Operator:.

[Foreign Language] Good afternoon. This is Kim Heeyeon in-charge of LG Display’s IR. On behalf of the Company, let me thank all the participants at this conference call.

[Foreign Language] Today, I am joined by the CFO, DH Suh; Seung Min Lim, in-charge of Corporate Business Management; Matthew Kim of TV Marketing; JY Kwon of IT Marketing and Seonggon of Auto Marketing.

[Foreign Language] This conference call will be conducted for one hour in both Korean and English, starting with the presentation on the financial results of Q3, 2020 and the Company's outlook, followed by Q&A.

[Foreign Language] Please refer to the IR presentation document in the Company's website for more details on the financial results of Q3, 2020. For those joining through the webcast, please refer to the details on the widget on your screen. [Foreign Language] Before we begin the presentation, please take a moment to read the disclaimer.

[Foreign Language] Please note that today's results are based on consolidated K-IFRS Standards prepared for your benefit, and have not yet been audited by an outside auditor. [Foreign Language] With that said, we will now start with the presentation on Q3, 2020 earnings results. [Foreign Language] Let me start off with our business performance in Q3.

[Foreign Language] Revenue in Q3 was 6.7 trillion won, up 27% quarter-on-quarter. There was increase in IT product shipment following the trend of work from home and online schooling due to COVID-19. Supply of new P-OLED products bean for strategic customers and there was robust global demand for TV.

[Foreign Language] Operating loss was 164.3 billion won. Turning around to profit after seven quarters -- I'm sorry operating profit was 164.3 billion won turning around to profit after seven quarters. [Foreign Language] Operating margin was 2%, EBITDA margin 19% and net income was 11 billion won. [Foreign Language] Next is area shipment and ASP.

[Foreign Language] Area shipment in Q3 was 8.3 million square meters up 23% Q-o-Q. It is owed mostly to growth in TV panel shipment and IT products as work from home and online schooling became the new norm. [Foreign Language] ASP was $706 up 8% Q-o-Q and up 38% Y-o-Y.

This is due to growth in the share of large OLED and [PO] mobile product shipment and rise in LCD panel price. [Foreign Language] The Company's production capacity increased by 15% Q-o-Q following the start of Guangzhou new OLED fab conversion of Gen-8 facilities to IT and the start of new lines for small-to-mid size OLED.

But there was a decrease by 17% Y-o-Y due to LCD fab downsizing. [Foreign Language] Next is Q3 revenue breakdown by product segment. [Foreign Language] IT revenue was maintained after the spike in Q2 due to working from home and online schooling. TV revenue rebounded rapidly after the downturn in Q2.

[Foreign Language] TV revenue share was 28% up 5 percentage points Q-o-Q due to increase in OLED TV panel shipment following the start of Guangzhou new fab. Mobile and other products share was 29% up 4 percentage points Q-o-Q with full scale shipment of new products for strategic customers.

[Foreign Language] Next is the Company's financial position and ratios. [Foreign Language] The Company's inventory at the end of Q3 was 2.4 trillion won, which is an increase Q-o-Q. There was production ramp up of TV panels ahead of seasonal demand and preparation of mobile product shipment for strategic customers.

[Foreign Language] As for financial ratios, current ratio improved, while liabilities to equity ratio, and net debt to equity ratio remained a little change to Q-o-Q. [Foreign Language] Cash flow at the end of the quarter was 3.3674 trillion won falling slightly from the previous quarter.

Although net income turned around to profit, there was increase in working capital along with revenue growth, as well as partial repayment of debt. [Foreign Language] Particularly noteworthy is interest bearing debt decreasing by 310 billion won for the first time since large scale topics began in 2017.

[Foreign Language] Next is the Company's guidance for Q4, 2020. [Foreign Language] Although uncertainties are expected to persist in Q4, such as COVID-19 and macro factors, the company expects to see a low single-digit growth in area shipment following increased sales with mass production starting in the Chinese OLED fab.

Blended ASP is expected to keep up the pace of increase as shipment for strategic customers grows and LCD panel price rises. [Foreign Language] Next is presentation by the company CFO, DH Suh..

