Lg Elec S/Gdr 144A

Good morning and good afternoon. Thank you for joining LG Electronics Earnings Release Conference Call for the second quarter of 2021. This conference call will start with a presentation on the earnings results, followed by a Q&A session, at which time, if you wish to ask a question, you will need to press star and 1 on your telephone. I would now like to hand the conference over to the first speaker.

Good afternoon.

My name is Sangbo Shim from Investor Relations. Thank you for joining LG Electronics Earnings Release Conference Call for the second quarter of 2021. With me are representatives of business management division of each business, Mr. Lee Gong Kim from Home Appliance and Air Solutions, Mr. Jung Yi Lee from Home Entertainment, Mr. Ju Yong Kim from Vehicle Component Solutions, Mr. Chung Hyun Park from Business Solutions, We are also joined by Mr. Sang-ho Park from Corporate Business Management Division, Mr. Hyung-kyu Lee from Finance Division, and Mr. Hong-soo Lee from Accounting Division. Please be noted that all statements we will be making today regarding our financial results of the second quarter are subject to change in accordance with the results of the external review. I would also like to remind you that uncertainties in the market and changes in strategies may cause our results to be different from the outlooks and forward-looking statements made today. Today, I will outline the overall performance results of the second quarter of 2021 and the outlook for the third quarter. After that, each division will take turns to deliver its business results and outlook. Now let me start with the consolidated financial results of the second quarter of 2021 and the outlook for the third quarter. Consolidated sales of the second quarter was 17.1 trillion won and operating profit was 1.1 trillion won. Sales grew 48% year on year, driven by strong sales of premium appliances in HNA, expanded sales of OLED TVs in HE, and revenue growth in BS attributable to the demand recovery in the automotive market. Operating profit showed significant improvement year on year thanks to increased sales from premium products in the appliance and TV businesses and efficient resource management. I will now briefly review the second quarter performance of each business. HNA recorded $6.8 trillion won in sales, $653.6 billion won in operating profit, and 9.6% in profitability. HE recorded $4 trillion won in sales, $333.5 billion won in operating profit, and 8.2% in profitability. GS recorded $1.9 trillion won in sales, and $103.2 billion won in operating loss. ES recorded 1.7 trillion won in sales, 61.7 billion won in operating profit, and 3.7% in profitability. All MC-related profitability was reflected in income and loss from discontinued operations. Further details by business will be covered in later slides. Let's move on to the profit and loss and cash flow of the second quarter. In terms of profit and loss, our net income reflecting financial income and expense, equity method gain and loss, other non-operating income and expense, and corporate income tax posted negative 113.6 billion won. Next, on cash flow. Cash flow from operating activities of the second quarter was 366.6 billion won and cash flow from investment activities was negative 483.5 billion won. As a result, net cash flow amounted to negative 94.4 billion won and when reflecting cash flow from financial activities of negative 22.8 billion won, cash balance at the end of the second quarter decreased by 117.2 billion won quarter on quarter to stand at 6.2 trillion won. Next is the key financial position and indicators for the second quarter of 2021. As of the end of the second quarter, our assets did at 50.6 trillion won, liability at 31.7 trillion won, and equity at 18.9 trillion won. All leverage ratios, liability to equity, debt to equity, and net debt to equity were maintained at stable levels. Next is the outlook for the third quarter. In terms of the macro environment, along with expectations for recovery in the global economy in the second half, on the back of progress in COVID-19 vaccinations, there are uncertainties stemming from the spread of the virus variant and a possible shift in the monetary policy. Amidst this environment, we will mitigate potential risks by increasing sales through expanded market coverage in main businesses and accelerated growth in new growth businesses. as well as by continuously improving cost structures and responding preemptively in operations. We expect sales to maintain a sound upward trend in the third quarter year-on-year affected by continued demand for premium appliances and TVs and incremental growth in the vehicle component business. Profitability is projected to be maintained at stable levels through efficient resource and supply chain management though there are concerns regarding the rise in logistics costs and raw material prices. Now let's move on to the second quarter results and outlook by business. First is H&A. Let me share the second quarter results of H&A. Sales stood at 6.8 trillion won with a 32% increase year-on-year driven by growth in overseas markets. Operating profit improved year on year thanks to sales growth in overseas markets and efficient resource management. Next is the outlook for the third quarter. Intensified competition and cost pressures from raw material price hikes and increased logistics costs are expected to remain in the market. Amidst this environment, we expect to maintain our sales growth momentum year on year by strengthening product competitiveness and proactively enhancing sales by region and product. We will focus our capabilities to achieve similar profitability levels as the same period of the previous year by saving costs and optimizing operations. I will share the second quarter results of HE Sales increased by a large margin year-on-year thanks to the recovering demand in the global TV market and expanded product sales of OLED TVs. Despite the continued rise of LCD TV panel prices, operating profit grew significantly year-on-year driven by operating leverage effects and improved product mix focusing on premium products. Now, let me share the outlook for the third quarter. In the market, with the progress in COVID-19 vaccination, demand for products related to the entertainment at home is expected to be stagnant, but premium product demand is projected to continue its upward trajectory. We will maintain sound profitability by improving product mix with a focus on premium TVs and expanding sales though we expect some cost pressure due to the continuous panel price hike. Let me share the second quarter results of ES. Sales grew year on year, driven by increased volumes from major projects on the back of the demand recovery in the global automotive market and increased sales of electric vehicle components. Profitability improved significantly year on year, with revenue growth from the increased demand for vehicle components, but decreased quarter on quarter with the temporary spike in cost due to the semiconductor supply shortage. For the third quarter outlook, the automotive semiconductor supply shortage is expected to persist for a considerable period of time, but as major semiconductor manufacturers take action regarding the shortage, the supply situation is projected to stabilize in the second half. We will focus our capabilities on securing major components by strengthening global supply chain management and will continuously improve profitability by maximizing sales and continuing cost-saving activities. I will share the second quarter results of BS. Sales grew year-on-year on the back of expanded sales of high-end large screen and gaming monitors and grand PCs. and the gradual recovery in the demand for information display products. Operating profit decreased quarter on quarter and year on year due to rising prices of major components such as LCD panels and solar wafers. Now, the outlook for the third quarter. A gradual recovery of demand is expected in the B2B business with expanded infrastructure investments by major economies on the back of the resumption of economic activities. But risks related to rising prices of major components such as LCD panels and supply shortage for some semiconductors are expected to continue. We expect sales to grow quarter on quarter and year on year with the demand recovery in the B2B market, but improvements in profitability may be limited due to the impact from continuing price increase of major components. We will focus on securing profitability through proactive cost reduction activities. That brings us to the end of the second quarter earnings release and the outlook for the third quarter. We will now take questions. Operator, please commence with the Q&A session.

