[Foreign Language] [Interpreted] Good morning and good evening. First of all, thank you all for joining this conference call. And now we will begin the Conference of the Fiscal Year 2022 First Quarter Earnings Results by LG Display. This conference will start with a presentation followed by a divisional Q&A session. [Operator Instructions].

Now we shall commence the presentation on the fiscal year 2022 first quarter and results by LG Display..

[Foreign Language] [Interpreted] Good afternoon. This is Brian Heo 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, Sung-Hyun Kim; Hee-Yeon Kim, Senior Vice President of Corporate Strategy Group; Jeong Yi, [ph] in-charge of Business Intelligence; Daniel Lee, in-charge of Large Display Marketing; Seong Gon Kim, in charge of Medium Display Marketing; and Ki Hwan Son, Vice President of Auto Marketing.

[Foreign Language] [Interpreted] The conference call will be conducted in both Korean and English. Please refer to the provisional earnings release today or the IR Events section in the company's website for more details on the financial results of Q1 2022.

[Foreign Language] [Interpreted] Before we begin the presentation, please take a moment to read the disclaimer. [Foreign Language] [Interpreted] 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.

[Foreign Language] [Interpreted] Let me start off with our business performance in Q1. Revenue in Q1 was KRW 6.471 trillion, down 27% QoQ and 6% YoY. Seasonality was a factor as well as the macroeconomic environment and market volatility following the change in the pandemic situation.

[Foreign Language] [Interpreted] Operating profit was KRW 38 billion, shipment of large and small OLED panel decreased and LCD price fell. Operating profit margin in Q1 was 1% with EBITDA margin at 19%. Net profit was KRW 54 billion. [Foreign Language] [Interpreted] Next is area shipment and ASP.

Area shipment in Q1 was 8.14 million square meters, decreasing 13% from the previous quarter. Again, seasonality was a factor as well as soft demand in the downstream industry, leading to reduced shipment in large and medium panels.

There are also production and shipment disruptions arising from parts supply and logistics issues due to lockdowns in China. Area ASP was $660, down 18% QoQ. Mobile shipments slowed due to seasonality and LCD panel price continued its downward slide.

[Foreign Language] [Interpreted] The company's production capacity in Q1 remains almost flat from the previous quarter. [Foreign Language] [Interpreted] Next is Q1 revenue breakdown by product segment. TV’s share was 26% from the adverse seasonality and sustained decline in LCD price.

Mobile and others accounted for 26%, five percentage points lower QoQ. LCD TV and OLED TV took up low 10% respectively. High end IT products where the company has competitiveness took up 48%, maintaining solid performance. [Foreign Language] [Interpreted] Next is the company's financial position and ratios.

The company's cash and cash equivalents at the end of Q1 was KRW 4.11 trillion. Inventory was KRW 4.23 trillion, increasing by KRW 880 billion QoQ. The inventory value was higher than usual, due to increased portion of OLED and high end LCD products.

Overall inventory level also increased with the buildup of buffer stocks to prepare against the supply chain uncertainties like materials and logistics issues. [Foreign Language] [Interpreted] Liabilities to equity ratio was 159%, almost flat QoQ. Net debt to equity ratio came in at 67% and current ratio was 90%.

[Foreign Language] [Interpreted] Next is cash flow. The company's cash and cash equivalents at the start of Q1 was KRW 4.285 trillion. It decreased by KRW 174 billion ending up at KRW 4.111 trillion at the end of Q1. [Foreign Language] [Interpreted] Next is presentation by the company CFO Sung-Hyun Kim on guidance for Q2 2022 and strategy..

[Foreign Language] [Interpreted] Good afternoon. This is LG Display CFO Sung-Hyun Kim. [Foreign Language] [Interpreted] Let me now move on to guidance for Q2 2022 and the company's operations strategy. First is Q2 guidance. Individual panel price is expected to fall in large and medium segments.

Area price is expected to fall by around 10% QoQ due to continued seasonality in mobile panels. [Foreign Language] [Interpreted] But area shipments in Q2 is expected to increase by low to mid 10% QoQ.

Shipments of large OLED is expected to surge with recovery in part of the volume affected by logistics and parts issues in Q1 and TV set maker’s preparation for seasonality and new product launches.

