LG Display Co., Ltd.

Good afternoon.

This is Kim Hee-yeon in charge of LG Displays IR. On behalf of the company, let me thank all the participants at this conference call.

경영관리 임승민 상무, TV마케팅 김창원 상무, IT마케팅 김창원 팀장이 함께 참석하였습니다.

Today I am joined by the CFO, D.H. Seo, 승민 임 in charge of corporate business management, 마수 김 of TV marketing, 창원 김 of IT marketing.

금일 실적 설명회는 약 1시간 동안 구경문 통합 방식으로 진행될 예정이며, 2020년 1분기 경영 실적 및 전망에 이어서 질의응답 순서로 진행하도록 하겠습니다.

The conference call will be conducted for one hour in both Korean and English, starting with a presentation on the financial results of Q1 2020 and the company's outlook, followed by Q&A.

1분기 실적과 관련된 상세 자료는 당사 홈페이지 내 투자 정보의 IR presentation 문서를 참조하시기 바라며,

Please refer to the IR presentation document in the company's website for more details on the financial results of Q1 2020. 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 KIFRS standards prepared for your benefit and have not yet been audited by an outside auditor. 그러면 지금부터 1분기 실적을 발표하도록 하겠습니다.

With that said, we will now start with the presentation on Q1 2020 earnings results.

먼저 1분기 경영 실적에 대해 말씀드리겠습니다.

Let me start off with our business performance in Q1.

The sales of some of the units were recorded at 4,242 billion won, which decreased by 26% compared to the previous quarter due to a decrease in production capacity due to LCD structure reform activities and some production losses due to COVID-19 issues and seasonal factors. However, the LCD panel price has been reduced by 3,619 billion won due to the increase in the price of the LCD panel and the effort to reduce the price of the LCD panel.

Revenue in Q1 was 4.7 trillion won, down 26% quarter-on-quarter. Production capacity was reduced as part of the activities to improve the LCD business structure. There were some production disruptions due to COVID-19, as well as seasonal factors. Operating loss was 362 billion won, an improvement quarter-on-quarter, thanks to the rise in LCD panel price, cost reduction efforts,

and exchange rate effects.

Operating margin was minus 8%, EBITDA margin 13%, and net loss was 199 billion won.

Next is area shipment and ASP. Area shipment in Q1 was 7 million square meters, down 24% QOQ.

It is O2 seasonal factors, LCD FAB downsizing, and COVID-related production disruptions.

ASP was $567.

down 6% QOQ and up 7% YOY. While LCD TV panel price rose, plastic OLED smartphone shipment fell.

자사이 생산가능 캐파는 LCD FET DOWNSIZING에 따라 전분기 대비 8% 감소하였습니다. 이는 전년 피크 대비로는 약 26% 감소한 것입니다.

The company's production capacity was reduced by 8% QOQ due to LCD FAB downsizing. It is a decrease by 26% from previous year's peak. Next is Q1 revenue breakdown by product segment.

TV sales, despite LCD FAB downsizing, recorded 31% increase in LCD panel evaluation and OLED value, which is a small increase compared to the previous quarter. Each configuration is OLED 14% and LCD TV 17%. IT products such as monitors and laptops, tablets, etc. are 37%. Mobile and other sales amounts decreased by 4% compared to the previous quarter due to a decrease in the volume of strategic customers' plastic OLED smartphones.

Share of TV revenue was 31%, up slightly QOQ. Although there was LCD FAB downsizing, LCD panel price rose, while share of OLED also increased. The respective share was OLED 14% and LCD TV 17%. Share of IT products, including monitors and laptops and tablets, was 37% of total revenue. Share of mobile and others was 32%, down 4 percentage points from the previous quarter. It is owed to volume reduction of P-OLED smartphones for strategic partners. Next is the company's financial position and ratios.

The company's inventory at the end of Q1 was 2.3 trillion won, up 13% QOQ.

It was in preparation for new models and early acquisition of strategic materials amidst COVID-19.

As for financial ratios, net debt-to-equity ratio rose slightly, QOQ, while liabilities-to-equity ratio stayed flat.

Cash flow at the end of the quarter increased to 3.6 trillion won up from the previous quarter due to increase in debts among other factors.

