ANNUAL REPORT Contents

2008 SAMSUNG ELECTRONICS ANNUAL REPORT Contents The Way We Lead 01 Message from the CEO 10 About the Board 14 2008 Financial Summary 16 Performance by Business 18 2008 at a Glance 20 DMC 22 Digital Media & Communications Business Product Gallery 28 DS 34 Device Solution Business CSR Corporate Citizenship 40 Partner Collaboration 42 Sustainability 44 Financial Statements 47 Investor Information 98 Global Network 99 THE WAY WE LEAD At Samsung Electronics, we believe that crises are opportunities for innovation and that change is about action. It takes a different kind of strategy to navigate tough economic times and become one the world’s leading companies. And we have what it takes to get there. HERE’s HOW WE DO IT Knowing how to lead is one thing. Being able to sustain that leadership is an entirely different one. In the next few pages, we’d like to introduce a few of our exceptional people and the unique ways they’re helping us lead the way in brand marketing, manufacturing, research and development, and design. 03 Understanding Tomorrow’s Markets And Consumers When it comes to developing premium home appliances for specific regions, it’s essential to have detailed data and research on those markets and consumers. The reason our front-loading washers with vibration-reduction technology and French-door refrigerators top their respective categories in the US is a direct result of our robust market- and consumer-focused market-sensing capabilities. And the insights we gain are helping us lead the way to a more convenient, comfortable future. Kyu-Hee Lee Assistant Manager, Brand Marketing Group Digital Appliance Division Collaborating For Greater Synergy Since 2007, we’ve operated an innovative “cell-based” manufacturing system that has doubled productivity for our entire Digital Media & Communications Business product portfolio. These remarkable gains have been made possible by close collaboration between each of our departments—from manufacturing and development to marketing and purchasing. And the greater synergy this collaboration enables is helping us lead the way to a more productive, profitable future. Gab-Soo Lee General Manager, Application Engineering Group Global Production Technology Center Digital Media & Communications Business 505 Thinking Outside The Box The most important principle in any R&D process is thinking outside the box. That’s what we did when we set out to develop a small but very important component of smart card information security. In addition to significantly lower fabrication costs, the resulting all- digital solution has the added benefit of easing migration to different platforms, technologies, and markets. And the ability to step back and challenge the conventional is helping us lead the way to a more secure digital future. Ihor Vasyltsov Senior Engineer, Digital IP Development Team System LSI Division Arriving First With Speed And Efficiency The thing that’s helped us rise above our rivals in the ultra-competitive LCD panel industry has been our ability to consistently develop technologies and ship products ahead of the rest. Our cutting-edge R&D capabilities enabled us to seize the first-mover advantage in a new product category at CES 2009 when we unveiled a ready-for-production HD LCD TV with edge-lit LED backlighting when others were just showing mockups. And this ability to consistently be first to market is helping us lead the way to a greener, more profitable future. Yong-Il Kim Manager, Development Team 2 Backlight Technology Group 2 LCD Division 07 Connecting With Consumer Lifestyles At the Samsung Experience in downtown New York, visitors can enjoy an engaging and memorable hands-on experience with over 300 of the latest and greatest Samsung products. Our staff of “brand ambassadors” strives to provide exceptional service to each customer while delving deeper into their needs to help them make the connection with Samsung products that fit their lifestyles. And those lasting impressions are helping us lead the way to a richer, more enjoyable future. Angelo Vicari General Manager, Samsung Experience Making Smart Choices That Grow Markets One of our strategic goals in 2008 was to grow our mobile phone market share in emerging markets. While many of our rivals lost ground in last year’s market downturn, our smart, focused product line and resource allocation choices enabled us to achieve dramatic gains in both sales and brand awareness across Southeast Asia and Oceania, a trend we expect to continue in 2009. And those are the kind of choices that are helping us lead the way in more markets everywhere. Jee-Hyun Dina Lee Manager, Southeast Asia Sales & Marketing Group Mobile Communication Division 09 Creating Value That Can’t Be Touched The inspiration for our TV designs comes out of a product development process that includes extensive research on the user experience, meticulous consideration of each process step, and countless development and marketing discussions. Our sophisticated “liquid crystal” bezel design was the fruit of this exhaustive investigative