[Foreign Language] [Interpreted] Good morning. This is Daniel Lee, in charge of LG Display's IR. On behalf of the company, let me thank all the participants at this conference call.

Today, I'm joined by the CFO, DH Suh; Heeyeon Kim, Senior Vice President of Corporate Strategy Group; Seung Min Lim, Vice President of Corporate Planning; Stephen Ko, Vice President of TV Marketing; Jae Yong Kwon, Vice President of IT, Strategy and Marketing; and Ki-Joon Jin, in charge of Auto Marketing.

The conference call today will be conducted for one hour in both Korean and English, starting with the presentation on the financial results of Q2 2021 and the company's outlook for Q3, followed by Q&A. Please refer to the IR presentation document in the company's website for more details on the financial results of Q2 2021.

For those joining through the webcast, please refer to the details on the widget on your screen. Before we begin the presentation, please take a moment to read the disclaimer. Please note that today's results are based on consolidated IFRS standards prepared for your benefit and have not yet been audited by an outside auditor.

With that said, we will now start with the presentation on Q2 2021 earnings results. Let me start off with our business performance in Q2. Revenue in Q2 was KRW 6.966 trillion, up 1% QoQ despite the seasonality. There was increase in TV shipments, including OLED TV and continued solid demand for IT.

Operating profit was KRW 701 billion, an increase QoQ, thanks to rise in LCD panel price and improvement in OLED TV profitability. Operating margin was 10% with EBITDA margin at 25%. Net profit was KRW 424 billion. Next is area shipment and ASP. Area shipment in Q2 was 8.91 million square meters, up 4% from the previous quarter.

Individual panel price kept up its rising trend in Q2 led by large sized panels. But area ASP was $703, down 4% QoQ but up 7% YoY. There was reduced shipment of mobile products owing to seasonality. The company's production capacity in Q2 increased 3% QoQ. Next is Q2 revenue breakdown by product segment.

In terms of share out of revenue, IT panel maintained its highest portion at 39%. TV panels came in next with 38%, up seven percentage points from the previous quarter, thanks to OLED shipment growth and LCD price hike. Mobile and others accounted for a 23% due to reduced shipment from seasonality. Next is the company's financial position and ratios.

The company's cash and cash equivalent at the end of Q2 was KRW 4.3 trillion. Inventory was KRW 2.723 trillion, increased by KRW 371 billion QoQ as we increase the share of high value-add products and prepared for the seasonality in the second half. Financial ratios kept showing improvement.

Liabilities to equity ratio was 164% improved by 11 percentage points, current ratio was 96%, net debt to equity ratio came in at 69%, improved by six percentage points QoQ. Next is cash flow. Nothing was out of ordinary in the net cash flow and cash equivalent was KRW 4.317 trillion, largely unchanged quarter-on-quarter.

Let me now move on to guidance for Q3. In Q3 area shipment is expected to grow by mid-single digit QoQ. We are entering what is normally a positive seasonality but it may be susceptible to some variability due to part supply issues. Area and price is expected to rise by mid-single digit QoQ driven by the growth in mobile shipments.

Next is presentation by the company's CFO DH Suh on business performance and strategy..

[Foreign Language] [Interpreted] Good morning. This is DH Suh, CFO of LG Display. Let me first thank all of you, all stakeholders, including our shareholders, investors and analysts for your support and interest in LG Display, even as uncertainties continue and the extended impact of COVID-19. First and foremost, I wish for your health and safety.

I will now brief you on the company's Q2 performance. Revenue was KRW 6.966 billion, the highest ever in Q2. Operating margin recovered to double digit and EBITDA margin at 25.4% was the highest since Q3 2009.

Breaking down the performance by business, large OLED TV shipments in the first half was 3.5 million units, which is around 80% of last year's shipment. It has significantly bolstered its position in the premium TV market. Global OLED TV sales - the actual global sales of OLED TV sets in the first half of 2021 was over 60% YoY in growth.

Thanks to this development, we have been expanding our market share in the over $1,000 premium TV market. IT also kept up its improvement despite some parts supply disruptions, thanks to a solid demand for enterprise and education.

The company also has strong competitiveness in both the products and customer base in IT and has been achieving solid performance. For the mobile business in Q2, there was some typical seasonality but we focused on stabilizing our development, production and quality to respond to the large volume for our strategy clients in the second half.

