LG Display Co., Ltd.

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 physical year 2022 first 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 1, that is star number 1 on your phone during the Q&A session. Now, we shall commence the presentation on the physical year 2022 first quarter earnings results by LG Display.

Hello, I'm Heo Seok-sil, CEO of LG Display IRC. Thank you for attending the conference call to explain the results of this quarter. Today's conference call was attended by CEO Kim Seong-hyeon of CFO, CEO Kim Hee-hyeon of Business Intelligence Lee Ki-young, CEO Lee Tae-jong of large-scale marketing, CEO Kim Chang-won of medium-sized marketing, and CEO Song Ki-hwan of auto marketing.

Good afternoon. This is Brian Ha in charge of LG Displays 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 Hyun Kim, Senior Vice President of Corporate Strategy Group, Ki Young Lee, in charge of Business Intelligence, Daniel Lee, in charge of Large Display Marketing, Chang Won Kim, in charge of Medium Display Marketing, and Ki Hwan Son, Vice President of Auto Marketing.

The conference call will be conducted in both Korean and English.

Please refer to the provisional earnings released today or the IR event section in the company's website for more details on the financial results of Q1 2022.

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.

Let me start off with our business performance in Q1. Revenue in Q1 was 6.471 trillion won, down 27% QOQ and 6% YOY. Seasonality was a factor, as well as the macroeconomic environment and market volatility following the change in the pandemic situation.

Operating profit was 38 billion won.

Shipment of large and small OLED panel decreased and LCD price fell. Operating profit margin in Q1 was 1%, with EBITDA margin at 19%.

Net profit was 54,000,000,000,000,000. Next is area shipment and ASP.

Area shipment in Q1 was 8.14 million square meters, decreasing 13% from the previous quarter. Again, seasonality was a factor, as well as soft demand in the downstream industry, leading to reduced shipment in large and medium panels. There were also production and shipment disruptions arising from part supply and logistics issues due to lockdowns in China. Area ASP was $660, down 18% QOQ. Mobile shipment slowed Due to seasonality, an LCD panel price continued its downward slide.

The company's production capacity in Q1 remained almost flat from the previous quarter. Next is Q1 Revenue Breakdown by Product Segment.

TV's share was 26% from the adverse seasonality and sustained decline in LCD price. Mobile and others accounted for 26%, 5 percentage points lower QOQ. LCD TV and OLED TV took up low 10% respectively. High-end IT products, where the company has competitiveness, took up 48%, maintaining solid performance.

다음은 재무현황 및 주요 지표입니다. Next is the company's financial position and ratios.

The company's cash and cash equivalent at the end of Q1 was 4.11 trillion won. Inventory was 4.23 trillion won, increasing by 880 billion won QOQ. The inventory value was higher than usual due to increased portion of OLED and high-end LCD products. Overall inventory level also increased,

with the buildup of buffer stock to prepare against supply chain uncertainties like materials and logistics issues.

Liabilities-to-equity ratio was 159%, almost flat QOQ. Net debt-to-equity ratio came in at 67%, and current ratio was 90%. 다음은 현금 흐름입니다.

기초 현금 4조 2,850억 원에서 1,740억 원 감소하여 기말 현금은 4조 1,110억 원을 기록했습니다.

Next is cash flow. The company's cash and cash equivalent at the start of Q1 was 4.285 trillion won. It decreased by 174 billion won, ending up at 4.111 trillion won at the end of Q1.

이어서 당사의 CFO인 김성현 전무의 2020년도 2분기 전망 및 사업 전략 설명이 있겠습니다.

Next is presentation by the company's CFO, 성현김, on guidance for Q2 2022 and strategy.

안녕하십니까? CFO 김성현입니다. Good afternoon, this is LG Display CFO, Seonghyun Kim.

Let me now move on to guidance for Q2 2022 and the company's operation strategy. First is Q2 guidance. Individual panel price is expected to fall in large and medium segments. Area price is expected to fall by around 10% QOQ due to continued seasonality in mobile panel.

On the other hand, we expect an increase of 10% in the second quarter. But area shipment in Q2 is expected to increase by low to mid 10% QOQ.

Shipment of large OLED is expected to surge with recovery in part of the volume affected by logistics and parts issues in Q1, and TV set makers' preparation for seasonality and new product launches.