[Foreign Language] Good morning this is DH Suh. [indiscernible]. [Foreign Language] COVID-19 is lasting longer than expected. First and foremost, I wish health and safety for all our shareholders, investors and analysts. [Foreign Language] Allow me to add more details on the company's Q3 performance.

As work from home and online schooling are becoming a new lifestyle due to COVID-19. The company's IT business has shown robust performance, thanks to its preemptive response to the changes. [Foreign Language] The company was able to turn around to profit for the first time in seven quarters.

Thanks to stable supply of P-OLED panel to strategic customers and start of volume production in the Guangzhou new OLED fab. [Foreign Language] Area shipment in Q3 was up 23% Q-o-Q. Shipment of IT products continues to grow and shipment of large size panel also jumped amidst robust global demand and sales of TV.

[Foreign Language] In addition, supply of new mobile products to strategic customers increased and the rising LCD panel price pulled up ASP by 8% bringing the total revenue up by 27% Q-o-Q. [Foreign Language] There was even improvement in the financial performance across the businesses.

[Foreign Language] By product segment, IT is maintaining consistent profit structure, thanks to unique competitiveness while mobile P-OLED achieved meaningful improvement in profitability. Thanks to better quality and yield and growth in new products for strategic customers.

[Foreign Language] TV also contributed to profitability improvement with the start of mass production in the Guangzhou OLED fab and flexible operation of LCD fab according to supply demand status. [Foreign Language] Next is Q4, 2020 outlook and the company’s direction.

[Foreign Language] There continued to be both opportunities and volatility, non face-to-face culture and home entertainment have fast become the new norm, while uncertainties in the external environment persist. [Foreign Language] COVID-19 has given new rules and a high level of importance to display.

And along with changes in the industry is competitive landscape, volatility in the display industry in the future is likely to be different -- in different patterns than in the past. The company plans to double down on our activities in various fronts to remain flexible to the market environment.

[Foreign Language] One example is converting part of the LCD TV facilities to IT to strengthen our readiness to respond rapidly and flexibly to the new opportunities like non face-to-face and remote online activities.

[Foreign Language] For LCD TV, we intend to have greater flexibility in fab operations according to supply and demand, while maintaining the basic principles of structural innovation.

Production of LCD TV panels in Korea is running flexibly within the existing facilities and available resources based on customer's needs and short-term supply demand status while following the principles of structural innovation. [Foreign Language] For OLED TV, we were able to lay the basis for a reliable supply to mainstream all that.

With the stabilization of the Guangzhou new fab followed by full scale shipment, COVID-19 slowed down demand for high-end products in the first half. But sales in the second half are expected to double from the first half with the reopening of offline retailers. For the year, shipment is expected at mid 4 million units.

[Foreign Language] Production capacity for large size OLED is total 140,000 sheets in Paju and Guangzhou combined. We will grow to 7 million to 8 million units in 2021 by responding to demand for a mid size of up to 48 inch and for ultra large size of 77 inch or bigger.

[Foreign Language] The COVID triggered changes in lifestyle have also highlighted various uses of TV in addition to just watching. For such uses as gaming, work from home and home training, OLED unique strengths such as natural colors, flexible design, and eye comfort will stand out even more.

[Foreign Language] We’d display products that are optimized for the new environment and customer's needs and that are able to flexibly respond to new form factors. The company will keep broadening its market leadership. [Foreign Language] As for P-OLED supply of new products began fully for strategic customers.

We will try to minimize seasonal volatility and ensure consistent business management by achieving reliable product quality and yield and stronger relations with strategic customers. [Foreign Language] Let me also touch upon the path of our LCD structural innovation.

The purpose of this is to further strengthen the company's already competitive areas and speedily rationalize the fabs and products that are structurally less competitive. [Foreign Language] It is under this principle that our China LCD fab will be made even more competitive.

Part of the domestic LCD TV fab will be converted to IT and the remaining capacity will be flexibly run within the given facilities and available resources in response to the market situation and customers need. [Foreign Language] Next is management direction and financial management.

[Foreign Language] The company is continuing with preemptive financial management under the worst case scenario to respond to uncertainties and volatility in the business environment. CapEx for this year has been adjusted to a high 2 trillion won level to keep investment within EBITDA.

We will further tighten control our finances to keep improving our financial position. [Foreign Language] That concludes the company's presentation on Q3 performance and outlook. I hope to come back to you at the next earnings release with more improved performance and outlook. Thank you for your attention..

