LG Display Co., Ltd.

Hello, I'm Heo Seok, CEO of LG Display IRC. I would like to thank everyone who attended the conference call to explain the results of this quarter. Today's conference call was attended by CEO Kim Sung-hyun of CFO, CEO Kim Hee-yeon of management strategy, CEO Lim Seung-min of management management, CEO Lee Ki-young of business intelligence, CEO Lee Tae-jong of large-scale marketing, CEO Kim Chang-won of medium-sized marketing, and CEO Song Ki-hyeon of auto marketing.

Good afternoon and good morning. 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. Seung Min Im, Vice President of Corporate Planning. Ki Yong Lee, in charge of Business Intelligence. Daniel Lee, in charge of Large Display Marketing. Chang Won Kim, in charge of medium display marketing, and Kyuhan 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 events section in the company's website for more details on the financial results of Q2 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. I would like to talk about the 2nd quarter business performance. Due to COVID-19, China's blockade of production sites has affected the production and export of IT products with high value, and the 2nd quarter business performance has dropped its original target value. In addition to the drop in exports due to the blockade of production sites, the impact of the demand of the entire industry and the decline in the price of LCD panels have continued, and sales have recorded a decline of 5.670 billion won, which fell by 19% compared to the previous quarter and by the previous year. Let me start off with our business performance in Q2.

Due to COVID-19, there were lockdowns in some of the Chinese production bases, which have also affected the production and shipment of the company's high value at IT products. And as a result, the company's business performance in Q2 has underperformed on the initial guidance. Revenue in Q2 was 5.607 trillion won, down 13% QOQ and 19% YOY. There were shipment disruptions from lockdowns in production bases, soft demand in the downstream, and continuing fall in LCD panel price. There was operating loss of 488 billion won. Operating margin in Q2 was minus 9%, with EBITDA margin at 12%. There was net loss of 382 billion won.

Next is the export area and the price of the area. The second quarter export was due to China's production blockage, Due to the risk of flooding in Gyeonggi Province, there was a decrease in purchase of set-up companies to minimize supply, and the drop in large and medium-sized products decreased. As a result, the drop in area recorded 7,850,000 square meters, which decreased by 4% compared to the previous quarter. According to the annual factor, the drop in P-OLED smartphone products decreased,

next is area shipment and asp trend area shipment in q2 was 7.85 million square meters decreasing four percent from the previous quarter aside from the impact from chinese lockdowns concerns of economic downturn led to slowing demand in the downstream set makers to minimize inventory reduced their purchase, resulting in less shipment of both large and medium display products. ASP per square meter was $566, down 14% QOQ. Shipment of P-OLED smartphones decreased due to seasonality, and LCD panel price continued to decline.

The production capacity in Q2 decreased 5% QOQ owing to active adjustment in general use LCD production as well as new product development and maintenance. The LCD product's price drop has continued, but OLED TV panels have increased based on positioning in the high-end TV market. As a result, TV sales accounted for 31%, which increased by 5% compared to the previous quarter. On the other hand, the sales of the IT sector have recorded 45%, which has decreased by 3% compared to the previous quarter, due to the impact of the drop in demand due to China's production block. Next is revenue breakdown by product segment.

TV panels accounted for 31%, up 5 percentage points QOQ. Even as LCD panel price continued to decline, shipment of OLED TV panels increased thanks to its positioning in the high-end TV market. IT panel took up 45%, down 3 percentage points, QOQ, with a significant impact from shipment disruptions resulting from Chinese lockdowns. Mobile and others were 24%, flat, QOQ.

Next is the stock market and the stock market indicators. The cash assets are 3,669 billion won. The stock is based on the fall of the Chinese production block and the late P.O.L.E.D. new model, Next is the company's financial position and ratios.

The company's cash and cash equivalent was 3.669 trillion won. Inventory was 4.722 trillion won, increasing by 492 billion won QOQ. The inventory was prepared against shipment disruptions from Chinese lockdowns and to be ready for high-end product shipments in the second half, such as new P-OLED models.

Liabilities to equity ratio was 162%.

and net debt-to-equity ratio came in at 71%, increasing QOQ. There was increase in borrowing to invest in OLED to preempt the future market.

Next is the cash flow. In the basic cash, 4,110 billion won, OLED investment for future preparation and Next is cash flow.

