Good morning. 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, CSO; Seung Min Lim, Senior Vice President of Corporate Planning; Keuk Sang Kwon, Vice President of Auto Marketing; Ki-Yong Lee [ph], in charge of Business Intelligence; [indiscernible] In Charge of Large Display Strategic Marketing; and Myoung-Kyu Kim, In Charge of Medium, Small Display Strategy.

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 Q3 2023. 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. I will start with Q3 business results.

Revenue was almost flat Q-o-Q in the midst of intense inventory correction continuing in the downstream industries, as demand is slow to recover due to macroeconomic uncertainties with the impact being felt differently by product category like TV, IT and mobile. Revenue in Q3 was KRW4.785 trillion, up 1% Q-o-Q.

There was operating loss of KRW662 billion, narrowing Q-o-Q and Y-o-Y, maintaining the improvement trend. As the company continues with business structure upgrade, it has also remained on the path of cost innovation and operational efficiency. Next, on area shipment and ASP per square meter.

Q3 area shipment was up 1% Q-o-Q to 4.77 million square meters. ASP per square meter was $804, up $1 Q-o-Q. In terms of revenue breakdown by each product segment, TV panels revenue mix was 23%, almost flat Q-o-Q. IT accounted for 40%, down 2 percentage points Q-o-Q, due to delayed recovery in B2B demand.

Mobile and others took up 28%, up by 5 percentage points following the seasonal increase in mobile panel shipments. Auto business revenue mix was at 9%, down by 2 percentage points Q-o-Q as a result of some shipment adjustment. OLED revenue mix remained unchanged at 42%. Next is on the financial position and key metrics.

Company's cash and cash equivalent was KRW4.087 trillion. Inventory value was KRW3.349 trillion, up by KRW667 billion Q-o-Q to prepare for seasonal demand. Key financial ratios were up Q-o-Q, resulting from activities to strengthen liquidity, as well as net loss in the quarter. Debt-to-equity ratio was 322% and net debt-to-equity ratio, 151%.

Cash flow at quarter end was KRW4.087 trillion, up by KRW235 billion from the KRW3.853 trillion in the beginning from activities to strengthen liquidity. Next, on Q4 guidance.

With increase in TV panel shipment to respond to year-end demand as well as expansion in the previously delayed IT panel shipment, shipment area in Q4 is expected to grow by 19% Q-o-Q. Shipment of panels for smartphones with high ASP per square meter is expected to grow, likely to drive up ASP per square meter by mid-20% level Q-o-Q. Thank you.

Next, CFO, Sung-Hyun Kim will walk us through the key highlights..

Good afternoon. This is CFO, Sung-Hyun Kim. The company was able to narrow the loss in Q3 again following Q2. Despite the challenging market environment, where downstream demand remains sluggish, by focusing on upgrading the business structure and innovating costs.

In Q4, panel inventory adjustment will ease in the downstream industries and shipment of mid- and large-sized products and panels for new mobile products will grow to respond to the year-end seasonality. Profitability improvement continues.

As the company keeps up its cost innovation and operational efficiency activities and turnaround is expected in Q4. The company will keep strengthening key businesses to respond to market demand and changes in the business environment and improve its profit structure by persisting with the enterprise-wide cost innovation.

Allow me to explain more about the OLED business strategy, which I understand to be of high interest in the market. In large OLED, we will broaden our position in the premium TV market and improve profitability by boosting customer portfolios centered on ultra large products and by innovating costs.

For example, cutting material costs in key components. In small and medium OLED, we are driving shipments of mobile products by fully utilizing the new ramped up capacity.

We are also preparing for volume production and supply of IT OLED in 2024, equipped with the technology marked by higher durability and performance like long life and high luminance. Over the mid to long term, the pace of OLED penetration is likely to differ by IT product, like monitor, notebook PC and tablets, as well as by consumer acceptance.

And it is important to efficiently utilize the existing infrastructure and respond wisely to varying customer needs and market opportunities.

