WHAT MAKES TOMORROW INNOVATIVE? >>>> A PASSION FOR LEADING
THE DIGITAL CONVERGENCE REVOLUTION. >>>>>
For comparison purposes, all figures in this section are translated into US dollars at the exchange rate of USD 1 = KRW 1,043.
>>> TVs >> Home AV >>> Portable AV >> Cameras & Camcorders >> PCs
BUSINESS HIGHLIGHTS MARCH
Won iF Design Awards for five products, including the SPD-50P4H plasma TV, LT17N2/LT22N2 LCD TVs, DVD-HD931 DVD player, and SyncMaster 173P LCD monitor.
Program search and encryption technologies are adopted by the TV-Anytime Forum.
Established Toshiba Samsung Storage Technology, a joint venture to produce DVD recorders. Signed a $130 million contract with DirecTV to supply subscriber equipment.

$ 7.4 billion

$ 7.7 billion
$143.8 million -$ 24.7 million

FINANCIAL HIGHLIGHTS

OPERATING PROFIT
DIGITAL MEDIA BUSINESS The global market for televisions grew about 5% in 2004 with more than 135 million sets sold. While the venerable cathode-ray tube television still commands around 90% of the world market, significant growth occurred in all digital television technologies. The market for plasma TVs increased to 2.2 million units in 2004, while sales of LCD TVs more than doubled to surpass 8 million units. There was also strong growth in microdisplay projection TV sales, particularly in the North American market. Overall, our sales rose 4% to $7.7 billion as digital technologies continued to replace analog products. We made the strategic decision to exit many analog product categories during the year, sacrificing short-term sales growth to strengthen our position as a leader in digital products. Despite a disappointing $24.7 million operating loss due to continued weakness in our home market of Korea, our performance in overseas markets was encouraging as we continued to lead the world in the vast majority of our product categories. We were No. 1 in TVs, computer monitors, and DVD-VCR combos. We were No. 2 in projection TVsincluding microdisplay DLP TVsas well as in DVD players and monochrome laser printers. And we were No. 3 in LCD TVs, and No. 4 in plasma TVs and camcorders.>>>>>We continued to lead with technology in 2004. Our Digital Natural Image engine or
TV SHIPMENTS SPP-2040 Photo Printer

2004 2003

This full-featured A6 dye-sublimation printer gives high quality prints from PCs as well as directly printing from memory cards, digital cameras, and even mobile phones via Bluetooth.

137.9 133.2

million million
eXpandable Home Theater (XHT) networking via IEEE 1394 is adopted as a standard by the Consumer Electronics Association.
& Monitors >> Printers & Multifunction Devices >> Optical & Hard Drives >>>

OCTOBER

Entered the Coral Consortium for digital rights management, joining HP, InterTrust Technologies, Philips, Matsushita, Sony, and Twentieth Century Fox Films.

NOVEMBER

Shipped the VM-M110 Miniket memory-based MPEG-4 camcorder featuring 6-in-1 functionality including a camera, MP3 player, voice recorder, videoconferencing camera, and file storage.