The company's cash and cash equivalent at the start of Q2 was 4.111 trillion won. It decreased by 442 billion won and stood at 3.669 trillion won at the end of Q2. There were investment in OLED, payout of annual dividends for 2021, and net loss in Q2.

There were investment in OLED, payout of annual dividends for 2021, and net loss in Q2. There were investment in OLED, payout of annual dividends for 2021, and net loss in Q2. There were investment in OLED, payout of annual dividends for 2021, and net loss in Q2. Let me now move on to guidance for Q3 2022.

In Q3, area shipment will increase by mid-single digit QOQ. Shipment of IT panels affected by Chinese lockdowns will recover, and shipment of large OLED and P-OLED smartphones is expected to grow in response to the seasonal demand. But recovery in Q3 is likely to be limited due to demand slowdown caused by macro instability and weaker consumer confidence, as well as customers' attempt to minimize inventory.

P-OLED smartphone and wearable products are expected to increase by 20% due to the increase in wearable products and OLED TV panels. ASP per square meters is also expected to rise to a 20% level thanks to increased shipment of P-OLED smartphones and wearable products, as well as OLED TV panels.

Per product, price is expected to keep declining for IT panels, while for LCD TV panels, the price decline is expected to gradually moderate as panel makers adjust production, such as utilization rate. Next is presentation by the company CFO, Sung Hyun Kim, on operational strategy.

Good afternoon, shareholders, investors, and analysts.

This is the CFO, Sung Hyun Kim. Following the briefing on Q2 business performance, allow me to explain to you the company's operational strategy.

Recently, as the economy has become more realistic and the consumption of essential materials is expected to deteriorate in general, the set of customers and distribution companies are doing conservative business operations. We are actively promoting activities that strengthen the risk management of assets under the premise that this flow can continue for the time being and at the same time find the power of future growth.

As economic downturn looms, consumption is expected to generally slow down except for essential goods. Set makers and retailers in general are becoming more conservative in their business operations. Assuming that the trend will continue for some time, the company will strengthen risk management while actively seeking to identify new growth drivers for the future.

First, I would like to talk about the risk management activities that the company is focusing on. Above all, we want to reduce variability and continue to improve the business structure in order to ensure the stability of business operation. We will accelerate internal decision-making and execution speed in the future under the principle that we will quickly adjust the business that does not generate profits due to lack of competitiveness.

Let me first share with you the company's current focus on risk management. We will remain unwavering in our business realignment initiative, more so now to reduce volatility and ensure stability in operations. Under the principle that insufficiently competitive and thus unprofitable businesses will be quickly realigned, we will further accelerate internal decision making and execution.

One example is LCD TV panels where differentiation is deemed to be limited.

It is currently being downsized in phases with the goal of discontinuing domestic production of LCD TV panels sometime next year.

We will now speed up this process given the worsening market and competitiveness. The company will strengthen operational efficiency to respond to the highly volatile environment.

We are revisiting the optimum capacity for each FAB and finalizing how to enhance cost efficiency, such as reducing fixed cost. We will also ratchet up activities for cost innovation and efficiency as the insecure supply chain and inflationary pressure have driven up volatility in production cost.

Next, I would like to address the issue of Next is strengthening inventory management.

The company intends to focus more on minimizing inventory, given the uncertainty in market outlook. There was the specific issue of Chinese lockdowns in Q2, but in the second half, we will focus on recovering the shipment disruptions and proactively and flexibly adjusting production to minimize inventory by the end of the year.

Lastly, we will strengthen investment efficiency. Investments for the structure and future competitiveness of the business structure will proceed without shaking, and investments that can be adjusted, including normal investment, will be re-examined in terms of scale and time, and the speed of execution will be adjusted. This year's annual capex will be adjusted to the level of the price-to-value ratio fee to secure financial stability and to strictly manage investment discipline in the future. Although the uncertainty of the global economy and business environment is severe, Last, we will further improve investment efficiency.

While remaining steadfast in investment to upgrade the business structure and secure future competitiveness, we will revisit all adjustable investments, including current investment, to review their size and timing as well as execution speed. Annual capex will be adjusted to the level of depreciation and amortization to secure financial soundness. We will keep strictly managing investment discipline. Even as uncertainties remain high in the global economy and business environment, the company intends to preemptively control risks by flexibly responding to changes enabled by stronger internal operation activities. Meanwhile, the company is also actively implementing activities to create unique performance that is unaffected by the market and to discover future growth engines.

