Samsung q2'16 commentary reduct

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Results Q2 2016
Summary and Commentary
(Based on Samsung Electronics’ un-audited earnings release of 27th July 2016)
Note: Samsung Q2 = Calendar Q2
The following slides are in USD, converted from the KRW results using quarter-end spot exchange rates.
This provides the most relevant comparisons with global technology companies.
(Samsung has not yet released its Dollarised results, which when available may vary
depending on the mix of exchange rates and currency hedges employed by the company)
These data are derived from results published by Samsung Electronics Co Ltd, from the published
results of other companies, and from assorted independent analysts, as identiﬁed in the slides.
The opinions are those of the author, and should in no way be interpreted as investment advice.

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Samsung Electronics
•Samsung Electronics is the largest company within the
Samsung Group, a “Chaebol” conglomerate based in
the town of Samsung, in South Korea.
•Samsung Electronics comprises three main divisions,
one of which is usually reported in two parts. These are:
•Device Solutions, which includes:
•The Semi-conductor Division, abbreviated to “Semi”
•and the Display Panel Division, abbreviated to “DP”
•Consumer Electronics Division, abbreviated to “CE”
•IT & Mobile Communications Division, abbreviated to
“IM”. This includes the smartphone and tablet business.
•In 2013, Samsung Electronics accounted for 68% of the
revenue and all of the Net Income of Samsung Group
•This report focuses entirely on Samsung Electronics

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Key Data Points
Q2 ’16 (₩) Q2 ’16 ($) Q1 ’16 (₩) Q2 ’15 (₩) YoY ₩ YoY $
Revenue 50.9 T₩ 45.4 B$ 49.8 T₩ 48.5 T₩ + 6% + 3%
Net Proﬁt 5.6 T₩ 5.2 B$ 5.3 T₩ 5.8 T₩ + 13% + 0%
Diluted EPS TBA TBA 36.4 k₩ 37.8 k₩
Semi-Conductor Div Sales 12.0 T₩ 10.7 B$ 11.1 T₩ 11.3 T₩ + 9% + 4%
DP Division Sales (Display) 6.4 T₩ 5.7 B$ 6.0 T₩ 6.6 T₩ -12% -5%
CE Division Sales (CE) 11.6 T₩ 10.3 B$ 10.6 T₩ 11.2 T₩ + 4% + 1%
IM Division Sales (Mobile) 26.6 T₩ 23.7 B$ 27.6 T₩ 26.1 T₩ + 7% 0%
Smartphone Sales (IDC) Units 77.0 M 81.9 M 73.0 M + 5%
Tablet Sales (IDC) Units 6.0 M 6.0 M 7.6 M - 21%
Source: Samsung Electronics Results, IDCNote: USD Figures where not reported by Samsung are converted at the same effective rate as Samsung’s reported RevenuesNote: USD Figures where not reported by Samsung are converted at the same effective rate as Samsung’s reported revenuesNote: USD Figures where not reported by Samsung are converted using reported exchange rates

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Source: Samsung Electronics Results
Quarterly Revenue and YoY Growth
Growing Again
•A second quarter of
growth suggests a real
turnaround, and a gain
of 3% in USD
•Samsung Electronics
USD revenues were just
passed Apple’s, though
Mobile sales value
remains around half of
Apple’s
•The momentum appears
to have been triggered
by strong sales of OLED
panels for mobile and
high end TVs, plus the
Galaxy S7, which has
been well received
Comparative
Revenues
CQ2 2016
-30%
-15%
0%
15%
30%
45%
60%
75%
90%
0
10
20
30
40
50
60
70
80
Q1
'11
Q2
'11
Q3
'11
Q4
'11
Q1
'12
Q2
'12
Q3
'12
Q4
'12
Q1
'13
Q2
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Q3
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Q4
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Q2
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Q3
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Q4
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Q1
'15
Q2
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Q3
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Q4
'15
Q1
'16
Q2
'16
Q3
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Q4
'16
Growth
(%)
Revenue
(B$)
Samsung Electronics Revenue
Revenue B$ Revenue YoY Growth
Apple
Microsoft
Alphabet