Sens M40 Notebook PC

This full-featured notebook makes an ideal desktop replacement with a17-inch widescreen display, 80GB drive, and DVDR/RW burner in a slim, stylish package weighing just under three kilograms.
YH-999 Portable Media Center
This EISA award-winning device is distinguished by a 3.5-inch LCD and a 20GB hard drive that stores hours of digital music, photos, and videos for on-the-go entertainment.
DNIe video enhancement technology continued to evolve, keeping our big-screen TVs on the cutting edge of image quality, while our groundbreaking Anynet AV system control solution gave consumers a powerful incentive to buy other Samsung audio and video components along with their Samsung TVs. Several of our advances were also adopted in industry standards. The core technologies of our IP-based eXpandable Home Theater or XHT audio-video networking solution were adopted as part of the Consumer Electronics Associations CEA2027 standard. Our methods for handling program searches and encryption were adopted by the TV-Anytime Forum. And our active participation in the Blu-ray Disc standardization process was a great success, enabling us to develop all key technologies for this high-capacity next-generation HDTV recording and playback format.>>>>>We believe that many fundamentals point to 2005 being a year of improved growth and profitability. Digital broadcasting in the US will continue to be an important driver of digital TV sales, and this trend will steadily spread to other major markets around the world over the next few years. Digital audio is another important category for us as we build on our core competencies in digital technology. We will also be promoting our technologies through international standards bodies as we collaborate with service and content providers to make digital content delivery as seamless and convenient as possible. Internally, the consolidation of our European production network at our new manufacturing base in Galanta, Slovakia in 2004 will significantly enhance our cost competitiveness across that region. The scheduled move into our new business headquarters in the Suwon Complex in September 2005 will also serve as a catalyst for inter- and intra-business collaboration and synergy in every area from marketing to R&D. As demonstrated by our early 2005 announcements of world-firsts such as an 82-inch LCD TV, a 102-inch plasma TV, and SlimFit TVs that are just two-thirds the depth of conventional sets, we will continue to build momentum around our most innovative products, enhancing our reputation as a digital innovator as we continue to lead the digital convergence revolution.

>>>Mobile Phones >>> Network Systems >>>> Core Systems >>>> Wireless
Introduced the SCH-A790, the worlds first CDMA/GSM world phone at CeBIT 2004. Won iF Design Awards for SPH-i500 and SCH-X800/SPH-X9100 phones.
Demonstrated the SCH-B100 satellite DMB phone. Named top US phone brand for a third straight year in the Brand Keys Customer Loyalty Awards.
Launched the SPH-S2300, the worlds first 3.2-megapixel camera phone with a 3x optical zoom.
MOBILE PHONES SOLD SGH-D500 Mobile Phone
This sleek slide-up GSM phone features a 1.3-megapixel camera, MP3 player, and convenient Bluetooth connectivity.

86.5 55.7

TELECOMMUNICATION NETWORK BUSINESS The global mobile market grew 31% in 2004 with more than 680 million phones sold worldwide. This remarkable growth was driven by strong replacement demand in mature markets as customers traded up to phones with camera, camcorder, video-on-demand, and other multimedia capabilities as well as surging demand in emerging markets such as Brazil, China, India, and Russia. These favorable conditions enabled us to far surpass our initial sales goal of 65 million handsets as we sold 86.5 million phones worldwide, a 55.3% increase that once again made us the worlds No. 1 supplier of CDMA phones and No. 3 overall behind Nokia and Motorola with 12.7% of the global market. Our system sales also grew at a modest pace in 2004, reaching $1.08 billion as we demonstrated WiBro, the worlds first mobile broadband solution based on the IEEE 802.16e standard that supports Internet connections while moving at speeds of up to 60 km per hour.
$18.1 billion $11.9 billion $ 2.3 billion $ 2.7 billion
03 SALES OPERATING PROFIT 04
Systems >>>>>> Broadband Equipment >>>>> Home & Office Products >>>>>>

AUGUST

Hosted the second annual Samsung 4G Forum to discuss migration paths to 4G mobile networks.

SEPTEMBER

Demonstrated the SPH-V5400, the worlds first hard drive-equipped phone with 1.5-gigabytes of storage for music, photos, and video.
Introduced the SCH-S250, the worlds first 5-megapixel camera phone.

