of Shareholders . 193VII. Information on Shareholders . 1971. Ownership of shares by the major shareholder(s) and related parties . 1972. Matters related to the major shareholder . 1983. Change of the major shareholder . 2014. Ownership of shares . 2025. Stock price and stock transactions . 203VIII. Executives and Employees . 2051. Executives and employees. 2052. Remuneration for directors . 208IX. Affiliates and Subsidiaries . 217Samsung Electronics Business Report2 / 291
X. Transactions with affiliates and subsidiaries . 2371. Credit offerings for affiliates and subsidiaries. 2372. Acquisitions and disposals of assets with affiliates and subsidiaries . 2383. Business Transactions with Affiliates and Subsidiaries . 2394. Transactions with Stakeholders other than Affiliates and Subsidiaries . 239XI. Other Information. 2401. Changes in public disclosure . 2402. Contingent liabilities . 2403. Sanctions and others . 2414. Subsequent events and other matters. 247XII. Appendix . 2511. Subsidiaries subject to consolidated financial statements (detailed) . 2512. Affiliates & subsidiaries (detailed) . 2593. Equity investments in other corporations (detailed) . 2734. R&D results (detailed) . 280Samsung Electronics Business Report3 / 291
CertificationLetter of CertificationWe, Ki-nam Kim and Yoon-ho Choi, as a CEO and the executive in charge of reporting, respectively, certifythat we have thoroughly reviewed the half-year business report of Samsung Electronics Co., Ltd. for the sixmonth period ended June 30, 2021.Based on our knowledge, this report does not contain any untrue statements of material facts or omit anymaterial facts; and it does not contain any statements that are intentionally misleading for the users of theinformation in the report.We confirm that Samsung Electronics operates the Internal Controls over Financial Reporting, as defined inArticle 8 of the Act on External Audit of Stock Companies.Date:August 17, 2021Samsung Electronics Business Report4 / 291
I. Corporate Overview1. OverviewA. Legal, commercial name:- Samsung Electronics Co., Ltd.B. Date of establishment:- Samsung Electronics Co., Ltd. (“SEC” or “the Company”) was established as Samsung Electronics Industry Co., Ltd.on January 13, 1969, and held an initial public offering on June 11, 1975.- SEC changed its name from Samsung Electronics Industry Co., Ltd. to Samsung Electronics Co., Ltd. following aresolution passed at the Annual General Meeting (AGM) of shareholders on February 28, 1984.C. Address, phone number, and English language website of the corporate headquarters- Address: 129, Samsung-ro, Yeongtong-gu, Suwon, Gyeonggi-do, Korea- Phone Number: 82-31-200-1114- Website: https://www.samsung.com/secD. Core businesses- The Company (defined below) consists of business divisions that operate independently: CE (ConsumerElectronics); IM (Information Technology & Mobile Communications); DS (Device Solutions); and Harman(Harman International Industries, Inc. and its subsidiaries), which produces automotive electronics components.SEC is a global electronics firm consisting of headquarters in Korea and 237 subsidiaries (collectively, “SamsungElectronics” or the “Company”) across the world, including 9 regional headquarters for the CE and IM Divisions, 5regional headquarters for the DS Division, and the Harman Division’s subsidiaries.Key products in each Division are presented below:DivisionKey productsCETVs, monitors, refrigerators, washing machines, air conditioners, etc.IMHHPs, network systems, computers, etc.DSDRAM, NAND flash, mobile APs, OLED panels for smartphones, etc.HarmanDigital cockpits, telematics, speakers, etc.[CE Division]The CE Division manufactures TVs, monitors, refrigerators, washing machines and air conditioners, satisfying customerneeds and leading the global digital era by continuously offering new products featuring innovative technology, uniquedesigns, and enhanced value propositions.TV is the core product of the CE division. The Company has maintained its position as the market leader for 15consecutive years by leveraging competitive advantages in hardware such as LCD/LED TVs as well as in software drivenproduct features within our Smart TV product portfolio. We will continue to expand our market leadership based on ourcompetitive edge in the premium segment through our 8K QLED and ultra-large products to name a few.Samsung Electronics Business Report5 / 291
