Letter to Shareholders

Letter to
Shareholders To Our Valued Shareholders,

The year 2023 was exceptionally challenging, with high interest rates, inflation, and geopolitical issues elevating macro uncertainties even further, while competition in the Memory Business intensified amid a deep industry downturn.

Under such conditions, Samsung Electronics ended the year with KRW 258.9 trillion in revenue and KRW 6.6 trillion in operating profit. We continued to expand R&D investments and pre-emptively execute capex to pave the way for future growth; we enhanced our product competitiveness and technology leadership; and we pushed forward in our commitment to sustainability management and shareholder value.

Our accomplishments would not be possible without the interest and support of our shareholders. We extend our deepest gratitude and will now share the highlights of 2023.

Reinforced competitiveness amid the challenging environment

Despite the challenges in the Memory Business, we pre-emptively invested in strengthening our mid and long-term competitiveness. Through this, we developed the industry’s first 1b nm-class 32Gb DDR5—the largest capacity currently available—and started full-scale mass production of HBM3, thus establishing a leading foothold in the high-density, next-generation markets.

The Foundry Business moved forward with capacity expansions at facilities in Pyeongtaek and Taylor, aiming for a timely supply of future demand. Moreover, Foundry booked its highest-ever total for annual orders, primarily from HPC and automotive semiconductors, boding well for growth in the medium to long term. At the same time, the System LSI Business enhanced its competitiveness in SoCs.

For Display, we kept our market share steady and achieved strong results by focusing on high-end segments and providing OLED products with differentiated technology and functionality.

The Mobile Business, facing decreased market demand, improved its product mix by concentrating its competencies on flagship smartphones, and we led innovation in next-generation products featuring AI technology. At the same time, the business continued to strengthen multi-device experiences via tablets, wearables, and other devices.

In the Networks Business, we remained committed to entering new markets while strengthening our global business foundation through our overseas 5G business.

The TV Business, prioritizing Neo QLED, OLED, and Micro LED, spearheaded the premium market and solidified its industry-leading status by consistently discovering new products for our Lifestyle lineups.

The Digital Appliance Business, along with efforts to provide our customers with the highest quality and performance, enhanced competitiveness by creating innovative, eco-friendly products and differentiated smart appliances.

Harman continued to post earnings growth, backed by increased sales of consumer audio products and fortified synergies with Samsung Electronics, while continuing its work to enhance in-cabin experiences.

Overall, we expanded the application of AI technology in our products and strengthened connectivity between devices via SmartThings, aiming to elevate customer experiences to an unparalleled level.

In 2023, Samsung Electronics invested approximately KRW 53.1 trillion in strategic capex to prepare for demand in the medium to long term and bolster our technology leadership. R&D investments reached KRW 28.3 trillion—our highest total to date—and we achieved the top position in the number of registered US patents for the second consecutive year.

Finally, Samsung Electronics’ brand value in 2023 was estimated at USD 91.4 billion by Interbrand, valuing our company as the world’s fifth most valuable brand for the fourth consecutive year.

Committed to sustainable growth

Samsung Electronics is the world’s largest IT manufacturing company, and we are fully committed to leveraging innovative technologies through our products and services to ensure Everyday Sustainability and a sustainable future.

In September 2022, we announced our New Environment Strategy and committed to achieving carbon neutrality by 2030 for the DX Division and company-wide by 2050. Samsung is laser-focused on meeting this goal by reducing gas emissions during manufacturing, transitioning to renewable energy, reducing the carbon footprint in the product-use stage, increasing the circularity of resources, and more.

We continued to invest in reducing direct emissions amid an increase in semiconductor production and developed a regenerative catalytic system (RCS), a new technology for treating process gases.

The DX Division completed the transition to 100% renewable energy at our operational sites in Korea and manufacturing facilities in Vietnam, India, and Brazil, following the full transition of sites in the US, Europe and China. We are also actively seeking out competitive renewable energy generation projects.

To reduce the carbon footprint in the product-use stage, Samsung developed ultra-low-power memory semiconductors, and we applied low-power technology to flagship models across our top seven product lines: smartphones, refrigerators, washing machines, air conditioners, TVs, monitors, and PCs. On top of that, SmartThings AI Energy mode helps our users reduce energy use even further. We continue to drive innovation to increase the circularity and eco-friendly application of resources such as recycled resins, aluminum, rare earth elements, steel, and cobalt in all our products.

In 2023, we announced Samsung’s Global Human Rights Principles and have been striving to strengthen the commitment to respect human rights by extending the responsibilities to employees, suppliers, local communities, business partners, and customers; and we remain dedicated to serving the communities in which we operate.

Samsung Electronics will continue to inform our stakeholders, including shareholders, of our efforts and milestones in sustainability management.

Management’s commitment to shareholders

In accordance with our shareholder return policy for 2021–2023, the annual dividend for 2023 is KRW 9.8 trillion. The annual dividend per share, including the quarterly dividends that have already been paid, is KRW 1,444 per share for common stock and KRW 1,445 per share for preferred stock.

Over the past three years, Samsung has returned capital to shareholders worth KRW 29.4 trillion, equivalent to 157% of free cash flow for the period and 313% of the shareholder return pool defined by our policy. We are pleased to have faithfully executed our return policy despite the significant pressure on our free cash flow last year caused by the deep downturn in the memory market and the slowdown in the global economy.

Regarding our AGM, we have been using an electronic voting system to enable shareholders to exercise their voting rights more conveniently; and we continue to expand activities to encourage shareholder participation, such as broadcasting the AGM live online and enabling stakeholders to submit questions online in advance of major IR events, including our quarterly earnings calls.

In 2023, Samsung Electronics stock gained around 42%, with our work to reinforce business competitiveness and management’s commitment to shareholders contributing to shareholder value.

We will continue our efforts to strengthen our shareholder-oriented management throughout the year.

Dear shareholders,

In 2024, although macro uncertainties are likely to remain high, we expect to uncover several new opportunities via next-generation technology innovation with the advent of AI.

Samsung Electronics has a history of overcoming hurdles by fortifying its fundamental competitiveness and leaping forward by proactively addressing paradigm shifts in the electronics industry.

Indeed, we will keep enhancing the competitiveness of our core businesses, aiming for innovation in key future areas such as AI, customer experiences, and ESG. To this end, we will create organizations and implement systems to lead the development of new products, new business models, and new businesses.

On behalf of the entire Board, we thank you for your continued support and interest in Samsung Electronics and our efforts to pursue growth.

We wish you and your family good health and happiness.

Thank you.

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