LG Display Co Ltd (LPL) 2007 Q4 法說會逐字稿

Good morning and good evening. First of all, thank you all for joining this conference call. And now we will begin the conference of the fiscal year 2007 fourth quarter earnings results by LG Philips LCD. This conference will start with a presentation, followed by a divisional Q&A session. (OPERATOR INSTRUCTIONS). Now we shall commence the presentation on the fiscal year 2007 fourth quarter earnings results by LG Philips LCD.

Welcome to LG Philips LCD's fourth quarter 2007 conference call. My name is Daniel Kim and I'm the Vice President of Investor Relations. On behalf of LG Philips LCD, I would like to welcome everyone to our global quarterly earnings conference call. I am joined by our CFO, Ron Wirahadiraksa, and the Vice President of Marketing, Brian Kim. We have approximately one hour for this call. We'll spend the first part of the call discussing the key issues for the quarter, which correspond to the slides available on our website. Following this, we'll take your questions. Please do not hesitate to contact us after the call if you have further questions.

Before we move into our discussion of the earnings results, you should be aware that this conference call may contain forward-looking statements within the means of U.S. Private Securities Litigation Reform Act and Securities Regulations in Korea, including statements, among others, regarding LG Philips LCD's expected future financial performance. You are cautioned that these statements may be affected by important factors, among others, set forth in LG Philips LCD's filings with the U.S. Securities and Exchange Commission and in its fourth quarter of 2007 earnings release. Consequently, actual operations and results may differ materially from the results discussed or presented in these forward-looking statements. LG Philips LCD undertakes no obligation to publicly update any forward-looking statements as a result of new information, future events or otherwise.

Now, please take a minute to read the disclaimer. We are reporting in consolidated Korean GAAP, with an appendix to this presentation that includes our reconciled U.S. GAAP numbers.

I would now like to turn the call over to Ron.

Thank you, Daniel. Before we start, I would like to take this opportunity to wish everyone a happy and prosperous New Year.

Let me begin by saying that we are very proud of our better than guided performance last quarter and throughout 2007. This was driven by strong global demand and stabilizing ASPs. During the last quarter we achieved our planned cost reduction in COGS per square meter in U.S. dollars of 2%. On an annualized basis we exceeded our projected cost reduction of 25%, reporting an actual 31% annual reduction.

These accomplishments were the results of our Company-wide cost reduction initiatives, driven by more effectively and efficiently engineering and manufacturing our products. Our commitment to achieve sustainable growth by staying close to our customers, focusing on continuous cost savings, investing in technology leadership and product innovation also contributed to the outstanding results. Most importantly, it was all due to the hard work by our teams across all levels of the organization.

In addition, as part of our ongoing efforts to enhance our customer relationships, we opened the module plant in Guangzhou, China during the last quarter. This will allow us to better serve our customers, specifically in the rapidly emerging Chinese LCD TV market. Moreover, we have formed a strategic alliance with HannStar that links LPL's acquisition of preferred shares with a commitment to purchase high quality LCD panels. These are all good examples of the innovative steps we have historically taken to bind and secure our relationships with important customers and suppliers in an increasingly competitive and dynamic marketplace.

And to fuel our future growth, we continue to move forward to construct the industry's most competitive and highest performing Gen 8 fab. Additionally, we invested significant efforts in strengthening our technology leadership, especially in the flexible display and public display areas. These efforts resulted in important breakthroughs such as the 14.3 inch color flexible display and 52 inch multi-touch screen display. We will continue our focus on developing these areas, specifically in E-Book and E-Newspapers, which are emerging as compelling near-term products.

As many of you know from our press release issued earlier today, I will be resigning as Joint Representative Director and CFO of LPL. The reasons behind my resignation are very straightforward. As a result of Philips' stake sell down below the 25% threshold in 2007, I will step down from these positions at the Company's AGM in late February as per the shareholders' agreement between LGE and Philips. In preparation for this, I've been working closely with Y.S., our CEO, and other members of the Board and management team to make it a smooth and seamless transition. For a period beyond the AGM, I will continue to consult and advise our teams in several areas. James Jeong, formerly Executive Vice President and CFO of LG Electronics, is planned to serve as our next CFO after the Annual General Meeting.

