LG Display Co., Ltd.

Hello, I would like to thank everyone who attended today and start the LG Display 2021 3rd Anniversary Performance Announcement Conference Call. This conference call will be held after the announcement of the LG Display, and we will have a Q&A time with everyone who attended. If you have any questions, please press the star and number 1 on the call button. Then, there will be a announcement of the LG Display from now on. 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 2021 third quarter earnings results by LG display. This conference will start with a presentation, followed by a divisional Q&A session. If you have a question, please press star one that is star and one on your phone during the Q&A. Now, we shall commence the presentation on the fiscal year 2021 third quarter earnings results by LG Display.

Hello, I'm Heo Seok, the team leader of LG Display IR. I would like to thank everyone who attended the conference call for the performance explanation of this quarter. Today's conference call includes CEO Seo Dong-hee, CEO Kim Hee-yeon, CEO Lim Seung-min, and CEO Ko Ki-young of TV Marketing. Good morning.

This is Brian Ha, LG Display's IR team leader. On behalf of the company, let me thank all the participants at this conference call. Today, I'm joined by the CFO, D.H. Sa, Hyun Kim, Senior Vice President of Corporate Strategy Group, Seungmin Im, Vice President of Corporate Planning, Steven Ko, Vice President of TV Marketing,

Jae Young Won, Vice President of IT Strategy and Marketing, and Ki Hwan Son, in charge of Auto Marketing.

The conference call will be conducted for one hour in both Korean and English. starting with the presentation on the financial results of Q3 2021 and the company's outlook for Q4, followed by Q&A.

Please refer to the provisional earnings release

Announce today or the IR event section in the company's website for more details on the financial results of Q3 2021. Before we begin the presentation, please take a moment to read the disclaimer.

금일 실적 발표 내용은 국제회계 기준인 IFRS에 따라 연결 기준으로 작성된 재무 수치로 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 Q3 2021 earnings results.

Let me start off with our business performance in Q3. Revenue in Q3 was 7.223 trillion won.

Operating profit was 528 billion won. Revenue was up 4% QOQ. and operating profit was down 25% QOQ. But YOY, revenue was up 7% and operating profit was up 222%. Operating profit fell QOQ due to drop in LCD panel price, rise in materials cost, and increased costs from new facility operations.

Operating margin was 7%, with EBITDA margin at 23%.

Net profit was 463 billion won. Next is area shipment and ASP.

Area shipment in Q3 was 8.36 million square meters, down 6% from the previous quarter due to decrease in TV panel shipment

from soft global demand and later-than-planned shipment of IT panel from parts supply issues.

Even though the LCD TV panel price dropped, it recorded $750, which rose by 7% compared to the previous year, due to the increase in mobile products due to seasonal factors. This is a 6% increase compared to the previous year.

Area panel price was $750, up 7% QOQ despite the drop in LCD TV panel price, on the back of increased mobile product shipment from Seasonality. It was up 6% YOY.

KEPA, which produces 3 minutes of data, increased by 3% compared to the previous quarter due to the influence of the additional 30,000 units of operation of Gwangju OLED factory.

The company's production capacity in Q3 increased 3% QQ, mostly coming from the 30,000 ramp-up in OLED plant in Gwangju. Next is Q3 Revenue Breakdown by Product Segment.

IT panel is 45% of each segment,

TV panels came in next with 32%, down 6 percentage points from the previous quarter. Mobile and others accounted for 23%.

Next is the company's financial position and ratios.

The company's cash and cash equivalent at the end of Q3 was 4.2 trillion won. Inventory was 3.58 trillion won, increasing by 857 billion won QOQ, owing to deferred shipment to Q4 and buildup of safety stock to prepare against supply chain uncertainties, such as power shortage at the production site and continued parts supply issues.

Financial ratios kept showing improvement.

Liabilities to equity ratio was 157%, improved by 7 percentage points. Current ratio was 95%.

Net debt-to-equity ratio came in at 63%, improved by 6 percentage points, QOQ.