First, it is the market control strength of large OLEDs and IPVs, which have their own distinctive strengths. In the case of OLED TVs, the entire TV market will continue to expand market control based on the fundamental competitiveness in terms of OLED trend in order to show meaningful results, such as 7-8 million growth in the environment where the market is growing.

First is to strengthen dominance in the large OLED and IT segments where the company already has differentiated competitiveness. OLED TV is showing meaningful performance, growing in actual sales, even when the overall TV market is showing negative growth. We will continue solidifying our market dominance in large OLED based on our fundamental competitiveness as large OLED increasingly becomes the mainstream.

In IT, even as the market in general is slowing down,

IT devices have now positioned themselves as essentials due to post-pandemic change in lifestyle. The company will keep consolidating its positioning in the market based on our customer base and competitiveness in high-end IT products and generate differentiated performance.

Secondly, we want to actively develop and expand a multi-purpose business to secure a stable business structure. Second, the company will actively develop make-to-order business to establish more consistent business operations.

As business volatility keeps rising, the company is accelerating our push to increase the portion of make-to-order business based on alliance with key customers.

In the mobile sector, we will secure profitability based on P-OLED differentiated products and establish a future new technology business base through cooperation with strategic customers. In addition, we will expand the portfolio of IT products through medium OLEDs, which are currently being invested, and strengthen high-end leadership, and plan to prepare for a differentiated future based on existing infrastructure and customer base in the future.

In mobile, we plan to ensure profitability with differentiated P-OLED products and establish the basis for new technology businesses in collaboration with strategic customers. We will also expand our IT product portfolio and solidify high-end leadership through mid-sized OLED where investment is ongoing. We will make differentiated preparation for the future based on existing infrastructure and customer basis.

In the case of auto, the assets are based on a line-up of OLED and high-end LCDs, providing a differentiated solution to global customers and expanding market control. Based on sales, we maintain a global 1-2-G within the current auto display, and aim to increase market share by 30% in the next three years. We will strengthen the demand activity for global OEM customers.

In auto, the company continues to broaden its market dominance by providing differentiated solutions to global customers with our lineup ranging from OLED to high-end LCD. We remain global number one in auto display in terms of sales. We will strengthen activities to win contracts from global OEM customers with the goal of exceeding 30% market share in the next three years.

Third, we will accelerate the promotion of market creation and actively attack the market. We will focus on the expansion and expansion of the current new businesses to prepare for a differentiated future. The area where the current performance is being demonstrated is the large OLED field, Third, we will accelerate rollout of market-creating businesses and aggressively explore markets.

We will focus on broadening new businesses to prepare for a differentiated future, where we are already seeing visible results in large OLED, Market-creating businesses include gaming and transparent OLED, as we are actively trying to open up or broaden new markets in live display.

Lastly, we are preparing for future business promotion and businessization. With the example of OLED TV and high-end IT, we are going to introduce a new technology Last is preempting future businesses and building the base for business development.

Similar to OLED TV and high-end IT, the company plans to broadly utilize our differentiated technologies to more diverse applications. We will actively open up new display areas and build up competitiveness.

Although volatility remains high in today's business environment,

The company will continue to differentiate and create value through preemptive risk management and operational efficiency improvement while preparing for the future and ensuring growth.

Thank you very much for your attention.

That brings us to the end of earnings presentation for Q2 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 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 phones. 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 Won Seok Jung from High Investment Securities. Please go ahead with your question.

Hello, I'm Won Seok Jung from High Investment Securities. I have two questions for both LCD and OLED. First of all, LCD has a low set demand for display panels. I'm curious about how the LCD line will be operated in the future. I'm curious about the scrap plan or the possibility of OED conversion. Also, it was expected that the LCD uphang would be delayed to some extent after COVID-19, but I think that the LCD line structure adjustment compared to domestic competitors is a little late in the market. So, I'm curious about the biggest reason why it's not running well. I have two questions, one for LCD and another for OLED.

Now for the LCD, we see that the set makers that utilize LCD display are also seeing demand decline. So then my question is, what is the company's plan for the LCD lines? So will they be scrapped or will they be converted to OLED production? And related to this, it appears as if the domestic company's realignment of the LCD business has been a bit delayed or a bit belated. despite the fact that the LCD market's sluggishness has already been predicted since COVID-19. So I wonder what the specific reasons or causes are for this lack of flexibility in the LCD line operations. And the second question is about OLED. Now, overall, the demand for TV continues to fall, and also we see that the LCD panel prices are also declining. So, this does not bode well for the OLED TV market in general either. So, what is the company's plan for shipment for the remainder of the year? This is Hee-Yeon Kim, Senior Vice President of Corporate Strategy Group, responding to a question about the operation of LCD lines.