I will be leaving LPL in very strong financial shape, specifically the EBITDA margin, net P/E ratio and cash flow. I've been here since the conception and the subsequent inception of LPL, and I'm enormously proud of the people of LPL and what we have accomplished. It has been an honor working as a Member of the Board and management team at LPL, specifically with the successful completion of the world's first concurrently listed IPO on the Korean Stock Exchange and the New York Stock Exchange in 2004. It was my pleasure to host the quarterly earnings conference call to you, representing LG Philips LCD, and I'm sure our paths may cross at a future occasion.

Now let's continue with the key highlights for the fourth quarter earnings. Next slide, please. Revenue in the fourth quarter was KRW4.3 trillion, up 9% sequentially from the third quarter of 2007. The sequential sales increase was largely the result of stronger than expected ASPs and demand. Operating income for the quarter was KRW869b, up 25% sequentially from the third quarter of 2007. On an annual basis the revenue in 2007 increased by 35% to KRW14.4 trillion, and operating income increased by KRW2.4 trillion to KRW1.5 trillion, achieving a successful turnaround from 2006.

COGS per square meter in dollars decreased by 2% quarter on quarter and 31% year on year, exceeding our annual target of 25%. In Korean won this represents decreases of 3% and 33% respectively. For cash COGS per square meter in dollars, these decreased by 3% sequentially and 30% year on year, in Korean won 4% and 32% respectively. Quarter-on-quarter EBITDA margin increased by 6 percentage points to 41% and net margin improved by 5 percentage points to 18%.

As of December 31, cash was approximately KRW2 trillion, up 20% compared to the previous quarter. Please note that short-term financial instruments of KRW785b is included in our cash amount.

Finished goods turnover levels for large panels remained at slightly less than two weeks this past quarter. IT inventory levels were under two weeks and TV remained under three. Again, we're keeping close tabs on this aspect of our business and we'll continue to work on appropriate levels going forward.

Our net-debt-to-equity ratio at December 31 was 17%, well within our stated goals. The sequential decrease was mainly due to increased net income and partial advance redemption of our long-term debt. Please turn to the next slide.

Cash flow from operations increased to KRW1.6 trillion, mainly due to the improvement of net income and net change in working capital. Cash flow from investing during the fourth quarter of 2007 was KRW266b, a decrease of KRW62b compared to the previous quarter, and was largely used for overseas modules plants. On a delivery base, meaning taken to the balance sheet, it was KRW281b compared with KRW91b in the third quarter of 2007.

As for the third quarter, we had positive free cash flow. To maintain an appropriate cash balance level and to reduce costs associated with our debt, we decided to move further ahead with the partial advantage -- sorry, with the partial advance redemption of our long-term debts during the fourth quarter.

Next slide. Now, I would like to explain in more detail about several specific performance metrics. Please turn to the next slide.

Stronger than expected demand during the fourth quarter resulted in exceeding the guidance of shipments and ASP in both TV and IT segments. Shipment of total display area reached 3.4m square meters during the fourth quarter and, as said, this was a sequential increase of 9%. On average, ASP per square meter of net display area increased to US$1,375 and total ending ASP per square meter also increased to US$1,377.

For the TV segment, average ASP per square meter in the fourth quarter remained flat, while quarter end ASP per square meter declined by 3%. For IT, quarterly average ASP increased by 3% and quarter ending ASP per square meter increased by 2%.

Next slide, please. For the fourth quarter of 2007, the TV segment represented 50% of revenues. This was the largest portion of sales. It was followed by monitors at 24%, notebooks 21%, and other applications accounted for 5% of our revenues.

Next slide. P7 performed efficiently and averaged 136,000 input sheets per month during the fourth quarter, slightly higher than we previously indicated. As we said before, we have started to de-bottleneck and retool some of the equipment at P7 at the end of last year, in order to further expand our capacity. We expect these activities to continue mainly into the first quarter of this year across our existing facilities, as an efficient means to prepare further future growth.