In the first half of the year, there is a concern that major variables such as demand and supply network uncertainty will continue to affect seasonal effects, but in the second half of the year, large OLED and medium-sized OLED new model supply expansion and high-end IT, In the first half, there are concerns of persistent external factors such as demand and supply chain

due to seasonality. In the second half, we look forward to improved performance to come from increased supply of large OLED and new small to medium OLED models and stable operations in high-end IT. The company will keep an eye on demand uncertainty and persistence in supply chain issues and strengthen risk management to help achieve our targets.

Next is business management strategy. Next is operational strategy for each business.

Although market volatility has recently gone up, the company will keep improving performance with OLED and high-end LCD products that have differentiated competitiveness.

The company is continuing its efforts to reduce variability and secure the stability of business operations. We are trying to increase the proportion of the business model based on the strategic approach of key customers by gradually reducing the level of variability that occurs depending on the demand of the market. We want to continue to advance the business structure of expanding the market creation business by differentiating it from the outlet OLED.

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

As a part of this strategy, the company plans to run the ever competitive LCD business

with focus on areas where the company has competitive advantage. The part of LCD business that maintains competitiveness, like high-end IT, will be strengthened. In LCD TV, the non-competitive products will be gradually adjusted.

I would like to talk about the status and plans of the large OLED business that the company is focusing on. Last year, the 1st quarter TV set market recorded a 10% reverse growth, but the OLED TV set sales increased more than 40% based on the different strengths of technology and products, and the growth of the entire high-end TV market was determined. As a result, the high-end TV market also increased by 10% compared to the previous year. Next is an update and plan on large OLED business.

Although the TV set market saw a negative growth of 10% in Q1 in continuation from last year, sales of OLED TV set grew over 40% thanks to technological and product differentiated strengths, driving the expansion in high-end TV market in general. The high-end TV market grew at a 10% level YOY. The company's large OLED business is expected to see significant growth in shipment from the second half of the year as more consumers recognize their value.

Profitability is also expected to improve on a phase-by-phase basis.

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

Joongseo Yong OLED will improve its performance by introducing a new smartphone model in the second half of the year and strengthen its business competitiveness by focusing on high-end products. In the case of small and medium-sized OLED,

We aim to further improve profitability from last year by increasing supply to new smartphone models in the second half. We will strengthen our business competitiveness with focus on high-end products. Based on our automotive competitiveness and leadership in the wearable market, we will broaden the achievements of small OLED business. We will also try to preempt the premium mid-sized OLED market, leveraging our unique competitiveness such as Tandem. The company will keep highlighting its differentiated technological competitiveness in small and medium OLED as well.

The company will keep highlighting its differentiated technological competitiveness in small and medium OLED as well. Last is our investment plan.

CAPEX this year will grow YY with the start of investment execution in medium OLED FAB that was decided last year. But it will remain around EBITDA. The principles and implementation of investment will strictly focus on growth and profitability. We will spare no effort to continuously create higher market values while leveraging our unique difference. Thank you.

That concludes the earnings presentation for Q1 2022.

We will now take questions.

Operator, please commence with the Q&A session. Now, Q&A session will begin. Please press star 1, that is star number 1, if you have any questions. Questions will be taken according to the order you have pressed the star number 1. For cancellation, please press star number 2, that is star number 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 presented by Dongwon Kim from KB Securities. Please go ahead with your question.

Yes, thank you for the question. I have one question for OLED and LCD. First of all, I would like to know if there are any changes in the future of OLED and LCD, which you originally planned for the year, depending on whether the 1-minute large OLED drop will lower the expectations. And I would like to know if there are any changes in the future of OLED and LCD, I would like to ask for your opinion on the overall direction of our WIPO LED medium-term strategy. Next is related to the LCD business. Recently, the LCD panel evaluation has been continuing, and it seems that competition with Chinese panel companies is intensifying and hope is getting worse. At this point, the demand and evaluation of the LCD panel in the second half of the year that our LG Display is looking at I have two questions, one each for OLED and LCD.

In the first quarter, we see that shipment for large OLED underperformed expectations. Does this mean that there would also be some changes in terms of the large OLED revenue for the year as well as the profitability? and also the shipment? And also, will this mean that there would be some changes in the company's plans for capacity wrap-up for large OLED, as well as the customer diversification? And what would be the company's mid- to long-term strategy for white OLED? And the second question is about the LCD. We see that the LCD panel price continues to fall. And amidst this, there is also more fierce competition coming from the Chinese market. panel makers, and the market situation continues to appear to worsen, then what is the company's outlook for the LCD demand as well as the price in the second half, and also what is the company's approach to secure profitability?