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Net Profit and YoY Profit Growth
Apple$18.4B
Net Profit Recovers
•Net Profit returned to
growth again
•IM was the leading
driver of this, with
Operating Profit gaining
by 53%, and delivering
over half the profits
•Semi declined, but still
accounted for 32%
•DP profit crashed by
75% due to problems in
its LCD business
•Samsung’s net profit
grew to about two thirds
that of Apple
Comparative
Net Income
CQ1 2016
Alphabet
Microsoft
-60%
-40%
-20%
0%
20%
40%
60%
80%
100%
120%
140%
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
10.0
Q1
'11
Q2
'11
Q3
'11
Q4
'11
Q1
'12
Q2
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Q3
'12
Q4
'12
Q1
'13
Q2
'13
Q3
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Q4
'13
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'14
Q2
'14
Q3
'14
Q4
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Q1
'15
Q2
'15
Q3
'15
Q4
'15
Q1
'16
Q2
'16
Q3
'16
Q4
'16
Net Profit
Growth
Net Profit
(B$)
Samsung Electronics Net Profit Growth
Net Profit B$ Net Profit YoY Growth

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Divisional Profitability
Semi, IM Gain
•Healthy profitability across most
divisions were led by Semi, with good
mix and gains in DRAM and NAND.
Although Semi declined YoY, it still
returned the best margins of around
24%
•IM leapt in contribution again,
delivering 53% of the operating profit
for the group. This was largely due to
improved product mix from strong
sales of the Galaxy S7, with the higher
margin S7 Edge taking more than 50%
of the mix
•DP crashed, declining 75% in profit,
and slipping to only 2% of the profit
for the company, and a 2% margin
•CE remained profitable thanks to
strong sales of UHD and curved
screened TVs, and a 9% margin was a
marked improvement
•IM’s return to deliver 53% of the profit
is hugely welcome for Samsung
-2.0
0.0
2.0
4.0
6.0
8.0
10.0
Q1
'11
Q2
'11
Q3
'11
Q4
'11
Q1
'12
Q2
'12
Q3
'12
Q4
'12
Q1
'13
Q2
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Q3
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Q4
'13
Q1
'14
Q2
'14
Q3
'14
Q4
'14
Q1
'15
Q2
'15
Q3
'15
Q4
'15
Q1
'16
Q2
'16
Q3
'16
Q4
'16
B$
Divisional Operating Profit
Semi Opera*ng Profit B$ DP Opera*ng Profit B$ CE Opera*ng Profit B$ IM Opera*ng Profit B$

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Divisional Profit Margins
CE, IM Up Sharply
•This chart clearly shows Samsung’s
dependence on Semi-conductor for
margins, and Mobile for profit, while
the CE and DP divisions bump along
the bottom
•Both CE and IM ticked sharply up - no
doubt there is some correlation
between both of these and the S7
success
•It is worth noting however that while
Apple, as a largely mobile business,
can return gross margins of close to
40%, and operating margins of around
30%, Samsung is forced to run a much
tighter ship
-10%
0%
10%
20%
30%
40%
Q1
'11
Q2
'11
Q3
'11
Q4
'11
Q1
'12
Q2
'12
Q3
'12
Q4
'12
Q1
'13
Q2
'13
Q3
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Q4
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Q1
'14
Q2
'14
Q3
'14
Q4
'14
Q1
'15
Q2
'15
Q3
'15
Q4
'15
Q1
'16
Q2
'16
Q3
'16
Q4
'16
Divisional Operating Profit Margins
Semi $ Opera+ng Profit Margin DP $ Opera+ng Profit Margin
CE $ Opera+ng Profit Margin IM $ Opera+ng Profit Margin

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Diluted EPS, Gross & Net Margins
Margins Jump Back
•EPS will not be reported until the
audited results are released
•Gross Margin and Net Profit both
ticked up in line with the overall
business
•Net profitability is around 7 points
lower than that of Apple
•While the businesses have some
similarities, there are enough
differences (in particular the non-IM
divisions) to prevent too many
conclusions from being drawn
•However one might expect greater
benefits from the synergy and vertical
integration between the divisions
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
0.00
10.00
20.00
30.00
40.00
50.00
60.00
Q1
'10
Q2
'10
Q3
'10
Q4
'10
Q1
'11
Q2
'11
Q3
'11
Q4
'11
Q1
'12
Q2
'12
Q3
'12
Q4
'12
Q1
'13
Q2
'13
Q3
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Q4
'13
Q1
'14
Q2
'14
Q3
'14
Q4
'14
Q1
'15
Q2
'15
Q3
'15
Q4
'15
MarginsDiluted
EPS ($)
Samsung Electronics EPS and Margins
Diluted EPS $ Gross Margin % Net Profit %