Signed a triple-play equipment supply agreement for telephony, broadband Internet, and entertainment services with Netherlands-based Versatel.
Overall, we enjoyed one of our best years to date as we grew operating income 17.4% to $2.7 billion on sales of $18.1 billion.>>>>>Two trends we see accelerating in 2005 are the convergence of broadcasting and communications and the integration of wired and wireless communications. We expect global demand for mobile phones to slow considerably in 2005, dropping into the high-single-digit range as it surpasses 700 million units. In addition to maintaining our market leadership in CDMA phones, we plan to roll out a steady stream of premium products, including phones with enhanced multimedia functionality, 3G phones with sophisticated music, gaming, and video-on-demand capabilities, and phones for digital satellite and terrestrial broadcast networks.>>>>>Emerging opportunities in the mobile network, fiber-to-the-home, and home network markets will be another key focus in 2005. We expect network equipment sales to pick up substantially as wireless operators worldwide accelerate their rollout of mobile networks using our CDMA2000 1X EV-DO and WCDMA solutions. We also expect WiBro wireless broadband subscriber and operator equipment to be a key growth area as Korean telecom operators prepare to launch the worlds first low-cost commercial services in mid 2006. Finally, we expect our VoIP solutions to do well in Korea as well as other markets where this next-generation phone service is rapidly gaining momentum in the consumer and business marketplace. Looking further ahead, we will continue to actively participate in setting standards for fourth-generation telecommunications as well as focus on growing our market share in the United States, Europe, Southeast Asia, and emerging markets around the globe.

OfficeServ SOHO Gateway

With support for two phone lines, four VoIP channels, and eight cordless handsets, this is the ultimate SOHO wireless communications gateway.

SCH-B100 Mobile Phone

The worlds first mobile capable of receiving satellite DMB programming, this CDMA2000 1X EV-DO phone boasts a 1-megapixel camera and a unique flip-out main LCD for TV-like viewing.
> Refrigerators >> Microwave Ovens >> Washing Machines >> Dishwashers >

JANUARY

Joined forces with Philips to launch the Universal Home API initiative for TVs, set-top boxes, and other home electronics.

FEBRUARY

Entered a strategic five-year alliance with home appliance powerhouse Maytag to bring high-end drum washing machines to the US market.
Won best new product award for the RH2777AT HomePAD refrigerator at the 2004 Kitchen/Bath Industry Show & Conference in Chicago.

$ 3.3 billion

$ 3.1billion -$ 106.2 million -$ 51.5 million

DIGITAL APPLIANCE BUSINESS The global appliance market was valued at around $165 billion in 2004 as it continued to steadily grow at an annual rate of about 3%. During the year, our sales fell 4% to $3.1 billion as demand in our home market of Korea remained stagnant and revenues from our microwave business dried up with the transfer of our microwave production facilities to subsidiaries in Southeast Asia. We also recorded a $51.5 million operating loss primarily due to the poor performance of our air conditioner business. Despite this disappointing overall performance, 2004 saw a number of key developments that will positively impact our performance going forward. In April, we successfully wrapped up a three-year, $10 million R&D project with the introduction of new air conditioner, refrigerator, and washing machine products featuring our revolutionary Silver Nano Health System technology with silver nano-particle surface coatings and silver ion generators to safely and effectively kill disease-causing fungi, germs, and up to 650 types of bacteria. The year also saw us win Homevita total home network solution orders for 17,000 apartment units as we completed the worlds largest home network project to date covering 480 units in Daegu, Korea and took the next step in promoting Homevita as a
R&D INVESTMENT SH12BPH Air Conditioner
This premium wall-mounted air conditioner features a silver ion-based filtration system that kills airborne bacteria and fungi in just minutes.

$147.7 $130.4

>>> Oven Ranges >>> Vacuums >>>> Air Conditioners >>> Home Networking >>>
Cumulative vacuum production surpassed 30 million units as we rose into the ranks of the global top-three makers for the first time.
Partnered with Almere in the Netherlands to provide a Homevita network solution and appliances to 200+ homes in the EUs first broadband city project.
Established the Universal Home API Forum with Philips, HP, the Digital TV Industry Alliance of China, and Access Co., Ltd.

H1245A Washing Machine

This compact and quiet 10kg drum washer features a silver ion generator for outstanding anti-bacterial and sterilization performance.