Hello. I'm in charge of large-scale marketing. I will answer two questions.

Thank you very much. I would like to respond from the large marketing team.

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

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

And regarding the medium-term planning of large OLEDs, as our CFO mentioned earlier, we are preparing for a period of time in which our investment rules will ensure profitability and continuous growth.

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

And with regards to the continued drop in the LCD panel price,

Now, when we were coming up with the business plan for this year, now last year we had expected that the Chinese makers would also become more disciplined given the market situation at the time. But today we see that even as the market is shrinking by over 10%, they are offering very aggressive pricing strategies.

So in response to this, as the CFO had explained earlier, rather than trying to directly respond to the market price, what we will do is try to

Just our business structure, for example, reducing the portion of the non-competitive products, for example, the general TVs that are produced from the FAB, so that we can continue to manage risks.

Yes, I'm the marketing director. I'll explain the IT-ACD part. First, I'll explain the demand and price in two ways. First of all, in terms of demand, B2C was looking forward to a decline as the number of COVID-19 cases decreased. B2B demand was expected to grow slowly, but it is true that it is less likely than expected due to the influence of the local economy. However, we expect this demand to maintain a level of growth compared to before the pandemic.

And this is from the media marketing team. And I would like to respond to a question about the LCD and IT. Now, I would like to respond in two perspectives, from demand and price. Now, for demand, in terms of the B2C, now, with the waning of the COVID-19 boom, the B2C is also expected to fall. and for the b2b we had initially expected a slight improvement but then the improvement has been slower than expected because of the macro situation having said that the demand level still will be higher than the pre-pandemic level

Next is from the price perspective.

Now, for the price, it has started to decline from late last year, and the decline has continued into this year. But for the company, we have a very high share in the high-end market. So out of our IT revenue, the high-end portion is over 70%. So high-end meaning that it is less susceptible than the pricing. And so this means that for the company, it has a more stable structure. So we will continue to strengthen our positioning in the high-end so that we will be able to secure profitability.

Yes, we will take the next question. The next question will be presented by Sunwoo Kim from Merits. Please go ahead with your question.

Hello, I am Sunwoo Kim from Merits. I would like to ask two questions about the crime of investment. The first question is about our investment policy. There is a rule that says that you can collect CapEx within EBITDA. It's good to have a certain standard, but considering the recent urgent demand, China's lockdown, and the risk of disaster, uncertainty about profitability seems to continue to expand. So, I will ask you about the possibility that our policy will be more conservative and more flexible in addition to the change in that standard. The second is that since last year, we have been . I'm curious about what kind of ROIC you were looking forward to and what kind of ROIC you were looking forward to. A little further ahead, OLED seems to continue to expand from mobile to IT, tablets, and laptops. I have two questions regarding investment.

First is that I understand the company's investment policy, meaning that the CapEx would be kept within EBITDA. And of course, that would be advisable. But then also at the same time, looking at the current environment, where there is a surge in demand and also the lockdowns in China, as well as the geopolitical risks, it appears as if the uncertainties in the profitability are growing significantly. So given the situation, then, is the company also open to more flexible operation of your policy or perhaps a turn to be more conservative in terms of the investment policy? And the second question is, now, I also understand that the company has been making investments for strategic customers in the Americas. And so when does the company foresee the completion of the FAB? And also, when will the revenue start to rise from these FABs? And what is the company's expectations for the ROIC for this FAB? And also, for the OLED, we see that the applications are quite broad. So, for example, from mobile to IT and also even a motor. And so, with the broad applicability, how does the company believe that this will affect the profitability of this business? And also the Chinese makers are continuing to increase their presence in this business as well. So how does the company plan to respond?

Yes, I would like to talk about investment first. This is CFO. First of all, we have been talking about the principle for a few years that we are going to implement CapEx in the eyes of EBITDA. As you know too well, the reason is that investment itself This is the CFO responding to a question about investment.

And of course, over the years, we have maintained the policy and emphasized the policy that CapEx would be kept within EBITDA. And this is because we want to make sure that investment will not be detrimental to our financial structure or financial health. At least, we do not want to increase the burden.

At the same time, the company should ensure that the right time for investment is secured and that it is important. And how much is needed in terms of sales or entering a new market, considering various things, we set certain steps. Depending on that, the investment situation, for example, the market situation is not good.