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

Yes, thank you for the opportunity to ask a question. Congratulations on your good performance in the second quarter. I have two questions for you. If you look at the end of July, the MC business will officially end. In early July, a joint venture called LG MAGNA was established. So, I think the power plant business will be strengthened. If you can mention how the long-term business strategy of LG Electronics has changed in the future, please share it. The second is a part that many people are curious about in the market. Now, when the MC business is over, we see that most of the personnel relocation has been completed. Thank you.

I'd like to pose two questions. My first question is on corporate-wide basis, and second question is related to MC. My first question in corporate-wide basis, as of end of July, you officially closed the MC business, and early July, you established the joint venture between LG and Magna. And also, because of this reason, we can look forward to strengthening of your business of automotive electronics. So I will appreciate if you can share if there's any change in your strategy for your long term. And my second question is related to VS Company. Actually, the market is keenly interested in your situation after your announcement for the closing of MC business. And it seems that most of the reassignment with your MC members have completed. So, it will be appreciated if you can share the overall size of internal transfer and external transfer to other affiliates. In particular, in the case of internal transfer, considering the technological relevance, I'm wondering if you can look forward to the synergy impact from this reassignment of MC members.

. . . . .

Let me take your first question. After closing of MC Business and business restructuring and of automotive electronics, the long-term business strategy for our company in the long term is being considered based on two major pillars centering around qualitative growth. If I explain the first pillar, we are going to make more innovative business methods and models based on our existing business, and we are going to enhance both revenue growth and profitability at the same time.

In order to do this, we are planning to expand our business with new approaches such as platforms, services, and solutions based on customer and consumer behavior data with high loyalty. And as you know, in our electric vehicle parts business, we will strengthen the synergy effect through cooperation with Magna.