Next slide, please. Cash ROIC in the fourth quarter of 2007 increased from the third quarter of 2007 by 21 percentage points to 72%. That increase is attributable to a higher EBITDA margin and improved sales over invested capital in the fourth quarter.

Next. Let's now turn to our outlook discussion. Next slide. For the first quarter of 2008, we expect for the TV segment shipments to decrease by a high single digit percentage, and both average ASP and ending ASP will decline by a mid single digit percentage. In the IT segment, we anticipate shipments to increase by a high single digit percentage, with a high single digit percentage declining average ASP and a mid teens percentage declining ending ASP. Overall, we expect our shipments in the first quarter of 2008 to decrease by a low single digit percentage, with a mid single digit percentage decline in average ASP and a high single digit percentage decline in ending ASP.

Our COGS reduction per square meter is expected to decrease by a low single digit percentage in the first quarter. Accordingly, our EBITDA margin for the first quarter is expected to be around the mid-thirties range.

Looking forward to 2008, we anticipate continued progress in our cost reduction efforts, positioning us well to achieve annual cost reduction of around 20%, which of course will be linked with the ASP decline.

We're planning approximately KRW3 trillion for our 2008 CapEx, which will be mainly used for Gen 8 preparation, as well as capacity expansion and maintenance for existing facilities. Gen 8 is well under preparation for the planned ramp up in the first half of 2009. Our goal, as said, is to build the most competitive fab in the world. We will turn this investment into a success by maximizing investment efficiency and productivity. At the same time, we are already working closely with our strategic customers to better understand how this new fab can deliver the utmost value.

Moreover, to pave the way for additional growth strategies, we have acquired employees and intellectual properties from LGE's AMOLED business. With the valuable resources acquired, we will put our efforts in further developing small and medium business and enhancing technology development for larger actions -- sorry, for larger applications. Thereby, we will thoroughly prepare for the ultimate goal of producing large TVs with AMOLED technology.

Let me conclude by saying that we are encouraged by the progress we have seen over the last six quarters by implementing value-based management. Not only our financial performance has improved; also our customer relationships and technology leadership have experienced great improvements as we emphasize value over volume. We will continue to focus on these areas, making necessary improvements that will secure sustainable growth for the long term, and we believe that we are making the right moves to bring about greater shareholder value. We will, of course, continue to update you on our progress and thank you for your ongoing support of LG Phillips LCD.

This concludes our earnings presentation for the fourth quarter of 2007. We'd like to now answer your questions.

Our Q&A session will begin. (OPERATOR INSTRUCTIONS). The first question will be provided by Mr. C.J. Muse from Lehman Brothers. Please go ahead, sir.

Yes, good evening. Thank you for taking my question. I guess a couple of quick ones here. First off, on the demand picture, can you talk a little bit more about, I guess, what's going into your analysis for shortages on the TV side as well as, I guess, solid strength on the IT side? I know there's a lot of concern, U.S. and even Europe type of recessionary fears, and I guess I'd love to hear what your thoughts are on that front.

Thank you for your question. As you know, we are now end of 2007 the retail TV channel inventory was very healthy. We can guess TV inventory was six or seven weeks and IT was five weeks inventory; it's very healthy. Also our panel maker says that inventory, a good inventory, TV case are 2.5 weeks and IT product case 1.5 weeks. So that's why this first quarter also we think the sales condition is very nice with that kind of healthy inventory. Also, 32 inch and 42 inch our sales order is very good, so we think that there is no problem during this first quarter in TV business.

Of course, this is the information we have today. And as we said also last time, we will continue to monitor what's happening in the actual market to follow as best as possible, so through watching of course customer ordering positions and those kinds of things. So -- but the information right now that we have seems encouraging. Should things develop in a different way, then of course we will give an update if that would be the right thing to do.

That's it, great. And I guess the second question, with your inventory levels down 9% sequentially and your outlook for only a slight decline in shipments in Q1, I guess that would suggest that you guys are going to maintain high utilization rate here in Q1?

Yes, we'll remain fairly high utilization rate but, as we said, we're also retooling some of the equipment that fits into our what we call max capacity minimization loss program. So we're doing some overhaul to a certain extent to gear them up for slightly more expansion.

