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2010
SAMSUNG ELECTRONICS
ANNUAL REPORT
2010 SAMSUNG ELECTRONICS ANNUAL REPORT

Table of contents

  • Page 1
    2010 SAMSUNG ELECTRONICS ANNUAL REPORT 2010 SAMSUNG ELECTRONICS ANNUAL REPORT

  • Page 2
    ... in sales, operating profit and net income growth ratios - Maintained sound financial structure with 50.3% liability ratio, 66.5% capital adequacy ratio and 18.0% return on equity ratio on a consolidated basis - Recorded KRW 949,000 stock price as of the end of 2010, a 19% increase over 2009 - Paid...

  • Page 3
    .... Samsung Electronics is also accelerating the development of new engines that will drive future growth. We are fast improving our technological capabilities in medical equipment and solar energy. Meanwhile, our agile response to market changes in software and solutions is enabling the company...

  • Page 4
    ... technologies. The Mobile Communications Business sold 280 million phones in 2010, up 23% over 2009, and achieved a double-digit operating profit margin, supported by strong smartphone sales. The Visual Display Business recorded the leading global market share for TV sales for the fifth...

  • Page 5
    ...Finance Officer & President, Corporate Management Office, Samsung Electronics (2010~Present) - President & Head, Corporate Auditing Team, Samsung Electronics (2009~2009) - Head, Management Support Team, Corporate Executive Staff, Samsung Electronics Head, Global ERP Task Force, Corporate Executive...

  • Page 6
    ... and success, Samsung Electronics isn't swayed by the winds of marketplace storms. We are cultivating engines for future growth that will drive new businesses and hone our leadership. We are advancing into worldwide markets by building sustainable growth and focusing on key differentiations across...

  • Page 7
    ...SMART TVS BUSINESS TV Sales (in units) TV Sales Revenue (in millions of USD) Global TV Market Share (based on unit sales) 45,115,000 25,969 37,819,000 23,561 22.1% Supported by our vital technologies and inimitable design, Samsung Electronics has achieved the world's No. 1 market share in TVs...

  • Page 8
    ...supports mobile printing. We provided business customers with a complete product line, including the first dual core CPU-equipped printer on the market, a multifunction printer and an A3 copier. Easy-to-use features and powerful performance secured second global market share in the A4 laser printer...

  • Page 9
    ... DIGITAL APPLIANCES FOR GLOBAL CUSTOMERS BUSINESS Sales (in trillions of KRW) Global Four-Door Refrigerator Market Share 11.6 9.6 Samsung Electronics is strengthening our brand image by introducing premium home appliances that offer essential services for daily life. In 2010, our innovative...

  • Page 10
    ... of use into portable mobile devices. The Samsung user experience represents a new lifestyle." Alex Veprik Engineer, North America S/W Development Group 1, Mobile Communications Business Mobile Phone Sales (in millions of units) Global Mobile Phone Market Share 280 227 20.6% 2009 2010 Source...

  • Page 11
    ...IRAN UAE INDIA THAILAND PHILIPPINES SINGAPORE MALAYSIA INDONESIA PERU BRAZIL NICARAGUA VENEZUELA KOREA JAPAN CHINA TAIWAN MEXICO DOMINICAN REPUBLIC USA 24.5% KUWAIT ITALY LEBANON QATAR MOROCCO EGYPT SAUDI ARABIA SOUTH AFRICA AUSTRALIA 2010 Source: Samsung Electronics Commercial Contract Trial...

  • Page 12
    ...BUSINESS Sales (in units) 15,095,000 Total Sales Premium digital cameras, percentage of category sales Premium digital HD camcorders, percentage of category sales 16,928,000 Total Sales GROWING WITH AN INNOVATIVE AND CHALLENGING SPIRIT AS THE TOP BRAND IN DIGITAL IMAGING At Samsung Electronics...

  • Page 13
    ...disk drives (HDDs) to the market, including a 2.5 inch 334GB HDD and a 3.5 inch 667GB HDD. Sales and Operating Profit (in trillions of KRW) Global Semiconductor Market Share 37.64 Sales 2nd 9.4% 26.81 Sales 10.11 Operating Profit 2.6 Operating Profit 2009 2010 Source: Samsung Electronics...

  • Page 14
    ...BUSINESS Sales (in trillions of KRW) and Operating Profit Rate 30.0 Sales Sales and Global Large LCD Panel Market Share ACHIEVING THE NO. 1 SHARE IN THE GLOBAL MARKET FOR LARGE LCD PANELS FOR NINE YEARS IN A ROW The industry leader, Samsung Electronics has achieved the No. 1 market share for LCD...