MD1200 Microwave Oven

Winner of a 2004 IDEA bronze award, this unique oven features a rounded interior thats perfect for pizzas and makes clean-up a breeze.
de-facto industry standard by opening up our S-cube powerline communications protocol to third-party manufacturers.>>>>>We also completed a major restructuring of our manufacturing operations in 2004. At home, we consolidated our domestic operations by relocating washing machine and air conditioner production from Suwon to our Gwangju plant. In Asia, we expanded our Suzhou plant to focus on package air conditioners, small- and medium-capacity drum washing machines, and medium- and large-capacity refrigerators, while our plants in Malaysia and Thailand became our microwave manufacturing hub as we halted production in Korea. In Europe, we shut down microwave production in the UK as part of the overall relocation of our European operations to Slovakia.>>>>>With the restructuring of our global production network now complete, we believe that the groundwork is in place for our white goods business to not only return to profitability in 2005, but also position us to emerge as a global top-tier player later in the decade. While we intend to improve on our top-three global market share in the microwave oven and vacuum cleaner sectors, our focus will be on three major product categoriessystem air conditioners, side-by-side refrigerators, and drum washing machinesas we continue to transition our business portfolio toward higher-margin markets. Our Silver Nano Heath System will play a key role in our premium marketing strategy in these fields. We also expect our strategic alliance with Maytag to add growth momentum in the US market as we aggressively leverage our leadership in home networks by aiming for 300,000 Homevita orders worldwide through 2007 and 1.2 million by the end of the decade.

>>>>>> Dynamic RAM >>>>>>>> Flash Memory >>>>>> Multi-Chip Packages >>>
Announced a 512Mb XDR DRAM, a nextgeneration technology offering up to 8x the bandwidth of DDR400 DRAM. Opened a system LSI research center in Hangzhou, China.
Introduced an advanced lineup of device solutions for the mobile market at the 1st annual Samsung Mobile Solution Forum in Taipei, Taiwan.
Broke ground for the second phase of a US$500 million nanotech expansion project in Austin, Texas. Developed a system-on-chip HDTV solution with dual MPEG-2 decoders.
CAPEX INVESTMENT 2Gb DDR2 SDRAM
We announced the industrys first 2-gigabit DDR2 memory chip featuring a proprietary three-dimensional recessed channel array transistor design to deliver a density generally expected to require a future 65-nanometer process with todays 80-nanometer technology.

$3.5 $4.1

billion billion
SEMICONDUCTOR BUSINESS The global semiconductor memory market grew 43% in 2004 to over $48 billion as the industry benefited from strong pricing in the DRAM market due to industry-wide process migration problems and production allocation between DDR1, DDR2, and legacy products. The NAND flash memory market also experienced robust growth as demand for digital cameras and MP3 players skyrocketed. Despite fierce competition, pricing pressure from the rising Korean won, and other formidable challenges, our ongoing investment to enhance both technology and production capacity once again enabled us to extend our market leadership in all major memory sectors as we captured 31% of the DRAM, 28% of the SRAM, and 27% of the flash markets according to Gartner Dataquest. Overall, memory accounted for 77% of our revenues, system LSI products for 12%, and other storage media for 10% as we grew sales 43% to a record $17.5 billion. Our operating margin rose from 28% to 41% as operating income jumped a remarkable 107% to $7.2 billion, making 2004 our most prolific and profitable year since we began silicon wafer fabrication 30 years ago. >>>>>We continued to push memory den-
$ 17.5 billion $ 12.2 billion $ 3.5 billion $ 7.2 billion
Announced the industrys first 8Gb NAND flash memory using 60nm technology, a 2Gb DDR2 SDRAM using 80nm technology, and a 667MHz mobile processor.
>>> Display Driver ICs >>>>>>> CMOS Image Sensors >>>>>>> Mobile CPUs >>>>
Announced a 1Gb OneNAND flash memory using 90nm technology, a new unified storage concept that combines fast NOR read speeds with high NAND densities.