And that will be completed by the end of Q1?

Yes, that should be completed by the end of Q1.

Okay. And the last question for me, with the recent tank explosion at Asahi, has that had any impact on glass supply within Korea?

No, for us -- sorry, Daniel, go ahead.

That Asahi tank explosion of the chloric acid tank has not affected our, or for that matter Samsung's, glass supply. And for that tank, tank was situated a little bit further away from the actual glass manufacturing facility, so it did not affect the production of the glass either.

Very helpful, thank you.

(OPERATOR INSTRUCTIONS). The following question will be presented by Mr. Jeffrey Toder from ABN Amro. Please go ahead, sir.

Good evening. Congratulations on an excellent quarter. A couple of questions. First, I was reading through the notes from the domestic meeting and I think there was a comment about demand and seasonality related to the Olympics, and I was wondering if you could elaborate on that.

What Y.S. has commented during the domestic earnings conference was that usually after such big events, such as Olympics or World Cup, following that we have a softer season. And he also mentioned that since we are going to have Beijing Olympics next May, we were expecting slower seasonality coming in the year 2009. Did that answer your question, Jeffrey? Hello? Hello? Hello?

The following question will be presented by Mr. J.J. Park from JP Morgan. Please go ahead, sir.

Thanks for taking the question. And then, first of all, I'm really sorry to hear that Ron resigned the (inaudible). Good job in the past few years.

Thank you.

I have a question on the first quarter guidance. You mentioned you have the strong demand from the emerging markets ahead of the Beijing Olympics, but looking at the guidance you expect the TV panel shipments decline by the high single digits but IT panel price increase by high single digits. It must be reverse trend, given the potential slowdown in the competitive end for the IT in the middle of the slow season. Can you elaborate why you expect the IT panel shipments to increase while the TV panel shipments decline?

That will not reflect the general industry trend but that situation is particularly true to us. Because of the new product introduction and preparation, our TV shipment is coming down a little bit in preparation for the stronger season. Our IT, because of our especially stronger customer portfolio, we still have a very strong IT shipment requirement, especially in the notebook segment.

A second question I have. During the (inaudible) mentioned expect around a 30% year-on-year shipment growth. Can you explain how much HannStar will account for the solid position with the growth in 2008?

HannStar's portion is going to add about -- around 2.5% of the total shipment.

That's very marginal.

Very marginal, yes.

Yes. In terms of -- because you guys buy only monitors from HannStar, in terms of a proportion of the total IT, it would be much higher?

I think it would be around 5% of IT, around that, yes?

Okay, thank you very much.

Welcome.

The next question we reconnect Mr. Jeffrey Toder from ABN Amro. Please go ahead, sir.

Hi, sorry. I guess we had some technical difficulties before. I just wanted to clarify, so your -- so the comment was related to demand in 2008 versus 2009, and that then 2009 growth in demand might decelerate. Is that correct?

That was what Y.S. was saying, yes, you are correct.

Okay. Do you have a number for demand growth in 2008 and one for 2009?

Yes. The demand growth for 2008, according to [this research], is in terms of area about 20%, 30%, just a minute - 31%.

And then, following up on the previous question, I just wanted to check on the metrics for 2008. On the shipment side, could you break down between capacity increase and efficiency improvement, and then you've already mentioned the HannStar number is 2.5%?

That is correct. So as Y.S. was saying during the local conference, about -- among the -- I'm sorry, 30% annual shipment growth, 80% is going to come out of what we have been saying the Max Capa Min Loss program efficiency gains.

That's essentially extending the effective capacity of the existing fab - is that correct?

That is correct.

Okay. And then the other 20% would come from better capacity conversion ratios, or --?

No, actually the 80% is going to come from Max Capa Min Loss, Min Loss meaning a better capacity conversion, basically a better capacity -- CCF, right, capacity conversion factor.

Right.

And Max Capa also is better utilization of our assets, with or without cash injection. So they are all linked to the improvement of our total productivity enhancement. The remaining 20% is going to come from basically the periodic cash injection and also HannStar panels.