[IM Division]The IM Division manufactures and sells smart mobile devices, network systems, and computers. For smartphones, a keyproduct of the business, we have developed a lineup ranging from low-end right through to premium models with theGalaxy series. We will lead growth of the smartphone market and deliver exceptional user experiences by continuing toinvest in future growth drivers such as Cloud, IoT, healthcare, AR, and VR. At the same time, we will lead the global 5Gmarket based on our end-to-end solutions, which encompass handsets, chipsets, as well as our commercializationexperience in initial 5G markets.[DS Division]The Memory Business, System LSI Business, Foundry Business, and Display Panel (DP) Business make up the DSDivision. The Memory Business manufactures and sells DRAM and NAND products; the System LSI Business designsand sells mobile application processors (“mobile APs” or “APs”) and camera sensor chips; the Foundry Business is incharge of consignment production of semiconductors; and the DP Business manufactures and sells display panels.The Memory Business has maintained its position at the top of the global memory market by sustaining costcompetitiveness and applying the latest advanced process technology in each technological iteration. The System LSIBusiness has not been complacent, expanding its focus from mobile to include automotive chips, and it is expanding itsmarket power by offering differentiated products, such as APs and CISs, and strengthening competitiveness via itsadvanced manufacturing process technology. The Foundry Business is expanding by securing technology competitivenessvia adopting enabling technologies and new structures, strengthening its manufacturing capacity in a timely manner toaddress demand, enhancing its IP and infrastructure for customer support, and diversifying its product portfolio usinglegacy processes.In the Display division, the mobile panel business’s differentiated technology is a main factor behind the increasedadoption of OLED panels, while its release of products in new applications—such as foldable devices, rollable devices,and automotives—has expanded the overall market. Meanwhile, the large panel business is focusing on premium productssuch as high-definition, ultra-large, QD TVs and is enhancing its competitiveness through continuous improvements intechnology and productivity.[Harman Division]Harman designs and develops connected products and solutions for automakers, consumers, and companies worldwideand is a global leader in the market for connected car systems, audio and visual products, professional solutions, andconnected services. Harman has established an internationally renowned brand and employs both internal developmentand strategic acquisitions to expand its lineup of quality products. See 『II. Businesses Overview』 for more details about each Division.Samsung Electronics Business Report6 / 291
E. Subsidiaries subject to consolidated accounting (summary)These interim consolidated financial statements have been prepared in accordance with Korean International FinancialReporting Standards (K-IFRS) 1110, Consolidated Financial Statements. As of June 30, 2021, Samsung Electronics, thecontrolling company, had 237 consolidated subsidiaries, with the addition of 2 subsidiaries and reduction of 6 subsidiarieswhen compared to totals as of December 31, 2020.Number of subsidiaries subject to consolidated accountingClassificationAs of January 1,2021AddedRemovedAs of June 30,2021Number of al24126237137See 『Appendix-1. Subsidiaries subject to consolidated accounting (detailed)』 for details.1H21: Changes in subsidiaries subject to consolidated yReasonSamsung Electronics Industry and Commerce Ltd. (SETK-P)EstablishmentSVIC 52 New Technology Investment AssociationEstablishmentViv Labs, Inc.No longerconsolidatedMergerStellus Technologies, Inc.LiquidationSigMast Communications Inc.LiquidationArcam LimitedLiquidationSamsung Suzhou Module Co., Ltd. (SSM)SaleSamsung Suzhou LCD Co., Ltd. (SSL)SaleF. Whether the Company is an SMEThe Company is not subject to Article 2 of the Framework Act on Small and Medium Enterprises.Small and medium enterpriseNoVenture companyNoMedium-sized enterpriseNoSamsung Electronics Business Report7 / 291