To this end, we are going to make use of growth assets, loyal customer base and customer behavior data. And based on this, we are going to take a new approach regarding platform service and solution to expand the business. And with respect to the electric vehicle components, We are going to closely cooperate with Magna to strengthen synergy, and we are going to accelerate the growth of vehicle lamps and automotive electronics to make the new growth engines.

The second axis is the effort to secure future growth and profit potential by implementing new projects with high market size, growth, and expectation rate. In order to do this, we will invest our capital in business areas where the future is promising,

Secondly, we are going to enter into the new businesses where we expect the market size growth profitability to be high and we will secure both future growth and profitability potential at the same time. To this end, we are going to pursue inorganic growth based on partnership with strategic businesses and equity investment for the future businesses. So, we will continue to seek the scale-up of new businesses for the future.

The second question is about the resettlement of employees and how much they will actually contribute. After the announcement of the MCC, I will take the second question regarding the size of reassignment of MCN members and their contribution to our business. After the announcement of our business closing,

We have opened job positions for transfer. With the top priority on individual preference and job relevance, we implemented transfer both internally and to external affiliates. Out of Korean employees, around a quarter of the members decided to transfer to affiliates.

Yes, and to talk about the synergy effect, in the group and in the electronic sector, With respect to potential synergy, there were great needs to hire more

to grow their business fundamentals and prepare the future within LGE and in LG Group. To fulfill the needs, we implemented reassignment by matching the individual functional and technological capability with the requirements. So that's the reason why we can look forward to making a great contribution to individual growth at the same time to expanding our business for the future within our LG Group.

I'll take the next question, please. The next question will be presented by Sungyul Kwon from DV Financial Investment. Please go ahead with your question.

Thank you for your question. I would like to talk about one business solution I would like to ask two questions about HNA business. First of all, regarding business solutions, recently, as the supply of vaccines has expanded and mobility has increased, concerns are being raised that the demand for IT-related products for consumers, such as laptops, may decrease. How do you see the future demand for these IT products in LG Electronics, and is there a response strategy for this? First of all, I'm curious. Secondly, when it comes to HNA, it seems that Samsung Electronics has been doing very aggressive marketing, focusing on bespoke. It seems that the competition in the premium electronics market will be fierce, and I wonder what LG Electronics' countermeasures are for this. Next, how much is LG Electronics' premium sales and object sales?

Thank you for taking my questions. I have two questions. The first question is on BS. With widespread vaccinations and increased mobility, the demand for consumer IT products such as laptops is forecast to decline. What is your outlook for the demand for IT products? and what's your response to this? And my second question is on H&A. Samsung Electronics is engaging in very aggressive marketing for their bespoke. What is your response to the increased competition in the premium home appliance market? And what is the sales proportion of objet collection out of total revenue of premium products? And I'd like to know if there are any changes in your sales strategy around objet collection.

First of all, I would like to answer the question related to the demand for IT. The 21-year year-long outlook that the IDC announced in the second quarter of 2021 is a growth of 11% for the entire monitor compared to 20 years, and the gaming monitor is expected to grow by 54%. In the case of the 22-year year-long outlook, the monitor is expected to decrease by a small margin compared to 21 years, I will answer your first question on BS.

According to the market research firm IDC's Q2 report of 2021, it expects 11% year-over-year growth of the monitor market as a whole and 54% year-over-year growth of the gaming monitor market in 2021. In 2022, the monitor market is expected to slightly decline year-on-year, whereas the gaming monitor market is expected to grow by 6% year-on-year.

And the future demand of IT products, which the company sees, has changed significantly due to COVID-19, so home work and online education have become a common trend, not a temporary phenomenon.

Regarding the demand for IT products going forward, with significant lifestyle changes brought on by prolonged COVID, we believe that remote working and online learning have become a common trend, not a temporary phenomenon. Therefore, we believe the demand will continue.

Having said that, as contactless trends can shift with signs of economic recovery, we're keeping a close eye on market trends, and we haven't detected a major change yet. We are going to focus on the sales of high-end products such as large screen monitors, gaming monitors, high-performance and ultra-light laptops, and at the same time, we will continue to capture business opportunities in the B2B business market.