Okay. I guess just to -- in previous calls I think what you've said is that about 25% of the increase would come from additions in capacity, even though that might be from your Max Capa program, and then another 5% would come from better capacity conversion factors. Are those still correct ratios?

You are right. They are still correct ratios. I guess I have been confusing you with the different --

Terminology, that's okay.

Right, right. The 20/80 (inaudible), right.

Okay. So you get 28% and then you'd add 2.5% for Hannstar?

Right.

That gives you 30%, okay, got it. And then you mentioned that your annual target for cost reduction is 20%.

Around.

Around 20% for this year and then, Ron, you commented that was linked to price decline. Is that indicating that you are looking for a 20% year-on-year price decline this year as well?

No, what we're saying is that is the current expected price decline. We're not guiding for that. We only give guidance for the first quarter. What we're trying to say is if price declines would be more strong, we will push harder to get better cost pricing on purchasing and, of course, also from our development efforts. That's basically what that means to say.

Okay, I understand. And do you have guidance for depreciation for the first quarter?

I think annual depreciation for next year is, sorry, I just closed the book, so.

All right.

I'm very sorry. Depreciation is -- will be around what this year is, around 2.7 again.

Okay.

This year was about 2.8.

Okay. Great, excellent. Thank you very much.

You're welcome.

There are no participants with questions. (OPERATOR INSTRUCTIONS). And a follow-up question will be provided by Mr. C.J. Muse from Lehman Brothers. Please go ahead, sir.

Good evening again. I was looking through your 2008 Major Action Item presentation, and I guess I was going through some of the advanced process technology that you're planning on doing. And I guess, in terms of moving from four to three masks to IGP and then Color Filter on Array, I guess can you tell us which ones do you expect to see first? And will we see that some point in 2008 and will that drive some cost savings for you, or is that more of a 2009/2010 event?

I think at this moment, as we said in the afternoon, we're experimenting between masks in the larger fabs. So I don't expect very big contribution of that in 2008. Probably towards the second half, fourth quarter, we'll see some results with that. I think that will be a more 2009 thing.

I think, in terms of what you mentioned on Color Filter on Array, that may be have a somewhat earlier contribution. We, by the way, call it color filter on TFT CLT.

And within that construct, how does that change the, I guess, material content for an LCD? Do you still require the two pieces of glass?

Yes, we do.

And in inkjet printing, where do you guys stand there? Still hearing that there are yield issues that make that difficult to adopt.

That is correct and we are still experimenting with it. Basically the mold printing, as far as printing technology is concerned, mold printing first comes for the use of color filters, and inkjet printing is more adaptable to the TFT printings. And because of the many more technical hurdles that we have to come through, it's not going too far ahead in terms of contributing to our production.

Thank you very much.

Okay.

The following question will be provided by Mr. Jeffrey Toder from ABN Amro. Please go ahead, sir.

Hi again. I was wondering if you could elaborate at all on the dividends or potential for dividends this year. I guess the CEO (technical difficulty).

I think we lost him again. All right, let's wait, operator, till he comes back. If there is another question, we can handle that.

Okay. This is operator and we will move on to the next question. And the next question will be provided by Ms. Darice Liu from Maxim Group. Please go ahead, ma'am.

Good evening. Can you elaborate on your AMOLED plans for 2008? And can you also provide a timeline when you're planning to start introducing commercial products?

We are already introducing some commercial products, for example for the use of cellphones and such, very small size, up to 4 inch full color flexible AMOLED. But as for the use to such applications such as large size TV, it's going to take some time still.

In terms of your introduction of small size panels, which products are you currently in and how many products are you expected to be in this year?

We are currently producing and doing some cell business with foreign cellphone companies. The quantity is not that big.

Can you say do you plan to ramp up quantity this year and can you say to how much?

Not that much, no.

As production comes (multiple speakers) sorry, go ahead.

I'm sorry. No, you go ahead.

Okay, I will go ahead. So this production comes mainly from our P1 factory, so the quantities are relatively small. We would like to expand but also it's not very easy technology, so if we are more successful we're going to see more. It's actually not a very substantial part of our small business at the moment.