In terms of competitiveness, the LCD TV PEP has been continuously reducing capacity since 2019. However, due to the COVID-19 special response, the existing UU-CAPA was temporarily replaced with MAX.

Now, because of the lesser competitiveness, the LCD TV's FAB capacity has been gradually reduced since 2019. But we have been utilizing the existing capacity to the fullest extent possible to respond to the demand arising during the pandemic period.

Now, for the domestic LCD business, where the competitiveness is weak,

The business will be downsized, and we are planning for an earlier exit. So, where we are aligned with the customers, then we will begin to discontinue production, and we will be reducing our capacity into the first half of next year.

However, China's NCD TVPAP, which maintains its high cost competitiveness, is planning to gradually shift to IT and commercial centers with product competitiveness.

But for the LCD TV FAB in China, where we do have cost competitiveness, we will keep converting them to the more competitive products like IT or commercial.

In the case of P7 FAB in Korea, we have about 150,000 FAB, but we plan to reduce it to 60,000 FAB in the second half of the year and 30,000 FAB in the second half of the year. Out of 200,000 FAB in China, 10% of them are already switching to IT. As I said, the remaining 170,000 copies will be converted into products that are competitive in terms of commercials and IT. As a result, about 40% of the TVCAPI will be released in the second half of next year.

Now, in the Korean P7 Fab, the capacity is 150,000, and we will be reducing 60,000 in the second half of the year. and another 30,000 in the first half of next year. The Chinese FAB, we have 200,000 capacity, and of this, 10% has already been converted to IT, and the remaining 170,000, they will be converted, as I explained earlier, to either commercial or IT, whichever has a bigger competitive edge. So by the second half of next year, about 40% of the TV capacity would have been reduced.

Aside from the TV capacity, the IT capacity, for which we have about 200,000,

So the IT capacity will remain based on the cost competitiveness as well as the product competitiveness.

Thank you.

Next, this is Daniel Lee in charge of large display marketing, responding to a question about the OLED shipment and the plan for the remainder of this year.

As mentioned earlier, the display market is currently in a difficult situation. The entire TV market has grown by about 14% in 2021, and is continuing to grow by about 10% in the first half of this year.

As has been duly noted by the questioner, the display market in general is struggling. So, for the TV market, there was negative growth of 24% in 2021 and another negative growth of 10% in the first half of this year.

On the other hand, OLED TV's real sales have shown significant results with a growth of about 20% in the middle compared to last year.

But in the first half of this year, what we have seen is, despite the challenges, the actual sales of OLED TV has increased by about mid-20% YOY. And we believe that this is quite a meaningful performance that has been achieved in cooperation with our customers.

In the second half of the year, unlike the market in general, we still expect the actual sales of OLED TV to continue to grow.

Having said that, because of the economic downturn, as well as the sluggish demand in the downstream, we believe that the overall set sales are also going to slow down compared to the first half. So, it is projected to be in the mid-10%.

According to the macro uncertainty, it is expected that the stock policy of the exporter and the set company will be very conservatively operated, and in the case of the private sector, it is expected that the market So because of the difficulties, the retailers as well as set makers have been quite conservative in their inventory management.

So the company will keep monitoring the market situation And we'll run our own operations and inventory based on the assumption that the downside risks are going to materialize. And so overall, the shipment, YOY, is going to grow slightly.

Yes, we'll take the next question.

The next question is from SK Kim from Daiwa Capital Market. The following question will be presented by SK GIM from Daiwa Capital Market. Please go ahead with your question.

Yes, hello. Thank you for the question. I also have one or two questions about OLED and LCD. Regarding OLED, as the CEO said earlier, the next generation of IT, cars, and MR devices that are expected to be released in the future, In terms of technology for new applications, it is known that the company is quite superior to competitors. I would like to ask you to explain this part in more detail. What is the point of discrimination in terms of competitiveness compared to competitors, and to what extent there is a technical gap? I would appreciate it if you could let me know. Secondly, in terms of LCD, I also have two questions.

