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00:00Samsung Digital City is the beating heart of Samsung Electronics, a sprawling hub the size of 250 football fields.
00:08It houses more than half the company's R&D staff, bringing to life some of its most popular products.
00:16It all began with these black and white TVs more than half a century ago.
00:20They dominated the Korean market in the post-war years.
00:23Since then, Samsung's built everything from kitchen appliances to PCs to chips and, of course, mobile phones.
00:31And it's a popularity of its new foldable smartphones the company's banking on, as it tries to offset the pressure on the all-important chip business.
00:40I think our approach for this generation was such that we don't want to sacrifice anything.
00:45Because you want to make it thinner, then obviously battery capacity is one of the issues.
00:49And also, how are we going to actually make sure it's durable enough?
00:54When you actually design a device thinner, obviously you can only use less metal, which can make a device less durable.
01:03But we actually not only just come, we actually start with all this redesign of components, structure, even the materials.
01:12That's how we actually, we didn't do any sort of compromise in terms of durability and also performance, while making this device thinner and lighter.
01:21How successful do you expect this new generation to be?
01:24Do you have an idea of whether you could break record sales?
01:30We do have a very high confidence that we can do better than, you know, the previous years.
01:35And then we'll, as I mentioned, this is just the beginning of making these foldables mainstream.
01:41How does Samsung think about competition?
01:43Because you have also so many Chinese makers coming out with foldables, with good cameras.
01:48You know, rather than focusing on competition, I think we have been focusing on our consumers.
01:54What are the experiences that we can bring to the consumers and how complete they are?
01:59So we've been focusing on those, and I think healthy competition with other companies, I think will bring more innovations and then bring more benefits to consumers.
02:12So we are welcoming kind of others to join this category, which we created back in 2009.
02:19Even if Apple comes out with a foldable next year, which is what people are saying, how do you keep that edge?
02:25No, I mean, we've been doing this for many years, and this is, we have accumulated a lot of technologies and know-hows.
02:32And, you know, having one of the, I mean, another global company joining this category, I think it's good for the industry.
02:41And also it's going to be great for the consumers.
02:44When we see the pressure on Samsung semiconductors and we see the success in mobile,
02:49does that change your thinking about how heavy your shoulders are at this point?
02:53No, I mean, our pressure has been there for all the time.
02:58I mean, nothing has changed.
03:00And I think there is a, you know, I think one of the, Samsung is one of the companies who has every aspect of this supply chain,
03:10not only from, I mean, not only from the components to all the way to the devices and also applications and services.
03:15So we believe there will be a big synergy we can, we can have across all these different business units.
03:24And we'll continue to kind of utilize this, this complete ecosystem that we have.
03:29This is the flip phone.
03:32And this is the first time that in a foldable you put your Exynos chips as well.
03:37How significant is that for Samsung as a whole?
03:41Choosing a chipset for a device, I think we do have a very rigorous kind of process and very complicated kind of equations.
03:49And we look at not only performance, power consumption, but also kind of regional aspects of the consumer requirements.
04:00And looking at all these dynamics, we always try to choose the best one for the device and for the consumers.
04:08So it's not so much about Qualcomm or Exynos.
04:12It is about how we're going to deliver our best experience using the right chipset platform for our consumers.
04:17You expect the Exynos 2600 chip for next year as well?
04:22I think we'll consider every option.
04:25And then we'll go through all these regular kind of chipset selection process as we have been doing for the next year as well.
04:32And then whichever actually gives us the best performance, best experience to our consumers, we'll choose that one.
04:38So far are you on track?
04:39We are on track and we haven't finished the evaluation process, but we are in the middle of doing it.
04:45Let's talk a little bit about the tariff concerns around the world, because President Trump says that potentially there could be a 25 percent tariff on Samsung phones not produced in the United States.
04:57How are you preparing for that?
05:00Very good question and tough one.
05:03So Samsung has long established multiple manufacturing facilities in key regions around the world.
05:14That kind of gives us a flexibility in dealing with or responding to any changes in other countries' kind of trade policies, not just the U.S.
05:24So we have established that kind of a flexible system.
05:29And, you know, in regard to this potential tariff by the new U.S. government administration, there are a lot of still uncertainties.
05:39But we have seen that deal that at least brings down the threats of tariffs from more than 40 percent to 20 percent for Vietnam, which is a huge manufacturing base for Samsung.
05:51How do you see the developments and how much of a benefit could that be?
05:55Or does it still hurt because it's still higher than it was originally on average 3 percent?
06:00The new tariff policies obviously are very challenging to us in terms of business.
06:09And about Vietnam, obviously the lower the better.
06:16But also, as I mentioned, we do have multiple locations, multiple manufacturing capabilities.
06:20And then over the past few months, we've been working very hard to make sure the products that are bound to U.S. can be manufactured in any of the locations.
06:33Not any, but in multiple locations.
06:35So depending on – so we're looking at the Vietnam, but also we're looking at Korea, India.
06:42I mean, what were the final tariffs?