DECEMBER

Marked our 30th anniversary in the semiconductor business. Shipped the industrys first 512Mb GDDR3 DRAM for nextgeneration graphics applications.
sities higher across-the-board in 2004 as we rolled out next-generation DDR2 SDRAM, multi-chip packages, and OneNAND flash memory solutions for the mobile device market. We bolstered our system LSI operations by opening a new research lab in China and developing innovative new display driver ICs, CMOS image sensors, and mobile processors. In the storage field, we continued to develop key components for the optical and magnetic storage devices that will store and retrieve digital content for tomorrows high-tech home and portable entertainment devices. We also continued to sharpen our competitive edge on a more fundamental level by adopting sub-micron process technology across all our product lines and developing revolutionary new design tools and methodologies that will save development time and reduce costs as they dramatically shorten time-tomarket.>>>>>Our leadership over the past decade in a volatile commodity business like semiconductors is a testimony to our ability to consistently pioneer new segments as we innovate to drive down production costs and diversify our product portfolio by responding to high-end and specialized markets. As we marked our 30th anniversary in the business on December 6, 2004, we announced an ambitious $24 billion investment in our production infrastructure over the next six years to strategically position ourselves for emerging opportunities across the industry. In 2005, we will be stepping up development of nanotechnology to meet early market demand as we continue to expand our product expertise and offerings in the system-on-chip, advanced logic, large-scale circuit integration, and magnetic disk storage fields. We will also be accelerating work on efficient new memory design structures to meet the performance requirements of tomorrows mobile devices and high performance computing applications. This continuous cycle of innovation will give us a strategic portfolio of key patents that will serve as a catalyst for convergence and synergy on both the product and technical levels, empowering us to create entirely new solutions that will keep us solidly at the industry forefront in the years ahead.

2.0-Megapixel CMOS Image Sensor
The industrys first CMOS image sensor fabricated with 0.13-micron technology provides an ideal balance of size and resolution for next-generation mobile devices.

8Gb NAND Flash Memory

We continued to lead in the mobile memory space by developing the industrys first 8-gigabit NAND flash memory chip with 60-nanometer process technology, paving the way for memory cards with capacities of up to 16-gigabytes.
>>>>>>>> Mobile Panels >>>>>>>>>>>>>>> Notebook Panels >>>>>>>>>>>>>>>>
Launched S-LCD venture with Sony to produce LCD for TVs. The venture began operating Line 7-1, the worlds first seventhgeneration fab, in April 2005.
Developed the worlds first 2.6-inch amorphous silicon LCD panel capable of delivering full VGA images with 300-pixelper-inch resolution.
Signed an agreement with Kent State Universitys Liquid Crystal Institute to co-develop display technologies.
$ 8.3 billion $ 5.0 billion $ 850 million $ 1.8 billion
LCD BUSINESS In the 10 years that we have been making LCD panels, we have come to lead the industry in every benchmark of performance as we have emerged as the worlds No. 1 supplier of large-area panels for notebook PCs and desktop monitors. In 2004, the first year our LCD operations were run as an independent unit, we recorded impressive gains by growing sales 67% to $8.3 billion. While this performance is remarkable in itself, our operating margin was even more so, rising from 17.1% to 21.6% as operating income climbed 111% to $1.8 billion.>>>>>We believe these achievements are the direct result of aggressive investment in both production capacity and ongoing R&D that has given us a significant technological and competitive edge in this fastgrowing industry. In 2004, we continued to prepare for future growth opportunities by joining forces with Sony to establish S-LCD Corporation, a 50:50 venture in which we hold a one-share majority. Dedicated to
LARGE PANEL SHIPMENTS 82-inch HDTV Module
We defied the common wisdom that LCDs couldnt be as big as plasma displays with this massive full 1,920 x 1,080 HDTV-resolution prototype, far surpassing the 57-inch module we developed in 2003.
Developed a 4-inch widescreen LCD panel for portable media players.
>>>>>>>>>>>>>> Desktop Panels >> >>>>>>> >>>>> TV Panels >>>>>>>>>>>>>>>>>

Announced the launch of construction for Line 7-2, our second seventh-generation LCD line.