Are you using a low temperature polysilicon back plate or are you still using amorphous silicon for the active matrix OLED?

We're using LTPS.

Okay. Thank you very much.

Sorry, we have a small LTPS set-up in that factory, so LTPS it is. Yes?

Okay, thank you.

Thank you.

The following question will be provided by Mr. Ong Chong How from JL Capital. Please go ahead, sir.

Hi, good evening. One follow-up question on this AMOLED. How much have we invested in this technology?

Well, if you refer to the recent takeover of people and patents from LG Electronics, it's only a very small amount of money. So there has not been a lot invested. A number of years ago we invested in relatively modest capacity in LTPS, but on the AMOLED investment it's very minor at the moment.

Right. In the recent (inaudible) 11 inch OLED TV that's selling for US$2,500, so what kind of timeline are you looking at, this OLED actually match TFT price per square inch or something like that?

I think that's going to take a while. There are still a number of issues to be resolved. And I hear what you say on the 11 inch; it's very expensive. And our understanding is that sales are not very smooth, it's maybe a little early. So we don't have at this moment any short-term plan for that.

Right. So this wouldn't be competitive technology for the next five years for TFT probably, yes?

Well, as Daniel just said, we are already in commercial products on a very modest scale. But what I'm trying to say to you is we're not sure at what timeframe it's going to be applicable in economic fashion into the larger panel sizes.

Right, okay. The second thing I want to check is your 4Q guidance. Last time we met up with you guys you said the revenue would actually be down Q-on-Q because of some maintenance. Was that actually maintenance conducted in 4Q or what happened?

Maintenance? Shipments, you mean? Shipments, we have started from our P7, the seventh fab, we have started maintenance and retooling of our equipment. And that is going to continue all throughout the first quarter.

Right, okay. So that was later than expected?

We were planning to start from December and we started from December.

But the point is, as I said earlier, it's a very good point that you mentioned, we actually have ramped the Gen 7 line to still slightly more input sheets than we expected, 136k. And even though there may have been some dip in usage, it was bigger than we expected. So also in other fabs a little bit more output, so hence still the shipment increase. Yes?

Okay, right. Could you elaborate on your new CapEx and when do you think that the new fab will come online?

Well, we expect for next year around KRW3 trillion in CapEx and the majority of that amount, a little over KRW2 trillion, will be spent on the Gen 8 facility. And we expect to ramp that in the first half of 2009.

So, in terms of equipment, all those, what kind of delay, is it like 18 months to 30 months you can get the equipment if you place order now?

Yes, so we already had the shell in quite an advanced stage. So we completed that and we have started ordering equipment. And typically, between fab-in and mask production, it's about six months.

Right, okay. Understood. Okay, thanks a lot, Ron.

Yes, thank you. You're welcome.

Have a good rest.

Thank you.

The following question will be provided by Mr. Oliver Lee from Alliance Capital. Please go ahead, sir.

Hi. Just a follow-up question regarding the capacities in '09. Based on the ramping in the first quarter, how much area growth would you see in '09?

Thanks a lot for the question. Actually, we're not giving guidance at the moment yet for -- we're giving guidance for 2008. And, of course, we want to make that happen, hopefully a little more, to seize the market opportunity. I think that will be more -- become more clear towards the second half of this year.

Okay, so the equipment will be about 60,000 per (inaudible).

Well, we have started initially about a little over 80,000 input sheets for the Gen 8 ramping in the first half of '09. So at this moment that is still the plan that we have.

Okay. In case you -- in case there would be a demand increase, is that actually you increase the capacity and up to how much you can go at this moment?

At this moment, we -- our plan is to go up to 83,000 input sheets. If the demand increased suddenly, maybe we might adjust ramping speed, not the scale, I mean the total input size that we're going to.

Okay, okay, thank you. And thank you for, Ron, your good presentations over the past few years.

Thank you, Oliver. By the way, if the demand would not be as we expect, as you know, we will temporize the ramp schedule, so it works both ways for us. Yes?

Okay, thanks.

Thanks.

The following question will be presented by Mr. Jeffrey Toder from ABN Amro. Please go ahead, sir.