G. Credit ratingSEC’s credit rating is assessed by two external credit ratings agencies. As of June 30, 2021, SEC’s credit ratings were Aa3with a stable investment outlook as rated by Moody’s (US); and AA- with a stable investment outlook as rated by S&P(US). As of July 2021, S&P had maintained its rating of AA-.SecuritiesCorporate bond(USD denominated;issued in 1997 and expirein 2027)DateRatingsCredit rating agencyNoteMay 2019Jul 2019Aug 2019Jul 2020Sep AnnualreviewCredit rating range: Moody’s (Aaa-C), S&P (AAA-D)[Credit ratings SpeculativegradeDefinitionSuperior ability to repay debt obligations;lowest level of credit riskHigh ability to repay debt obligations; verylow credit riskS&PAAAAA /AA/AA-A1/A2/A3Upper-medium ability to repay debtobligations; low credit riskA /A/A-Baa1/Baa2/Baa3Medium ability to repay debt obligations;moderate credit risk, speculative factorsBBB /BBB/BBB-Ba1/Ba2/Ba3Speculative; substantial credit riskBB /BB/BB-B1/B2/B3Speculative; high credit riskB /B/B-CaaSpeculative; very high credit riskCCCCaHighly speculative; likelihood of being inor near default; some prospect forrecovery of principal and interestCCCTypically in default; little prospect forrecovery of principal or interestCDDefinitionExtremely strong ability to meet financialcommitments; highest ratingVery strong capacity to meet financialcommitmentsStrong capacity to meet financial commitments;susceptible to adverse effects of changes ineconomic conditionsAdequate capacity to meet financialcommitments; relatively more susceptible toadverse economic conditionsMajor ongoing uncertainties; exposure toadverse business, financial, or economicconditions can impair ability to meet financialcommitmentsMore vulnerable to nonpayment than thoserated BB; has capacity to meet financialcommitments but adverse financial or economicconditions are likely to impair ability to continuedoing soVulnerable to nonpayment; dependent uponfavorable business, financial, and economicconditionsHighly vulnerable to nonpayment; default hasnot yet occurred but expected to be a virtualcertaintyHighly vulnerable to nonpayment; obligation isexpected to have lower ultimate recovery vis-àvis higher rated obligationsIn default or in breach of imputed promises,upon the filing of a bankruptcy petition or thetaking of a similar actionH. Whether the Company is listed (or registered or designated) and matters related to special listedcompaniesThe Company listed on the Korea Stock Exchange on June 11, 1975.ListedDate listed(or registered or designated)(or registered or designated)Stock market (KOSPI)June 11, 1975Special listed companyNoSubject to regulations forspecial exception companiesNoSamsung Electronics Business Report8 / 291
2. Company historyA. Company historyJan 13, 1969Jun 11, 1975Feb 28, 1984Nov 1, 1988Aug 1, 1992Mar 23, 2010Sep 2, 2010Feb 11, 2011Sep 1, 2011Apr 1, 2012Jun 26, 2013Aug 6, 2013Sep 24, 2013Mar 5, 2017Mar 10, 2017Jul 4, 2017Nov 1, 2017Aug 30, 2018Nov 7, 2018Apr 3, 2019Apr 24, 2019Samsung Electronics Manufacturing IncorporatedListed on the Korea Stock ExchangeRenamed as Samsung ElectronicsMerged with Samsung Semiconductor and CommunicationsDeveloped 64M DRAM, a world’s firstUnveiled Galaxy SUnveiled Galaxy TabLaunched Exynos, the first mobile AP brandUnveiled Galaxy NoteSpun off the LCD division (established Samsung Display)Launch of S4 LTE-A, the world’s first LTE-A smartphoneMass production of the world’s first 3D V-NAND flash memory chipsDevelopment of ISOCELL, an industry-first next generation CMOS image sensor technologyReleased advanced Quantum dot-based QLED TVSEA acquired shares of Harman International Industries, Inc. (100%)Started