Next is cash flow. Cash and cash equivalents were 4.209 trillion won at the end of the quarter, down by 108 billion won from the 4.317 trillion won at the start of the quarter.

Let me now move on to the guidance for Q4. 3분기에 부품 수급 차질로 인하여 출하 감소된 부분은 4분기에 회복할 것으로 전망합니다.

In Q4, area shipment is expected to grow by mid-single-digit QOQ. The shipment decrease in Q3 coming from part supply issue is expected to recover in Q4.

면적당 판가는 LCD TV 판가 하락세가 지속되겠지만 면적당 판가가 높은 모바일 출하 확대로

area price is expected to rise in low single-digit QOQ even with continued drop in LCD TV panel price thanks to shipment growth in mobile that has higher area price. Next is presentation by the company CFO, D.H. on business performance and strategy.

Good afternoon.

This is D. H. Seo, CFO of LG Display. Let me thank the shareholders, investors, analysts, and all stakeholders who are participating in today's earnings release conference call. I will first brief you on the main performance and operation strategy for each business in Q3, followed by Q4 outlook. First is main performance of each business in Q3.

There were meaningful results in Q3, such as solid performance in IT and strengthening of large OLED positioning in the high-end TV market, despite the volatility in LCD markets.

In IT, there was some shipment delay due to supply disruption of some components, but the company was able to achieve consistent performance thanks to our differentiated competitiveness and customer base.

대형 OLED 사업 또한 글로벌 TV 세트 수요의 약세에도 불구하고, The premium TV, OLED panel, has a growth rate of 90% compared to the previous year, and it has strengthened its position in the high-end market. Based on this, we have started ramp-up of 30,000 additional devices in Gwangju, and in terms of profitability, it is expected to change dramatically year-on-year compared to the previous year.

In large OLED business as well, demand for OLED panel, which is premium TV, achieved 90% growth year-to-date in Q3 YOY, despite the globally weak demand for TV set. It was able to further consolidate its positioning in the high-end market. The company began capacity ramp-up in Guangzhou by 30,000. Profitability also improved QOQ and is now expected to turn around to profit for the year.

다음으로 사업별 운영 전략을 좀 더 상세히 말씀드리겠습니다.

Let me now explain the operation strategy for each business in more detail.

최근 들어 LCD 시황의 변동성이 확대되고 있지만 당사는 LCD 구조 혁신을 통해 경쟁력 있는 IT에 집중하며 선제적인 준비와 안정성 강화 노력을 지속해 오고 있습니다. 작년까지 대규모 적자를 지속했던 대형 및 중소형 OLED 사업이 안정화되며

Although volatility in the LCD market keeps growing, the company has continued to make preemptive preparation and strengthen stability by focusing on competitive IT through LCD business innovation. Large and small to mid-sized OLED business has been stabilized after being deep in the red last year, and we now have the basis to turn around to more than BEP this year. From next year, we will focus on stable growth and profitability.

As a result, even if there is an increase in the LCD trend in the future, we will continue to improve our business structure

we believe that should there be additional worsening of the LCD market, we can maintain stable business operation and absorb a considerable part of the market volatility based on a business structure built for sustainable growth and profitability.

By business, large OLED shipment will increase in Q4 thanks to its stronger positioning in the high-end TV market.

It is expected to turn around to profit for the year and achieve the sales goal of 8 million units.

And with the additional 30,000 capacity in Guangzhou that started operation in Q3, we will build the infrastructure to produce 10 million units a year, which will further help drive growth in OLED business.

In terms of the market, the mainstream market is contracting in the second half, but the high-end keeps growing, creating a wider gap in the market. This is due to the consumer's willingness to pay more for higher specifications, as TV increasingly becomes a multi-use device with more time spent and higher quality content.

LG Display is a company that has been Based on such change, LG Display intends to segment the consumer market more finely and develop product offerings customized for each segment.

This will help build the basis for profitable growth for large OLED to keep growing and improve profitability at the same time.