[Foreign Language] [Interpreted] In the first half, there are concerns of persistent external factors such as demand and supply chain uncertainty due to seasonality. In the second half, we look forward to improved performance to come from increased supply of large OLED and new small to medium OLED models and stable operations in high end IT.

The company will keep an eye on demand uncertainty and persistence in supply chain issues and strengthen risk management to help achieve our targets. [Foreign Language] [Interpreted] Next is operational strategy for each business.

Although market volatility has recently gone up, the company will keep improving performance with OLED and high end LCD products that have differentiated competitiveness [Foreign Language] [Interpreted] The company continues to secure stability in business operation by minimizing volatility.

We are gradually reducing the portion of supply/demand businesses susceptible to market conditions while increasing the businesses that can produce consistent results in strategic collaboration with customers. And based on our OLED technology, we will keep upgrading our business structure to expand businesses that create new demand and market.

[Foreign Language] [Interpreted] As a part of this strategy, the company plans to run the ever competitive LCD business with focus on areas where the company has competitive advantage. The part of LCD business that maintains competitiveness like high end IT will be strengthened. In LCD TV, the non-competitive products will be gradually adjusted.

[Foreign Language] [Interpreted] Next is an update and plan on large OLED business. Although the TV set market saw a negative growth of 10% in Q1 in continuation from last year, sales of OLED TV set grew over 40% thanks to technological and product differentiated strengths, driving the expansion in high end TV market in general.

The high end TV market grew at a 10% level YoY. The company's large OLED business is expected to see significant growth in shipments from the second half of the year, as more consumers recognize their value. Profitability is also expected to improve on a phase by phase basis.

[Foreign Language] [Interpreted] For large OLED, the company intends to keep expanding its customer and product lineup to keep growing its performance. Live display area will also focus on exploring new markets to keep broadening its performance.

[Foreign Language] [Interpreted] In the case of small and medium sized OLED, we aim to further improve profitability from last year by increasing supply through new smartphone models in the second half. We will strengthen our business competitiveness with focus on high end products.

Based on our automotive competitiveness and leadership in the wearable market, we will broaden the achievements of small OLED business. We will also try to present the premium mid-sized OLED market leveraging our unique competitiveness such as tandem.

The company will keep highlighting its differentiated technological competitiveness in small and medium OLED as well. [Foreign Language] [Interpreted] Last is our investment plan. CapEx this year will grow YoY with the start of investment execution in medium OLED fab that was decided last year.

But it will remain around EBITDA, the principles and implementation of investment will strictly focus on growth and profitability. [Foreign Language] [Interpreted] We will spare no effort to continuously create higher market values while leveraging our unique difference. Thank you..

[Foreign Language] [Interpreted] That concludes the earnings presentation for Q1 2022. We will now take questions, operator please commence with the Q&A session..

[Foreign Language] [Interpreted] Now Q&A session will begin. [Operator Instructions] In order to allow as many Q&A chances as possible within the restricted time, we would appreciate only two questions per each participant. [Foreign Language] [Interpreted] The first question will be presented by Dohn Kim from KB Securities.

Please go ahead with your question..

[Foreign Language] [Interpreted] I have two questions, one each for OLED and LCD. Now in the first quarter we see that shipment for large OLED underperformed expectations.

Then, does this mean that there will also be some changes in terms of the large OLED revenue for the year as well as the profitability and also the shipment? And also will this mean that there will be some changes in the company's plans for capacity ramp up for large OLED as well as the customer diversification? And what would be the company's mid to long term strategy for white OLED? And the second question is about the LCD.

We see that the LCD panel price continues to fall and amidst this there is also more fierce competition coming from the Chinese panel makers and the market situation continues to appear to worsen.

Then what is the company's outlook for the LCD demand as well as the price in the second half and also what is the company's approach to secure profitability?.

[Foreign Language] [Interpreted] Thank you very much I would like to respond from the large marketing team. [Foreign Language] [Interpreted] Now first of all, it is true that shipment of OLED in the first quarter underperformed our plan.

But then on the other hand, we see that whereas the TV market in general shrunk by 10%, the sales of OLED TV grew by over 40%. And now looking at the trend from April then we see that the shipment of OLED is likely to pick up from the second quarter and alongside it the profitability as well.