Next is the company's outlook on Q3. As we move into positive seasonality, demand growth is expected across all segments, TV, IT to mobile. Annual shipment for OLED TV is planned at below 2 million units. While improved performance is expected quarter-on-quarter in all products of IT on the back of strong demand.

In mobile, expanded production of customers new models are expected to have positive effects. At the same time, it is believed that uncertainty remains with the prolonged impact of COVID-19 as well as issues with key parts supply. The company will strengthen market monitoring and ensure preemptive management so as to minimize volatility.

Next is on the company's strategic direction for each business. First is the large OLED. Large size OLED has taken out a firm position in the premium TV market with stronger internal capabilities such as yield and productivity along with enhanced product lineup and size diversification. We believe it has laid the basis for generating profits.

Going into the second half, we will try to further boost OLED TVs position in the ultra large segment while broadening the audience specialized premium market that we have been working on.

We will also identify applications beyond the existing TV market where OLED can unleash its distinct inherent value and focus our capabilities on developing them into a high margin, high growth business.

For the large OLED business, we will try to turn around to profit in the second half of the year, achieve mid-single digit operating margin or higher in '22 and double-digit margin or higher in the longer term. Next is P-OLED. The P-OLED business has been stabilized thanks to improved internal capability.

We have also laid the basis for stable volume and built up a revenue structure by solidifying our trust with customers. We will work toward growing the volume and preparing for new models based on stronger partnership with customers and reinforce our revenue base by broadening our high margin portfolios such as wearable.

Third is our operational plan and strategy for LCD. Under the principle of focusing on where we are competitive, we shifted part of our capacity to high value-add IT products and we'll focus our TV business on high margin products like ultra large and commercial products.

We are enhancing our mid-to-long term cooperation with major customers to build a stable operating basis, stay resilient against market changes. Next is on financial activities, borrowing was reduced by around KRW 500 billion in Q2.

For the mid-to-long term, we will improve our financial structure and key financial ratios stable without increasing borrowings as we maintain the principle of keeping CapEx within EBITDA. Last is an update on the current discussion regarding dividend policy, one of the frequently asked questions, of late.

The company is currently working on a policy to use a certain percentage of the consolidated net profit as the dividend resource. Once we finalize a dividend policy that will be predictable and sustainable for the mid-to-long term, we will communicate with the market without delay.

We will also strengthen IR activities in the second half to better communicate with the recently increased individual shareholders. Thank you very much for attention. That brings us to the end of earnings presentation for Q2 2021. We will now take questions. Operator please commence with the Q&A session..

Question-and:.

[Foreign Language] [Interpreted] Now Q&A session will begin. [Operator Instructions] The first question was presented by Kim Dong-won from KB Securities. Please go ahead with your question..

[Foreign Language] [Interpreted] Now first of all, congratulations on the good performance. I have one question each word LCD and OLED. And first, when we look at the revenue share, then it seems as if it is the LCD TV where the profitability is the most susceptible to change depending on the changes in the pricing.

But I wonder what was the share out of revenue in the second quarter of the LCD panels and also looking ahead to the second half of the year, what do you see in terms of the price trend for the LCD panel? And then for next year, the company plans to have the LCD exit and are there any changes to your exit strategy for LCD? And the second question is regarding OLED.

I do agree, according to the [indiscernible] presentation that the company was able to lay the basis for profitability, thanks to improved cost structure in the small-to-mid size panels as well as the increased sales of large size panels.

Now then, but then there are also some press reports saying that there could be need for additional ramp up of the Guangzhou plant or the E6 lines. If that does happen, then it will increase additional costs including depreciation and amortization.

So then do you believe that if this does happen, then it could potentially delay the timing of the OLED business turning around to profit?.

[Foreign Language] [Interpreted] I take it that you asked questions about the LCD followed by OLED so let me respond to the second question first.

[Foreign Language] [Interpreted] Now for both the large size OLED and small-to-mid size plastic OLED, on doesn't the company need additional investment, meaning that it could potentially delay our turn around to profitability, is the gist of your question as I understand it.