The small and medium-sized OLED sector will continue to expand its capacity through development, production, quality competitiveness, innovation, and strategic trade relations to become one axis of future revenue. We will continue to strengthen our partnership with customers

We intend to turn it into another pillar of future profitability by steadily increasing its volume by strengthening mass production, quality competitiveness, and strategic client relations. We will keep solidifying our partnership with clients to drive volume and new product development and improve our profit structure by broadening product portfolio into wearables, for example.

Next is the management direction of the LCD business. In the meantime, the LCD TV's CAPA, which has been very variable, has been preemptively converted to IT, and IT has expanded its high-end production base to reduce the business share directly linked to demand and strengthen its revenue structure.

Next is the direction of LCD business. We have been improving our profit structure by preemptively converting part of the capacity from highly volatile LCD TV to IT, and broadening high-end production in IT by downsizing the business that is directly linked to the market cycle.

At the same time, we have secured stability in medium-term water management through cooperation with strategic traders, IT commercial 등의 차별화 사업 영역을 바탕으로 수익 창출을 지속해 나가고 있습니다. 희망의 변동성이 커지고 있지만, LCDTV는 변화를 선행 관리하여 수익성과 경쟁력 관점에서 탄력적인 펩 운영을 해나가도록 하겠습니다.

We also secured stability in longer-term volume management in cooperation with strategic clients and continue to generate profit in differentiated business in IT and commercial Market volatility keeps growing, but we will preemptively manage changes in the LCD TV market and maintain flexible FAB operations with the goal of profitability and competitiveness. Next is Q4 outlook.

In the fourth quarter, we expect a drop of 10% to the middle. We expect a drop of 10% Hanbong Gijong chaga comes on who wouldn't have been gave a book there because we're using them, you know, get yourself homesick. You've got to move. I'll try to do what they did.

You've got to move. You've got to move. You've got to move. You've got to move. You've got to move. You've got to move. You've got to move. You've got to move. You've got to move.

You've got to move. The company also believes that supply demand uncertainties could continue due to worsening of the LCD market, continued issues with key components,

and power shortage in China. The company will try to minimize risk by strengthening market monitoring and ensuring thorough preemptive management.

Next, I would like to talk about the demo management activities. The interest rate has been reduced since the last quarter to this quarter, and the amount is about 3.7 billion won. This year's CAPEX is expected to be in the middle of 3 trillion won. Next is on financial management activities.

Borrowing was reduced two quarters in a row by about 370 billion won. CapEx for the year is expected at mid 3 trillion won. It will be finalized depending on the timing of equipment moving at year end.

Next year, CapEx is expected to increase YOY due to the new investment on small to medium OLED, which was already announced.

But we will abide by the principle of CapEx within EBITDA.

We will stably manage our cash flow as we try to improve financial soundness.

Last, allow me to respond to the question that was left at the time of registration and frequently received at the IR team. The most frequently asked questions are on OLED business performance, profitability, LCD operation, and dividend. I will explain about dividend, which was not covered so far.

As I mentioned in the last performance announcement, the business is predictable in the medium term, 지속적으로 실행할 수 있는 정책을 구체화하는 중입니다.

As was explained at the last earnings release, the company is currently working on a policy that will ensure predictability and practicality over the mid to long term.

3분기 누적 기준으로 영업이익은 1조 7,530억 원, 단기 순이익은 1조 1,531억 원으로 Operating profit year-to-date until Q3 was 1.753 trillion won.

and net income was 1.1531 trillion won. This is a meaningful year for the company as we achieved a turnaround after three years of deficit. We are positively reviewing dividend for the year, and as soon as we finalize the dividend amount, we will immediately communicate with the market. Thank you very much for your attention. And one correction from the interpreter. Earlier, it was mentioned that in Q4, area shipment will grow by mid-single digit, but let me make a correction that it is actually mid-teen QOQ. So in Q4, area shipment is expected to grow by mid-teen QOQ.

Thank you. Operator, please proceed with the Q&A session.

That brings us to the end of Earnings Presentation for Q3 2021. We will now take questions. Operator, please commence with the Q&A session.