and collaborative process, transforming our TVs into veritable objects of art. And that unique design touch is helping us lead the way in living rooms around the world. Hee-Bong Kim Junior Designer, Design Group Visual Display Division Message from the CEO 11 Our vision of becoming one of the world’s leading companies is coming to life with creative innovation and progressive entrepreneurship. Dear Samsung Electronics stakeholder: As the US financial crisis deepen the global economic downturn in 2008, we experienced an extremely challenging year with conditions that recalled those we faced a decade earlier during the 1997 Asian financial crisis. This difficult situation was further aggravated as high oil prices fueled inflation, ex- change rates increased in volatility, and falling asset values impacted real income. Despite this challenging business environment, systematic oversight and effective action enabled us to post continued growth in our core businesses as we delivered yet another solid financial performance with record consolidated sales of KRW 121.3 trillion and a net profit of KRW 5.5 trillion. THE YEAR IN REVIEW Despite the global Our core semiconductor, mobile phone, LCD panel, and TV businesses enjoyed continued growth. economic downturn in While DRAM and NAND memory prices dropped sharply in 2008, our technical leadership and ongoing “ cost-reduction efforts enabled us to further extend our lead over our industry rivals. Our non-memory 2008, systematic oversight semiconductor businesses delivered dramatic growth despite significantly weakened market demand. and effective action In mobile phones, we continued to generate stellar growth as our focus on bolstering our lineup with enabled us to generate new smartphones and building market share in emerging markets paid off, enabling us to ship nearly 200 million phones for the year as we demonstrated our potential to vie for the industry’s top spot. Our continued growth in our LCD business overcame slowing demand and tougher competition in the second half of the year as we core businesses as we maintained our industry-leading net profit margin and extended our lead over the competition in the delivered yet another 40-inch-and-larger TV panel market. Our TV business also overcame adverse conditions to grow ship- ments by 54% over 2007 as our global market share surpassed 20%, solidifying our position as the solid financial undisputed industry leader as we marked our third consecutive year at the top of the LCD, flat-panel, performance. and overall TV markets. We used creativity to strengthen our foundation for global leadership. Fueled by creativity, our ambition to become one of the world’s top companies has driven continuous ” improvement in every area of our organization thanks to our hard work and success in attracting the best and brightest people, pursuing innovative R&D, and building a strong, distinctive brand. Approxi- mately 40% of our global employees are now involved in R&D as we develop the technologies of tomorrow. In 2008, we earned 3,515 patents in the US, a 29% increase over 2007 that kept us a solid No. 2 in the annual patent ranking. We also continued to press forward with a variety of market- and customer-focused brand marketing programs, including our successful role as the official wireless communications equipment partner of the Beijing 2008 Olympic and Paralympic Games. We actively worked to build shareholder value and promote sustainability. Even as volatility in financial markets was triggering the global economic downturn, we were actively pushing ahead with investor relations initiatives to improve our stock valuation. While the majority of global bourses and technology stocks lost more than half their value in 2008, our shares faired com- paratively better, declining just 19% as our IR efforts paid off. We also launched a number of initiatives to improve workplace environment, safety, and health as well as reduce energy consumption as part of our growing commitment to sustainability. Our ongoing efforts to reduce toxic chemicals and improve product recycling were recognized by our second place ranking in Greenpeace’s quarterly Guide to Greener Electronics. 2008 Consolidated sales Breakdown By division 35% 28% 17% 12% 8% DiGital MEDiA TELECOMMUnicatiOn SEMiCOnductor LCD Other NetworkS * Based on 2008 organizational structure THE YEAR AHEAD We will take the next With the global economy limping along in the aftermath of last year’s crisis, it’s unclear whether we will step toward being one see the beginning of a recovery this year. This has made demand forecasting and planning extremely “ difficult. From a survival perspective, the battle for industry leadership is intensifying as we face some of the world’s top of the biggest challenges in our history. That said, we have intelligently weathered countless crises over companies, intelligently the years, demonstrating our ability to turn adversity into opportunity as we have grown to become a world-class consumer electronics company.

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