Now first of all, let me say that for the past few years, of course, on one hand, there was the sluggishness of the LCD market. Also on the other hand, the company had to invest a large sum into OLED but at the same time was not able to have a timely mass production or secure revenue in a timely manner.

That - so these are also some of the issues that pose challenges for the company. [Foreign Language] [Interpreted] So then obviously, this was also an opportunity for us to remind ourselves of the very fundamental principles of making investment especially large scale one.

In other words, or in the future whenever we make large scale investment, then this would - the decision will be based on a very thorough and objective analysis of the status quo as well as the outlook.

In other words, whether we have the capability and whether it will be possible for the volume as well as profitability as a result of making investment.

So again, this was a chance for us to further consolidate our principle in investment, meaning that we should move ahead with any type of large scale investment only when such conditions are fulfilled. So no matter the type of investment, we will make sure that those principles will be fulfilled.

And also, we will make sure that mass production will follow in a timely manner as well as well as bring the volume and profitability. [Foreign Language] [Interpreted] To sum up my answer to your question, so in our decision making for any investment, but obviously this will not lead to delay in a turnaround to profit or in profitability.

[Foreign Language] [Interpreted] Regarding your second question about the LCD, so in terms of the sales out of the share - out of sales with LCD TV, of course, it depends on the quarter but then overall, it is around 15% of any sales so one with a double digit.

[Foreign Language] [Interpreted] Now regarding the panel price, of course, this is an obvious point of interest for the company and we are always closely monitoring the trends. So I understand your question to be the panel price outlook for the second half of the year and perhaps into next year.

Now I remember reiterating this in last IR session as well but then it comes to the panel pricing then there are allegedly two perspectives, supply and demand and where the supply and demand dynamics meet, then that's where the price is formed.

Now for the time being for IT, we believe that the demand growth will remain solid into the second half of the year. Then the question is whether there will be a point where supply exceeds demand in the near future. But when you look at the parts as well as the module readiness, then it appears likely that the price will remain strong for some time.

And then of course, looking ahead to next year, there would be various factors at play including not the least the COVID-19. And also, we have to take a look into the peer's readiness, for example, whether they have sufficient IT part supply and so forth.

So, at this point, it is difficult for us to decisively say what the IT panel price trend is going to be for next year. But then we will be running our business under the assumption that panel price would stabilize or even go into a downward slide.

Then regarding the LCD TVs, especially for the 30 inch or the 33 inch, in other words, the mid --small-to-mid sized LCD TV, we see that for the 30 inch or the 43 inch, for the small-to-mid sized LCD TV, that the demand appears to be dwindling. And perhaps, of course, there could also be various factors and one factor is COVID-19.

So, perhaps, it has also driven down the pseudo demand. And another factor also related to COVID-19 is that, we're to understand that the sales of 30 inch or the 43 inch LCD TVs were occurring mostly in emerging markets. And now with another surge in COVID-19 in major emerging markets including India, we understand that the retail sales are suffering.

But then the question is whether this is going to be transient, in other words, whether it is only limited to the COVID-19 impact, or is it more of a structural phenomenon, but we will have to wait and see and also closely monitor the situation.

But our assumption is that unlike IT, demand for LCD TV is probably going to fall faster and as a result of that pricing is likely to be weaker than IT. [Foreign Language] [Interpreted] Then your next question, I'm not sure I understood this correctly, but then I think you're asking about the LCD exit strategy.

And let me first off say that this is actually not the right way to call it for the company. [Foreign Language] [Interpreted] Now, I believe I have had the chance to repeat this point at various channels, including quarterly IR and other communication channels regarding our, the company's LCD operation strategy.

And of course, out of our three major innovation projects, LCD business realignment was one of them and our LCD structural innovation project was not about reducing or even abandoning the LCD business.

[Foreign Language] [Interpreted] Now, for the LCD business, the key to the LCD business realignment was to strengthen where we are differentiated where we are competitive already.

And so in our operation of the LCD business, of course, we have the LCD fab in China as well, but then we - what we had intended to do was to remain flexible in the utilization of the LCD fabs, so that from the let's say, less competitive areas, maybe we can shift the resources to the more competitive areas as we have done so for the TV capacity.

So, much of the TV capacity has been shifted to IT and there would be some additional capacity to be shifted further. So, this is what we have been intending to do. So that we will be able to shift from less competitive areas to more competitive ones, then as a result of shifting the capacity from TV to IT.