Now I will answer on H&A. As the role of home changes,

and the need for personalized and tailored space grow, the competition in the tailorable home appliance market, including object collection and bespoke, is expected to intensify, as you said. As you said, the competition in object collection and bespoke is expected to intensify, as you said.

As you said, the competition in object collection and bespoke is expected to intensify, as you said. As you said, the competition in object collection and bespoke is expected to intensify, as you said. As you said, the competition in object collection and bespoke is expected to intensify, as you said. As you said, the competition in object collection and bespoke is expected to intensify, as you said. As you said, the competition in object collection and bespoke is expected to intensify, as you said. As you said, the competition in object collection and bespoke is expected to intensify, as you said. As you said, the competition in object collection and bespoke is expected to intensify, as you said. As you said, the competition in object collection and bes Unlike our competitor, we have launched object collection from the outset as a package ideal for design. With newly coined terms such as space interior appliances,

and Appliance Terrier, which is a combination of appliances and interior. For each life stage of customers, we offer a variety of materials and colors to give them options to choose from and help them make the desired choice by facilitating decision-making.

In the future, we will continue to expand various materials and colors that can harmonize with the interior tone of the entire house, not just a specific space. Going forward, we will continue to expand materials and colors that can be in harmony with the overall interior of customers' home, not limited to a specific area. To do so, we will continue to expand our partnerships with different companies

such as the Pantone Color Institute, a world-renowned color institute. In addition, rather than responding to the low-end coverage of the competitor in the increasingly competitive market, we are going to expand our presence as a premium brand by clearly differentiating our design and performance. And the sales of appliances under the object collection are steadily on the rise, delivering strong double-digit profitability.

Next question, please. The next question will be presented by Jongwook Lee from Samsung Securities. Please go ahead with your question.

Hello. Thank you for the question. I have two questions. The first one is from the BS headquarters. It is expected that the growth of our BS headquarters, focusing on B2B business, will be high depending on the expectation of the recovery of the economy. What do you think about the overall business situation and prospects of the current headquarters? The second is the HE headquarters. The sales response of OLED TV is good and the growth expectation is high. If competitors such as Samsung Electronics purchase a W OLED panel from the LG display and enter the OLED TV market, what impact will it have on our LG Electronics?

I'd like to pose two questions. My first question is on BS. With the expectation for economy recovery, high growth is expected for the BS company focusing on B2B business. In line with this, can you share with us the current status and forecast of your business? And my second question is on HE. Your OLED TVs are getting positive response from the consumers, and there is great expectation for the growth. and if Samsung enters into the OLED market with W-OLED panel source from LGD and can you share with us what do you think about the impact this movement will have on LGD?

First, I would like to answer the question from the BS department. Our BS department focuses on IT business centered on monitor and PC, information display business of signage and hotel TV, and solar module business. Our B.S.

company is running three different product categories, one for IT devices including monitor and PC, second for information display such as signage and hotel TV, and lastly solar module business.

Graven up by non-face-based environment embodied by working from home and online schooling,

The IT business is showing a growing sales trend. For the future market, it is forecast to show a rather slower increase for monitor and PC from 2022. But then for the high-end product segment that we are focusing on, with large size monitor, gaming monitor, and high performance ultra lightweight laptop, the demand dynamics is forecast to go up continuously.

Elec S & Gdr 144A Elec S & Gdr 144A

With respect to information display, with the recovery of demand in 2021, the sales of ID products are showing signs of recovery. With the expectation for economic recovery, the private and public sectors are expected to spend their investment. Against this backdrop, we also expect the sales increase from major verticals, like corporate verticals, schools, and hospitality, for digital signage, e-board, hotel TV, and others. But again, the business is more volatile against COVID-19. It's the reason why the current resurgence of COVID-19 is more concerning for this sector.

And the solar module business, under the new renewable energy policy of major countries such as the United States, Lastly, solar module business.

With the clean energy policies of the U.S. and other major countries, the demand is forecast to continue to go up. But then with the rising prices of raw materials such as polysilicon, the profitability level has declined and with more aggressive investment by Chinese players, the competition is heating up. At the end of the day, we'll focus on enhancing the product competitiveness like high output product and improved cost level.

LG E is the world's first to launch OLED TV.

So far, there has been widespread awareness among consumers that equals LGE with OLED TV.