[Foreign Language] [Interpreted] And as for our medium to long term strategy for large OLED, now as was explained by the CFO earlier, based on the principles of profitability and growth, we will continue to make preparation for the investment and communicate with the market when they're ready.

[Foreign Language] [Interpreted] And with regard to the continued drop in the LCD panel price, now, when we were coming up with the business plan for this year, now last year, we had expected that the Chinese makers would also become more disciplined given the market situation at that time.

But today we see that even as the market is shrinking by over 10%, they are offering very aggressive pricing.

[Foreign Language] [Interpreted] So in response to this, as the CFO had explained earlier, rather than trying to directly respond to the market price, what we will do is try to adjust our business structure, for example, reducing the portion of the non-competitive products, for example, the general TVs that are produced from the fab so that we can continue to manage risks..

[Foreign Language] [Interpreted] And this is from the medium marketing team. And I would like to respond to a question about the LCD and IT. Now in terms, I would like to respond in two perspectives, from demand and price. Now for demand in terms of the B2C, now, with the waning of the COVID-19 boom, the B2C is also expected to fall.

And for the B2B, we had initially expected a slight improvement, but then the improvement has been slower than expected because of the macro situation. Having said that, the demand levels still will be higher than the pre-pandemic level. [Foreign Language] [Interpreted] Next is from the press perspective.

Now for the price, it has started to decline from late last year and the decline has continued into this year. But for the company, we have a very high share in the high end market. So out of our IT revenue, the high end portion is over 70%.

So high end meaning that, it is less susceptible than the pricing and so this means that for the company, it has a more stable structure, so we will continue to strengthen our positioning in the high end so that we will be able to secure profitability.

[Foreign Language] [Interpreted] The next question will be presented by Jun Il Kim from Meritz. Please go ahead with your question..

[Foreign Language] [Interpreted] I have two questions regarding investment. The first is that I understand the company's investment policy meaning that your CapEx would be kept within EBITDA.

And of course, that would be advisable but then also at the same time looking at the current environment where there is a surge in demand and also the lockdowns in China as well as the geopolitical risks, it appears as if the uncertainties in profitability are growing.

So given the situation, then is the company also open to more flexible operation of your policy or perhaps a turn or turn to be more conservative in terms of the investment policy? And the second question is, now, I also understand that the company has been making investments for strategic customers in the Americas.

And so when does the company foresee the completion of the fab? And also when will the revenue start to arise from this fab? And what is the company's expectations for the ROIC for this fab? And also for the OLED, we see that the applications are quite broad, so for example, from mobile to IT, and also even to motor.

And so with the broad applicability, how does the company believe that this will affect the profitability of this business? And also the Chinese makers are continuing to increase their presence in this business as well.

So how does the company plan to respond?.

[Foreign Language] [Interpreted] This is the CFO responding to your question about investment. And of course over the years we have maintained a policy and emphasized the policy that CapEx would be kept within EBITDA. And this is because we want to make sure that investment will not be detrimental to our financial structure or financial health.

At least we do not want to increase the burden. [Foreign Language] [Interpreted] And now when the company comes up with a plan of investment for the year, then a lot of factors would be taken into consideration.

For example, when do we need to make the investments, so in other words, when will be the timing that would be the best for making the investment? What is the importance of the investment and also what would be the relevance in terms of the revenue or the market presence and so forth? And based on these different factors, we would also define the phases of the investment.

And now along the course of the investment if the market situation were to sour, so if things were to change, then of course the company will remain flexible in its investment plan to make sure that it will not become too burdensome.

[Foreign Language] [Interpreted] And the risks that you have pointed out, for example, the Chinese lockdowns and the geopolitical risks and profitability uncertainties, of course, we see them as the characteristics of the market this year. But what we look for when -- what we look for with CapEx is profitability for the future.

So this means that for the current constraints or the earnings or cash flow, let's say, the cash flow constraints then of course, we would take them into consideration and try to be flexible but then for investment for the future, we plan to continue with it..

[Foreign Language] [Interpreted] And this is Senior Vice President Hee-Yeon Kim of Corporate Strategy Group responding to a question about the small to medium OLED and of course, you would understand that we are not able to name specific customers.