Next is the company's guidance for Q2 2020. considerable decline in demand is expected due to retail closings and other measures.

Demand for IT for purposes of work from home and online schooling is expected to grow, partially offsetting the demand decline in TV and mobile. But the full consequence of COVID-19 is yet to be determined, and it is basically showing downside risks to demand. Still, blended ASP is expected to rise thanks to growth in IT share.

Next, I'd like to hear from Director Seo Dong-hee, the CFO of the company.

Next is presentation by the company's CFO, D.H. Seo.

Good morning to our shareholders, investors, and analysts.

I am D.H.

Seo, CFO of LG Display.

With the ongoing global spread of COVID-19, we continue to be in an uncharted territory. First and foremost, I wish everyone and your family health and safety. Allow me to add some more details on the company's Q1 performance.

The overall market share decreased by 24% compared to the previous year due to China's production of module assembly factories due to COVID-19. The overall market share decreased by 6% compared to the previous year due to ASP's high P-OLED product share. The overall market share decreased by 26% compared to the previous year due to the previous year.

Area shipment fell 24% QOQ as fab downsizing for large LCD TV continued and COVID affected production at China's module assembly plants. Area ASP was down 6% QOQ and up 7% YOY due to seasonal factors and the reduced share of the higher ASP P-OLED products. Revenue was down 26% QOQ.

Despite the drop in revenue, operating loss improved slightly.

This is owed to the exchange rate as well as the rise in LCD panel price. stemming from concerns over COVID-related production disruptions in China and potential supply crunch. The company's push to reduce material cost and overall input cost also helped. Next is Q2 2020 outlook and the company's direction.

The effect of the coronavirus on the industry In Q1, COVID's impact on the industry stayed on the production side that mostly takes place in China and Korea.

But starting in Q2, we are seeing it affect the demand side as well.

Demand for TV and mobile is expected to significantly decline.

Fortunately, the strong demand increase in IT will partially offset the decline, but overall, it will remain a challenging environment.

We are seeing demand shrink starting with TV.

with major sporting events like the Tokyo Olympics and Euro Cup having been postponed, and retail stores shutting down in developed markets like the U.S. and Europe. The short-term impact is made more severe by work suspension in customers' production lines that are proximate to major global markets.

On the other hand, in the IT sector, due to home work and online activities, monitors, laptops, tablets,

In comparison, shipment growth is expected in IT products, QOQ, and YOY across all categories like monitors, notebooks, and tablets following increase in working from home and other online activities. It is also due to the growth in online sales as retail stores remain shut.

It is also due to the growth in online sales as retail stores remain shut.

In particular, IT segment is where the company has a differentiated competitive edge with unique technology, high-end product lineup, and a global clientele. It is expected to somewhat smooth the impact of the fall in revenue in the second quarter.

In the case of mobile, there is a large drop in the second quarter, For mobile, impact in the first half is relatively small, as large-scale shipments this year are concentrated in the second half.

but concerns of weakening actual sales by strategic customers are likely to affect the company's sales as well. There are challenges, but the company will make thorough preparation for new models in the second half as we strengthen our operational capability and reduce risk factors in collaboration with strategic customers.

Next, I would like to talk about operating standards and emergency management activities.

Next is management direction and crisis mode management.

To prepare for an environment with growing volatility, the company is now in crisis mode management under the worst-case scenario, as we see the current situation as a combination of global financial stress and real economic

Specifically, the company is swiftly and thoroughly analyzing retail sales trends and customer status so that we can assess the level of volatility in the market. We are also preemptively reducing the inventory level to respond to the growing risk of demand contraction.

We are also strengthening our cash management plan where we can respond to even worsening scenarios by optimizing resource input and tightening monitoring of financial risks.

In particular, the company is also modifying the production system to rapidly address new opportunities that always arise, even as demand decreases. Work from home and online classes are such opportunities that are driving demand for IT products.

Next is the current and future plans for Gwangju OLED PAP. Gwangju OLED PAP was delayed due to COVID-19 issues. Next is the status and planning for OLED fab in Guangzhou, China.