Does this mean that we now are able to have a stable operation of the IT capacity? Now, not so but then what we intend to do now is to look ahead from a more mid-to-long term perspective. That is why we are strengthening our partnership with major clients.

As I have explained in my presentation earlier, we remain resilient to short term volatility or variability. And especially for the IT business of LCD, we have the technology and the competitiveness as well as the customer base and fair competitiveness.

So for the LCD business, especially for the IT, we will continue to differentiate and strengthen our competitiveness and solidify our customer base. [Foreign Language] [Interpreted] So for the - and then for the LCD TV. Now, compared to the maximum level the capacity is now about half of that.

So, for the LCD TV, I would say that it has become much leaner and lighter. So now then utilizing this lighter capacity, we will be focusing more on the high profitability businesses like commercial or large size products.

And similar to IT, we would also be strengthening our partnership with the strategic clients but there we will be able to be resilient to market changes. And of course, still it could be subject to some variability down the road.

But then as I mentioned earlier, we also have the capability to have flexible operation and utilization among the different fabs. So whenever there are some changes then we would also exercise the operational agility to be flexible towards the market circumstances..

[Foreign Language] [Interpreted] The following question will be presented by Kim Hyun-soo from Hana Financial Investment. Please go ahead with your question..

[Foreign Language] [Interpreted] I have two questions, and one is regarding the EBITDA guidance, because it was mentioned earlier in the presentation that the company will maintain the principle that the CapEx execution will remain within EBITDA.

Now, then, of course, because of the higher earnings expected for this year and next, perhaps it would be difficult for you to give us a definitive response to this, but then, what would be the EBITDA guidance for this year and next? And the second question is for the CapEx.

Now, there are talks of P-OLED ramped up in response to IT demand and also further investment in mobile area as well. And regarding the investment, you have been conservative and even now, your response has been a conservative. And of course, we do understand that this requires cautious review and decision making.

So I also do understand that it would be difficult to give a conclusive response at this point but do you believe that investing into the P-OLED ramp up would be necessary?.

[Foreign Language] [Interpreted] First regarding the EBITDA guidance, now, as it stands today, the company's depreciation and amortization for this year and also will be similar for next year but it would be around KRW 4.5 trillion.

So then, assuming that there is going to be BEP in the second half of the year, then KRW 4.5 trillion plus operating profit of KRW 1.1 trillion would be about KRW 5.7 trillion. Of course, at this point, we cannot pinpoint what the operating profit is actually going to be in the second half.

But then, looking at the market expectations, then perhaps that is where it is going to be. But then with the KRW 4.5 trillion in depreciation amortization, then also with the operating profit, then I would say that the EBITDA would be around KRW 5.5 billion to KRW 6 billion.

And that is what we need to achieve and I believe that that would be achievable. [Foreign Language] [Interpreted] And for the plastic OLED, especially investment in IT and mobile, what I can tell you at this point is that these issues are under review at this time. There has been some progress in the review.

So once we have something final and concrete to share with the market, we will do so without delay. But I would like to ask for your patience a bit longer. We will take the next question..

The following question will be presented by Woo Dong-je from Bank of America. Please go ahead with your question..

[Foreign Language] [Interpreted] Also congratulations on the excellent performance that makes me also feel a lot better. Regarding the quarterly performance, then I see that the number one contributor to the quarterly earnings this time was once again the LCD, despite the seasonality.

And it appears as if the company feels that it is also in a good position with the LCD perhaps because of its differentiation.

But then now looking at the IT use LCD, for example, with the oxide, now what are the reasons, if any, that the companies in Taiwan, Japan or China not do as well as the company today? And also looking at China, then it seems as if they are making large scale investment not only Gen 8 LCD, but now and in Gen 10 LCD.

This means that the LCD TV price, which had gone up by over 100% recently, is now at the risk of falling dramatically. Of course, the company mentioned its response strategy, for example, strengthening its partnership with the strategic clients, and also strengthening your differentiation.

But still, when we look at the history of LCD so far, especially for the past 10 years, then whenever there has been an oversupply then without exception it led to plummeting crisis. So perhaps that is a risk that could materialize as early as the end of this year or next year.

