LG Display Co Ltd (LPL) 2008 Q2 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 2008 second quarter earnings results by LG Display. This conference will start with a presentation followed by a divisional Q&A session. (OPERATOR INSTRUCTIONS). Now we'll commence the presentation on the fiscal year 2008 second quarter earnings results by LG Display.

Hi. Welcome to LG Display's second quarter 2008 conference call. My name is Thomas Hyun and I am the Vice President of Investor Relations. On behalf of LG Display I would like to welcome everyone to our global quarterly earnings conference call.

I'm joined by [Brian] Kim, Vice President of Market Intelligence department, Kevin Choi, Vice President of TV Marketing department, [Davis Lee] Vice President of IT Marketing department, C. S. Chung, Vice President of Mobile Marketing department, [G. S. Che], Head of R&D and Planning department and C. H. Lee, Head of IR Team.

We have approximately one hour for this call. We will spend the first part of the call discussing the key issues for the quarter, which correspond to the slides available on our website. Afterwards, we will take your questions. Before we move into our discussion of the earnings results, please take a minute to read the disclaimer.

Okay, we are reporting in consolidated Korean GAAP with an appendix to this presentation that includes our reconciled U.S. GAAP numbers.

Before we review the financial performance in detail, I would like to offer some general observations and perspectives on our industry in the second quarter. In the second quarter our area base shipment was affected by several factors. In China, LCD TV demand was influenced by the natural disasters.

In the U.S., there was a downward panel-size shift from large to small and medium, due to the economic slowdown. Also, some of our IT customers made inventory adjustments in June to manage their inventory [ladders]. As a result of these factors, our shipment was per square meter during the second quarter was lower than our guidance, representing a 3% increase.

But despite the lower than expected shipment decrease, we were able to meet our guided EBITDA margin during the second quarter, resulting in 38% through our ongoing cost reduction efforts and a favorable foreign exchange rate. But during the second quarter we were able to reduce our COGS per square meter in U.S. dollars by 5% sequentially, which exceeds our expectation. So the cost reduction was mainly contributed from the productivity improvement, from min loss activities and a favorable foreign exchange rate.

Going forward, we anticipate the market will improve in the second half of this year, reflecting seasonality. Especially, we expect the China market will recover in the second half. Since we have a strong presence in China we anticipate to benefit from this expected market improvement.

In order to better prepare ourselves for the future we made an investment decision and have reorganized some of our businesses structure. Today, our Board of Directors have approved the Gen 6 extension plan and we will invest an approximately KRW1.4 trillion in the Fab. The mass production at this Fab is expected to start from Q2 2009 and it will mainly produce IT panels. This new Fab will help us maintain our leadership position in the IT market by being able to better meet our customer demands.

Last month we launched the new OLED business unit, the [KDR] OLED business, in a highly strategic and organized manner. Previously, our OLED business was managed by the mobile business unit. We are committed to develop and strengthen our OLED business, one of the future growth engine of the Company.

Now to the financial details, and please turn to the next slide. Revenues in the second quarter was KRW4.2 trillion, up 4% from the first quarter of 2008 and up 26% compared to the same period last year. COGS per square meter in U.S. dollars decreased by 5% quarter on quarter, exceeding our guidance.

Operating income in the second quarter was KRW889b, which was slightly higher than the operating income in the first quarter. EBITDA margin recorded 38%, which was in line with our guidance, in spite of the lower-than-guided shipment.

From the second quarter we are using a simplified method to calculate our EBITDA by adding depreciation and amortization to operating income, in order to improve the comparability of the figure with other companies in the industry. If we apply the previous EBITDA margin calculation method, our Q1 and Q2 EBITDA margin would be 40% and 38% respectively. Next slide, please.

As of June 30, 2008 we reported approximately KRW3.8 trillion in cash. In the second quarter, our finished goods inventory turnover level for large panels was slightly under three weeks. PV inventory level was increased slightly over four weeks, from four weeks in the first quarter, while IT inventory level was increased to about two weeks, from one week in the first quarter.