There were some difficulties in the Guangzhou OLED fab as COVID delayed the deployment of our technical personnel. We plan to complete the work needed to ensure optimum volume production conditions within Q2. Thereafter, full capacity operation will be subject to the market situation.

LCD PEP 운영에 대해서 말씀드리면 지속적인 구조 개선 활동으로 지난해 피크 대비 대형 LCD 캡파를 약 31%가량 축소하며 시장 대비 LCD TV 수요 약화 역량은 As for the LCDFAB operations,

The capacity was reduced by 31% from the peak last year as a result of continuous business reshaping efforts. Thus, the impact from weakening demand for LCD TV will be less for the company. The shrinking demand signals a downward pressure on panel price. But given the situation today, we cannot expect the kind of price elasticity where a falling price will trigger demand growth. Our work in improving the general-purpose LCD business structure will stay the original course, with some flexibility to be exercised to ensure profitability in the short term.

Q2 is shaping up to be a time of challenge and hardship for all companies, including ourselves. The company will keep managing risks while remaining open to potential demand downsides as COVID has worsened the demand volatility.

But once again, we have seen that there are opportunities even in the worst of times. such as structural changes in IT demand and growth in online sales of TV. The company will try to wisely overcome the current challenges by focusing on capturing short-term and longer-term business opportunities while making painstaking preparations in our investment and financial position.

In the next July performance announcement, we hope to see your health

Thank you very much for your attention.

Operator께서는 질의응답 안내를 부탁드립니다.

That brings us to the end of earnings presentation for Q1 2020. We will now take questions. Operator, please commence with the Q&A session.

처음으로 질문해 주실 분은 KB증권의 김동원님입니다. The first question will be presented by Dongwon Kim from KB Securities. Please go ahead with your question.

네, 질문 감사드립니다. 저는 OLED와 LCD의 질문 한 가지씩 드리겠습니다. 먼저 코로나19에 따른 광주 램프업 지연을 고려를 할 때 올해 예상하셨던 대형 OLED 패널 출하 목표에도 변화가 있는지 말씀 부탁드립니다. 그리고 P-OLED 소닉 개선의 예상 시기를 언제로 보시는지도 부탁드리겠습니다. 두 번째로 최근 PC 수요가 크게 증가하고 있는 걸로 알고 있습니다. 그럼 저희가 파주 P8 라인에서 지금 수요가 안 좋은 TV 대신에 I have one question each for OLED and LCD.

First, there has been some delay in the Guangzhou ramp-up because of the COVID-19 situation. I wonder, because of this, have there been any changes to the company's plan for the large OLED shipment for this year? And the second question is, when do you expect the profitability to improve for plastic OLED? And then the next question is about the PC. Now we see that there is a rapidly rising demand for PCs these days. Then given the current situation, then is the company also considering perhaps converting some of the TV capacity in the Paju P8 line to IT panel production so that you will be able to improve profitability?

Yes, I'd like to start with the first question. I'd like to start with the first question. I'd like to start with the first question. I'd like to start with the first question. I'd like to start with the first question. I'd like to start with the first question. I'd like to start with the first question. I'd like to start with the first question. I'd like to start with the first question. There's a lot of demand in the second quarter due to COVID-19. There's a lot of demand in the second quarter due to COVID-19. There's a lot of demand in the second quarter due to COVID-19. There's a lot of demand in the second quarter due to COVID-19.

Regarding your first question about the OLED TV shipment of this year. Now, it is true as you have mentioned and also as was presented earlier that because of the COVID-19 situation, there have been some delay in the final tuning work at the Guangzhou OLED Fab because of the delay in allocating our engineers there. But we do plan to complete the necessary work within the second quarter of this year. Now, having said that, regardless of the Guangzhou fab, there is going to be decline in demand in the second quarter due to the COVID-19. First of all, we see that the retail stores have shut down in the U.S. and European regions. That is going to have an impact on demand and also many of the set plants, the set build plants. Now, they are located close to the markets for where the consumers are. And because of the supply disruptions there, so once again, we do foresee demand decline in the second quarter.

In general, we are looking closely at whether the 2nd quarter's capacity will improve in the second quarter. Nevertheless, it is decided that the 2nd quarter's demand reduction will give a lot of capacity. And now the question is whether the impact from Q2 will last into the second half of this year.