  • Page 15
    ... CONSOLIDATED FINANCIAL STATEMENTS 28 In 2010, Samsung Electronics realized a record-setting performance of KRW 155 trillion in sales and KRW 17 trillion in operating income. At the same time, we maintained a stable business structure with a 50.3% liability ratio, 66.5% capital adequacy ratio...

  • Page 16
    ..., the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Samsung Electronics Co., Ltd. and its subsidiaries as of December 31, 2010, December 31, 2009, and January 1, 2009, and of their financial performance and their cash ï¬,ows...

  • Page 17
    ... 2010 USD December 2009 USD January 2009 USD Assets Current assets Cash and cash equivalents Short-term financial instruments Available-for-sale financial assets Trade and other receivables Advances Prepaid expenses Inventories Other current assets Total current assets Non-current assets...

  • Page 18
    ...2009 USD 8,570,155 95,019 43,796 (719,819) 7,989,151 Revenue Cost of sales Gross profit Research and development expenses Selling, general and administrative expenses Other operating income Other operating expenses Operating profit Share of profit or loss of associates and joint ventures Finance...

  • Page 19
    CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY Samsung Electronics Co., Ltd. and its subsidiaries (In millions of Korean Won) (In thousands of U.S dollars (Note 2.25)) 2009 KRW Preferred stock 119,467 - Common stock 778,047 - Share premium 4,403,893 - Retained earnings 62,281,216 9,571,598 - ...

  • Page 20
    ...-sale financial assets, net of tax Share of other comprehensive income of associates and joint ventures, net of tax Foreign currency translation, net of tax Total comprehensive income Dividends Change in ownership interests, including new stock issues by consolidated subsidiaries Effect of business...

  • Page 21
    CONSOLIDATED STATEMENTS OF CASH FLOWS Samsung Electronics Co., Ltd. and its subsidiaries For the years ended December 31, (In millions of Korean Won, in thousands of U.S dollars (Note 2.25)) (In millions of Korean Won, in thousands of U.S dollars (Note 2.25)) Notes 2010 KRW 2009 KRW 2010 USD ...

  • Page 22
    ...December 31, 2010, SEC's shares are listed on the Korea Stock Exchange, and its global depository receipts are listed on the London and Luxembourg Stock Exchange. SEC is domiciled in the Republic of Korea and the address of its registered office is Suwon, the Republic of Korea. China Rest of Asia...

  • Page 23
    ... purchase method of accounting is used to account for the acquisition of subsidiaries by the Company. The cost of an acquisition is measured at the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange. Identifiable assets acquired and...

  • Page 24
    ... and used for cash management purposes only, in which case the overdraft is treated as cash and cash equivalents in the cash ï¬,ow statement. 2.6 Financial Assets 1) Classification The Company classifies its financial assets in the following categories: at fair value through profit or loss, loans...

  • Page 25
    Capitalized interest is added to the cost of the underlying assets. The acquisition cost of property, plant and equipment acquired under a finance lease is determined at the lower of the present value of the minimum lease payments and the fair market value of the leased asset at the inception of the...

  • Page 26
    ... year are addressed below. 2.26 These consolidated financial statements were approved by the Board of Directors on January 28, 2011. 1) Revenue recognition The Company uses the percentage-of-completion method in accounting for its fixed-price contracts to deliver installation services. Use of the...

  • Page 27
    ..., Samsung Electronics China R&D Center, Samsung Electronics Limited, Samsung Electronics Poland Manufacturing, Samsung Telecoms (UK) Korean GAAP Adjustments: Change in scope of consolidation Fair valuation of land (*) Derecognition of financial assets Capitalization of development costs Pension...

  • Page 28
    ... Assets Cash and cash equivalents Short-term financial instruments Available-for-sale financial assets Trade and other receivables Other financial assets (*) Total Loans and receivables Available-for-sale Held-to-maturity financial assets investments Total Fair value Financial instruments...

  • Page 29
    ... liabilities that are measured at fair value at 31 December 2009. (In millions of Korean Won) Translation & exchange difference Acquisitions / additions Level 1 Short-term derivatives Available-for-sale financial assets (*) Total assets Short-term derivatives Total liabilities 3,334,089 3,334,089...

  • Page 30
    ... investees including Samsung Life Insurance and iMarket Korea, were listed during the current year. The differences between the acquisition cost and fair value of the investment is recorded under other reserves, a separate component of equity. 56 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 57

  • Page 31
    ...mentioned above. As of December 31, 2010, the Company has credit insurance with Korea Trade Insurance and overseas insurance companies against its export accounts receivables from approved foreign customers. Samsung SDI Samsung SDS Samsung LED 58 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 59

  • Page 32
    (In millions of Korean Won) 11. Property, Plant and Equipment Changes in property, plant and equipment for the years ended December 31, 2010 and 2009, consist of the following: 2009 Investee Samsung Card Samsung Electro-Mechanics Samsung SDI Samsung SDS Samsung LED Percentage of ownership (%) 35...