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Samsung Share Price
Recovering Again
•Samsung share price drifted through the
ﬁrst part of the year, with a nadir of ₩
1,050k in late August, before recovering
through the second part of the year
•The past three months have seen a steady
climb back to ₩ 1,425k at the end of June
•This still leaves the stock short of its all
time high of ₩ 1,580k in January 2013
Source: Samsung
Share Price - 12 months
Share Price Past Three Months
Mkt Cap Rank
Apple $ 562 B 1
Alphabet (Google) $ 519 B 2
Microsoft $ 442 B 3
Exxon Mobil $ 374 B 4
Facebook $ 353 B 5
Amazon $ 348 B 6
China Mobile $ 258 B 10
Toyota $ 185 B 25
Samsung Elctrncs $ 160 B 30
IBM $ 155 B 35
Market Caps 29 July 2016

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Research & Development
R&D Investment Cut
•Samsung’s investment was $3.1B in
R&D in Q1, ﬂat on Q4, and equated
to 6.9% of revenues
•This level of investment at the lower
end of historicals, most likely
reﬂecting rationalisation and cost
savings in Korea
•This remains higher than Apple’s CQ2
spend of $2.5B, though the trajectories
look set to cross
•Samsung remains a modest R&D
spender by comparison with some
other major tech companies
R&D $ R&D %
Apple $ 2.0 B 4.1%
Microsoft $ 3.0 B 12.9%
Google $ 3.1 B 16.4%
Intel $ 3.0 B 21.9%
R&D Spend (Avg/Qtr 2015, % of Rev)
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
0
1,000
2,000
3,000
4,000
5,000
Q1
'11
Q2
'11
Q3
'11
Q4
'11
Q1
'12
Q2
'12
Q3
'12
Q4
'12
Q1
'13
Q2
'13
Q3
'13
Q4
'13
Q1
'14
Q2
'14
Q3
'14
Q4
'14
Q1
'15
Q2
'15
Q3
'15
Q4
'15
Q1
'16
Q2
'16
Q3
'16
Q4
'16
R&D vs Rev
(%)
R&D Spend
(M$)
Samsung Electronics Research & Development
R&D M$ R&D % of 12m Trailing Rev

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Inventory
Inventories Jumped Back Up
•Inventory levels stabilised after the Q4
“inventory adjustment” in mobile
•Post the S7 launch there appears to
have been little change, suggesting a
good balance, though the level is still
around 32 days
•This contrasts dramatically with Apple,
who carried only 4.1 days of stock at
the end of the same quarter
•This level of inventory is a huge
overhang for a technology company
and is likely still to be playing on
Samsung’s mind, especially if it
continues to seek to emulate Apple
0
10
20
30
40
50
0.0
5.0
10.0
15.0
20.0
25.0
Q1
'11
Q2
'11
Q3
'11
Q4
'11
Q1
'12
Q2
'12
Q3
'12
Q4
'12
Q1
'13
Q2
'13
Q3
'13
Q4
'13
Q1
'14
Q2
'14
Q3
'14
Q4
'14
Q1
'15
Q2
'15
Q3
'15
Q4
'15
Q1
'16
Q2
'16
Q3
'16
Q4
'16
Days of
Stock
Inventory
(M$)
Samsung Electronics Inventory
Inventory B$ Days of Stock