And that is the situation where we are closely monitoring as well. But then now we do expect the impact on demand that we are seeing in the second quarter to have a lingering effect into the second half of this year as well. So we are expecting about a 10% reduction or the 10% decrease to the demand that we compared to our original expectation.

And then the second question is about the plastic OLED's hand-in-hand improvement. Regarding your second question about the profitability of the P-OLED business, as we did mention in the last IR,

We have secured some volume for the strategic customers, and we do believe that we have laid the basis for a turnaround.

So far, there has been no specific change in terms of the strategic customers, the development schedule, and the release schedule. I think this will affect the impact of the COVID-19 pandemic on the market. And we are maintaining close consultations with the strategic customers regarding development and the launching schedules.

But it has not been finalized yet. But then we also are mindful of the impact from the COVID-19 situation. And that is also going to affect our activities here. Having said that, we still believe that we will be able to more than double the revenue in the second half of this year. So we will be able to lay the basis for a turnaround in the second half.

Um, I understand that you are asking about how to shift KEPA to IT and make the most of the opportunity to use IT. As you know, most of the lines of commercial TV have been removed from Paju's 8 factories since last year.

And then to your next question about the P8 capacity, so some of the P8 capacity being shifted for IT purpose, so as to seize the opportunity where there is rising demand for IT. Now, that is how I understood your question. And as you would know, since last year, in terms of the general purpose TV at P8 in Paju, we have already removed the lines for the general purpose TV.

We are operating 8 factories as an IT-only line, but some commercial TVs are being produced, so we are making efforts to secure a little more production capacity for IT. In particular, the back-end side of the panel is more of an issue than the issue of the panel line. Recently, the demand for the module line has been rapidly increasing. In order to secure the capacity of the module line, we will mainly be a manufacturing factory in Namgyong, but we will be able to shift the workforce that was producing other products, or we will be able to convert the line that was made for other products into an IT product.

So that means that the P8 plan is already mostly being used for production of IT with some production of commercial TV at P8. Having said that, of course, we will be making efforts to allocate some more capacity to IT production And now the issue would be the back end, the module side, rather than the panel. So I would say that maybe there would be where we could have a bottleneck. So we will be trying to improve the capacity there by, for example, reallocating some of the human resources from other products or by allocating other lines to IT production. So by doing so, we hope to beef up the capacity for back end and also to make sure that we have sufficient procurement of the necessary materials.

The next question will be presented by Kim from . Please go ahead with your question.

Yes, hello. Thank you for the question. I'm Kim from . I'd like to ask two questions. First, you've been commenting that the IT side is better than we thought. Q. How much do you think the demand is good compared to the previous forecast? And furthermore, the situation is not good for TV, so I think Chinese competitors will be able to make a lot of money in this market. Please explain in detail whether there is a strategy that can be differentiated as a product. The second question is a recent article, and it seems that domestic competitors will shut down the LCD FAB a little faster and bigger than expected. Is there a change in our future strategy when this happens? Or, depending on this, what do you think about the LCD supply in the second half of this year? Thank you.

I have two questions. First is, now it's been mentioned several times that the demand for IT is better than expected. So the question is, by how much? So how much is it better than expected? And a related question is, now if the demand for IT is faring better than expected, then let's say instead of the, so let's say for example in the TV site where the Chinese competitors are flooding the market with commodities, Do you still see any opportunities for the company to differentiate yourself with the product? And the second question is, now there has been an announcement by the domestic competitor of a faster and larger scale shutdown of their LCD business. So does this change the company's strategy for LCD? And also, how do you expect this to affect the LCD supply and demand dynamics in the second half of this year?

First of all, I'd like to answer the first question. You said that the growth rate of demand for IT will increase to some extent. We are judging that the growth rate will increase by about 20-30% in the short term, not in the short term. I don't know if there will be any changes in the future, but I can tell you that the growth rate will increase by more than 20-30% in the future. However, after the second half of the year, there seems to be quite a lot of opinions about the demand for IT. There was a significant increase in demand for EQ, so in the second half of the year, it can be seen as quite weak. On the other hand, the demand for IT has changed from the concept of one-person, one-house PC to the concept of one-person, one-device. Or do you want to upgrade to an upgraded product in the near future? I think there are some opinions that the demand will be strong even in the second half of the year. As I said earlier, we are going to respond to the increase in EQ by operating the production system more resiliently. Now to your first question about the IT demand and how much better than expected is it?