We will now begin the Q&A session. If you have any questions, please press the star sign and number 1 on the call button. If you wish to cancel your questions, please press the star sign and number 2. Now, Q&A session will begin. Please press star 1, that is star and 1, if you have any questions. Questions will be taken according to the order you have pressed the number star 1. For cancellation, please press star 2, that is star and 2, on your phone. In order to allow as many Q&A chances as possible within the restricted time, we would appreciate only two questions per each participant. The first question will be provided by Nicholas Godua from UBS. Please go ahead with your question.

The first one is on RGB OLED profitability. You talked about white OLED, but how would you characterize the trajectory for RGB OLED profitability in Q3 and Q4 and for a full year and initial thoughts for next year? And secondly, on the LCD side, you talked about running flexible operations. Would that imply that you would be lowering utilization rates already for some of the lines? Or would you intend to do that soon or increase effectively downtime for equipment, for maintenance, et cetera? And how is the current environment influencing the timing of closure of Gen 7 capacity in Korea? Thank you.

First, I would like to ask about the profitability of RGB OLEDs. You mentioned about the white OLEDs. Regarding the profitability of RGB OLEDs, I would like to ask about the Q3, Q4, and the annual profitability, and also about the prospect of profitability next year. And the second question is related to LCDs. You said that you would move it flexibly after the announcement, but if so, Are you planning to lower the price? Are you planning to lower the price? Are you planning to lower the price? Are you planning to lower the price? Are you planning to lower the price? Are you planning to lower the price? Are you planning to lower the price? Are you planning to lower the price?

First of all, I would like to express the profitability of RGB OLEDs as plastic OLEDs. We have two factories. We have two factories, PajuPEP and GumiPEP. It is difficult for me to tell you in detail about the specific factories, but in the major factories, the number of BPs has already exceeded quite a bit. There are some issues with the products that are made for various customers, so there are some issues with the products that are made for various customers, so there are some issues with the products that are made for various customers, so there are some issues with the products that are made for various customers, so there are some issues with the products that are made for various customers, so there are some issues with the products that are made for various customers, so there are some issues with the products that are made for various customers, so there are some issues with the products that are made for various customers, so there are some issues with the products that are made for various customers, so there are some issues with the products that are made for various customers, so there are some issues with the products that are made for various customers, so there are some issues with the products that are made for various customers, so there are some issues with the products that are made for various customers, so there are some issues with the products that are made for various customers, so there are some issues with the products that are made for various customers, Now, first about the RGB OLED, or what we call the plastic OLED, anyways, the plastic OLED profitability.

Now, we have two plants, Paju Fab and Kumi Fab, and I'm not going to specify which fab, but IN ONE MAJOR PLANT, WE HAVE ALREADY GONE OVER THE BEP LEVEL. AND FOR THE OTHER PLANT AS WELL, BECAUSE OF SOME, THERE HAVE BEEN SOME RELOADING ISSUES, BUT NOW COMPARED TO THE PAST WHERE WE HAD MADE LARGE INVESTMENTS AND WERE NOT ABLE TO FOLLOW UP WITH PROPER UTILIZATION FOR SOME TIME, WE ACTUALLY HAD SEEN LOSSES UP TO A TRILLION. BUT THEN NOW TODAY, THE TWO SITES COMBINED we now have the basis for going over the BEP. And going into next year, we look forward to achieving, going beyond the BEP and achieving profitability because we believe that we have laid the capability as well as the customer and the product structure to make it happen.

I'll give you the answer to the second question about LCD. . . . . . . . When we compare it with the end of this year, we reduced the capacity by about 25%. We partially reduced the capacity of some lines by factories. As you know, if we convert the TV into IT, there will be a cap-down. In IT, we also reduced the capacity Regarding your question about the LCD, so I believe that you're asking about the flexible operations of the LCD TV side.