Hi. I have recalled in, so hopefully the line will be more stable. I was asking before about the dividend policy.

Well, welcome back, first of all. So we are thinking about the dividend; no decision has been taken yet. We have to propose that to our Board of Directors. And, of course, subsequently we'll propose it to the General Meeting of shareholders in February. So, there is a thought about that but no decision taken.

And was there -- I think there was some indication that you're thinking about 30% of an adjusted figure. Is that a correct quote from the local -- from the Korean presentation today?

No, I'm not sure if that's the number that we're looking at. I won't say no but I'm not confirming it at the moment.

Okay.

But we'll do that once we have more approval in the right process.

Okay. And then your tax rate went up pretty substantially, I think, in 4Q.

Right.

I was wondering if we should look at the Company paying toward 25% taxes in 2008 as well.

No, I think the tax rate will go maybe in the direction of 20%. And, of course, the tax rate went up because we're making a profit in the fourth quarter. That's basically the key determinant of that. And also in terms of tax, we have been able to carry -- to finish the carry forward deficit last part of 2006, so we are very happy to have utilized that. So going forward, tax rate will grow, I think, towards around 20%.

Around 20% as a marginal tax rate?

Right, right.

Okay. And then I apologize because I was offline. Did you just mention that your 8P capacity at the end of next year would be 83k input sheets?

No, what we said is we'll ramp the fab in the first half of '09 and the initial capacity we're thinking about now is a little over 83,000 input sheets on a monthly basis.

Okay.

And the ramp schedule, so the question before was how about if demand increases will you increase that, if we have that outlook we'd probably advance the ramp schedule and not the input capacity. Conversely, if the demand would not be what we think it should be, then we'll temporize that.

Okay. Now, I've -- you've been extremely successful at extending the capacity of your fabs throughout all generations and you can take the numbers for fourth quarter as well. And I've spoken with some other TFT LCD companies and everyone's very surprised at how you've been able to do that, which is an excellent achievement on your part. I was wondering if you have a feeling on how far that might go, where P7's actual capacity might rest, because you've far exceeded the design capacity already and, as you mentioned earlier in the call, you've exceeded the target for the end of 2007 as well. So I was wondering if you have an idea of how far that might be able to stretch in 2008.

Yes, I think I said in the last quarter, at that time we aimed for 130, I said we should be able to do another 20%, around, for P7.

The maximum capacity?

I would put it at that number at the moment.

Okay. And what about P6?

Well, P6 is already, let's say, in a very high stage of ramping. It's around 160 average. Maybe 10%, 15% more in that fab.

Okay. Okay, that's great. That's very helpful, as always. Thank you very much.

You're welcome.

Thank you.

The following question will be provided by Ms. Darice Liu from Maxim Group. Please go ahead, ma'am.

Just a follow-up on the capacity question. You talked about P7 and P6. Are you doing any more efficiency increases in P5 or below?

Yes, the Max Capa/Min Loss, it goes for all fabs, so we're doing what we can to bring that to the limits of what is achievable. So Max Capa means increasing the theoretical capacity through things like tech time reduction and other de-bottlenecking activities. And Min Loss basically means reducing as much as possible all the waiting or unproductive use that we have, for example in maintenance.

With that --

Go ahead.

With that being said, what is the current capacity for P5 and how much more can we see from it?

The current capacity for P5 is 155 input sheets capacity per month. I think that it's not going up a lot. I would say maybe close to 10% possible. That's our ambition for P5 for this year. Hello?

I would assume, for P4 and below, it will be low single digit in terms of efficiency increases?

For P4, yes, that's right, there's not much more stretch in those factories.

Okay. Thank you very much.

Welcome.

(OPERATOR INSTRUCTIONS). The following question will be provided by Mr. [Todd Menasco] from One Capital. Please go ahead, sir.

Hi, guys. I have two quick questions. The first one is on the industry demand and supply. I think for a few quarters people have been expecting a pretty tight supply situation in 2008, maybe -- especially in the second half. But given that in the past, maybe a few months, it seems like a few companies like Sharp and Samsung and maybe some Taiwanese companies have indicated that they're pulling in their ramp into '08 a little bit, I'm wondering what your thoughts are in terms of the supply that's coming online and what the potential demand -- what would be your thoughts on the supply/demand situation now for the industry directionally?