Now for the short term, so for the second quarter, we expect this to be about 20% to 30% growth, YOY. Of course, it is subject to change as we move further into the second quarter, but at this time, the expectation is about 20% to 30% growth. But then now the question is, will this be sustained into the second half of this year? Now regarding this question, there are differing views. Some say that because of the sharp increase in demand in the second quarter, there is going to be much softer demand in the second half, while some others contend that the demand will continue to be strong with more households are claiming that there should be more than one PC per household and also some growing needs to upgrade to better devices. But now, as for the second quarter demand increase, we are trying to respond to this growth in volume by flexibly adjusting our production. And we will be closely watching how the situation unfolds into the second half with any changes in the demand situation so that we will be able to fully leverage our advantages.

I think that's the second answer to the first question. The difference between Chinese companies. As the demand for IT increases, there will be many companies shifting to IT from the TV industry. We understand that from the perspective of the questioner. Among the increasing demand for IT, the low-end type is also increasing a lot. From our point of view, it's the TM method, but we don't do it as well as you know. We focus on IPS and then oxide. Now this

would be the second question, a second answer to your first question. And that was about how we are going to differentiate ourselves in TV as the demand for IT continues to rise. So my understanding is that because of the increase in the IT demand, we will be shifting more of the capacity from TV to IT. Then amidst this, how are we going to keep competing? And now, yes, we do see that there is growing demand in IT. And then also now there is especially a growing demand for low-end types. But then now for the panels, now for the Chinese competitors, they are mostly dealing in PM, and actually the demand of increasing is for PM panels, but then we are TM, sorry, so TM, but then we are not dealing in their products. And where we are focusing on is IPS and oxide-based technology. And for this, we already have a very close tie-up with the strategic partners, meaning that this is not the segment where the Chinese companies can enter in the short term. So we will continue to focus on the oxide-based and IPS technologies so that we will be able to fully capture the demand here.

Then, the domestic competition may close the LCD PAP in the early stage. You asked about our operation strategy and the situation in the second half of the year. I don't think there's anything that can be done strategically for us to close the LCD PAP in the competition. Because we have already said that we will no longer produce LCD TV products in Korea. And most of the domestic PAPs will be operated mainly by IT. Because the portfolio of LCD products is fundamentally different from competitors, the competition's PAP adjustment, which was operated mainly by TV,

And your second question was pertaining to the domestic competitor closing down the LCD fabs earlier than expected and whether that would have any impact on the company's operation strategy and also what the expected landscape is going to be in the second half of this year. Now, first of all, let me simply say that the competitor's withdrawal from the LCD business will have little impact on the company from a strategic point of view. Because for the company already, let's say for the LCD TV, the general products, we are not producing them domestically anyways. So the domestic fabs are all mostly producing IT products. So then the competitor's LCD product portfolio has been basically different from ours. So the competitor withdrawing from the TV-based FAB, LCD business, has little impact on the company, meaning that it changes little in terms of our strategy.

I'll answer from the perspective of the second half of the year. If the competitors win, I think it will have an impact on the market. As you know, the market situation is very complicated. Due to the COVID-19 situation, demand is decreasing, and there is a possibility of a pack closing. There are such short-term factors, but if you look at it from a wider perspective, if you look at the overall supply situation of LCDs, quite a lot of packs are being prepared for the 10th generation. In the current normal situation, the supply and demand balance has continued to exceed the demand, so it may have a short-term effect, but if you think about it from a medium-term perspective, I think it will not be the case if it has a huge impact on the supply and balance and can bring a rapid change in the price.

And regarding how it will affect the operations in the second half, now, of course, the competitor's decision to withdraw from the market would have an impact on the market in general. But then now, looking at the market situation now, it is highly complex. We already have the COVID-19 situation. And then on top of that, the competitor's decision to close its fabs. Now, of course, they will have some impact for the short term. But then seeing things from a perspective, then we already see that there are a lot of fabs, a number of fabs that are preparing for a Gen 10 LCD production. So even in a normal situation, we are already seeing high oversupply compared to demand. So yes, for the short term, there might be an impact. But then over the longer term, will this have a major impact on the supply-demand balance? And will this also have a major impact on the panel price? My answer to that is not necessarily so.