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Mobile Product Lines
Mix Remains Stable
•Samsung does not report product line
sales, so this chart is based on analyst
data - for Feature Phones this is
particularly thin, so should not be
taken as being precise
•Despite the strong IM quarter,
Samsung appears to have declined in
overall smartphone shipments YoY
•This was enough to retain overall
market share at around 22.4% market
share, and to retain the #1 ranking
globally for Samsung
•The feature phone business most likely
dropped again, though a relaunch of
Tizen may reverse this in the future
•Upcoming Galaxy C speciﬁc to China
is designed to restore success in this
market
•Meanwhile tablets fell back a further
25% YoY, in a market that saw
declines of 12% overall (IDC). They
have never threatened smartphones as
a product line Source: Counterpint, IDC, and others
0
20,000
40,000
60,000
80,000
100,000
Q1
'11
Q2
'11
Q3
'11
Q4
'11
Q1
'12
Q2
'12
Q3
'12
Q4
'12
Q1
'13
Q2
'13
Q3
'13
Q4
'13
Q1
'14
Q2
'14
Q3
'14
Q4
'14
Q1
'15
Q2
'15
Q3
'15
Q4
'15
Q1
'16
Q2
'16
Q3
'16
Q4
'16
Unit Sales
(000's)
Mobile Product Line Growth
Feature Phones kU Smartphones kU Tablets kU

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Smartphones vs iPhone
Source: Apple Results, Gartner, IDC and others
Tracking the trailing 12 months (current and 3
previous Quarters) eliminates seasonality, and
gives a better indication of the longer term trends
0
80,000
160,000
240,000
320,000
400,000
0
20,000
40,000
60,000
80,000
100,000
Q1
'11
Q2
'11
Q3
'11
Q4
'11
Q1
'12
Q2
'12
Q3
'12
Q4
'12
Q1
'13
Q2
'13
Q3
'13
Q4
'13
Q1
'14
Q2
'14
Q3
'14
Q4
'14
Q1
'15
Q2
'15
Q3
'15
Q4
'15
Q1
'16
Q2
'16
Q3
'16
Q4
'16
Trailing 12m
Units (000s)
Q Units
(000s)
Smartphone Units vs iPhone
Smartphones kU Smartphones Trailing 12m kU
Apple iPhones Trailing 12m kU

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Tablet vs iPad: Still Behind
Source: Apple Results, Gartner, IDC and others
Tracking the trailing 12 months (current and 3
previous Quarters) eliminates seasonality, and
gives a better indication of the longer term trends
0
20,000
40,000
60,000
80,000
0
5,000
10,000
15,000
20,000
Q1
'11
Q2
'11
Q3
'11
Q4
'11
Q1
'12
Q2
'12
Q3
'12
Q4
'12
Q1
'13
Q2
'13
Q3
'13
Q4
'13
Q1
'14
Q2
'14
Q3
'14
Q4
'14
Q1
'15
Q2
'15
Q3
'15
Q4
'15
Q1
'16
Q2
'16
Q3
'16
Q4
'16
Trailing 12m
Units (000s)
Q Units
(000s)
Tablet Units vs iPad
Tablets kU Tablets Trailing 12m kU Apple iPads Trailing 12m kU

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Regional Revenue Trends
Most Markets Steady
•America has been the Samsung
success story, and its decline was an
indication of the challenges facing the
company. Some signs of stability now
•Europe, and most worryingly China,
have been heading downwards, but
seem to have stabilised a little
•China, the world’s largest smartphone
market, remains a challenge, as
Samsung is buffeted by lower-cost and
increasingly high-proﬁle Chinese
brands such as Huawei, Xiaomi and
Lenovo
•Asia/Africa was touted as a potential
winner, with India an increasing hope
for the company, where it leads with
the Z family of Tizen-based phones.
However the trend is not encouraging
•Even in its home market, South Korea,
Samsung remains stagnant, with
apparent inexorable decline
Note: Q2 Regional Breakdowns not yet available from Samsung - commentary relates to Q1
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
Q1
'11
Q2
'11
Q3
'11
Q4
'11
Q1
'12
Q2
'12
Q3
'12
Q4
'12
Q1
'13
Q2
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'13
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'13
Q1
'14
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'14
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'14
Q1
'15
Q2
'15
Q3
'15
Q4
'15
Q1
'16
Q2
'16
Q3
'16
Q4
'16
Trailing
12m (B$)
Regional Revenue Growth Trailing 12 Months
South Korea 12m Trailing B$ America 12m Trailing B$ Europe 12m Trailing B$
Asia/Africa 12m Trailing B$ China 12m Trailing B$