In terms of amount,

The OLED market share is a whopping 70% showing absolute market presence, and we expect this trend to continue to be in the market.

The OLED market share is a whopping 70% showing absolute market presence, and we expect this trend to continue to be in the market. Around 19 companies have already entered into OLED bands, and with this entrance of our competitors, if I explain the positive impact of LGE in terms of market,

With the size of market increasing, we are able to expand the ecosystem of OLED TV.

With this expanded market,

If we continue to strengthen our market presence based on the competitiveness of our product, we will be able to create more sales in the market.

Also, due to the increase in the amount of OLED, the cost of panels due to competition is expected to be greater than the increase in the cost of panels due to competition, and the cost improvement factor

Furthermore, with the expansion of OLED volume, instead of having worry about the possibility of panel price increase, we rather forecast that thanks to the increased yield, there will be more pressure to decrease the overall cost level, and with the improvement of cost, there will be more positive impact on LG E's business.

Next question, please. The next question will be presented by Sungkyu Kim from Daiwa Capital Market. Please go ahead with your question.

Thank you for the question. I have two questions. One is for H&A Business Administration and the other is for VS. Q. In the case of H&A, due to COVID-19, Q. I am curious if there are any changes in the sales of premium products by the company in the center of the developed countries. Q. Please explain in relation to this. Q. And I would appreciate it if you could tell me how the demand for premium products per region is. Q. In relation to the second VS, in the month of July, The market for the E-Power Train is very high. On the other hand, the competitiveness of the E-Power Train industry and the competitiveness of our company are not yet understood by investors. The competitiveness of the company for key components such as motors and inverters, Thank you for taking my questions. I have two questions. My first question is on H&A. Have there been any changes in the trends in advanced markets?

with respect to sales of premium products due to the impact of COVID-19? And what does the demand for premium products look like in those regions? And my second question is on VS. With the launch of LG Magna e-PowerTrain in July, the market expectations for your EV business is quite high. However, investors don't have full understanding of the competition dynamics in the e-PowerTrain industry or your competitiveness. So can you tell us about your competitiveness regarding core components, such as motors and inverters, and perhaps your channel status and the current competition dynamics?

Yes, I will tell you about H&A. After the COVID-19 situation, the purchase volume of consumers During the pandemic, consumer buying behavior is shifting from stress buying to planned buying.

In advanced markets with increased disposable income and more time spent at home, the demand for high-end home appliances has grown, and it seems that the growth in the demand for those premium products is continuing.

Therefore, the sales and demand for premium products in advanced markets are continuously growing throughout COVID.

and in line with the needs arising from more time spent at home, the demand for large capacity models is on the rise.

Yes, I will answer the VS department. LG Electronics has a core technology that can lead the high-performance motor market based on the performance of hairpin motors related to EVs. In addition, I will answer your second question on VS. We have core technologies including hairpin motor manufacturing to lead the high-power motor market.

And we also have the capability to develop and produce inverters and power modules, the core parts of the e-PowerTrain module, in-house, meaning we have the competitiveness regarding individual EV components. Based on this, we are winning projects from global major OEMs. Please understand that we cannot disclose the details about the current status regarding OEMs as we have signed an NDA.

The next question will be presented by Ji-San Kim from Kiwoom Securities. Please go ahead with your question.

Thank you for your question. There are two questions. The first question is, in the V.S. business sector, there was a significant increase in the number of short-term losses in the second quarter, and risk factors such as vehicle semiconductor supply issues are emerging. I am curious if the black-and-white transition in the second quarter is still effective. In addition, Thank you. I'd like to pose two questions, one for VS and the second for MC. My first question is on VS. In the second quarter, VS Company has recorded quite a big deficit level.

and there are still risk factors in the market such as automotive semiconductor shortage. I'm wondering if you are maintaining your plan to swing to profit in the second half of this year and also can you forecast the sales and profitability for the following year? My second question is on MC. You officially closed your MC business and I'm wondering if you have any plan to sell off your patents or assets?

Yes, I will answer the question. In the second quarter, there were several risks such as lack of vehicles and shutdown of some OEM factories, but the impact of the company's sales was minimized through cooperation between the customer and demand response. Through this, we achieved sales performance above the planned level, but there was a temporary restriction in terms of profitability due to the increase in cost from the customer response point of view.