In automotive business, the company will keep solidifying its world #1 position by expanding orders won and revenue based on our unique technology competitiveness that encompasses Tandem OLED to high-end LCD, as well as rigorous quality control and stable supply capability.

With little visibility into the future trajectory of real demand, the company plans to push ahead with intense restructuring of the revenue structure, so as to achieve more meaningful performance next year. Thank you very much for your attention..

That brings us to the end of earnings presentation for Q3 2023. We will now take questions. Operator, please commence with the Q&A session..

[Operator Instructions] The first question will be presented by Eun Kim from Meritz Securities..

Thank you. I have a two-part question. I would like to ask my first question, then follow up with the second after the response. Now the first question is about the issues of delay in the second half of the smartphone panel shipments.

So I wonder what have been the changes in the smartphone panel shipment in the second half for the company compared to the plan?.

Now this is the CFO responding to your first question. And of course, I do realize that this kind of question is important and perhaps necessary, but then I also would have to ask for your understanding that I must give you a short response, meaning that we are actually not at liberty to discuss issues that are related to certain customers.

And this also is, I would say, related to the limitations of the nature of the industry itself. Now having said that, yes, it is true that as the market is already aware, there have been some disruptions in our production in, let's say, in a form that is different from the past, but then we were able to overcome the issues.

And then now going into the fourth quarter, you would know that there have been improvement or a ramp-up in our production capacity. So we are going -- we plan to fully utilize the new ramp-up capacity, so that we will be able to make up for the delay as much as possible..

Now then -- my next question is, as was the guidance in the previous quarter, it is the same communication, meaning that the company is looking forward to a turnaround in the fourth quarter.

So that is, as I understand, on the back of the recovery in the mobile industry, but so I wonder whether the assessment or the projection by the company still remains valid. And does the company believe that there is now some visibility into the achievement of this goal.

And of course, if there is a turnaround that is achieved, then perhaps things might improve. But still, I would say that the environment is still challenging. For example, the rates remain high. Borrowings appear to have gone up again throughout the quarters again. So that would also bring up the interest expense as well.

So this is by no means an easy environment for the company.

And I wonder whether there are any financing activities planned for the company to strengthen its liquidity? And also how does the company plan to repay its borrowings?.

Now regarding the turnaround, yes, it remains as our target for Q4, and we keep working very hard toward it. And I would like to ask for your patience and support as we continue to work towards this, which remains as a valid target for us. And yes, it is true that the market environment is not easy.

But throughout this, what we have been focusing on, is to drive cost innovation so that we will be able to improve our profitability to the level of the market. So again, the company has been focusing its capabilities on doing this.

And once the market improves, I must say that, of course, there have been these ups and downs in the past, but I must say that this time around this, let's say, the tough time is quite long and perhaps a bit more challenging than before.

But once this is over, then I believe that all the activities that we have persisted with during that time are going to come back to us with quite a lot of benefits.

So in the meantime, the company intends to strengthen its key businesses and also continue to drive ahead with the cost innovation, so that we will be able to improve our -- so in line with the market environment. And as we have been going through this tough time for about 2 years now.

And as you would know, this is the kind of a business or an industry that requires quite a lot of investment with not so much return in the beginning, which is something that you all know. And so as we have gone through this tough time for some time, it is also true that it has had an impact on our financial strength.

And so of course, there are various options in financing, but then we tend to keep to the traditional approach, which means that we still are maintaining stability. So rather than the stock market now going to the financial market, we can sense that there is still quite a lot of trust in the company.

So we have been working to get financing from government-run banks as well as large commercial banks. So indeed, most of the major financial institutions are working to finance a low interest and long-term instruments..

The following question will be presented by Hyun-Soo Kim from Hana Securities..

Thank you for giving me the opportunity to ask my questions. I also have 2 questions, one on LCD TV and another on OLED TV. Now for the LCD TV, there have been reports lately that main major set makers will be increasing their purchasing of panels.