AND NOW FOR OVERALL, NOW FOR THE LCD FAB, GEN 8 CAPACITY, SO NOW SPEAKING ONLY ABOUT THE GEN 8 CAPACITY, THEN COMPARED TO THE END OF 2018, BECAUSE THE LCD BUSINESS BEGAN TO SOUR STARTING IN THE SECOND HALF OF 2018. SO COMPARED TO THE END OF 2018, THEN THE CAPACITY THIS YEAR IS DOWN BY 25%. per plant, then we also reduced the capacity in some lines. And also, as you already know, we converted some of the TV capacity to IT. And in this process, there is also some capacity loss, as you would know. And especially for the IT, we converted mostly to high-end products, like high resolution, meaning that there was some capacity loss. At any rate, compared to the end of 2018, today we are down by about 25% in the LCD Gen 8 capacity.

On the other hand, the IT CAPA has increased by about 30%.

But out of the 25% decrease in capacity between 2018 and now, if you look at the capacity adjustment by a product, then for a TV, compared to 2018, it is down by 40%.

But for IT, it is up by 30%.

Most competitive among the existing Gen 8 fabs, it has both the competitiveness as well as the profitability to keep competing against the peers for some time.

The P7 factory is also a generation that does not have many global products. Among the 7th generation factories, there are only a few factories in Paju and a few in the global market. So, what are the products that can be produced most competitively in the 7th generation factories? We have analyzed various different ways. As I said a few times in the past, we are a company that has a competitive Then the question is, what about the operation of the P7 plant?

And for the P7, now, again, I mean, this is also, we would say, one of the few plants of this generation left in all of the world, not only in Korea. So given that it is one of only few Gen 7 plants that are left, we were thinking about what would be the most competitive products to be built out of these plants. And as we had explained earlier, we have differentiated competitiveness in ultra-large commercial products, for example, those of 80 inch or larger. So we plan to keep focusing the G7 plans on producing such ultra-large products. And then for the remaining capacity, we would think about how to flexibly put it into use.

I'll take the next question.

The next question is from Kim Hyun Soo of Hana Financial Investments. The following question will be presented by Hyun Soo Kim from Hana Financial Investments. Please go ahead with your question.

Thank you for the question. I'm Kim Hyun Soo of Hana Financial Investments. I'd like to ask two questions about OLED TV and LCD TV. First of all, it's the OLED TV. As you can see, in the White OLED section recently, the possibility of adding domestic set customers has been raised since the beginning of this year. Regarding this, please tell us about the possibility of adding domestic set customers or new customers in the future. As you mentioned earlier, I think it will be capped at about 10 million next year. I would appreciate it if you could tell us if the profitability of the White Wallet sector will be able to achieve a sales return of about half of the number of seats as of 2022, which was previously proposed. And it's the LCD TV side. Recently, the panel price of LCD TV is falling. Thank you.

I have two questions, one each for OLED TV and LCD TV. Now first about the OLED TV, especially the white OLED, there have been talks from the beginning of this year of the possibility of adding a domestic set customer. So the question is then what is the possibility of acquiring a new domestic set customer or any other new customer down the road? So if you could share that information with us. TO THE EXTENT THAT IS POSSIBLE, THEN THAT WILL BE APPRECIATED. AND THEN NOW IT WAS MENTIONED IN THE BRIEFING THAT THE CAPACITY WILL BE NOW CLOSE TO 10 MILLION. NOW UNDER THAT ASSUMPTION, THEN FOR THE WHITE OLED, DO YOU BELIEVE THAT IN TERMS OF THE OPERATING PROFIT FOR 2022, IT WILL REMAIN SIMILAR TO THE GUIDANCE, WHICH WAS THE MID-SINGLE DIGIT THROWS IN THE OPERATING PROFIT? AND THE SECOND QUESTION IS ABOUT THE LCD TV. Now, we see that the LCD TV price continues to decline, but the company's LCD TV business remains in the black. Now then, for the company to maintain such a profitability, then how much further drop in the LCD TV price can the company accept? LCD TV panel, so the pricing, so how much further drop can the company accept?