Let me take your question on VS. In the second quarter, there were multiple risk factors such as automotive semiconductor shortage and shutdowns of some OEMs. But to respond to the demand from the OEMs, we closely cooperate with them to minimize the impact on our sales side. Our sales performance exceeded the previously set plan, but there were overall price and cost increase to respond to demand so our profitability was temporarily impacted.

Looking into the latter half with automotive semiconductor shortage expected to get mitigated, we look forward to additional sales. On top of that, through cost-saving activities, we will aim to turn around in the second half. Considering the backlog we already secured and the cost structure improvement that we are working on now, we look forward to improvement of sales and profitability in the mid to long term.

Let me take your question regarding our patent.

Regarding your question on our plan to sell our assets or patents, that is deeply related to our business model. So we are considering various ways to make a profit stream using the patents. So once we decide on our direction, let us communicate with the market proactively.

For your information, if I add my explanation regarding our plans to utilize the patent assets, we hold around 24,000

Telecommunication Standard Patent for 4G and 5G. And with the core IP assets that we secured from mobile communication business, we'd like to leverage them to develop new products based on IoT and other smart appliances.

And our telemedicine technology can be utilized as a key technology for vehicle connectivity, for example, for electric vehicles. So not only telematics,

Those telecommunication assets are the core component or core technology for vehicle connectivity, so we are going to use them to develop infotainment products such as display radio as well as telematics.

I'll take the next question, please. The next question will be presented by Dongwon Kim from KB Securities. Please go ahead with your question.

Yes, thank you for your question. I have a question for VS and MC. After the acquisition of GKW, I am curious about the synergy effect between LG Electronics and GKW so far. In what form will the future visual evaluation Thank you for taking my questions. I have two questions. My first question is on VS. After the acquisition of

I am wondering what kind of synergies you are generating and could you specifically tell us about the activities that you have been doing and when and how we can see visible results? And my second question is on MC. In relation to the net loss from discontinued operations, approximately how much is directly associated with the withdrawal of the business Can you share the details related to obsolete inventory or compensation for distribution channels and suppliers, etc.?

Yes, I will answer the question. Recently, in the headlamp sector, the importance of connection and related technology with electric parts is increasing. Based on this market trend, we expect that the lamp strengthening technology of JKW and the competitiveness of the company in the field of electric parts will create synergy.

Recently, in the headlamp business, the connection between vehicle lamps and vehicle components and relevant technologies are growing in importance. Based on these market trends, we expect ZKW's lamp light technology and our vehicle component-related competitiveness to create synergy. And as for the visible outcome, ZKW has recently won the next generation headlamp business for a European customer. BKW's revenue and profitability were temporarily affected by COVID-19 and semiconductor supply constraints. But once the uncertainties in the external environment are resolved, we expect to see visible results.

Second, I will give an answer related to MC. As reported in this earnings call, the net loss from discontinued operations for the first half of this year

amounts to approximately $1.3 trillion.

The loss of $1.3 trillion in closed-off sales, as I mentioned earlier, is due to the increase in customer care, OS upgrades, and continuous app services.

I would like to say that we have sufficient provisions set aside for maintenance such as OS upgrades and app service operations for customer services that we have promised to deliver.

With respect to the costs associated with the withdrawal of the MC business,

If we exclude the loss from operating activities that occurred in the first half, which is estimated at around 530 billion won, the net amount is around 770 billion won.

In relation to the loss from the termination of business, you have requested for a detailed record of the loss,

I understand you asked for the details of the net loss from discontinued operations, but please understand that we are unable to disclose that information.

Next question, please.

The next question will be presented by Nicolas Godoy from UBS. Please go ahead with your question.

Nicolas Godoy Good afternoon and thanks for taking my questions. First one is on H&A revenue growth. So we will likely exit 2021 with H&A recording quite a remarkable more than 15% year-over-year revenue growth. This is probably not sustainable, so how do we look at 2022 growth? What are your initial thoughts about the growth you can achieve there and the key factors to sustain it? And secondly, on TV profitability, where do you see LCD and OLED TV operating margins going into the second half of 2021 and 2022? Thank you.

I will ask two questions.