40-inch HDTV Module

This widescreen panel features our patented S-PVA technology for ultrawide viewing angles and a sub-8-millisecond response time for flawless display of fast-moving images.
Next-Generation Technologies
Our 5-inch plastic TFT-LCD prototype showcases a technology that will enable innovative new wearable and mobile applications, while our 21-inch OLED module demonstrates the superior contrast, resolution, and color rendition you can expect from tomorrows flat-panel displays.
producing panels specifically for LCD televisions, S-LCD will own and operate Line 7-1, the worlds first seventhgeneration fab in Tangjeong, Korea, an area we have dubbed Crystal Valley because we intend to develop it into the industrys premiere LCD manufacturing complex. This new facility played a key role in our development of a massive 82-inch HDTV module in early 2005, by far the worlds largest to date.>>>>>In 2005, we intend to expand our industry leadership to the mobile device and TV panel segments. As S-LCD ramps up production on Line 7-1 beginning in April, we project our market share in the LCD TV panel category will rise significantly, benefiting from strong global demand that is expected to roughly double annually over the next few years. We will be investing about $3 billion in a second 7G line in Tangjeong targeted to begin production in the first half of 2006 to accelerate this momentum as we push ahead with development of new technologies and applications that will make our LCD products the superior choice in an increasingly commoditized industry. In addition, we will be working on next-generation technologies such as OLED for thinner, lighter, faster, and more power-efficient large-size panels as well as new technologies for small- and medium-size panels targeting the rapidly evolving mobile display market. Our other major goals for the year include boosting productivity by 30%, improving supply chain management, and upgrading our quality assurance system to dramatically lower the cost of poor quality as our Six Sigma efforts focus on tasks that will directly benefit our bottom line.
>>>>>>>> Investment >>>>>>>>>> Partnership >>>>>>>>>> People >>>>>>>>>>
RESEARCH & DEVELOPMENT Success today is just that. Global competition ensures that there is always something better coming tomorrow. At Samsung, we have thrived where others have faltered by using creative and innovative technology to create new lifestyles and markets. We believe that continuous innovation is the only way companies can achieve a sustainable competitive advantage going forward. That is why nearly one out of four of our 123,000 employees is directly involved in developing tomorrows products at our growing network of 17 R&D centers on almost every continent of the globe.>>>>> In 2004, we invested roughly $4.6 billion representing 8.3% of total sales in R&D and our hard work on the technologies of tomorrow was recognized with over 1,600 US patents. The payoff wasas you have already discovered throughout this reportan impressive list of global awards and world firsts like a 102-inch plasma TV, a mobile phone that takes 7-megapixel photos, and memory chips fabricated with sub-90-nanometer process technology.>>>>> In 2005, we will be initiating a broad range of strategic initiatives designed to drive future growth. We continue to identify, develop, and acquire the core technologies that will enable us to consistently be first-to-market with innovative products as we establish ourselves as an active participant in the global standardization process. Our recent cross-licensing agreement with Sony covering some 20,000 patents is just the start as we step up our patent registration and licensing efforts and enhance our global sensing and sourcing capabilities to acquire the best technologies the world has to offer. We are also well on the way to completing a next-generation collaborative network that will leverage the full potential of our global R&D resources to dramatically accelerate time-to-market. Using Six Sigma projects as a catalyst for innovation, we continue to benchmark other leading manufacturers as we strive to measure up to the standards set by the worlds best firms. And since our continued success ultimately depends on the vision and quality of our people, we are now developing a top-notch personnel system to attract and retain the worlds top talent. We believe our future is in very good hands.

$ 3.4 billion

$ 4.6 billion

$ 6.5 billion

$7.4 billion
INVESTMENT & US PATENTS GRANTED
03 R&D CAPEX US PATENTS 04