operations at semiconductor production fab in Pyeongtaek, the largest such facility in the worldSold Printing Solution businessLaunched QLED 8K TVs with Quantum Dot technologyUnveiled foldable display at the Samsung Developer ConferenceLaunched 5G smartphone, Galaxy S10 5GAnnounced “Semiconductor Vision 2030”—a vision to invest KRW 133 trillion through 2030 in systemsemiconductor and employ 15,000 personsSep 4, 2019Unveiled Exynos 980, 5G mobile processorSep 6, 2109Unveiled Galaxy Fold, a foldable phone with a new form factorJan 29, 2020 Launched AI-technology-based Grande AI washer/dryerFeb 4, 2020Launched world’s first ultra-high speed DRAM for AI and next-generation super computersFeb 11, 2020 Unveiled Galaxy Z Flip, a foldable model with a new form factorAug 30, 2020 Started operation of Pyeongtaek Line 2, the world’s largest semiconductor lineJan 7, 2021Unveiled Neo QLED TVMay 11, 2021 Announced expansion to the global market for “Bespoke Home”Jun 3, 2021Received certification for reducing carbon emissions, water use, and waste discharge for all of oursemiconductor worksites, a first in the global semiconductor industryB. Company location and changesThe Company’s head office is located at 129, Samsung-ro, Yeongtong-gu, Suwon, Gyeonggi-do. There were nochanges in the Company’s head office location over the past five fiscal years.C. Important changes in management executivesAs of June 30, 2021, SEC’s Board consisted of five Executive Directors (Ki-nam Kim, Hyun-suk Kim, Dong-jin Koh,Jong-hee Han, and Yoon-ho Choi) and six Independent Directors (Jae-wan Bahk, Sun-uk Kim, Byung-gook Park,Jeong Kim, Curie Ahn, and Han-jo Kim).Samsung Electronics Business Report9 / 291
Dateof changeAppointedType ofshareholderNewly appointedmeetingTerms expiredExecutive Director Sang-hoon LeeExecutive Director Oh-hyun KwonExecutive Director Ki-nam KimExecutive Director Boo-keun YoonExecutive Director Hyun-suk KimMar 23, 2018AGMExecutive Director Dong-jin KohIndependent Director Jeong Kimor dismissedReappointed(resigned)-Executive Director Jong-kyun Shin(resigned)Independent Director Sun-uk KimIndependent Director Han-joong KimIndependent Director Byung-gookIndependent Director Byeong-gi LeeParkCEO Ki-nam KimMar 23, 2018-CEO Hyun-suk Kim--CEO Dong-jin KohIndependent Director Han-jo KimIndependent Director In-ho LeeIndependent Director Jae-wan BahkMar 20, 2019AGMOct 26, 2019---Feb 14, 2020---Mar 18, 2020AGMIndependent Director Curie AhnExecutive Director Jong-hee HanExecutive Director Yoon-ho ChoiIndependent Director Kwang-sooSongExecutive Director Jae-yong LeeExecutive Director Sang-hoon Lee(resigned)--Executive Director Ki-nam KimExecutive Director Hyun-suk KimExecutive Director Dong-jin KohMar 17, 2021AGM-Independent Director Byung-gook-ParkIndependent Director Jeong KimIndependent Director Sun-uk KimCEO Ki-nam KimMar 17, 2021--CEO Hyun-suk Kim-CEO Dong-jin KohSamsung Electronics Business Report10 / 291
D. Changes in the major shareholderThe major shareholder changed to Samsung Life Insurance as the shares of the previous major shareholder werebequested to beneficiaries during 1H21.(As of June 30, 2021)Date of ChangeApr 29, 2021Name of majorNumber of sharesshareholderownedSamsung LifeInsurance1,263,050,053Share ratio21.16%Reason for changeNoteShares of the previous major shareholder-were bequested to beneficiariesNumber of shares owned and share ratio are the sum of those of major shareholder and its related parties, and the number of shares is based on shareswith voting rights (including those with limited voting rights in accordance with relevant laws). Please refer to 『VII. Information on Shareholders』 for details on the major shareholder.E. Company name changesIn 2017, Quietside LLC, NewNet Communication Technologies (Canada), Inc., and Martin Professional ApS changedtheir names to Samsung HVAC America, LLC, SigMast Communications Inc., and Harman Professional Denmark ApS,respectively.In 2018, Harman Connected Services Finland OY, and Harman Professional Singapore Pte. Ltd changed their namesto Harman Finland Oy, and Harman Singapore Pte. Ltd., respectively.In 2019, Samsung Electronics Greece S.A. (SEGR) changed its name to Samsung Electronics Greece S.M.S.A.