And now when the company comes up with a plan of investment for the year, then a lot of factors would be taken into consideration. For example, when do we need to make the investments? In other words, when would be the timing that would be the best for making the investment? what is the importance of the investment, and also what would be the relevance in terms of the revenue or the market presence and so forth. And based on these different factors, we would also define the phases of the investment. And now, along the course of the investment, if the market situation were to sour, so if things were to change, then of course the company will remain flexible in its investment plan to make sure that it will not become too burdensome.

And what you pointed out, the Chinese lockdown, the geopolitical risk, and the uncertainties in terms of profitability are considered to be the current market situation. And what we want to get through CapEx is more focused on future profits. So, according to the current financial situation or performance, And the risks that you have pointed out, for example, the Chinese lockdowns and the geopolitical risks and profitability uncertainties,

Of course, we see them as the characteristics of the market this year. But what we look for with CapEx is profitability for the future. So this means that for the current constraints or the earnings or let's say the cash flow constraints, Of course, we would take them into consideration and try to be flexible, but then for investment for the future, we plan to continue with it.

First of all, you will know that it is difficult to talk about a specific customer. And this is Senior Vice President Heeyeon Kim of Corporate Strategy Group responding to a question about the small to medium OLED.

And of course, you would understand that we are not able to name specific customers, but Regarding the revenue, the timing of the revenue that's being generated, when we were making the disclosure last year for the investment, we specified 2024, and the plan currently is on track.

You asked how you evaluated the ROIC of the investment. I will take it as how you are checking the overall investment volatility and answer your question. As you know, in the past, in the days of LCD, we made investment decisions by reducing demand and supply fluctuations due to high expectations of growth. However, the current investment is based on the expectation of high growth due to the fact that the growth of all products is reduced, stagnated, or penetrated by existing products. We cannot expose the risk of our profitability. In conclusion, when we decide to invest, it is emphasized more than any other time that we need to increase the visibility of our profitability, so I would like to say that we have made the investment decision by increasing the stability of this part. We will continue to make the investment decision by clearly increasing this visibility.

And you also asked about the company's expectations for the ROIC. And I take this question to mean, how does the company verify the feasibility of the investment? So allow me to respond along that line. Now, during the days of the LCD, then at that time, there were expectations of high growth. So the investment decision making was based on the high growth expectations. and was made despite the possibility of fluctuations in the supply and demand. But that was then, and today there is a slowdown or even, let's say, a stagnation in growth, and also the new growth would have to come from penetrating the existing products. So this means that we cannot just go for high growth without the expectations of of profitability. So the investment today would also have to be based on having a visibility in the profitability, and that is also how our decision-making is being done. So we also have safeguards in our decision-making process to make sure that there would be profitability, and I believe that the challenge for us down the road is to continue improving the visibility of the profitability in our investment decision-making.

네, 다음 질문을 받도록 하겠습니다.

다음으로 질문을 주실 분은 현대차증권의 조준우님입니다. The following question will be presented by Juno Jo from Hyundai Motor Securities. Please go ahead with your question.

네, 안녕하십니까. 현대차증권 조준우입니다. 질문 기회 주셔서 감사합니다. 저는 전장, 오토 관련해서 두 가지 질문 드리고 싶습니다. 첫 번째로는 The global automotive industry is being accelerated by automation and the self-driving trend, and LG Group's electric car business drive is also looking forward to it. In this respect, I would like to ask you to share the product, technology competitiveness, medium-term strategy, and the role that LG Group is looking forward to in the LG Group. And secondly, I would like to make sure that the strengths and visions of these companies can be felt by consumers My question is about the electronification of auto.

We see that globally the automotive industry is going through electrification and electronification, and I wonder what the LG displays positioning would be in this trend, so in terms of their products or technological competitiveness, and also about your medium to long-term strategy, and what would be your position or the role within the LG group as the group responds to this trend in the auto industry. And second question is, of course, we understand the company's competitiveness, but vision. But so for this type of competitiveness and vision, if you could help with the investors' understanding. So if you could give us some more details as much as possible. about, let's say, the order backlog for both the LCD and OLED, as well as the outlook for the two businesses as well.

Yes, I'm Song Gi-hwan of Auto Marketing. I'll start by answering the electric car and self-driving trend you gave me first. The electric car and self-driving trend is that there is no opportunity for premium technology such as display and OLED to be applied to cars, This is Kyu Hanson, Vice President of Auto Marketing, responding to your question.