First question is about the OLED. As the CFO has also pointed out earlier, the company is quite strong in terms of technology in IT and automotive, and then also there are the new MI devices. So the company appears to be strong in terms of technology for new applications. So if you could elaborate a bit further on your technological advantage compared to other players. So for example, what are the differentiating factors and what is the extent of the technological gap with other players? And the second question is about the LCD outlook. So up until July, it appeared as if the LCD TV price decline had slowed down. But more recently, we see that the pace of decline has picked up again. So based on the latest developments, then what is the company's view regarding the market outlook in the second half as well as the price trend for LCD in the second half?

Yes, I am Seung Ji-hwan of Auto Marketing. I will answer the first question related to OLED technology.

This is Ki-Hwan Son, Vice President of Automarketing, responding to a question about the OLED technology.

Yes, because we need to respond to the extreme environment, LGD has started the development of long-term and high-intensity tandem OLEDs since 2015. Through this technology, we have begun to mass-produce car-type tandem OLEDs since 2019.

Now, for the automotive OLED, because of the nature, it is very important for this product to withstand extreme environment and conditions. And because of this, LG Display has been developing long-living OLED and also the tandem OLED technology. So we have been developing the Tandem OLED devices since 2015, and as a result, in 2019, we were able to launch the Tandem OLED for automotive application.

And now, this type of tandem OLED technology, this can also be applied to IT products

because thanks to its high brightness as well as longevity. And it is also good in terms of low power consumption. So this means that they would also be good for latest technologies like MI. So we believe that the technology that we have developed for automotive purposes are also appropriate for IT products as well.

Yes, I'm in charge of BIE Lee Ki-young. I will tell you about the trend and the price of LCD in the second half of the year.

This is Ki-young Lee in charge of business intelligence, and I would like to respond to your question about the second half market outlook as well as the LCD price trend.

First of all, in terms of the demand in the second half of the year, the current real sales are very poor,

Now, first of all, about demand in the second half, because of the sluggish actual sales for the set makers, their inventory level at the end of the second quarter range from four weeks to seven weeks, meaning that they have an excessive level of inventory.

That's why we expect that the panel purchase control of the set companies will continue until the third quarter. In this regard, we expect that the decrease in the purchase of panel items will be even greater in the second half of the second quarter than the actual sale of the set.

And because of the high inventory level, the set makers will continue to adjust their purchasing of panels into the third quarter of the year. And as a result of this, there is likely to be a bigger decline in the purchase of panels, more so than the decline in the actual sales of the set products. And that is also the reason why the panel makers have started to adjust their utilization rate in the second quarter and such an adjustment is likely to become broader in the third quarter.

So against this backdrop, then looking toward the price trend in the second half,

It appears as if the price decline is likely to continue into the third quarter, but then now in the fourth quarter, as a result of the supply adjustment, the price trend is likely to at least partially stabilize.

Yes, we will receive additional questions.

The next question is from Kim Hyun-soo of Hana Securities. The following question will be presented by Hyunsoo Kim from Hana Securities.

Please go ahead with your questions. I'd like to ask you about the prospects for profitability in the IT sector in the second half of the year. The second is about OLED TV. You mentioned it once in the last quarter, but I'd like to ask you to share the current situation regarding the negotiation of a new customer in Korea. Also, I'd like to ask you to tell us if there are any updates regarding the future of OLED TV.

I have one question on the LCD IT, another question on OLED TV. First about the LCD IT business, it's assumed that the profitability in the second quarter would have deteriorated. So what was the extent of the profitability decline in the second quarter versus the first quarter? and also if the company could also give us guidance on the IT profitability in the second half of the year. And the second question is about the OLED TV and that the company was in negotiation with a new customer, domestic customer. So is there anything that the company can share with us at that point regarding the negotiation? And also regarding the OLED TV, is there any update on potential ramp-up This is Jangwon Kim in charge of medium display marketing and I would like to give you a response regarding the IT market as well as the profitability and profitability outlook.

As I explained earlier, in IT, the demand for monitor laptops is decreasing due to the deterioration of the economy, and the purchase of panels is also being reduced due to the lack of supply in the pipeline, from the production of panels to the distribution of sets.

Now, as has been mentioned several times by other speakers already, the IT market is now in a downturn, and because of this, demand for most of the products, including monitors and notebooks, is also declining. And that is why we also see that overall in the market, there also is quite a high level of inventory, and this also translated into lesser purchasing of panels as well.