My first question is related to H&A. In 2021, the sales of H&A business headquarters were quite good. Based on this, how do you look at the sales in 2022? And please share with us how you can achieve that goal. I would appreciate it if you could explain what the main factor is in achieving that goal. The second question is related to the profitability of TVs. I would appreciate it if you could give us an overview of the profitability of the late 2021 and early 2022 LCD and OLED TVs. First of all, I would like to answer H&A.

As you said, this year's growth is expected to be two-digit in terms of overseas market growth.

Thanks to the remarkable growth of overseas markets, as you said, we focused to achieve a solid two-digit growth rate.

Next year, the demand for pent-ups will be reduced, and the supply of competitors is expected to stabilize. In particular, it is expected that the competition in the advanced market, Europe and the United States, will be fierce, so the growth rate of sales

Looking into the following year, we expect the pent-up demand to slow down quite a bit, and also we forecast the competitors to offer more stable supply of their products. And looking into the advanced markets, the U.S. and European region, we forecast the competition to get intensified down the road. In line with this, if we focus our sales growth for the following year, that will be slower than that of this year. But then, internally, we are setting up scenario plan to maintain or expand the market share that we notch up this year by adding more growth higher than the average growth rate of the market.

TV Elec S & Gdr 144A Let me answer for the profitability of TV products. We expect a solid profitability to be maintained as we are going to expand sales of premium TVs including OLED TV and non-cell TVs. In 2022, the demand increase due to pent-up has now turned to normal, and the overall TV demand is expected to decrease.

Looking into the year 2022, with the pent-up demand returning to normal, we forecast the overall TV demand to go down slowly.

However, we expect the demand to continue to increase by more than $1,000.

but for the price and the product segment with a price tag of over $1,000, we focus the demand to continue to go up.

Elec S & Gdr 144A 당사는 OLED 시장의 GE 개선 및 물량의 증가를 추진하고 LCD TV는 QNED 초대형 중심의 매출을 확대하여 Mix 개선 및 원가 절감 활동을 통하여 22년에도 견저한 수익성을 유지할 것으로 계획하고 있습니다.

Given that, for OLED TV, we will improve the market presence and increase the volume. For LCD TVs, by expanding the sales of QNET TV and large-sized screens, we will achieve a solid profitability level.

네, 다음 질문 부탁드리겠습니다.

Next question, please. The next question will be presented by J.J. Park from J.P. Morgan. Please go ahead with your question.

Yes, thank you for your question. I have only one question for you. I know that LG Magna's powertrain company was launched yesterday. I'm a little confused. joint venture, but LG, VS, GKW, and Magna International will have their own customers. Is the order related to the customer's powertrain something that should only be done by LG, Magna, or LG, Magna International, and other customers and other businesses? What I'm curious about is whether the structure itself Thank you for taking my question. I have one question on VS. As I understand, the JV with Magna was launched yesterday, correct? But I'm a bit confused.

It's a joint venture, so each of you must have your own customers. So I'm wondering, your customers should only source from LG and Magnet e-PowerTrain, or can you please clarify the structure of your joint venture in terms of your agreement with customers?

Let me answer your question.

So what the e-powertrain JV is targeting is we are mostly focused on components related to motors and power. And we are planning to expand our product portfolio from individual parts, such as motors and inverters, into IPGM and drive units.

JV, Moesa, and Magna are using the same e-powertrain components. The Magna is also doing business on e-PowerTrain components, and we can either choose to source through Magna, and we can also partner with other OEMs independently.

Yes, that's all.

Next question, please. The next question will be presented by Dongjae Woo from Bank of America. Please go ahead with your question.

Yes, thank you for the question. First of all, regarding the car parts, and LAMP. This time, we're going to talk about how we can focus on growth and parts in terms of infotainment, safety, and convenience devices. Telematics is a function that we've been listening to for decades. What are the parts and solutions that can be based on growth in infotainment? Elec S & Gdr 144A Elec S & Gdr 144A Elec S & Gdr 144A The reason why it can be maintained continuously is that it sells a lot of expensive products and maintains a high market share in Korea and the United States. In the future, do you need the same strategy to maintain this continuity, or do you want to expand the number of subscribers through the cloud and provide not only hardware but also solutions? I'd like to pose two questions. My first question is on VS. You've already explained about your venture with Magna and your vehicle land business.