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Competitive Landscape - Smartphones
Samsung Remains Top, but Chinese Brands Win Big
•IDC sees Samsung retaining the top global slot in CQ2, with growth
ahead of the market, and Apple, but below the three Chinese leaders
•Apple’s decline is clearly visible, declining 15 points more than the
market
•Huawei continues to gain, though slowing, but holds a clear #3 rank
•OPPO and vivo, both domestic Chinese brands, continued to
advance strongly, and started to branch out into Asia
•With the overall market ﬂat the undifferentiated Android space could
get brutal, as it already has for HTC, ZTE and even Xiaomi
Source: IDCSource: IDC
Q2’16 M Q2’16% Q2’15 M Q2’15% Change
Samsung 77.0 22.4% 73.0 21.3% 5.5%
Apple 40.4 11.8% 47.5 13.9% -15.0%
Huawei 32.1 9.4% 29.6 8.6% 8.4%
OPPO 22.6 6.6% 9.6 2.8% 136.6%
vivo 16.4 4.8% 9.1 2.7% 80.2%
Others 154.8 45.1% 173.6 50.7% -10.8%
Total 343.3 100.0% 342.4 100.0% 0.3%
Q2 2016 Smartphone Units (IDC)
-20%
-10%
0%
10%
20%
30%
40%
50%
-20%
-10%
0%
10%
20%
30%
40%
50%
Q1 '14 Q2 '14 Q3 '14 Q4 '14 Q1 '15 Q2 '15 Q3 '15 Q4 '15 Q1 '16 Q2 '16
GrowthShare
Samsung Smartphones vs The Market
Samsung Smartphones Share Samsung Smartphones YoY Smartphones Market YoY

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Competitive Landscape - Feature Phones
Samsung Still Playing
•(Data on feature phone shipments is
sketchy, so these numbers should be
treated with caution)
•In a market that appears to have
bottomed out (as third-tier emerging
markets get on board), Samsung
continues to lose share sharply, but
remains a player (depending on how
Tizen is categorised)
•The main competition is coming from
domestic players in the large emerging
markets, in particular India’s Micromax,
Intex and Lava
Source: Counterpoint Research
-40%
-20%
0%
20%
40%
-40%
-20%
0%
20%
40%
Q1 '14 Q2 '14 Q3 '14 Q4 '14 Q1 '15 Q2 '15 Q3 '15 Q4 '15 Q1 '16 Q2 '16
Growth
Share
Samsung Feature Phones vs The Market
Samsung Feature Phones Share
Samsung Feature Phones YoY
Feature Phones Market YoY

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Competitive Landscape - Tablets
Samsung Still Second in a declining market
•Samsung declined faster than the market, as Lenovo, Huawei and
Amazon took share
•Apple still holds top slot, and its focus has switched strongly to
enterprise, with its IBM, SAP and Cisco partnerships, and the iPad Pro
•Lenovo has secured third place, and is the standard bearer for
Windows 10 tablets
•Huawei also continues to make waves in tablets
•Amazon surged again, with a focused set of products
•Microsoft has still to enter the top 5, giving hope for its OEMs
Source: IDCSource: IDC
-30%
-20%
-10%
0%
10%
20%
30%
40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
Q1 '14 Q2 '14 Q3 '14 Q4 '14 Q1 '15 Q2 '15 Q3 '15 Q4 '15 Q1 '16 Q2 '16
GrowthShare
Samsung Tablets vs The Market
Samsung Tablets Share Samsung Tablets YoY Tablets Market YoY
Q2’16 M Q2’16% Q2’15 M Q2’15% Change
Apple 10.0 25.8% 11.0 24.9% -9.2%
Samsung 6.0 15.6% 8.0 18.2% -24.5%
Lenovo 2.5 6.6% 2.5 5.6% 3.1%
Huawei 2.2 5.6% 1.3 2.9% 71.0%
Amazon 1.6 4.0% 0.1 0.3% 1208.9%
Others 16.4 42.4% 21.3 48.2% -22.9%
Total 38.7 100.0% 44.1 100.0% -12.3%
Q2 2016 Tablet Units (IDC)

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Samsung’s Q2 2016 Un-Audited Results Analysis
These popular slides cover an in-depth analysis of Samsung’s Q2 results
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Samsung q2'16 commentary reduct

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