06:44So as I mentioned, we're going to just do a lot of optimization according to the final numbers.
06:49But the lower the better.
06:51Is that easy to adjust, production?
06:53That we have been working very hard to make sure once you make that decision, that can happen really quick.
07:03So we've been doing a lot of preparation.
07:06When it comes to those costs, at what point does Samsung decide you have to actually pass it on to consumers?
07:12That is also a very difficult question.
07:14And also how we're going to – I think we'll definitely look at how the industry is evolving and how this tariff situation evolves.
07:26I think we'll make some adjustment accordingly.
07:29When it comes to India, how big is it relative to, say, Vietnam and South Korea?
07:33No, but remember, we are making products and shipping these products to globally, right?
07:42So, right.
07:44And some percentage of those products are going to U.S.
07:48And so we do have a lot of variables that we can play with.
07:54And those adjustments and the mobilization of the factory changes, those adjustments you have been making since the Trump administration came in or since coronavirus pandemic, how far along have you been making those calculations?
08:07So I think over the last few years, I think we've been trying to diversify our kind of manufacturing capabilities across the globe that we've been working for years.
08:19And in particular for how we're going to handle this U.S. tariff situation, especially for the products that we are building and shipping to the U.S.
08:28Because there are some special kind of equipments that we need to kind of make them ready in all these production lines and et cetera.
08:37So that over the last few months, actually, we have made them ready.
08:43The experience in the devices, especially with artificial intelligence, would you be willing to take new chances and opportunities with, say, integration of chat GPT that we've been hearing about?
08:54So with S25, as I mentioned, we integrate AI agents at the system.
09:01We built that system.
09:02And then Gemini from Google was the first agent that we integrate deeply into our Galaxy devices.
09:09And I can tell you that we already kind of tell the world that Gemini will not be the only AI assistant we're going to integrate with our Galaxy.
09:18We're going to integrate multiple AI assistants or AI agents with this framework that we've built.
09:27Which includes conversations with chat GPT.
09:30It could be anything.
09:31It could be anything.
09:32As long as these AI agents are competitive and AI agents can provide the best user experiences, we are open to any ideas.
09:42How far along are the discussions?
09:44We're talking to multiple vendors.
09:46I think at the time of S26, you're going to see more.
09:51Perplexity AI fits into those conversations, too?
09:54Anything, as I mentioned.
09:55Perplexity others.
09:57I mean, any AI agents out there in the industry, whichever provides the best experience with our Galaxy, to Galaxy users, will be open to integrating those.
10:09But the fact that you're saying we're going to get a decision by S26.
10:12You will see, in addition to Gemini, you will see more at the time of S26.
10:20Why does a bigger mix of AI developers make sense for Samsung?
10:25So, we really want to make our consumers have our consumers.
10:33We will give these choices to the consumers.
10:36Whichever agents they love or whichever agents makes more sense to them, we want to actually give the choice to them.
10:45So, we're not going to force our Galaxy just to choose one or another.
10:50We'll provide the multiple choices to them and then let them decide.
10:54You've had a very long relationship with Google.
10:57Will this change that?
11:00No.
11:00Google, we have been working very closely with Google ever since we launched our smartphone with Android.
11:08And this relationship actually has gotten stronger with this AI integration.
11:16What is your strategy inside of China when it comes to these AI models?
11:20China is very special.
11:23You know, Samsung is one of the companies that has an ability to deliver the products at the truly global kind of level.
11:33But also, we also believe that we need to do a lot of deep, we have a deep commitment to localization as well.
11:41So, China, we definitely have an R&D center there.
11:45And then we do a lot of partnership with the local Chinese vendors in regard to not only the models, but also AI solutions and services.
11:55So, we have been working with a lot of them actually to provide the best experience to our people in China.
12:01Where are you seeing the bright spots when it comes to smartphone sales?
12:05And where do you see the opportunities in the next few years?
12:08You know, some people are saying that, you know, smartphones, smartphone market is saturated.
12:13Maybe there is a need for the new kind of device to replace the smartphone.
12:19I don't necessarily agree with that kind of claim.
12:22I think we do have a wide range, whole range of devices, like we call those as Echo devices, around the smartphones.
12:31And then, like, wearables such as watches and earbuds and new computing devices, tablets and not PC.
12:38And then when these devices work together, I think there will be a synergy in terms of providing the better experience to the consumers.
12:45But also, when this, not only smartphone actually market increase or they have a solid growth, but these Echo devices actually have also solid growth.
12:57So, I think from the mobile industry point of view or market point of view, we strongly believe that the market will continue to increase, continue to grow.
13:06And also, the importance of smartphone is going to be more than rather than less.
13:13And the reason why I'm saying is that it's because of AI.
13:17When AI brings to the picture of this industry, smartphone will play a kind of central hub role so that it can not only interface with, users can interface with smartphones,
13:31but they actually can bring the AI benefits to other surrounding devices or Echo devices.
13:38So, I think smartphone market will grow and also importance of smartphone will increase.
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