I'd like to answer the first question about OLED TV. As you know, we haven't been able to give you a detailed explanation about the additional requirements for new customers. I'd like to ask for your understanding. What I can tell you is that we've been focusing on quality and performance. Regarding your first question about the OLED TV and the acquisition of a new customer potentially,

As you would understand, it is difficult for us to disclose information about customers, I ask for understanding. But now for the OLED TV business, of course, we have been working very hard to have the quality at the level that we wanted, as well as the yield, and also to secure the production capability. And now that we have them, then we believe that we will be now able to lay the basis for both growth and profitability at the same time.

From that point of view, so far, the traditional TV set makers have been our main customers. However, we are looking at the market in a very detailed way. We are talking to some of the customers, but except for the traditional TV set customers, we have fully mastered the white OLED, the large OLED, Now from that perspective, then so far our customers in this for the white OLED had been traditional TV set makers.

But now we are looking at the market in finer segmentation. And we are already in talks with some of the potential customers, but we believe that we will be able to acquire new customers aside from the traditional TV set makers. So new customers who would be able to deal with the white OLED and would also be able to appeal to the consumers utilizing the white OLED.

So for next year, as I mentioned earlier, we are able to sell 10 million units.

And if things go as planned, then we believe that we will be able to achieve a single, a mid-single-digit growth in profitability.

Next, I'd like to answer a question related to LCTB. How much is the price of LCTB? Even if it falls, can we run the business? I think that's the nuance of the question. As I said earlier, Kepa is about half the level compared to the end of 2018. If you open it up, the top part has a lot of commercial products. As you know, commercial products are developed and supplied by cooperating with customers, so the price is a little different from the market price. That's why we're running LG TV separately. I think you can see it like this. I don't know. Most of us, whether it's the KWF or the Korean Air Force, the panel factories are all out of business. So there's almost no burden on business expenses. I know that there is a slight difference in cost structure between overseas competitors and domestic competitors. It's hard for me to say for sure, but the COP structure of competitors, And regarding the LCD TV, so your question was how much, so what is the extent of the further drop in the price in the LCD TV panel that

that will allow the company to remain profitable. So if I may rephrase your question, I take it as, if I may rephrase your question, then what is the extent of the drop in the price that will still allow us to maintain our business operation? Now, for the LCD TV capacity, as I explained earlier, compared to the end of 2018, the capacity is almost half of it. and most of it is for commercial products. Commercial products meaning that the specifications are discussed prior with the customers. So in this case, the pricing is quite different from the market price. And this gives us a room for maneuver in the LCD business. And of course, for the commodity products, now for both the Guangzhou plant and the Korea plant, we have no further burden of the depreciation and amortization. So I would say that the cost structure is quite different from the peers. And also now then compared to the peers, I would say that in comparison of the COP, then it would be about 5% to 10% that would allow us to stay at least at the BEP level.

Yes, then we will take the next question.

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

Thank you for the question. I'm Woo Dong-jae from Bank of America. The first question is, as we saw in the conference call today, it's been a long time since we heard about the 30K additional capital in China from OLED. Then, Gen 6 has already been ramped up a lot, but I don't understand why CapEx is increasing this year. If you could explain why we have changed to a business model that has a lot of maintenance costs, I would be grateful. I'll ask the second question.

First of all, my question is about the capex. So as we're able to understand from the conference call, for the OLED business, there has been the 30K capacity ramp-up in the China plant, and then there was already the ramp-up in Gen 6. Then I wonder why the company still needs to have higher capex next year compared to this year. So does this mean that the company's business model fundamentally shifted to one that requires higher maintenance costs? I would like to follow up with my next question after the response.

Next year's CAPEX increase, as I said last time when I was at IAEA, and as we announced, the IAEA

For the CapEx next year, as was disclosed already, we have the investment plan for the 15K for small to midsize OLED. That is the reason why there is going to be higher CapEx required.

The following question will be presented by Jeonghwan Kim from Korea Investment Securities.