Now, yes, we believe that the auto electrification and autonomous driving trend present great opportunities to utilize large size display and especially the OLED premiere technology. So for LG display, we have the world's only technology, the tandem technology that can fulfill the automotive reliability requirements. So with this technology as well as the in-touch LTPS LCD, we intend to strengthen our market dominance.

In terms of the second synergy, each company is currently competing with each other in the field of each company. However, through the cooperation between the companies, we strengthen the customer portfolio And in terms of the synergy among the different group companies,

Of course, each company is competing in its own area or its own business under a fair competition. But we can also, of course, cooperate in order to strengthen our customer portfolio. So, for example, we can have co-promotion to provide a total solution to the customers, for example, between batteries, infotainment, sensor, camera, and display. And by doing so, we will be able to create the kind of synergy that can enhance the customer's overall value.

Yes, lastly, I would like to talk about the supply and demand. It would be difficult to talk about the specific supply and demand, but I would like to talk about the portfolio of supply and demand. Last year and two years ago, through OLED supply and demand in premium cars, overall, the supply and demand of OLED And last is about the order backlog and the outlook for the orders.

And please understand that I am not able to give you the specific number for the order backlog, but I would like to tell you about the portfolio. So we have continued to receive the OLED orders for premium auto for the past couple of years. And as a result, the OLED orders is now over 30%. And down the road, we believe that the orders will continue to increase so that we will be able to continue to strengthen our OLED business.

Yes, I will take the next question.

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

Thank you for the question. My question is related to OLED TV and XR display. In the case of OLED TV, as mentioned a lot through the press release, there is a negotiation about the negotiation of a new domestic customer. This is related to the negotiation of when it will be finished. And the important thing is whether there will be any changes in the supply of OLED TV panels in 2022 and 2023. and is there a possibility that it will be connected to mid-range? The second is related to the XR market. Recently, if you look at the display supply chain, the stock price is very sensitive to news related to XR investment and supply of panels rather than the current performance, and it is expected to have a high growth rate. I have questions about the OLED TV and the XR display.

Now for the OLED TV, as have been reported by the media so far, I understand that there are negotiations underway with a new domestic customer. So when does the company believe that the negotiations can be concluded? And then more importantly, then afterwards, then for the years 2022 and 2023, does the company believe that this is going to change the supply volume for the TV OLED panel? And also, does this mean that there will be possibility of a ramp up? And the second question is about the XR market. Now, in the display market, what we are seeing is that rather than any company's immediate earnings or performance, the stock prices are reacting more sensitively to XR-related demand or XR-related orders. And this is because there are quite a lot of expectations about the potential growth in this market. So what is the company's preparation for the XR, and what is the company's expectation of the potential revenue to come from XR?

First of all, there is nothing specific to tell you about the transaction of Samsung Electronics. And in the future, if there is anything I can tell you, First of all, about your question about the potential transaction with Samsung Electronics,

Now, I would have to say that there is nothing to say for certain at this time. And when there is, then we will, of course, communicate it with the market. And our positioning regarding this is the same as the previous quarter, meaning that the possibilities are open and the needs between the two companies have to be aligned.

As far as XR machines are concerned, we are always closely monitoring the market. If our standards are right, we will continue to prepare to enter the market as quickly as possible. We are working on research and development, as well as market development. We are working on what we need to prepare step by step.

And for the XR devices, of course, we are very closely watching the market at this time. And whenever we believe that the profitability and the volume are up to our standards, then we will be ready to enter the market as soon as possible because we are making the preparation for it. So in terms of R&D and also preparation, whenever the market is ready to take off, so the company is getting thoroughly ready, and we will make sure that we respond to this market accordingly.

This is Kim.

Heeyeon Kim from Corporate Strategy Group. I would just like to add a few more things to the CFO's comment.

As you know, the XR market has a high level of control over the overall market. However, the display's complaints and pain points are much greater than any other device. This means that there are many opportunities. LGD has the technical leadership that can solve the pain point of the display. In particular, the core technology used in large OLED, auto OLED, and IT OLED will play a key role in opening up the XR market.

Now, as we all know, for the XR market, there are high hopes indeed. But also at the same time, this is the market where there is a very high level of grievances and pain points for the display. So this means that there would be a lot of potential opportunities. So we believe that LG Display has the technological leadership to overcome the display pain points. and also, let's say, for the large OLED, auto OLED, or the IT OLED. So all the core technologies that we use for these different product types, we believe that these are the technologies that can help open up and lead in the XR market.