Then I wonder what the company's direction is in terms of the LCD TV business, including the Guangzhou LCD fab. And the second question is, there was earlier guidance on the increase in the shipment of medium to large-sized panels in Q4.

And the question is then whether it is reflecting the expected seasonality at the year-end with expected demand recovery? And also, if that is the case, then what would be the projection or the outlook for the large OLED shipment for the year? And also what is the company's plan for the medium- to long-term operations and also what is the company's projection for the longer-term profitability?.

This is the CFO responding to your questions. Now as has been the question, yes, it is true that there have been quite a lot of questions about the -- from the set makers about their sourcing of the LCD TV panel. Now, there has been -- there is quite a geographic concentration of the LCD TV production capacity.

And also because of the U.S.-China friction due to -- in consideration of the CSM stability, it is true that many companies are now trying to diversify their sourcing strategy and as a result, are also increasing their inquiries to the company.

But within the larger direction and the larger framework of upgrading the business structure, the company's strategy on LCD TV business remains unchanged.

Having said that, we would have to wisely and flexibly respond to the request coming from the set makers, so that we can strategically respond with varying options, so that we will be able to enhance the value of our LCD fab..

And this is [Won-Jae Lee] In-Charge of large display marketing. Now, it is expecting that panel shipments in -- the panel shipment is expected to grow over the third quarter, thanks to seasonality. But then the actual sales are not going to be as strong as the ordinary seasonality, due to macro impact and also the demand for high-end remains sluggish.

Now having said that, we are also seeing intensifying product competition for the ultra-large LCD sales coming from the Chinese region.

And also with the continuation of the inventory correction policy among the set makers as well as the retailers, they expect that the panel shipments for the year is going to be under the set shipment at around 5 million units. But now from 2024, there has been negative growth in demand for high-end products.

And then also, so from 2024, there is going to -- it is expected that there will be a negative demand for high-end products. And also the inventory will be -- will go back to normal. And so based on our stable customer base, the company believes that we will be able to strengthen our position in the high-end market.

And also the set makers' profitability is improving, and based on the higher volume and larger sales, the company expects to keep improving its profitability.

And this year, our efforts for cost innovation continued by trying to lower the material costs, especially in key components and materials -- and then going into next year, we will be running our fab in linkage to the real demand, so they will be able to optimize the labor costs and also the fixed cost and variable cost.

And we will try to improve our revenue per production capacity or production area, especially in non-TV businesses so that we will be able to improve overall profitability..

The following question will be presented by Dongwon Kim from KB Securities..

Now I have two questions about the Auto Display business. Now given the recent sluggish demand for EVs, then in the previous quarter, in the previous conference call, the company gave the guidance of about 15% revenue growth for auto business over the medium to longer term.

And I wonder whether this guidance remains still valid for the company? And then also, what is the auto -- for the medium to longer term, what is the order backlog for the auto business? And out of that, what is the share of the OLED business? And then what would be the overall -- and also based on the circumstances, does the company believe that it will be able to turn around the auto display business next year? And also what is going to be the overall auto shipment guidance for the medium to longer term..

This is Ki-Hwan Son, Vice President of Auto Marketing. Now first, about revenue. The revenue for the year will be within 10% of the company-wide revenue. And then for the next 5 years, we are looking forward to revenue growth in the mid-teen percent level.

And as for the order backlog, it is in the low KRW20 trillion for this year, and it is set to grow by approximately 30% until 2025. And in terms of the share of the order backlog for the high-end Tandem OLED panel, it will be in the low 40% for this year and will top 50% from '25 and on.

And given the fact that the stable revenue growth continues for OLED, it is expected that its profit contribution will also continue to grow. And then moving on to the next question, which is about the opportunities and risks or threats in the automotive business. Now first, about the opportunities.

We see that the auto market itself is gradually moving towards EV and SEV, meaning that it is becoming more and more the vehicle for lifestyle. And that means that the presence of the auto display is going to become even more important. And this is going to drive further demand for OLED, as well as large display.