Please go ahead with your question. I think there's a question about that. Regarding the IT panel price, I wonder if the company is looking at what the price trend will be like in the future. Recently, the demand for PC and laptops has been good until the first half of last year, but it seems to be decreasing little by little, so I think it would be good if you could tell us the outlook and view of the IT panel price trend. The second question is related to the price-to-market schedule. As we said, in the OLEB, the BEP change is almost certain. The BEP change may affect the price-to-market schedule, but I'm curious if it affects the price-to-market schedule or not. Likewise, in the ACB, the price-to-market schedule I also have two questions.

First is about the TV panel. Well, actually, the TV panel price, we have already discussed this at some length. But then I do not believe that we discussed the IT panel price. So what is the company's view on the IT panel price trend down the road? Because we see that for like PC or notebooks, So the set demand has been strong in the first half, but it started to slow down recently. So based on this environment, then what is the company's view on the IT panel price? And the second question is about the depreciation amortization schedule. So given that we see that it is almost certain that OLED will now be turning around to at least BEP, and perhaps on one hand it is owed to the higher utilization rate, but perhaps it is also owed to the lower depreciation amortization. So I wonder if you could explain this part. And also for the LCD, is there also a schedule for the depreciation amortization for LCD to also go down?

First of all, I would like to answer the question about the price of the IT panel. Earlier, uh... uh... uh... First, about the IT panel price, for the LCD TV, yes, the market changes are also affecting the panel price.

But then now for the IT, relatively speaking, it has So, I mean, its growth has slowed down somewhat, but still, relatively speaking, we believe that the price will remain solid into Q4. But, yes, it is true that compared to the first quarter of this year, then the increase rate has slowed down and is almost becoming flattish.

Next year, the specials that appeared during the COVID-19 period will be uh uh uh uh

And for next year, we believe that much of the online demand that we had enjoyed is going to go away. But of course, it's not that they will go away completely because there would still be some demand for non-face-to-face business and remote education and so forth. So the base effect will remain for some time. And also, on the other hand, much of the B2B market for which the demand had been much declined because of the need for non-face-to-face, we believe that there is going to be recovery in the B2B market next year.

So if you look at the evaluation flow, what we're looking at is a kind of commodity monitor. We're looking at it as the price will start to adjust from next year's EQ. For laptops, the price will start to adjust from next year's EQ or 3Q. We're looking at it like this, but I think it might be a little different in terms of commodity products and high-end products. The high-end products decide the price through spec negotiations with customers. So, there is a personality that is not closely related to the market flow. Even if we look at the past five years or more trends, the high-end side can be influenced by customers' items rather than market supply. And for the panel price, we believe that the price correction would probably start from commodity monitors.

So perhaps in the first quarter of next year. And for notebooks, the price correction is likely to start sometime in the second quarter or the third quarter of next year. But we see that the patterns of the price correction are going to be different between commodity products and high-end products because for the high-end products, we discuss the specifications with the customers ahead of time and determine the pricing based on that. meaning that for the high-end products, the pricing is not closely linked with the market. So it actually does not depend on the supply and demand dynamics, but it is more affected by the client's TAM. But then again, for the commodities, we believe that the price correction is likely to start in the first quarter of next year, and for notebooks, second quarter or the third quarter.

Next, I would like to answer the second question about OLED TV. I understood why OLED TV's profitability is improving. The first reason why OLED TV's profitability is improving is that, from the point of view of internal capacity, the yield has improved significantly. uh... theory uh... what they do if you want to come out and put them in the middle of the week it doesn't look like a lot of people who couldn't do it is really uh... uh... going to go uh... when you get to know it but i don't know i don't think i could come to a party to open some kind of a lot of money but i'm not going to look at the kids and i think it's not one of them uh... to get on but i'm not going to do it because it's not going to do it because it's not going to do it but i'm not going to Overall, the sales volume has increased twice as much as the previous year, and I would like to say that there was some leverage effect due to the increase in the volume of our development and various marketing costs. In addition to that, as most of you know, it has been quite a while since we invested in Paju Factory. So, I would like to add that Paju Factory is mostly out of stock.