[Foreign Language] This brings us to the end of earnings presentation for Q3, 2020. We will now take questions. Operator, please commence with the Q&A session..

[Foreign Language] The first question will be presented by Dongwon Kim from KB Securities. Please go ahead with your question..

[Foreign Language] I have two questions. First is about the LCD, and the second followed by the P-OLED question. So now first, the LCD market recently has been showing quite a good pickup.

So does this mean that there would be any changes to the company's strategy to reduce the portion of the LCD business as well as the structural innovation? And if you could also give us some specific details regarding the Paju lines for example, the P7 and P8 and also including your IT panel business? And the second question is about the P-OLED.

So, can you give us an update on the orders in the fourth quarter coming from your North American customer and also what do you -- what is your outlook for the P-OLED demand for next year?.

[Foreign Language] Now this is the CFO speaking and I would take the first question and I understand that your question is about where there are -- whether there are any changes regarding our strategy for structural innovation in LCD and also the current update on the progress.

[Foreign Language] Now on one hand, because of the COVID-19 impact, and also when it comes to the changes in the supply demand dynamics in the market and also on the impact of ASP, it is true that there has been some let’s say hope on improving the company's profitability.

Now having said that, let me emphasize that the company's strategy for structural innovation in the LCD business remains unchanged. [Foreign Language] Now the structural innovation is about strengthening the already competitive areas of the company, especially for the LCD.

And then also to speedily rationalize the structurally less competitive fabs or products. [Foreign Language] So first of all, as was mentioned in the last quarter, now out of the LCD business where we already have competitiveness so the IT products.

Now in IT products, we will continue to strengthen this, because we believe that when it comes to the customer base or the technology base, and also the competitiveness of the products themselves, the IT business for the company has unique competitiveness compared to others. So this is where we will continue to strengthen competitiveness.

[Foreign Language] So it is under such principle and direction that the LCD fab in China will continue to strengthen competitiveness. Now on the other hand, the LCD fab in Korea, it is true that we have already made some adjustments. So, for example, part of the facilities have been converted for IT.

So, this is applicable to P8 as you have asked about and then for the remaining capacity, we will make sure that they are run flexibly according to the market situation and customer needs, although we believe that they are prone to changes on this front as well.

So, we will try to run them according to the given facilities and the available resources. [Foreign Language] And now with regards to your second question about the P-OLED business. [Foreign Language] As you would know, extensive amount of time and efforts have been spent on trying to normalize the P-OLED business so far.

[Foreign Language] And yes, so, for a lot of hard work has gone into this and now starting in the second half. We were able to stabilize the development and as a result, we were able to ensure reliable quality in yield and based on these achievements, we are now able to produce mass.

So we are now able to have mass production and volume supply to our strategic customer. [Foreign Language] So as for the progress on -- in the second half of this year.

Now, we are currently fully utilizing the available capacity to respond to the demand coming from the strategic customers and then looking toward next year and on, although there would be some changes in demand depending on the seasonality based on the mass production capability that we have already secured.

We believe that we have now laid the basis for consistent business down the road. [Foreign Language] Now of course, in the early part of this year, we have explained about the three strategic tasks for the company. One of them was turnaround in the plastic OLED business.

So we will not be resting on our [indiscernible] when it comes to the achievement in the second half of this year. And we will continue to work towards a fundamental turnaround of the plastic OLED business. So rest assured that we will not be complacent..

[Foreign Language] The next question will be presented by Jung Woo Ko from NH Investment & Securities. Please go ahead with your question..

[Foreign Language] I have two questions regarding the OLED business. First is about the W-OLED. Now it seems as if there is a quite healthy demand for the 48 inch OLED TV recently.

So I'm wondering whether the changes in the demand for the 48 inch OLED TV have brought about any changes in the company's investment targets for the W-OLED? And also, your shipment guidance this year was for 4 million. But then I wonder whether there have been any changes since then? And also perhaps it is a bit early -- too early to tell.

But then, can you also give us some further guidance about the W-OLED business for next year aside from the guidance that you have already given? So for example, what would be your guidance for the shipment outlook of the W-OLED next year? And the second question is about the -- your P-OLED business.