(SEGR).In 2021, Samsung Electronics Portuguesa S.A. (SEP) changed its name to Samsung Electronics Portuguesa,Unipessoal, Lda. (SEP). Details are for SEC and major subsidiaries of SEC. See 『1. Subsidiaries subject to consolidated accounting (detailed)』 in 『XII.Appendix』 for details.F. Mergers and acquisitionsIn 2017, Samsung Electronics America, Inc. (SEA) acquired full ownership of Harman International Industries, Inc.In 2018, Samsung Electronics America, Inc. merged with Samsung Pay, Inc.; and Harman Connected Services, Inc.merged with Harman Connected Services Holding Corp. In the same year, SEA sold its full stake in NexusDX, Inc.In 2019, Samsung Electronics Benelux B.V. (SEBN) acquired shares of Corephotonics Ltd. In the same year, SECacquired a PLP business from affiliate Samsung Electro-Mechanics. In addition, Harman Becker Automotive SystemsManufacturing Kft merged with Duran Audio B.V.; and Samsung (China) Investment Co., Ltd. (SCIC) merged withSamsung Electronics (Beijing) Service Company Limited (SBSC).In the first half of 2021, Samsung Research America, Inc. (SRA) merged with Viv Labs, Inc. Details are for SEC and major subsidiaries of SEC. See 『1. Subsidiaries subject to consolidated accounting (detailed)』 in 『XII.Appendix』 for details.G. Important changes in the Company’s businessThere were no changes over the past five fiscal years.Samsung Electronics Business Report11 / 291
H. Changes in organizational structureIn June 2017, the System LSI business was divided into Foundry and System LSI businesses.[As of June sAfterCE Division (Visual Display, Digital Appliances,Medical Devices)CE Division (Visual Display, Digital Appliances,Medical Devices)IM Division (Mobile, Network)IM Division (Mobile, Network)DS Division (Memory, System LSI, DP)DS Division (Memory, System LSI, Foundry, DP)-Harman DivisionKorea, North America, Latin America, Europe, CIS, SouthwestAsia, Southeast Asia, China, Middle East, AfricaAmericas (DS), Europe (DS), China (DS), Southeast Asia (DS),Japan (DS)Korea, North America, Latin America, Europe, CIS,Southwest Asia, Southeast Asia, China, Middle East, AfricaAmericas (DS), Europe (DS), China (DS), Southeast Asia(DS), Japan (DS)Harman Division was added on the acquisition of Harman International Industries, Inc. in March 2017.Health & Medical Equipment Business was excluded from the CE Division in 1Q18 and included again from 1Q20.3. Changes in paid-in capitalThere were no changes in paid-in capital over the past five fiscal years.Due to the retirement of shares, the total par value of the shares issued is KRW 679,267 million (KRW 596,978million in common stock and KRW 82,289 million in preferred stock), which is not equivalent to paid-in capital ofKRW 897,514 million.(KRW, shares)Type of stockClassificationJune 30, 2021Number of issued sharesCommon5,969,782,550Par valuePaid-in capital100596,978,255,000Number of issued sharesPreferredTotal822,886,700Par value100Paid-in capital82,288,670,000Paid-in capital679,266,925,0004. Stock informationA. Total number of sharesAs of June 30, 2021, SEC’s issued shares on a cumulative basis totaled 7,780,466,850 registered common shares and1,194,671,350 registered, non-voting preferred shares; and the Company had canceled 1,810,684,300 common sharesand 371,784,650 preferred shares in accordance with resolutions of the Board of Directors (the Board). As of thesame date, issued shares and shares outstanding totaled 5,969,782,550 for common shares and 822,886,700 forpreferred shares.Samsung Electronics Business Report12 / 291
[As of Jun 30, 2021](Shares)Type of stocksClassificationI. Authorized 000,00025,000,000,000-II. Issued
- Samsung Electronics Co., Ltd. ("SEC" or "the Company") was established as Samsung Electronics Industry Co., Ltd. on January 13, 1969, and held an initial public offering on June 11, 1975. - SEC changed its name from Samsung Electronics Industry Co., Ltd. to Samsung Electronics Co., Ltd. following a
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