This is a situation where we are inspecting business optimization or scale based on market outlook and technical leadership. However, in order to increase the cost of technology, the market's price premium payment and

So based on such market outlook and technological leadership, we are now currently gauging the timing as well as the size of the company's entrance into this market and when we can start our business in this field. But also at the same time, we have to look at the other factors, for example, the price premium and also the pace of the market growth. So considering all these different factors, we will make sure that we are ready to respond to the market in a timely manner.

Yes. Lastly, we will take one more question before we end.

The last question will be presented by Simon Oh from BOA Securities.

Please go ahead with your question. Last year, LCD showed a good sign because of the situation where Korean companies shut down their 8-generation factories in earnest, and the cycle was good because of the two phenomena in which demand was greatly improved with COVID-19. In the future, if there is a situation under which the supply and demand of LCD can improve, I would like to ask you if the LCD cycle can be improved again. And the second is that we are looking forward to this improvement on OLED TV. The Chinese factory has increased to 90K. So I think the price will fall in earnest. But the problem is that the price of high-end LCDs and the price of our OLED TV panel is also in conflict, so we are working hard to check the price after the price improvement is made. Of course, rather than simply expecting a recovery in the second half of the year, when we look at the term for the next two years, the price drop and price trend of the OLED TV panel, which you can think of, Now, my questions might be a bit redundant from the previous ones, but now I would just like to ask about the management's views about the LCD market or the LCD cycle.

Now, in retrospect, when we look at the LCD boom last year, then that probably was thanks to the shutdown in the Gen 8 process and also the high demand driven by the COVID pandemic. Then looking ahead, what does the company believe would be the assumptions for both the supply and demand for the LCD cycle to improve again? And the second question is about the OLED TV. So there are expectations of profitability for OLED TV improving. We see that the Chinese factory capacity has gone over 90,000, and also now the company is set to really try to reduce the production cost. But then also at the same time, it appears likely that the – improvement in the OLED is going to coincide with the drop in the price of the high-end LCD. So then what is the company's view or the guidance for the pricing and also for the cost reduction? And not just for the second half of the year, but then for the OLED TV panel, so in terms of the cost reduction and also the pricing, and what does the company foresee for the next few years? And also, does the company believe that the operating profit margin of a high single-digit, like around 5%, is going to be doable in the near future?

First, I will talk about the LCD cycle in BI. Now, first, regarding the LCD cycle, I would like to respond from the business intelligence.

Now, I would mention two conditions. First is demand. In terms of demand, we see that the COVID boom has created a lot of pull in demand, meaning that for this year, quite a large extent of negative growth is expected. And given the current situation as well as the risk factors, we believe that the demand uncertainty is going to remain for some time. So this means that for the LCD supply-demand cycle to improve, then we would have to have a

improvement more from the supply side.

So, for example, for the short term, there is a need to adjust the utilization rate across the industry. And then for the longer term, then there are quite a number of old fabs over 15 years old. So, for these non-competitive fabs, we might have to close down some of them or make adjustments in order to improve the LCD cycle.

Therefore, because the uncertainty of demand is difficult to resolve, To sum up, given that the demand uncertainties are not likely to go away anytime soon, and this means that there is going to be some down cycle continuing this year,

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

I will answer the question about OLED in large-scale marketing. As you said in the previous question, it is true that we need to consider competition with high-end LCDs, As I explained earlier, even in the midst of a crisis in the entire TV market in the first quarter, OLED has increased the positive perception of consumers and has reached a growth rate of 40% in terms of YY. In other words, because OLED's own value is clearly recognized in the market, the volatility in price is relatively low, and it is judged that it can continue to operate at our planned level.

And this is Daniel Lee from Large Display Marketing responding to your question about OLED. Now, it is true, as you have asked earlier, that we also have to be mindful of the competition with the high-end LCD. But at the same time, as I explained earlier, we have seen that even as the TV market continues to shrink, in the first quarter, we saw the OLED TV grow by 40% YOY. This means that the OLED's specific value is increasingly being recognized in the market. So we believe that it is going to see less price volatility, and we believe that we will be able to run the business according to our plan.

Also, in terms of cost, there are quite a few factors such as raw materials and logistics that are rising in cost. However, there are also many factors such as And in terms of the cost, well, there are persistent factors that can actually drive up costs.

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

Thank you for your attention. We will now close Q1 2022 earnings conference call.

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