So I would say that that could be one of the biggest risks for the company and what can the company do regarding this potential risk? Then also it appear, this is the last question and it seems as if the facility investment has been consistently moving going over KRW 1 trillion for every quarter.

But from my perspective, about KRW 500 billion to KRW 600 billion of facility investment per quarter would be sufficient.

So because the EBITDA is growing, does this mean that we also have to increase the facility investment in correspondence to the growth in EBITDA or perhaps it could just stabilize the CapEx at around KRW 3 trillion per year and then for the surplus EBITDA, maybe we can utilize that as free cash flow and perhaps use that for the conversion or use that for share buyback to assure the shareholders perhaps that would be a better strategy, than providing cash dividends?.

[Foreign Language] [Interpreted] Regarding your first question about the differentiation of IT products, and I understand that your question was about the competitors in China, Taiwan or Japan, and of course that some are utilizing IPS and some are also utilizing oxide for some - for some products.

But I understand that there is still some entry barrier especially in infrastructure or the development process. And of course, it's I'm not in the position to tell you what the other players are thinking or what their judgment is but then as far as understand at this point there is still quite a high entry barrier.

[Foreign Language] [Interpreted] And for the LCD TV, the price potentially falling and how the company intends to respond to this potential risk, now, as we had reiterated earlier, the challenges for the company last year and the year before, not about the LCD itself, because for the LCD business, although the - let's say, for the LCDs, the sales were falling, but still, we were never in the red with the LCD.

So it was not actually the LCD business itself that was the cause of the company's challenges, but rather for the large size OLED or the plastic OLED, after making the investment, we were not able to go on our scheduled track for batch production and sales. As a result, we were amassing large size deficits.

So those were the biggest cause of our difficulties for the past few years. And now these issues are largely going away. Then now what are we going to do about the LCD's potential risks? Now regarding the fall - potential fall in the prices, we have our scenario planning and we will be making preparations in accordance with the scenarios.

And for the LCD panel capacity I have already mentioned that the capacity has been halved already. Then I also mentioned strengthening our partnership with the strategic clients and this is to assure operational stability down the road. And as for the fabs, for the LCD we have Paju P7 as well as the Guangzhou LCD.

But these are where we are able to make the LCDS for TV and we will continue to ensure operational stability in these fabs as well, so that we will be able to flexibly respond to changes.

So we would be - so in line with that strategy we will also be responding to the price in LCD, the price drop in the LCD TV whenever that happens so that we will be able to ensure mid-to-long term profitability in the LCD business.

[Foreign Language] [Interpreted] Your next question was regarding some concerns about the company's patterns in facility investment, I would say. Now, let me reiterate that when we said that we will maintain the principle of CapEx execution within EBITDA, it does not mean that we will use up all the EBITDA that we earn.

So of course it would be best if it can stay within the depreciation and amortization level. And for this year, that is what the company intends to do. Our CapEx would be within the depreciation and amortization level.

And then now for the additional EBITDA or the incremental EBITDA, we can use it to lower our borrowings or further consolidate our financial structure as we have done this time around.

Then, of course, for next year and on, if there are any strategic investments that are necessary, especially for the purpose of future growth drivers or to ensure future profitability, then those are necessary investment that we will make. But other than that, we would remain, of course, tight in our investment.

So I believe that the implication in your question was that perhaps the company was a bit, let's say, going overboard with our investment. And I would like to assure you that, no, that is not the case.

And some of the CapEx needed this year was to build a stronger safety environment in relation to the ESG management and also to preemptively prepare for the future.

I would like to explain that what we are doing in terms of the preparation is a bit different from what we have done in the past, so it's more of an aggressive preemptive preparation for the future. And of course, for the EBITDA, yes, this will remain as the large, let's say, a threshold or the CapEx.

Then aside from the strategic investments, we would remain tight in our investment operations, and we will continue to strengthen our financial structure and also leave room for some strategic or financial operation for future progression as well. We will take one last question..

The last question will be presented by Kim Sung Kyu from Daiwa Securities. Please go ahead with your question..

[Foreign Language] [Interpreted] I have two questions. One is about the OLED TV. I see that the sales in the first half for the OLED TV were quite high. And in the second half, considering the positive seasonality, I believe that it is more than likely that the company will be able to achieve the target of 1 million - the 8 million units.