And in terms of risks, now because of the continued sluggish demand in TV and IT, there is actually a heightened competition around auto display.

But then thanks to the company's Tandem OLED technology as well as its superiority in LCD and other technology, and also based on our strong relations and cooperation with global partners, the company will be able to continue to strengthen its competitiveness in winning contracts..

The following question will be presented by Kyuha Lee from NH Investment & Securities..

My first question is, according to the LCD panel prices that have been announced by a research organization early this week, there are signs that the panel prices are falling among the small and medium-sized LCD TV, then what does the -- what is the company's outlook for the ASP in the second half and also for the longer term? And the second question is, again, what is the company's outlook for the demand per application in 2024? And compared to this year, what does the company believe, will be some of the meaningful changes next year in the market?.

This is [Keong Yi] in charge of Business Intelligence, and I would like to answer the 2 questions at once. Now first, about the TV panel price. It has been on the rise since October last year and has been on an upward trend for the past 1 year or so.

And then going into the latter half of October, it began to slightly fall by the small and midsized products.

And it is believed to be the result of the set makers conservative management and conservative policy given the fact that we are not yet in a structural recovery of real demand and also, we are going into the seasonality in the first half of next year.

And it is expected that the panel makers will continue to flexibly adjust the utilization based on demand so that we can minimize the price volatility and continue to try to stabilize the ASP.

Looking ahead, there might be some ups and downs depending on the seasonality, but then the company believes that the ASP will remain at the level that would be higher than the industry's production cost. Now about the price for the IT panels. It has been -- it has remained flattish for some time now.

And now over the medium to long term, there are concerns of intensifying competition with expectations of demand recovery as well as the stronger supply capability of Chinese makers. So given that there are a combination of both positive and negative factors, the IT panel price is likely to remain flattish going into next year as well.

Next is on the demand outlook. Now in terms of TV, it seems as if the structural slow demand has been established. So it appears as if the demand is going to remain flat into next year as well. But there appears to be a strong demand for ultra large products. So then in terms of the area, then it is likely to achieve about mid-single-digit growth.

And for panel demand, thanks to the healthier inventory, we expect a slight growth in panel demand compared to this year. Now in IT, overall, negative growth continues, led by B2B and high end. It is also true that macroeconomic uncertainties remain like high interest and inflation.

But then the negative growth has slowed down in 2023 and now there are expectations of recovery from the second half and on. And likewise, for IT, the panel demand is expected to achieve positive growth as the set inventory has become healthier. And last is on the smartphone. In terms of the smartphone, the market is generally in saturation.

So we see that the -- it continues to remain sluggish. Now having said that, it is a positive factor that the OLED market, which is the target market for the company is maintaining positive growth. And looking into 2024, we look forward to similar positive growth in both set and panels..

Thank you. We will take one last question..

The last question will be presented by [indiscernible] from Kim Securities..

I have a question about the preparation on the IT OLED, which you said to go into volume production in 2024. So it was mentioned earlier that the preparation is underway smoothly. But then I wonder whether there are any changes to -- compared to the previous plan? And also, what is the outlook for the market size and competition.

So if you could -- if the company could provide us with further update, please?.

This is [Ming Hang Lee] In Charge of Medium, Small Display Strategy. Now for the IT OLED, as has been disclosed, the plan is to continue to invest into the first quarter of next year. And after the investment is completed, then we will go into mass production and the preparation is well underway.

We will apply the technology that has been accumulated in auto, as well as the large OLED business, so that we will produce high-end panels that have the advantage of low power and long life.

And over the mid- to long term, in terms of the pace of OLED penetration, we believe that it is going to differ depending on the characteristics of the IT product as well as the consumers' acceptance. So it is important for the company to wisely respond to varying customer needs and market opportunities by utilizing the existing infrastructure..

We will now close Q3 2023 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..