And there are great expectations for future growth in terms of infotainment and any devices related to safety and convenience. And I'm wondering how you'll be able to achieve such growth with which components. And actually, if you look at the vehicle market, the telematics appeared around a decade ago. So I'm wondering what kind of new component solution will be out there which will help us grow in the market. Especially related to safety and convenience, I'm wondering how we can achieve, especially in the electric vehicle industry. And my second question is related to HE and H&A. You have maintained a solid profitability with home appliances and TVs for the past two to three years, and I'm wondering if you can maintain such solid profitability in the long term as well. If the reasons behind such solid performance for expensive prices of your product and high market share in the United States and Korea. Are you going to maintain the same strategy or do you think there is need to apply new strategy like increase of subscription with your cloud service or offering solution set of hardware? So looking at the big picture, I'm wondering if you think you need to change or apply a change to your strategy to maintain the current solid profitability?

Yes.

The VS company, in response to the market and technological trend, is going to make use of our internal capability improvement and external partnership to offer customizable integrated product solution to become global top-tier No.1 vehicle component supplier.

Among them, the area of infotainment that you asked about is the area of infotainment We want to strengthen our cooperation with the existing core OEMs by strengthening our software development capability.

As you know, our products in the infotainment area include head units, telematics, CID, etc. Regarding infotainment, we are producing head unit, telematics, and CID. And what we look forward to in the future is to integrate all of the components to become and make an evolution into kind of cockpit.

We are going to operate and grow our business in line with the future trend like controller based on our software development capability. HNA

Elec S & Gdr 144A Elec S & Gdr 144A Elec S & Gdr 144A

Let me take your question regarding H&A. For the recent three years, H&A Company has maintained a solid growth every year and maintained around 8% to 10% of profitability. And also by expanding the sales of premium products and new appliances and also products featuring hygienic and healthcare functions, we are trying to offer better product services to maintain this solid performance.

Elec S & Gdr 144A Elec S & Gdr 144A

Also, by expanding the core business and new businesses, if I share the concept of our future growth for mid to long term, we are going to expand the new product category and also enhance the competitiveness of product based on our technological prowess and also we are going to to pick up the pace for the growth of our differentiated and customizable services to enhance the speed of transformation. And based on all of these activities, we will be able to secure growth in the mid-to-long term.

In particular, in the service industry, we provide a diverse experience that surpasses the expectations of customers through data-based customer division, and through the combination of products and services, In particular, we are trying to offer differentiated experiences that go beyond the expectation of consumers based on the customer microsegmentation based on the database.

And also, we are going to discover and develop various new business models like subscription economy by combining both product and services. By doing so, we will be able to secure growth momentum down the road.

Yes, I would like to tell you about the HEE headquarter. The HEE headquarter continues to implement the premium strategy centered on OLED.

Let me take your question regarding HE. We are going to continue to put our first priority on OLED TV continuously.

In terms of hardware products, we will continue to promote the high-end brand image in the OLED TV, which is the top line-up in the world. We will actively attack the large premium market through QNED Mini-LED TV, which will be released after that, and we will continue to promote the high-end

In terms of hardware, we are going to put our OLED TV at the top of our product lineup to solidify our brand awareness and power. And with QNET Mini OLED TV, we are going to target the large-size screen market. And also, with the expansion of NanoCell TV sales, we are going to pursue qualitative growth.

We are going to find a customer base who will find a value from various user experience and based on that we are going to create the new demand stream down the road. Elec S & Gdr 144A

For example, we are carrying out a project to create a fandom amongst the gamers through various marketing activities with our OLED TV. And recently, we launched Stand By Me, which is a portable wireless TV and also which is a portable individual personal device. And this product is targeting, for example, MZ generation who like to spend their time watching TV in their own spaces. So likewise, we are trying to offer new experiences to our consumers.

Also, with the strengthening of our software areas other than hardware, as you can see from the case where we acquired Alphonso,

Down the road, we are going to strengthen our content business. And also, we are going to enhance the size of this content business at the same time, securing solid profitability down the road.

That's all.

Thank you.

Yes, it is decided that there are no more questions. Thank you for attending our conference call for a long time. Then, we will end the conference call for the 1st Anniversary Performance Announcement in 2021. That brings us to the end of LG Electronics Earnings Release Conference call for the second quarter of 2021. For further questions, please contact the IR team. Thank you.