Samsung SDI Co Ltd Q4 2019 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: H. Kwon - JP Morgan Chase & Co, Research Division - Analyst : (foreign language) I have 2 questions. First question is about the cylindrical batteries for EVs. We're noticing that many of the OEMs are actually using cylindrical batteries for their EVs. In that context, can you share with us your outlook on the growth of cylindrical batteries for EV applications? And also, how much of your cylindrical battery business can become a supply to EVs to the OEMs? And if there's a change in the product mix of your cylindrical batteries, for example, a larger share being accounted for, for EVs, what kind of impact do you expect that to have on your profitability overall? without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. JANUARY 30, 2020 / 4:30AM, 006400.KS - Q4 2019 Samsung SDI Co Ltd Earnings Call My second question is related with the Electronics Material business, specifically the materials that go into semiconductors and OLED displays, which as a downstream are expected to have some stronger performance than last year. So in that context, can you share with us your outlook on your material businesses, specifically semiconductor and the OLED display? Unidentified Company Representative (foreign language) Regarding your first question about the cylindrical batteries for the EV application, if we look at overall market outlook and forecast, according to forecast, this year, the cylindrical battery market as a whole is expected to be around 6 billion cells, and within that cylindrical battery, EV demand is expected to be around 3 billion cells, which will be above 30% growth year-on-year. And so being 3 billion out of 6 billion, the EV battery demand in the overall cylindrical battery was expected -- is expected to be close to 50% and be a major driver in the cylindrical battery growth. Looking at our business towards the EV cylindrical supply, we are planning to start full-scale supply of our cylindrical batteries to EV customers, mainly in Europe and China. And so even though this year, because we're starting, the share of EV sales in our overall cylindrical battery will be relatively small, perhaps in the single digits. Going forward, we expect our supply to existing customers to continue to increase and also win some new orders so that in the mid- to long term, we expect the share of EV batteries in our overall cylindrical batteries to increase quite significantly. So looking immediately this year because EV will still be a limited part of our overall cylindrical battery supply, the contribution to the profitability from EV through cylindrical battery would be limited, but we expect that going forward, the contribution will continue to increase, and our profitability will be -- will improve as we increase not only the volume of cylindrical EV batteries but also internally enhance our manufacturing efficiency. (foreign language) To answer your second question about our outlook on the semiconductor and OLED materials business. First, on the semiconductor side. Actually, we've been seeing a gradual increase of our semiconductor material revenue starting from the third quarter of last year, especially around patterning materials. This year, as you mentioned, there is expectations that semiconductor demand will be increasing compared to this -- compared to last year. And also, customers are expected to increase their way for input. And so we are also expecting somewhat of an increase versus last year in our patterning materials, especially such as SOH or SOD. Also, on the OLED materials side, as more and more smartphones actually use OLED panels, this year, we're expecting our OLED material sales to also increase in terms of revenue by more than 20%. Another source of revenue growth for us would be the adoption of the foldable smartphone. This year, the foldable smartphone demand is expected to grow significantly versus last year, and the foldable smartphone, first of all, has a larger display area, so that would require more OLED materials to be used. Also, regarding the foldable smartphone, we supply the FOCA, which is the adhesive that goes between the layers of the foldable display. And we have the core technologies for that, and we expect with the wider sales and adoption of foldable smartphones, there will be greater demand for that material, which will help improve our earnings. (foreign language) We'll take one last question.