Directionally only. You're right; some of our competitors are pulling in their schedules and expanding their capacity. Therefore, the situation is going to be a little bit more relaxed than we have originally expected, but still we are looking at a very tight supply situation this year. It might not be as tight as last year, but it is going to be still tight supply situation.

Okay. And do you think the tightness will start as early as the first half, or would be that more like the seasonally strong second half?

Well, as you said, normally the seasonality starts up-swing from the end of second quarter. And you have also seen that has been pulled in about two months last year, so it could be that the strong -- the tightness may start depending on each company's -- each manufacturer's -- LCD manufacturer's discipline and the -- but it could start as early as maybe end of first quarter, beginning of second quarter.

Okay. And my second question is on your Gen 6 product mix. Can you tell us a little bit about the product mix in Gen 6? And then, going into Q1, it seems like with your shipment guidance of monitor increasing but TV declining, are you allocating more production of Gen 6 to more monitors?

You're correct. We are shifting more production to monitors in our Gen 6.

So if you had to give a percentage for Gen 6, how much of Gen 6 are you using for TV versus monitors versus notebook? Is that information that you can provide?

Yes, of course. For P6 square meters it's about almost 80%, I would say, still for TV.

80% TV.

Yes. What Daniel said is that they would increase monitors a little bit but it's not so that it is more than TV. So TV the vast majority, between 32 and 37 inch.

Okay. And the logic behind doing more monitors in Q1, is that because the profitability of monitors is still better or is there any other reason behind that?

Profitability and then it's a question -- a function of demand also.

Okay, got you. Okay, great. Thank you.

Thanks.

(OPERATOR INSTRUCTIONS). The following question will be provided by Mr. George Chang from Citigroup. Please go ahead, sir.

Hi, guys. Thanks for taking my call. Just a very quick question. I saw in the press that management commented that there would be possibly an over supply in the first half '09. First, I don't know if that's a misinterpretation by the press or that's the management's comment, because that does seem a little bit strange because in the first half '09 you guys think you have the largest incremental supply growth. So at the same time, if you are foreseeing like a possible over supply, perhaps you want to delay your Gen 8 fab ramp-up a little bit. Thanks.

Actually, from 2009, rather than Gen 7 plan, you will (inaudible) start to see a mass production.

Right, but if you look at AUO it's probably more like second half '09; Samsung's more like 2008. According to their schedule, they will finish ramping up by end of 2008. So I thought that [LPO] had the biggest incremental growth during that particular period, first half '09. I don't know, maybe that was a misinterpretation or --

So, I think 2009 the supply increase ratio is catch up demand increasing, so from 2009 the demand curve is maybe changed compared to 2008. So from -- according to seasonality, 2009, particularly during the first quarter, is very risky, I think.

Okay. So based on that sort of assumption, how will you change your plan on the P8 or Gen 8 ramp up? How much delay can be expected if the demand does turn out to be very bad?

Yes. So, as I said earlier, that depends on how things evolve towards the second half of this year, what will be the outlook. So if we don't see that we have a good outlook to ramp the capacity that we want and fill it productively, then we are going to temporize the ramp schedule.

Okay. And would that hurt your profitability for Gen 8, by knowing you could face it in the first half '09?

Well, if we delay the ramp schedule a bit, then probably we'd also postpone some of the initial expenses to a later stage.

Okay. So that will have no impact to your profit loss, basically?

I don't think it will be a very big impact.

As you know, there are 52 product case. That part will touch the -- purchase price will touch under US$2,000. That means from middle of 2009 the market will increase gradually, so.

Okay. Thank you, guys.

Currently there are no participants with questions. (OPERATOR INSTRUCTIONS).

Okay. On behalf of LG Philips LCD, if you don't have any more questions, we would like to thank you for participating in our fourth quarter earnings conference call. Should you have any further questions, please contact either myself or my colleagues. Thank you for your participation.

Thank you.

Thank you.