So it seems as if your business with Huawei in China would be bit suffering more recently.

So then based on that, what would be your outlook for P-OLED that business down the road?.

[Foreign Language] I will first respond to your question about the White OLED. [Foreign Language] Now first of all, yes, the -- I believe that your question was about whether there have been any changes to our shipment guidance, which was around 4 million this year.

And also whether the demand for the 48 inch W-OLED TV have brought about any changes to the company strategy. Now, first of all, the number that we have given in the pre-COVID timing was about 6 million for this year. But then because of the COVID-19 situation lasting throughout the first half. Now, things have changed.

And of course, the situation is slightly different even today. But then, immediately after the COVID-19 situation the demand for high-end TV has slowed down considerably. And that is why we have adjusted the guidance to around 4.2 million, 4.5 million this year.

[Foreign Language] And then regarding the impact of the increasing demand for 48 inch, now it appears that it is mostly for gaming purposes. Now and yes, there has been increasing the demand for 48 inch, but then unfortunately, the Guangzhou fab it's mostly for a 77 inch in MMG.

So this means that there is limitation production capacity for the 48 inch and because of that, we are not able to rapidly ramp up the production. [Foreign Language] So, we are currently trying to make improvement in order to improve the currently limited production capacity.

So, for example, we are currently developing the technology to develop -- to produce the 48 inch in the Paju lines. So, following such development we do believe that we will be able to produce more 48 inch next year. [Foreign Language] And then now to your question or the second question about the strategic customer in China.

[Foreign Language] So as you would also know, there is a big question mark about when we can resume our business because it's not only about the company gaining the license for the export, but then also for the other companies in the supply chain gaining expert so I believe that most of the semiconductor companies would have to gain the license in order to resume the business.

[Foreign Language] Now of course, strategically speaking, it's very important client for the company, but then when it comes to the volume itself, then we were not at the stage of providing mass volume. So when it comes to the impact on the business itself, then I would say that it is more than manageable.

But of course having said that, if the business were to resume then we would be ready to move in very quickly, so we are continuing to make preparation..

[Foreign Language] The next question will be presented by Han-Su Kim from Hana Financial Investments. Please go ahead with your question..

[Foreign Language] They all IT. Now first, regarding the TV market. Now the competitors recently appeared to be highly interested in the mini LED.

So I wonder what the company's view is regarding mini LED and also what is your response strategy to this? And then the second question is about the IT? Now COVID-19 has actually driven up demand for IT products and as a result of this many your peers are also strengthening marketing for IT for example, converting some of their facilities for TV for IT.

So then as a result of this, do you see any changes in the competitive landscape? And what is the company's view on the market going forward?.

[Foreign Language] Now then, this is the CFO and I will be responding to the first question and then the second question and IT will be taken by Mr. Kwon of the IT marketing business. [Foreign Language] Now, the first about the mini LED and the company’s -- so, your question is about the company's view on the mini LED.

And now yes, we do see that the -- there have been some moves by the competitors recently regarding the mini LED, but then when it comes to the set market, then we see that the some of the Chinese companies have launched mini LED backlight TV sets.

But then we see that the -- what we have seen so far is that the market -- the impact on the market has been minimum. [Foreign Language] So based on our understanding so far when it comes to the device structure, then basically this is an LCD that is backlight by mini LED.

But of course depending on the efforts of the set solution companies there would be some improvement over the LCD.

[Foreign Language] Now, if I may explain the background to this, during the COVID-19 era, many people in the home have been increasingly watching more TV or utilizing the monitor to do online schooling or so basically, we see that there has been an increase in the time spent on utilizing or viewing the display.

So we have done some survey on the users to identify their pain points in using the display. [Foreign Language] And in analyzing the customers pain points, we were once again affirmed that the solution that would be -- that would resolve many of the biggest challenges that the customers are experiencing would be OLED.

[Foreign Language] So there were many pain points that have been mentioned. And some of the most frequently mentioned ones are the concerns on the impact on the eye health or the ocular health after -- for having watching -- for having watched the display for so many hours.

And another is now because of the increase in working from home or online shopping. Many more customers also became interested in the color or the color representation. So for example, on the monitor or on the display, they would see color A and then they would make their choice based on that.