The next question will be presented by Kang Ho-bak from Daesin Securities. Please go ahead with your question.

Thank you for the question. I'm Park Kang-ho from Daesin Securities. I'd like to ask a question about the large OLED panel. As Chef said, in the second quarter, In the field of OLED TV, the demand will probably decrease significantly. At the current point of view, the prospects for the third quarter are not clear. If we look at it from that perspective, we will see a phenomenon where the supply will increase as the light bulb is activated. If you look at it that way, I think there will be a change in strategy for the large OLED panel that the company has been working on for a year. There will be a change in strategy for the large OLED panel I think there will be a change in the OLED panel size. If there is such a thing, I would appreciate it if you could mention it. Another one is a hypothesis. If the corona issue calms down in the second quarter and the TV show recovers in the third quarter, I think there may be a strategy to increase the market share of Chinese HD TV companies quite aggressively. If you look at it that way, the large OLED TV side is a premium strategy, so due to price competitiveness, I have a question about the large OLED panel.

As the CFO has mentioned, there is going to be a sharp decrease in demand for OLED in the second quarter. And the outlook for the third quarter is not clear either. And then on top of that, the Guangzhou fab is going into operation, which will end up increasing the supply. Now, does this mean that compared to the beginning of this year, there will be changes to the company's strategy regarding the large OLED panel, for example, changes to the lineup or to the target volume and so forth? So if there are such changes to our strategy, then please let us know. And the second question is, assuming that the COVID-19 were to subside in the second quarter and the demand for TV were to pick up in the third quarter, then it's highly likely that the Chinese HD TV makers will become very aggressive in trying to capture the market share. And now in such a case, given that the large OLED is based on premium strategy, the company will not be having a price advantage. meaning that it is also possible that demand for the company's large OLED could fall. So what would you say to this kind of presumption?

I said earlier that the demand for the company's large OLED could fall by about 10%. Even so, there is no plan to change the operation strategy of OLED TV. However, as we go through the COVID-19 situation, if I were to tell you some of the results analyzed in the market, some advanced countries, especially North America, Europe, uh... it took a day online uh... you don't check it you can't move it will not be well done but i thought uh... you can talk about that they didn't look at it and i don't want to talk about it and i don't want to talk about it and i don't want to talk about it It's a bit of a question of whether we'll be able to take advantage of the short-term supply of our products. If we have to describe these aspects, we're thinking about how we're going to use online distribution in a more normal way.

Now regarding the demand outlook, I have already mentioned earlier that there is going to be about 10% reduction to the demand than we had initially expected. But now this does not mean that we will be changing our strategy regarding OLED TV. So we do not have such plans at this point. Now, currently, as we experience the COVID-19 situation, there have been a lot of analysis from the market, and let me share with you some of their results. Now, one is that online sales are still remaining brisk in the developing markets like North America and Europe, where they have a vibrant online retail and also the logistics, as well as strong backup infrastructure. So given this, now of course there will be some impact on the demand, but now where the offline retail stores are shutting down and where the offline are falling short, the online marketing channels can pick up where the offline left off. So for the short term, we are mulling over how we are going to better utilize the online distribution channels. So in short, this means that compared to the normal situation, we are trying to think of ways to better utilize the online distribution channels.

The second question is that the Chinese LCD companies are using aggressive strategies in the second half of the year to weaken OLED's price competition. As you know, of course, there has been some price fluctuations in the first quarter, but most LCDs, especially LCD panels for TVs, It has been run at a close level to the cash cost, including us and other Chinese companies. In that situation, there was a slight rebound in the evaluation, but in the second half of the year, I think we will have to wait and see if it can come out aggressively through a considerable level of evaluation.