But regarding the revenue, the timing of the revenue that's being generated, when we were making the disclosure last year for the investment, we specified 2024 and the plan currently is on track. [Foreign Language] [Interpreted] And you also asked about the company's expectations for the ROIC.

And I take this question to mean how does the company verify the feasibility of the investment, so allow me to respond along that line. Now, in the -- during the days of the LCD, then at that time, there were expectations of high growth.

So the investment decision making was based on the high growth expectation and was made despite the possibility of fluctuations in the supply and demand. But that was then and today there is a slowdown or even, let's say, stagnation in growth and also the new growth would have to come from penetrating the existing products.

So this means that we cannot just go for high growth without the expectation of profitability. So the investment today would also have to be based on having a visibility into profitability. And that is also how our decision making is being done. So we also have safeguards in our decision making process to make sure that there would be profitability.

And I believe that the challenge for us, down the road is, to continue improving the visibility of the profitability in our investment decision making. .

[Foreign Language] [Interpreted] The following question will be presented by Junwoo Cho from Hyundai Motor Securities. Please go ahead with your question..

[Foreign Language] [Interpreted] Now, my question is about the electronification of auto. Now we see that globally the automotive industry is going through electrification and electronification.

And I wonder what the LG Display’s positioning would be in this trend, so in terms a product or technological competitiveness, and also about your medium to long term strategy and what would be your position or the role within the LG Group as the group responds to this trend in the auto industry? And second question is, of course we understand the company's competitiveness and vision but so for this type of competitiveness and vision if you could help the investors understanding, so if you could give us some more details as much as possible about, let’s say, the order backlog for both the LCD and OLED as well as the outlook for the two businesses as well?.

[Foreign Language] [Interpreted] This is Ki Hwan Son, Vice President of Auto Marketing responding to your question. Now, yes, we believe that the auto electrification and autonomous driving trend present great opportunities to utilize large size display and especially the OLED premier technology.

So for LG Display, we have the world's only technology, the tandem technology, that can fulfill the automotive reliability requirements. So with this technology as well as the in-TOUCH LTPS LCD, we can -- we intend to strengthen our market dominance.

[Foreign Language] [Interpreted] And in terms of the synergy among the different group companies, of course, each company is competing in its own area or its own business under a fair competition, but we can also of course cooperate in order to strengthen our customer portfolio.

So for example, we can have co-promotion to provide a total solution to the customers, for example, between batteries, infotainment sensor camera, and display.

And by doing so, we will be able to create the kind of synergy that can enhance the customer's overall value [Foreign Language] [Interpreted] And last is about the order backlog and the outlook for the orders.

And please understand that I am not able to give you the specific number for the order backlog but I would like to tell you about the portfolio. So we have continued to receive the OLED orders for premium auto for the past couple of years.

And as a result the OLED orders is now over 30% and down the road we believe that the orders will continue to increase so that we will be able to continue to strengthen our OLED business..

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

[Foreign Language] [Interpreted] Now I have questions about the OLED TV and the XR display. Now for the OLED TV as has been reported by the media so far, I understand that there are negotiations underway with a new domestic customer.

So when does the company believe that the negotiations can be concluded? And then more importantly, then, afterwards then for the years 2022 and 2023, does the company believe that this is going to change the supply volume for the TV OLED panel? And also does this mean that there will be possibility of a ramp up? And the second question is about the XR market.

Now, in the display market, what we are seeing is that rather than any company's immediate earnings or performance, the stock prices are reacting more sensitively to XR related demand or XR related orders. And this is because there are quite a lot of expectations about the potential growth in this market.

So what is the company's preparation for the XR and what is the company's expectation of the potential revenue to come from XR?.

[Foreign Language] [Interpreted] Now first of all about your question about the potential transaction with Samsung Electronics, now I would have to say that there is nothing to say for certain at this time and when there is then we will of course communicate it with the market.

And our positioning regarding this is the same as the previous quarter, meaning that the possibilities are open and the needs between the two companies have to be aligned.

[Foreign Language] [Interpreted] And for the XR devices, of course, we are very closely watching the market at this time and whenever we believe that the profitability and the volume or up to our standards then we will be ready to enter the market as soon as possible because we are making the preparation for it.

So in terms of R&D and also preparation, whenever the market is ready to take off, so the company is getting thoroughly ready and we will make sure that we respond to this market accordingly..