And then when they receive the product and they see that the color is different or not what they had expected. So many also complained that there are some limitations in the color representation.

[Foreign Language] And as I have mentioned earlier, yes of course that there will also be some improvement in the mini LED, but then when it comes to the customer’s pain points then once again we see that some of the oldest specific features are well suited to relieve such pain points. For example, the older display is less harder on the eyes.

And also it is one of the best technologies to represent the true colors. So it shows the natural colors and also what we call the Crystal Sound OLED or the CSO. So, this is the display embedded with speakers meaning that it is also good for mobility or portability.

So we believe that these are some of the advantages and strengths of OLED that the mini LED of being an LCD will find very difficult to keep up with. So we will continue to promote these advantages and strengths of all that and also in consultation with the customers we will try to fully take advantage of the all that specific advantages.

So they will be able to achieve the 7 million to 8 million shipments target for next year..

[Foreign Language] And now regarding your question about the IT business strategy and also the competitive landscape. [Foreign Language] Now first of all about the IT business environment, the COVID triggered upside demand. Of course, this is a highly subject to the developments in the COVID-19 situation as well as the real economy.

But we do believe that the upside demand so, the demand overall will remain high into the first half of next year. [Foreign Language] And regarding the competitive landscape, yes, it is true that some suppliers are trying to increase their production volume to respond to the IT demand.

So, that is one factor that that does not bode well for the company. But then on the other hand, there is also a positive factor for the company and that is the decrease in the number of suppliers. For example, there was an LCD exit by a domestic player and also the Chinese LCD makers are said to be going through restructuring.

[Foreign Language] But now also when it comes to the IT business environment and the changes the company has two advantages that you can rely on. And one is the technological advantage that we have, for example, IPS [oxides], nano bezel and high resolution.

So these are the technological edges of the company that allow us to keep leading the high-end market. [Foreign Language] And the second advantage is the fact that among the customers feedback, the most important is the technology.

So because the company has technological advantage over the peers this has allowed us to build a long-term partnership with strategic customers, which has ensured consistent business..

[Foreign Language] We will take one last question..

[Foreign Language] The last question will be presented by Nicolas Gaudois from UBS. Please go ahead with your question..

Good afternoon. Thanks for taking my question. The first one is regarding your Gen-7 LCD capacity remaining in Korea, which we believe is around 80,000 to 90,000 sheets per month and is currently used for -- its currently use for TV panels. It seems like that will continue to operate into year-end partly because of the upside in the market currently.

Could you update us on your plans regarding this capacity going into 2021, since you know initially you intended to actually close it down? And second question relates to CapEx, you explained you are [distinct] down the CapEx issue in line with the EBITDA, next year your EBITDA is very likely to go up.

Should we expect an increase in CapEx from the levels indicated for 2020 or do you actually intend to start lowering your debt next year by keeping CapEx as low as possible? Thank you. [Foreign Language].

[Foreign Language] Now regarding your first question about the Gen-7 capacity in Paju. Yes, currently it is maintained at between 80,000 to 90,000 per month.

And of course we are taking all the factors of the market into consideration when we make decisions but then the way we see it now is that it is a fact that it's well suited for ultra large commercial products. And so we believe that it is a fact that is quite competitive for that product category.

[Foreign Language] And as I have explained earlier, the much of the LCD TV capacity has been converted to IT and then what remains in P7, P8. So especially for P7, it is currently being run mostly for commercial products. And then for the remaining capacity as was explained earlier, we will be running them within the given human resources.

And of course, we also have to take into account the market situation as well as the customer's needs. So our position now is to make sure that it can be and it will be flexibly run in response to the customer's needs and the market situation. [Foreign Language] And then regarding your question about the CapEx for next year.

Yes, for this year, our plan is to keep CapEx within EBITDA. And then for next year, the plan is similar and meaning that the CapEx would be kept within the EBITDA. Now, of course, we want to be fully ready for the future. So what we intend to do is make investment where necessary as we continue to improve financial ratios.

So once we are ready with the final plans, then we will be communicating them to you, but basically the plan for next year is to keep CapEx within EBITDA..

[Foreign Language] So that concludes the Q3, 2020 earnings conference call. Thank you once again for joining us today. Please do contact us at the IR Team for any additional questions. Thank you..