And your second question about the Chinese LCD companies potentially becoming more aggressive in the second half, which would affect the company's demand for OLED products because of its premium strategy. Now, for the TV LCD panel, now the LCD panel for TVs, now they had already been selling at near the cash cost. So that was the same for the company as well as the Chinese companies. So given the situation already, then, whether there, and of course there had been some rebound in the ASP, but overall it has remained quite low. So then the question is whether they will go further in the, let's say, the price discount in order to compete in the panel market in the second half. Well, that question remains to be seen.

Even so, through the evaluation, the aggressive development of LCD can always be there, so we are considering it and are judging that we should expand the OLED operation strategy. However, due to the COVID-19 situation, some of the materials have been buried, but what we have been saying since last year is that uh, uh, uh, But then now, yes, it is also possible that the LCD makers will become much more aggressive in their approach.

with even steeper discount in the panel price. So, yes, we are also keeping that assumption as we are trying to unfold our strategy for OLED. But now, having said that, now there is one thing that was, let's say, a bit forgotten or was put on the sideline because of the COVID-19 situation, and that is the fact that we were able to increase a new clientele for OLED. So up until last year, we were able to increase our customers, and also this year, we were able to secure customers like Huawei in China, Vizio in the U.S., and Sharp of Japan, so the companies with much name value as well as marketing and sales prowess. So we have also secured these new customers, and we do believe that we will be able to better utilize our Guangzhou OLED fab utilizing these new customers. So even if the LCD makers were to have a competition with even lower panel price, we believe that we will be able to maintain our strategy for OLED.

The last question will be presented by Dongjae Woo from Bank of America. Please go ahead with your question.

Thank you for your question. The first question seems to be an OLED chip that we should focus on in the medium to long term. Last year, as we know, you sold more than 3 million panels, and this year, I think the market expects about 6 million panels to increase twice as much as that. I'm a little worried that there will be some adjustments due to China's production issues and global macro. 계속해서 한 5, 600만 대의 생산 수량을 달성하실 수 있는지 하고 그 이후에 800만 대, 1000만 대로 가는 시점이 언제고 그거에 따라서 언제쯤이면 다시 영업이익률 기준으로 좀 이익을 내실 수 있는지 본격적으로 의미 있는 이익을 낼 수 있는지 좀 설명해 주시고요. 그 다음으로 이제 CAPEX 관련 간단한 질문 좀 올리겠습니다.

Now, let me first give my first question. Now, for the mid to longer term, I believe that the focus is on the OLED TV. And last year, there were sales of over 3 million panels. And the expectation this year from the market is around 6 million panels. But of course, because of the disruptions in production in China, as well as the macro situation globally, there could be some adjustments. But still... Do you believe that the shipment of 5 to 6 million panels can be maintained? And also, when do you believe that you can reach 8 million or 10 million? And thereafter, let's say in terms of the operating profit, you will be able to achieve meaningful operating profit following that. And after the response, I will follow up with a question on CapEx.

Yes, as you all know, the number of cases will increase by 10% this year. As you all know, the number of cases will increase by 10% this year. As you all know, the number of cases will increase by 10% this year. And in the future, when can OLED sales reach 8 million and 10 million? Of course, it's a point of view that needs to be supported by production. That part is probably this year. As we go through the first half and second half, the corona situation is short-term. I think it's right to talk about the long-term concept of sales and production. I did mention earlier about the demand being lower by about 10% than our initial expectation.

And also, please understand that in terms of the number, it is very difficult for us to specify a number at this point. obviously because of the COVID situation and the fact that it could have a huge impact on the demand fluctuations. And also you asked about when we could reach 8 million or 10 million sales of OLED. And of course, this has to be backed by production as well. But again, now as we go through the first half and also into the second half, then there is no telling how COVID is going to develop. whether it is going to be subsiding this year and then will no longer have an impact next year, or will it just simply go away within the first half of this year and then things will recover in the second half of this year. There is simply no way of knowing that. So for us to share our planning, especially for the longer term, then we can only do so by scenario. So I do hope that we could have another opportunity later on to share such a long-term planning with you by scenario for both our production and sales.