Our liabilities to equity ratio as of June 30 was 76%, up two percentage points from the first quarter. Our current ratio as of June 30 was at 205%, which is a healthy level. Our debt as of June 30 was KRW4.3 trillion, which is a KRW261b increase from the end of the first quarter, mostly resulted from the increase of the export deal discount. Our net debt to equity ratio as of June 30 was 5%, down 7 percentage points compared to the end of the first quarter.

Please turn to the next slide.

Cash at the beginning of the quarter was approximately KRW3 trillion and cash flow from our operations was KRW1.2 trillion. The cash flow from the investing activities during the second quarter was a negative KRW606b. The change in cash excluding financing activities was KRW633b, and cash at the end of the quarter was approximately KRW3.8 trillion, which is an increase of KRW847b from the beginning of the quarter.

Next slide, please.

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

During the second quarter shipment of the total display area increased by 3% and reached 3.3m square meters, which was lower than our expectation. Shipment didn't increase as much as we anticipated in the second quarter, mainly due to a slower than expected China market, downward panel size shift in the U.S. and IT customers inventory adjustment.

ASP was in line with our guidance. On average, ASP per square meter of the net display area decreased 5% to $1,274. For the TV segment, average ASP per square meter in the second quarter fell 5% and, for IT, it fell 4%.

Please turn to the next slide.

For the second quarter of 2008 the TV segment represented 43% of revenues, maintaining the largest portion of sales. This was followed by Monitors at 26%, Notebooks at 26% and other Applications accounted for 5% of our revenues.

Please turn to the next slide, please.

During the second quarter the total production capacity at LG Display increased by 8% and it was mainly contributed by the capacity expansion at P7.

Please turn to the next slide.

Now we turn to our outlook discussion. Please go to the next slide.

I'd like to present to you our outlook for the third quarter of 2008.

We expect our total shipment to increase by a low-20s percentage. Average ASP per square meter is expected to decrease by a low-teens percentage. In the TV segment we anticipate our shipment to increase by a low-30s percentage, with an average ASP decrease of a high single-digit percentage. In the case of the IT segment, we expect shipments to increase by a low-teens percentage, with an average ASP decrease of a low-teens percentage.

We will continue to drive our cost reduction strategies and expect our COGS reduction per square meter to be a mid to high-single digit percentage in the third quarter. Since we made the decision to invest in the Gen 6 extension, our CapEx for this year will be increased to KRW4.5 trillion, and CapEx will be mainly used for Gen 8 and Gen 6 extension.

Let me conclude by saying that we will continue to focus on cost reduction activities, ongoing production [of] product innovations, enhancing customer relations and maintaining technology leadership for sustainable growth in the future.

Thank you, and this ends our presentation for the second quarter of 2008. And we're glad to answer your questions now.

Now the Q&A session will begin. (OPERATOR INSTRUCTIONS). The first question will be provided by Jae H. Lee -- Mr. Jae H. Lee from Daiwa Securities. Please go ahead with your question.

Yes, looking at the inventory amount I see that it has increased quite substantially from first quarter to second quarter, and I was wondering what's the finished goods amount of inventory for the IT panels and TV panels at the end of Q2.

Actually, -- this is C. H. Lee. We just do not communicate the end amounts without communicating the finished goods inventory DIO. We already communicated our inventory levels, as the potentially good base was increased slightly. And, as we said, TV inventory is slightly over four weeks; it was four weeks in the first quarter, so, slightly increased. And about -- and also IT area, it is about two weeks; it was at one week in the first quarter. So our inventory was increased. That is the situation.

All right. And what was your utilization rate in the 2Q?

We almost operated in full capacity.

I see. And if the inventory level rises further, do you plan to lower your utilization rate in third quarter?