  • Page 33
    ... 515,696 13,143 60,284 1,652,856 Account Production costs Selling general and administrative expenses Research and development expenses Total 2010 236,223 227,195 83,104 546,522 2009 285,063 78,083 3,256 366,402 2013 2014 Thereafter Total 62 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 63

  • Page 34
    ...: Discounts Total Current portion 2000.4.1 - - (4,010) 92,797 5,459 The pension expenses related to defined-benefit plans recognized in the statement of income for the years ended December 31, 2010 and 2009, are allocated to the following accounts: (In millions of Korean Won) 2010 Cost of...

  • Page 35
    ... amounts from changes in foreign currency exchange rates. Changes in the fair value of plan assets for the years ended December 31, 2010 and 2009, are as follows: (In millions of Korean Won) (A) The Company accrues warranty reserves for estimated costs of future service, repairs and recalls, based...

  • Page 36
    ... lease payments under finance lease agreements and their present value as of December 31, 2010 and 2009, are as follows: (In millions of Korean Won) G. In accordance with its risk management policy, the Company uses derivative instruments, primarily forward exchange contracts, to hedge foreign...

  • Page 37
    ... current shareholders for issuance of depository receipts, general public subscription, urgent financing with financial institutions, and strategic alliance. a. SEC has issued global depositary receipts ("GDR") to overseas capital markets. The number of outstanding GDR as of December 31, 2010, 2009...

  • Page 38
    ... of Korean Won) Loss from disposal of property, plant and equipment Donations Other 2010 Wages and salaries Pension expenses Welfare expenses Depreciation expenses Amortization expenses 11,380,257 563,408 1,618,992 10,847,374 546,522 2009 72 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 73

  • Page 39
    ... rate applicable to profits of the consolidated entities as follows: (In millions of Korean Won) 2010 Income before tax 19,328,656 2009 12,191,596 2010 Interest income Interest income from loans and receivables Interest income from available-for-sale financial assets Realized foreign exchange...

  • Page 40
    ...: Stock options. A calculation is done to determine the number of shares that could have been acquired at fair value (determined as the average annual market share price of the company's shares) based on the monetary value of the subscription rights attached to outstanding share options. The number...

  • Page 41
    ... of equity method Gain on disposal of property, plant and equipment Loss on disposal of property, plant and equipment Obsolescence and scrappage of inventories Net additions to provisions Other income / expense Adjustments, total Changes in assets and liabilities: Increase in trade receivables...

  • Page 42
    ... United States of America, England, Singapore, China, Japan, and Brazil to run and operate a local financial center for global financial risk management. The Company's financial assets that are under financial risk management are composed of cash and cash equivalents, short-term financial...

  • Page 43
    ...capital on the basis of the debt to equity ratio. This ratio is calculated as total liabilities divided by equity based on the consolidated financial statements. During 2010, the Company's strategy was to maintain a reliable credit rating. The Company has maintained an A credit rating for long term...

  • Page 44
    ... to key management for employee services is shown below: (In millions of Korean Won) 152,527 1,014,765 Salaries and other short-term benefits Termination benefits Other long-term benefits 2010 18,222 2,633 7,634 2009 12,322 965 2,807 84 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 85

  • Page 45
    ... in the consolidated statement of income for the year ended December 31, 2010 are KRW 2,264,243 million and KRW 63,228 million, respectively. 34. Events after the Reporting Period 1) Merger of Samsung Gwangju Electronics Name of the acquired company Headquarters location Representative director...

  • Page 46
    ... Headquarters 22nd Fl., Samsung Life Bldg., 1321-15, Seocho 2-dong, Secho-gu, Seoul 137-955, Korea Europe Samsung Electronics Europe Headquarters Samsung House, 1000 Hillswood Drive, Chertsey, Surrey, KT16 0PS, UK Tianjin Samsung Telecommunication Technology Co. (TSTC), Tianjin Onyang Plant San...

  • Page 47
    ...sby Ukraine Samsung Electronics Ukraine Company (SEUC), Kiev Greece Samsung Electronics Greece S.A. (SEGR), Athens China Mexico Samsung Electronics Mexico (SEM-P), Queretaro Shanghai Samsung Semiconductor (SSS), Shanghai Singapore Samsung Asia Pte. Ltd. (SAPL) United Kingdom Samsung Electronics...

  • Page 48
    ...SELV), Amman Mexico Samsung Electronics Mexico Sales (SEM-S), Mexico City Morocco Samsung Electronics Morocco Co., Ltd. (SEMRC), Casablanca United States Samsung Electronics America, Inc. (SEA), Ridgefield Park Samsung Semiconductor, Inc. (SSI), San Jose Samsung Telecommunications America (STA...