Samsung SDI Co Ltd Q4 2021 Earnings Call Transcript

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

Question: Hyun-Soo Kim - Hana Financial Investment Co., Ltd., Research Division - Analyst : [Interpreted] I have 2 questions. The first question is about the EV battery business. As we all know, the cost of raw materials such as lithium is continuing to increase. Is this having an impact on the profitability of your EV battery business? And what is your outlook? Second question is about the polarizer film business. The LCD TV, the downstream market growth rate itself is slowing down and many of the Korean panel producers are announcing that they will scale down their production. Despite this, do you expect you'll be able to defend the profitability mark and the revenue of your polarizer film business this year? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 27, 2022 / 4:30AM, 006400.KS - Q4 2021 Samsung SDI Co Ltd Earnings Call Unidentified Company Representative [Interpreted] So I think your first question about the raw material increases, especially with the increased demand for EV batteries, raw material prices are going up. Unfortunately, most of the projects, the raw material prices of the key metal materials such as cobalt, nickel, lithium, copper and aluminum are to be passed through to the customers. So the impact from these cost increases, price increases are limited on our profitability. That said, there are still some materials or components that are not passed through to the customer and the increase of these other materials is a risk that we are exposed to. We are continuing that risk by various ways, including signing long-term contracts with the vendors or actually diversifying our sources so that we're able to find the raw materials at the best price. Well, to answer your question about the polarizer film business. As you know, we've already been diversifying our customer base to overseas panel customers for some time. And so currently, the Korean panel companies account for a very small portion of our polarizer film business. And so downsizing of their production scale will have a negligible impact on the revenue as well as profitability of our polarizer film business. Looking towards the market outlook, as you mentioned, even though the entire LCD TV market growth is expected to be stagnant within the LCD TV segment, the large TV segment is expected to continue to grow, given the fact that consumers who are consuming various types of content, including movies and games, do prefer larger and higher picture quality TVs. Given that market outlook, we plan to continue to increase the share of the large-sized and high-performance polarizer film within our overall sales. We are aiming to maintain our revenue similar to last year and also defend our profitability. (foreign language)

Question: Soonhak Lee - Hanwha Investment & Securities Co., Ltd., Research Division - Analyst : [Interpreted] I have 2 questions. First of all is about LFP batteries. Just as the EV battery market is adopting LFP, the share of LFP batteries within the ESS market is also increasing faster than people expected. And according to some news even your competitor is considering the adoption of LFP chemistry. In that context, can you share with us SDI strategy regarding LFP chemistry? Second question is about Rivian, which is known to have some problems in producing its EVs. We would assume that, that would have some implications for SDI to supply. So can you share with us your current status of supply of batteries? And also, overall, in that context, what is your outlook for cylindrical EV battery sales this year? Unidentified Company Representative [Interpreted] Regarding your first question about our strategies of LFP batteries for ESS applications, as you know, the LFP battery does have a cost advantage, and that seems to be the reason it's increasing its share even in the ESS market. But still, LFP batteries have a disvantage of having low energy density. In terms of our ESS batteries, we use the same high nickel cathode material that we use for EVs in our ESS. This is how we improve our energy density and also gain cost advantages. On top of that, we are planning to provide ESS batteries that are cost competitive even with LFP by using

Question: H. Kwon - JPMorgan Chase & Co, Research Division - Analyst : [Interpreted] My first question is about the small cylindrical batteries. Power tool applications was a major source of growth last year, do you think you'll be able to maintain the same level of revenue as well as profitability for the small-sized cylindrical batteries this year? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 27, 2022 / 4:30AM, 006400.KS - Q4 2021 Samsung SDI Co Ltd Earnings Call Second question is about the OLED materials. When we look at the downstream, there is an increased penetration of foldables with OLED displays -- foldable handsets with OLED displays and your related company is planning to launch QD displays this year. This is all very favorable for your OLED materials. How much growth are you expecting this year? Unidentified Company Representative [Interpreted] For the power tool related cylindrical battery business, last year, power tool markets, demand growth was very strong as more people spent more time at home this year, the DIY-related power tool demand we level off a bit. But on the other hand, batteries have been developed to even produce higher power output. And this has enabled the adoption of these batteries and other applications such as professional-grade power tools or landscaping and other outdoor tools and machines. And so we expect there to be an increase of demand for high output batteries in these applications. On the other hand, if you look at the supply side, because major battery companies are focused on increasing their capacity around the EV batteries, which have a mid-power output profile, there's actually a tight supply in the high-power output batteries that are necessary for power tools. Having -- now seeing that we will lead -- continue to lead the market by launching a high-power output batteries for power tool applications ahead of our competition and continue to maintain both revenue and profitability. Interpreted About our OLED materials business, looking on the demand side, we're expecting growth in demand, given the fact that there will be greater penetration of foldable phones. Also, Chinese smartphone OEMs are expected to adopt OLED panels on a larger array, a larger -- a wider array of their handsets. Also, in addition to smartphones, there will be other applications that will be adopting OLED, such as an OLED TV, tablets or laptops. And so overall, we expect there to be an increase of OLED panel adoption, which will drive up the usage of the OLED materials that we supply, including the G-host or TFE. In addition to this, we have started the supply of 2D materials since late last year. And with our customer planning mass production this year, we're expecting our 2D related material revenue to significantly increase this year. Based on all of that, we are expecting