Yes, we try to be flexible. We definitely have internal guidance for appropriate inventory level and the inventory level is above our tolerance level, definitely, we will try to be flexible.

Okay, great. Thank you very much.

Sure.

The following question will be presented by [Tony Tang] from Lusight Research. Sir, please go ahead with your question.

Hi, good morning, guys. I just want to know what's the yield rate in the last quarter?

Can you repeat the question?

The yield rate, what's the (inaudible) rate in other words? Let's take every glass you cut the decision then how -- like what's the average successful rate cut?

Are you talking about the glass efficiency rate or yield?

The yield.

Yes, the yield has been improved substantially -- I mean every year the yield has improved. To me --

Yes, we actually communicated with CCF, which is the Capacity Converter Factors, which is around the mid 70s.

Mid 70s. Is that overall mid 70s or by each Fab? Which Fab is running at the highest yield rate right now?

No, no. It is just the average of the total [shortcuts].

So 75.

So CCF has been again increased dramatically every quarter. And, same quarter last year, it used to be around mid 60s. However, now, as C. H. has just communicated, it has been improved to low to mid 70% range.

Mid 70% range; okay, great.

The other one is about your capacity calculation rate, so is that -- do you take into consideration any technical maintenance and scheduled shutdowns? And does, like I say, take your P7 Fab, so you have, say, 18 [lost dollar], -- 800 -- square -- thousand [kilometer] square meters the (inaudible)? Is that calculation based on a 24 hour shifts, actually you have scheduled shutdowns at times and then technical maintenance and then -- I just wonder how do you calculate by capacity basically?

Can you hold on one second. We're just trying to digest your question; hold on one second.

All right, thank you.

Tony? Tony? Hello?

Yes, yes I'm here.

Tony, can I clarify your question? Your question is that you are asking how to calculate CCF, which is the cash converted factor -- the capacity converted factor? Is that your question?

No, no, my question is about your capacity right, so -- hello, can you hear me?

Yes.

Yes, okay. The Gen 7 plan you -- do you have a glass input of 1,742 -- 1.8m square meters glass input for the quarter or the first quarter '08, right? That number, like based on a 24-hour, three-shift day calculation is actually continuous. Is it the plant working? Or is it actually -- I know you have -- every plant you have a technical maintenance, some scheduled shutdown, like half a day --

Yes, I mean you're right. It is 24 hours a day and three shifts. Everything will be considered in the calculation, however, when the equipment or somehow input is stopped for the maintenance or whatever, then that should be taken out of the calculation method.

But based on what metrics are you calculating that -- your capacity level. How much -- I don't know how you plan is that, so how much maintenance is scheduled over the year, over the quarters, over 12 months, a year in time. Do you schedule three days of maintenance shutdown with the whole plant shut down, or is that six days or 12 days? Do you have any number like that?

No, it is really -- it depends on the situation. We don't particularly stop the total production for many days for a certain period of time. It all depends on the situation.

Okay, great.

All right.

Thank you very much.

Sure.

The following question will be presented by Mr. Andrew Abrams from Avian Securities. Please go ahead with your question.

Thank you.

Hello? Hello? I think it's got disconnected. Hello? Can you hear us? Hello?

Hello?

Hello?

Yes, can you hear me?

Yes, go ahead.

Okay, I have two questions. First, on the Gen 6 increase in CapEx, I was assuming that you were running, or you were expecting to run, about 30,000 sheets on that Fab. Is this increase in CapEx an additional 30,000 line, or is this an increase in your cost expectations?

The increase in CapEx is for the capacity increase, which is about -- when it is fully ramped up we're expecting about 60k, and the increased capacity is for that.

Okay. And the 60k goal, will that be reached by the end of 2009?

It's correct. It's correct. That's what we're intending to do.

Yes, that's -- okay. Excellent, thank you.

And Gen 7, I assume is -- or the additional Fab is already planning to be on schedule; you haven't changed anything on your other Fab schedules?

