SAMSUNG ELECTRONICS Co., Ltd. Half Year Report January 1, 2014 – June 30, 2014
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SAMSUNG ELECTRONICS Co., Ltd. Half Year Report January 1, 2014 – June 30, 2014 Note about forward-looking statements Certain statements in the document, other than purely historical information, including estimates, projections, statements relating to our business plans, 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 actual results to differ materially from the forward-looking statements. A detailed discussion of risks and uncertainties that could cause actual results and events to differ materially from such forward-looking statements is included in our financial reports available on our website. Samsung Electronics 2014 Half Year Report 1 / 153 Table of Contents Certification ....................................................................................................................................................... 3 I. Corporate Overview ....................................................................................................................................... 4 II. Businesses Overview .................................................................................................................................. 19 III. Management Discussion and Analysis ....................................................................................................... 52 IV. Corporate Governance and Affiliates .......................................................................................................... 53 V. Information on Shareholders ....................................................................................................................... 93 VI. Executives and Employees ........................................................................................................................ 99 VII. Related Party Transactions ..................................................................................................................... 106 VIII. Other Information Related to Investment Protection ............................................................................... 110 IX. Auditor’s Report ....................................................................................................................................... 116 X. Financial Statements ................................................................................................................................ 118 XI. Summary of Significant Accounting Policies ............................................................................................. 134 XII. Supplementary Information ..................................................................................................................... 149 Samsung Electronics 2014 Half Year Report 2 / 153 Certification Letter of Certification We, Oh-Hyun Kwon and Sang-Hoon Lee, as CEO and director of the company in charge of reporting, certify that we have reviewed this half year report of Samsung Electronics Co., Ltd. Based on our knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary that would be misleading with respect to the period covered by this report. Based on our knowledge, the financial statements, and other financial information included in the report, fairly present in all materials respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report. We confirm that Samsung Electronics operates an Internal Accounting Management System, responsible for establishing and maintaining disclosure controls and procedures and internal controls over financial reporting, as defined in Article 2.2 and 2.3 of the External Audit Act. We have disclosed our most recent evaluation of internal controls over financial reporting to the Company’s auditors and to the audit committee of the Company’s board of directors. Date: 2014. 8. 14 Samsung Electronics 2014 Half Year Report 3 / 153 I. Corporate Overview 1. Overview A. Legal, Commercial Name: - Samsung Electronics Co., Ltd. B. Date of Establishment: - Samsung Electronics (“SEC” or `“The Company”) was established as Samsung Electronics Industry Co., Ltd. on January 13, 1969, held an Initial Public Offering on June 11, 1975. - The Company changed its name from Samsung Electronics Industry Co., Ltd. to Samsung Electronics Co., Ltd. in accordance with the resolution of the Annual General Meeting of Shareholders on February 28, 1984. C. Address, Phone Number, and Website of the corporate headquarter - Address: 129 Samsung-ro Maetan-3dong Yeongtong-gu, Suwon, Gyeonggi-do, Korea - Phone Number: 82-31-200-1114 - Website: http:// www.samsung.com/us D. The Company is not subject to Article 2 of the Framework Act on Small and Medium Enterprises. E. Core Businesses - The Company independently manages three divisions, CE (Consumer Electronics), IM (Information Technology & Mobile Communications), DS (Device Solutions). Products in each division are presented below: Division Products CE CTV, Monitor, Printer, Air Conditioner, Refrigerator, Washing Machine, Medical Devices IM HHP, Network System, Computer, Digital Camera DS DRAM, NAND Flash, Mobile AP, LCD panel, OLED panel, LED The Company is a global electronics company comprised of the headquarters in Korea and 150 subsidiaries across the world including 9 regional headquarters for the CE and IM divisions and 5 regional headquarters for the DS division. [CE Division] The CE division is leading the global digital era through continuous new product offerings with innovative technology, unique design, and value. CTV is the core product of the CE. The Company has maintained its market leadership position for the past 8 consecutive years through competitive advantage in hardware products such as LCD and LED TV as well as software driven product features with our Smart TV product portfolio. Samsung Electronics 2014 Half Year Report 4 / 153 [IM Division] The IM division is leading mobile lifestyle innovation with consumer-friendly products such as the premium brand ‘GALAXY’ series, while at the same time driving the paradigm shift in the market beyond mobile convergence to focus on software. The IM division is focused on meeting market demands by enhancing mobile product differentiation through integration of key features from various product categories. In addition to HHP products, including smartphones, the IM division is also leading technological development and standardization in the global networks system market, including Long Term Evolution (LTE). [DS Division] The DS division is comprised of semiconductor and display businesses. The semiconductor business is divided into memory and System LSI businesses. The Memory business manufactures and sells DRAM and NAND products. System LSI manufactures Mobile AP (Application Processors) and various sensors including CIS (Central Imaging Sensors). The display business manufactures and sells display panels, including TFT-LCD and OLED. The memory business produces differentiated products and has maintained number one position in the global memory market by applying advanced process technology. The System LSI business is leading the industry shift from PC to mobile. For display business, the Company is leading the market with technological development and investment resulting in superior quality and cost competitiveness in TFT-LCD and increasing applications of OLED panels in various IT products. ☞ Refer to 『II. Businesses Overview』, for more details about each division Samsung Electronics 2014 Half Year Report 5 / 153 F. Affiliates The Company is an affiliate of Samsung Group according to the Monopoly Regulation and Fair Trade Act. As at June 30, 2014, Samsung Group had a total of 73 domestic affiliates. Compared to December 31, 2013, three new affiliates (Samsung Welstory, Samsung Card Customer Service, and Seoul Lakeside CC) were added and five (Samsung Corning Precision Materials, Samsung SNS, Global Tech, 365Homecare, and Samsung Petrochemical) were excluded. Among Samsung Group’s 73 affiliates, 17 including Samsung Electronics are listed, and 56 are unlisted. [As of June 30, 2014] No. of Name of affiliates affiliates Samsung C&T, Cheil Industries, Samsung Electronics, Samsung SDI, Samsung Techwin, SEMCO, Samsung Listed 17 Heavy Industries, Samsung Card, Samsung Life Insurance, Hotel Shilla, Samsung Fire & Marine Insurance, Samsung Securities, Samsung Fine Chemicals, Samsung Engineering, S1, Cheil Worldwide, CREDU Samsung Everland, Samsung SDS, Samsung General Chemicals, Samsung Total Petrochemicals, Samsung Lions, SERI, STECO, Samsung Thales, SEMES, Samsung Electronics Sales, Samsung Electronics Service, Samsung Electronics Logitech, Hantok Chemicals, CVnet Corporation, Care Camp, Allat., SECUI, Gacchinet, Open Tide Korea, Samsung Futures, Samsung Venture Investment Corporation, Samsung Asset Management, Saengbo, SD Flex, World Cyber Games, Samsung Claim Adjustment Service, Samsung Fire & Unlisted 56 Marine Insurance Service, S-Core, Suwon Samsung Bluewings FC, Human TSS, RAY, Songdo Land Mark City, S-1CRM, OpenHands, S-EnPol, Samsung Medison, Samsung Biologics, SMP, STM, Nuri Solution, Colombo Korea, Samsung Life Service, Miracom, SU Materials, Natural9, Samsung Display, Samsung Bioepis, Samsung Corning Advanced Glass , Daejung Offshore Wind Power Co., Ltd., SAMSUNG