Moody's current ratings on Samsung Electronics Co., Ltd. are:

Senior Unsecured (foreign currency) rating of A1

RATINGS RATIONALE

SEC maintains leading global market positions in a variety of business lines globally, mainly in the semiconductor, handset, and flat panel display segments. Its technological leadership also results in cost competitiveness against its global peers. Moreover, its core competence is supported by its innovative products and advanced R&D, both of which have helped improve its market share over time.

The A1 rating also considers SEC's expansion in the smartphone segment, where it increased its global market share to around 30.6% in 1Q 2012 from just 3.7% in 2009. Its leading market position and established brand equity are the main credit strengths that support the ratings over the medium to longer term.

The trend of more stable operating profit of this business segment provides opportunities for margin expansion.

However, SEC remains exposed to the volatile memory semiconductor business, and its core businesses are capital-intensive, requiring large investments for technology innovation and migration. These factors are partially offset by the company's strong balance sheet liquidity which, in the past, has provided an adequate cushion through the business cycle.

SEC enjoys stronger market positions and leverage metrics than its A-rated peers. However, the A1 rating is constrained by its capital intensity and significant exposure to the volatile memory business.

The stable outlook reflects the resilience of SEC's credit profile during cyclical downturns, and our expectation that the company will maintain its market leadership in its core business divisions over the medium term.

What Could Change the Rating - Up

Upward rating pressure could evolve over time if the company can maintain its solid financial strength and further diversify its business lines into areas that are not as volatile as its memory business. Any increase in the contribution of the more stable mobile business to overall profits would be credit positive.

What Could Change the Rating - Down

Negative rating pressure could arise if there is a significant erosion in SEC's profitability, such that adjusted debt to EBITDA exceeds 1.2x and retained cash flow to adjusted debt falls below 50% (excluding Samsung Card), due to: 1) weaker-than-expected consumer spending resulting from the global economic downturn, or 2) erosion in SEC's competitive strength in, for example, its cost competitiveness and technology development.

At this time Moody's believes that Samsung Card will not require capital injections from its shareholders. However, should SEC provide material funding to this affiliate in the future, it would be negative for SEC's rating.

The principal methodology used in rating SEC was the Asian Consumer Electronics Industry Methodology published in December 2010. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

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