[Foreign Language] [Interpreted] This is Hee-Yeon Kim from Corporate Strategy Group. I'll just like to add a few more things to the CFO’s comment.

[Foreign Language] [Interpreted] Now, as we all know, for the XR market there are high hopes indeed, but also at the same time this is the market where there is a very high level of grievances and pain points for the display. So this means that there would be a lot of potential opportunities.

So we believe that LG Display has the technological leadership to overcome the display pain points. And also, let’s say, for the large OLED, auto OLED or the IT OLED, so all the core technologies that we use for these different product types, we believe that these are the technologies that can help open up and lead in the XR market.

[Foreign Language] [Interpreted] So based on such market outlook, and technological leadership, we are now currently gauging the timing as well as the size of the company's entrance into this market and when we can start our business in this field.

But also at the same time, we have to look at the other factors, for example, the price premium and also the pace of the market growth. So considering all these different factors, we will make sure that we are ready to respond to the market in a timely manner..

[Foreign Language] [Interpreted] The last question will be presented by Simon Wu from BOA Securities. Please go ahead with your question..

[Foreign Language] [Interpreted] Now my questions might be a bit redundant from the previous ones. But now I would just like to ask about the management’s views about the LCD market or the LCD cycle.

Now in retrospect, when we look at the LCD boom last year, then that probably was, thanks to the shutdown in the Gen 8 process and also the high demand driven by the COVID pandemic.

Then looking ahead, what does the company believe would be the assumptions for both the supply and demand for the LCD cycle to improve again? And the second question is about the OLED TV, so there are expectations of profitability for OLED TV improving.

We see that the Chinese factory capacity has gone over 90,000 and also the -- now the company is set to really try to reduce the production cost. But then also at the same time, it appears likely that the improvement in the OLED is going to coincide with the drop in the price of the high end LCD.

So then what does -- what is the company's view or the guidance for the pricing and also for the cost reduction? And not just for the second half of the year, but then for the OLED TV panel, so in terms of the cost reduction and also the pricing, then what does the company foresee for the next few years? And also, does the company believe that the operating profit margin of high single digit like around 5% is going to be doable in the near future?.

[Foreign Language] [Interpreted] Now first regarding the LCD cycle, I would like to respond from the Business Intelligence. [Foreign Language] [Interpreted] Now I will mention two conditions, first is demand.

In terms of demand, we see that the COVID boom has created a lot of pull in demand, meaning that for this year, quite a large extent of negative growth is expected. [Foreign Language] [Interpreted] And given the current situation as well as the risk factors, we believe that the demand uncertainty is going to remain for some time.

[Foreign Language] [Interpreted] So this means that for the LCD supply demand cycle to improve, then we would have to have improvement more from the supply side. [Foreign Language] [Interpreted] So, for example, for the short term, there is a need to adjust the utilization rates across the industry.

And then for the longer term, then there are quite a number of old fabs over 15 years old, so for these non-competitive fabs, we might have to close down some of them or make adjustment in order to improve the LCD cycle.

[Foreign Language] [Interpreted] To sum up, given that the demand uncertainties are not likely to go away anytime soon and this means that there is going to be some down cycle continuing this year.

And moving into next year, then perhaps some of the demand uncertainties will be lifted and there could be some adjustment on the supply side and combined with these factors then the LCD cycle could improve next year..

[Foreign Language] [Interpreted] And this is Daniel Lee from Large Display Marketing responding to your question about OLED. Now it is true as you have asked earlier, that we also have to be mindful of the competition with the high end LCD.

But at the same time, as I explained earlier, we have seen that even as the TV market continues to shrink, in the first quarter we saw the OLED TV grow by 40% YoY. This means that the OLED specific value is increasingly being recognized in the market.

So we believe that it is going to see less price volatility, and we believe that we will be able to run the business according to our plan. [Foreign Language] [Interpreted] And in terms of the cost, there are persistent factors that can actually drive up costs, for example, the rise in the commodities price as well as the logistics price.

But then we continue to make improvements on our materials cost and also the development CI so that we can improve on our cost as well. So if all these efforts are to produce results, then we believe that the OLED profitability can be reached on a phase by phase basis..

We will now close Q1 2022 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..