And then for - but then for the LCD TV, as was mentioned earlier, it is likely that demand is going to fall earlier than expected, which could then have an impact on the demand and pricing as well.

But then in addition to this, regarding the OLED TV, does the company believe that there are also some, let's say, pressure, so downward pressure on the pricing so that you will be able to achieve the target for the second half of the year? So do you believe that there is such a risk of the downward pressure on the OLED TV pricing? And the second question is, it seems as if this year the shipment is to double, then first in the Guangzhou fab there is an additional capacity of 30,000 that is available, but then for next year then what is the company's target capacity? And there are already so the target shipment, and there are talks of 10 million or even 11 million, so could you give us a guidance about the new target shipment next year? And then the second question is about the automotive display business.

Because, in the first half, there have been a lot of issues regarding the automotive semiconductor supply. And in the second half, we see that the issue has been somewhat eased for EVs, but overall the semiconductor supply issues continue and perhaps all the way into late this year as well.

So, I'll just like to ask for the company's update on the automotive display business as well as OLED?.

[Foreign Language] [Interpreted] First question was I believe on the pricing of OLED in relation especially to the LCD price.

So whether the fall in the LCD price will come around to affect the OLED price, especially what is also going to be in the shipment for next year? Now for the first question about the pricing, yes, it is true that because the LCD and OLED are the two leading panels for TV, they tend to exchange impact with each other.

But as you would also know, for the LCD TV, while the price for the LCD TV has close to doubled compared to last year, it has actually not affected the OLED TV pricing much. And that is because we set the OLED pricing not in relation to the LCD, but based on a very thorough market research.

So based on the market research, and we try to determine the sweet spot in terms of the OLED TV pricing that would be acceptable to as many consumers in the market as possible.

Then based on this we also discuss the panel pricing with the customers, with the set makers and because of this, of course the changes in the LCD price could have some impact on the OLED price as well but then this will not directly affect the price because we look to the market to come up with the acceptable - the appropriate pricing.

So given this situation, we believe that any changes in the LCD pricing in the future but despite that, we would be able to manage the OLED price.

[Foreign Language] [Interpreted] There regarding the OLED shipment for next year, of course we are in the preparation for this but yes, we do have the capacity of additional 30K in Guangzhou and then based on that we can ship 10 million next year and also with some enhanced productivity and other preparations, we could also potentially ship 11 million the year after that.

[Foreign Language] [Interpreted] Next about the auto display, now it is true that there have been semiconductor shortage issues especially among the OEMs and the tier one suppliers. They have been intermittent and some have been in large scale shortage.

So yes, for the company it is also a risk, but then so far there have been no disruptions in our production because of shortage of these semiconductors. But still, yes as you have mentioned, it is a risk and we are always remaining vigilant regarding the risk of parts shortage not only for the company but also for our clients as well.

So we will keep a very close eye on the situation so that we will be able to manage any circumstances or changes so that we will not be losing out on valuable opportunities.

[Foreign Language] [Interpreted] And an update on our overall LCD business operation, now, so far for the auto panels, they have been based on amorphous but then we have been shifting to LTPS at least for the LCD and then the orders that we are receiving recently for LCD are mostly LTPS.

And then now for the next two to three years, once we finish supply of the LCD based on amorphous for the next two to three years, then we believe that we will no longer be producing based on the amorphous technology and from then on it would be solely LTPS for LCD.

[Foreign Language] [Interpreted] And for the plastic OLED, we believe that this is a panel that is optimized for electric vehicles. And we have been trying to reduce the orders received for plastic OLED and especially for the EV OEMs and also new OEMS and some of the OEMs that are preparing to enter the EV.

So, we are trying to target them for the plastic OLED. But then yes, for the plastic OLED as well as the large size OLED, we believe that it is important to first define the right target segment and then try to improve the profitability and also the business visibility of the auto display.

So we need to create the kind of mechanism that will allow us to ensure profitability in this business as well. So again, we are focusing on receiving the orders for the plastic OLED. And this is our strategic focus at this moment. Once we get good results in this front then we would also communicate this with the market in due time..

We will now close Q2 2021 earnings conference call for LG Display. Thank you once again for joining us today. Please do contact us at the IR team for any additional questions. Thank you.