So we see that overall the market is struggling and slowing down.

But then now, as you would also know, the company is mostly engaged in the high-end segment, where the volatility is less. So between the first quarter and the second quarter, compared to the overall decline in the IT market in general, I would say that the company's profitability impact has been lesser than the average market level.

And in terms of the outlook for the next quarter and on,

Now, although the other players are adjusting their utilization rate, which is also going to affect the overall demand and supply dynamics, the company will keep focusing on the high-end segment to generate consistent performance.

Yes, this is CFO. The second question is related to new products and OLED. You asked us to update the business progress. As you know, the company is currently making sure that OLED panels enter the market, and they are using their strength to popularize them, and they are achieving results. In the meantime, there was a story that a new customer wanted to use our panel. The market also found out about it.

Now this is the CFO and the questioner asked for an update on the negotiation in the OLED business. Now, as you would also know, the company had been focusing on solidifying the position of OLED panels in the market to make it the norm in the market. And I would say that the company has been making strides in that direction so far. And in this process, a new potential customer expressed intent to use our panels, and the market also became aware of it. So negotiations have been underway. But now at this time, there is nothing in progress. And down the road, we will be cooperating with any potential customers to create synergy effect as long as they recognize the value of OLED and are willing to work together to create new markets.

The next question will be presented by Donghun Jang from Samsung Securities. Please go ahead with your questions.

Yes, this is Jang Jung-hoon from Samsung. Thank you for the opportunity to ask a question. When you explained in advance, you said that the increase in supply in the second quarter is due to pre-production, but is the supply increase in the second quarter connected with the planned supply increase, or is there a certain part of the supply increase part that depends on the change in the end demand? In relation to this, if we look at the financial structure table, we increased by 1.2 trillion won in the previous quarter compared to the regular difference in the second quarter. So, we increased by a fairly large margin of 6 trillion won, but I think that the investment part in addition to the stock market has been financed in the short term. Please explain the part of how to solve this financially. Thank you.

Now in terms of the inventory, it became higher in the second quarter and in the presentation it was explained that this was a pre-emptive preparation for the demand to come in the future. So I would just like to ask for further clarification of the higher inventory level. So was this the result of a deliberate build-up in the inventory per plan and Or is it also at least partially due to the changes in the end demand? And another question is, now in the financial statement, it seems as if the short-term borrowings has increased significantly to about $6 trillion, one level. So I would imagine that it was probably due to investment. So the company probably needed some financing for investment. But if you could give us some explanation about the increase in the short-term borrowings.

This is Seungmin Im, Vice President of Corporate Planning, and I would like to respond to your question about the higher inventory level. The increased part is the upper part. As some of the upper sealing situations occurred, we could not produce IT modules, so we can say that some of the panels are mixed together in order to respond to the demand in the second half of the year.

Now for the inventory increase, now a considerable part of the increase is owed to our plan to respond to the higher demand for P-OLED in the second half. And then another part of it is because of the lockdown in Shanghai, and as a result, the inability to produce IT modules. So we also have built up the panels to make up for the shortfall

from the first half of the year.

But in terms of the specific inventory level, we will be running it according to strict planning. So in the second half, according to the sale situation and changes in the demand, we plan to normalize the inventory level.

It is not a short-term interest rate operation that you think. As you know, long-term interest rates are not being accepted in the market, and long-term interest rates have risen a lot. So, in the case of this case, there are credits set for each other, It's a short-term difference. It's not a short-term difference that you think. And if the stock price increases, there's a part where the raw materials and other raw materials are stored. I'm sure it's going to have a big impact on the increase in interest.

And this is the CFO, and the questioner also asked about the increase in the short-term borrowings, but I must clarify that this is not the type of short-term borrowings that you would know, or it's probably not the same kind of short-term borrowings under the conventional definition. Now, on one hand, the long-term borrowing is not acceptable in the market these days, and also the interest rate for long-term borrowings has gone up considerably. And the case that you have mentioned, that is actually where we set up credit line based on mutual agreement. And then we would continue to roll over in the form of short-term borrowing. So that is why I said that it is different from the type of short-term borrowing that we know. And also, because of the higher inventory level, for example, the materials cost or other costs probably would become sunken costs. So, that probably has partially affected our borrowing level as well.

Yes, I don't think there are any additional questions. This concludes the 2-minute performance explanation of LG Display 2022. It appears as if there are no further questions, and we will now close Q2 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.