I'm sorry for the similar answer, but I think it's related to what I said earlier about the black-and-white transition of OLED TV. Of course, when we operate with only Paju fans, Uh, uh, uh, uh, Depending on the market, the time when we can fully load KEPA will be closely related to that. We can't tell you when that time will be, so I hope we can tell you when that time will be, so that we can predict the future. I didn't understand KEPAX in detail,

And I'm sorry that I seem to be repeating myself, but the same question regarding, same response regarding your question about OLED turnaround as well. So now the, when we only had the PajuFab, then of course the depreciation amortization was solely from the PajuFab, but then now as the CEO FAB also goes into operation, then also there is going to be the burden of the startup cost. So in such a case, then we would also have to look at both FABs in terms of the cost. And also, it's also related to the question of how the market sees or when the market sees our capacity to go into our full capacity to go into operation. But of course, that is still a big question mark that it is highly uncertain. And I believe that we will be able to respond to that only when there is some visibility into the future projection.

Yes, thank you for the good answer. But the last question is, since it's been a long time since the first quarter of this year, the amount of capital investment is showing a decline in the price-to-value ratio, so is it okay to continue to see this as a trend in the future? In other words, the burden of capital investment per quarter is stabilized to less than 1 trillion won, and the exchange rate is improved by going up by more than 1 trillion won per quarter. And the exchange rate is also quite good at this level, isn't it? So, the benefits of the exchange rate. And then, looking at this performance, the tax part seems to have come in as a reverse exchange rate, but if you look at the tax-related situation, the overall financial structure or

And my last question is, now we see that finally in the first quarter, the investment in facilities, so the CAPEX in the first quarter, was below the depreciation amortization cost. So do you see this as a sustainable trend into the future? So in other words, the capex on a quarterly basis to remain below $1 trillion while depreciation and amortization to stay above $1 trillion per quarter, which will also improve the cash flow. And also the current exchange rate is working in favor of the company. So there would also be some benefits from that as well. And also in terms of the corporate tax, there appears to be a, that you're set to receive a refund for the tax. So I believe that the situation perhaps means that you will be able to improve your financial position as well as the financial structure. So I would just like to know whether that is, that is so.

Yes, thank you for the good question and also for the interpretation. Basically, I think it's going to be a lot different from talking about it excluding the corona situation and talking about it including the influence of the corona situation. When we were in the first quarter of 2014, we definitely had a lot of assets. Despite the assets, we have said that we can greatly improve the debt ratio due to the implementation of CapEx in the EBITDA. Like the question you just asked, I don't think there will be any major changes in carrying out CAPEX within the range of multinationals. This is not a short-term crisis. Since we have finished our investment this year and next year, I think it will be important to consider how to maximize the ROI through the finished investment. I would like to say that the amount of investment will be carried out within the range of multinationals.

Thank you for the good question and the good interpretation. Now, yes, I would say that the stance would become much different whether we are talking of a scenario that is inclusive of the COVID impact and exclusive of the COVID impact. But now having said that, in the first quarter, we did mention that there has been asset impairment in the first quarter, and also there have been some, as a result of that, there have been some improvement in the financial ratios. And yes, the capex falling below the depreciation amortization cost is not just for the past quarter, and it won't be for the short term either, because most of the major investment for the time being has been completed. So now what remains to be done is to try to improve the ROI on the investment already made.

Well, despite that, as I mentioned earlier, especially in this quarter, TV, mobile-centered demand reduction, some of them will be IT, but overall, it's a very difficult situation. Whether such a situation will end in 2Q or be connected to 3Q is a very big reality for us. We have to be able to overcome these things in a wise way so that CapEx can be invested in the South Korean-African Union and the financial structure can be improved. I think we can show you that. Anyway, how to overcome the difficulty of the two-minute period? This is the biggest task that CFO has. I'll tell you this first.

And also, it was already mentioned that the demand for TV and mobile will fall in the second quarter, although it would be partially offset by the increase in the demand for IT. But still, overall, it provides a very challenging situation for us. And also, there is a high level of uncertainty. So we don't know whether it will be ending in the second quarter or whether it will persist into the third quarter and on. So what we need to do is try to wisely overcome the current situation. It is only then that we will be able to improve our financial position by maintaining the capex below the depreciation amortization level. So let me say that as the CFO, I find it my major challenge to overcome the current difficulty. Thank you very much for your participation, and please refer to the IR team for any further questions. Thank you.