And your question about the OLED TV profitability, in other words, what are the factors that are driving up the profitability for the OLED TV business is how I understood your question. And there are several factors behind this. And the first and foremost, I would say it is thanks to the company's internal capability because we were able to achieve considerable improvement in the yield. And, of course, I have to thank the employees for such hard work in achieving this because we were able to improve the yield at a much faster rate than expected, almost to a point of reaching the critical point. Of course, we have to do the exact calculation to determine that, but I believe that we are almost there. And another is the cost reduction thanks to cost innovation efforts and the fact that the sales are more than doubled. This also helped. because it then allowed the leveraging effect of the fixed cost, such as the R&D or the marketing cost. And also for the Paju plant, you would know that it has been built quite some time ago, so most of the depreciation and amortization has gone away.

Next, you said that you are looking forward to the addition of the LCD. And then your question about the depreciation amortization for the LCD plant.

Now, of course, for the investment into any fab or plant, then there would be a major investment or some additional investment for improvement or financial investment. So some of the other types of investment might remain, meaning that some depreciation amortization might remain, but depreciation amortization coming from a major investment for all of our plants and fabs, that is almost completed.

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

Yes, thank you. I didn't get to ask the second question, so I asked again. The question is a bit simple, but I think it will be meaningful. . . . Thank you for explaining that OEM customers are not able to produce products properly in the fourth quarter. Especially, I don't think the increase in volume is from the LCD TV side from the outside. Once again, I would appreciate it if you could explain which side of the application has a 15% increase in area growth. Thank you.

Now then, I am back with my follow-up question, and this may be a simple but a meaningful question, I believe. Now, for the fourth quarter, the company is projecting a volume increase of about 15%, but then it would be good if we can have the volume deferred from the third quarter actually be realized in the fourth quarter. But does this mean that the OEMs might be trying to secure excessive volume of panels, or does the company believe that there is real demand coming from the OEMs? So despite the uncertainty in the macro environment, so perhaps the OEMs are trying to make up for the lost production in the third quarter, in the fourth quarter. So if that is the case, then that is going to be a good sign. But so more specifically than for the approximately 15% volume increase or the increase in the area shipment, can you explain by application from which application it is going to come most, perhaps not the LCD?

The IT sector will be the most likely to contribute to the increase in the area. As I said before, there is a part that has been delayed from 3Q. As far as we know, not only us, but also a lot of companies know that they are fixing it due to the shortage of parts. On the other hand, from the perspective of demand of set customers, there are still a lot of people who haven't been able to supply enough. So this part is... I think it's a point of view that we have to do our best to produce it within the scope of customer demand. Next, if you look at the trend of OLED TVs per quarter, most of them are 3Q and 4Q. At this time, the water quality is very important. So, OLED TVs will be able to operate in earnest, and OLED TVs will also contribute to the market. It doesn't have a big impact on the overall area, but if you look at it as an increase base, our plastic OLEDs are also at the point of maturity, so plastic OLEDs are also increasing in area. In summary, as you said earlier, the LCTB side is not as expected, but the rest of the products are increasing in area based on customer demand.

Now for the area shipment, there is much of the area shipment increase will come from IT. So there is the volume deferred from the third quarter. And as far as we understand, not only the company but also other companies struggled with the shortage of component supply. So for the set demand, still the supply falls short of demand. So currently what we need to do is try to do our best to fulfill the customer's demand that continues. And then also a part of it will come from the OLED TV because traditionally Q3 and Q4 are where the OLED TV volume is most concentrated. And given that the 30K ramp-up in the Guangzhou is also going into operation, we believe that the OLED TV is also going to make a contribution to the increase in the volume And then for the plastic TV, perhaps its contribution to the overall area shipment growth is not going to be much. But in terms of the sheer percentage of its own growth, we believe that there is also going to be some growth coming from the plastic OLED in Q4. And in sum, yes, as you have mentioned, not much is expected from the LCD TV. But I would say that in other applications, there is expected volume increase coming from customer's demand.

We will now close the Q3 2021 earnings conference call by LG Display.

Thank you once again for joining us today. Please do contact us at the IR team for any additional questions. Thank you.