You mean Gen 8?

I'm sorry, Gen 8, yes.

Right. No, we have no different schedule at the moment.

And, again, that's kind of mid-year 2009; is that correct?

We are just planning to kick in the production there in the middle of Q1 next year. However, again, the same as Gen 6, full ramp-up schedule is likely to be the end of the year.

Right, okay. And that was a 60 also, for the year end?

That's for about 83k.

83k, okay, got it. Thank you very much.

And one other question on the comments that you made in terms of the U.S. market moving from larger TVs to smaller TVs.

Right.

How does that affect your business? You still are looking for pretty substantial volume increases on a square meter basis for third quarter. Does that change anything in your outlook, you know, more units but smaller units? How does that affect you guys from the panel side?

Our outlook is already considered all the factors, and in Q2 what we're experiencing is about the unit doesn't have much other changes, whereas, because of it's a downshift from larger size to smaller and medium size, the area base is decreased. So we already considered that factors into outlook of Q3.

So would that assume that you're expecting a fairly substantial increase on the IT side to make up some of that additional volume?

Kevin, can you --?

No. Our TV production is substantially going up in third quarter because, even though our second quarter TV volume didn't hit the target of the area, that most of the impact comes from China market, because of China market -- You know that we are pretty strong in China market, and China market, because in second quarter there is an earthquake and also in late May and June time there is lots of rain in the southern part, so China market was very slow in second quarter.

But we expect from the third quarter, China market, there is big sales coming for October; that's one of the most big promotion days in October. And also, next year, January is a new year, China's lunar new year, so normally that -- from November, December the orders are coming in. So second half of this year we expect China market is much better than second quarter. So we expect that third quarter, fourth quarter TVs, the volume pick up is pretty higher than compared to second quarter. That's why we think that there's no competitive shift to IT -- from TV to IT.

Got it, thank you.

And, lastly, on the OLED business, is the OLED business part of your CapEx or is that going to be separate dollars spent or -- how do you account for the OLED business and where do you think the spending is going to be there?

At the moment we don't have any specific CapEx plan or investment plan for OLED. As you know, as I mentioned earlier, that we just started a new OLED business unit and they're going to do all the planning for the future. Technically there is technology, R&D and those things, but at the moment there is no CapEx plan for OLED business at the moment.

Thank you very much; I appreciate it.

Sure.

The following question will be presented by Mr. Michael Bang from Macquarie Securities. Please go ahead with your question.

Thank you for taking my call; I have several questions. My first question is, with your new CapEx guidance, what will your capacity growth or shipping growth be, year on year, in 2009?

Okay, let me just look up the data.

Capacity-wise -- this is C. H. Lee. Capacity-wise in 2009, worldwide capacity will be around -- below 30%, but our capacity increase will be over 30%. And also, our shipments in 2009 will be around, but below, 30%, while our worldwide shipment will be around about -- just over 25%.

In terms of the inventory, what do you think your finished goods inventory level will be at the end of third quarter?

As our CFO said, we will not increase our inventory levels above the level at the end of June, so we expect it will go down a little bit.

Also, looking on page 11 of your presentation, the Others CapEx has increased to KRW0.8 trillion from KRW0.6 trillion in your presentation that you had in April. The difference there, is it ForEx or is it something else?

Yes, we definitely have some ForEx effect because the Korean wan has been depreciated a bit in the second quarter. But, in addition to that, we have some capacity investment amount adjustments, not -- the investment detail was not changed but a bit adjusted. So purely it's, as you said, we had -- one of the part was the ForEx effect.

Okay. My final question is on your CapEx strategy. I'm having a real hard time understanding why you've decided to become much more aggressive. Can you give some more insight onto that?

This is Davis Lee of IT marketing. I can definitely cover the rationale for our [business] investment. Industry growth for the Notebook is going to be very significant; over 10% in next three, four years. While that kind of growth is continue, the industry competitive for the Notebook is not going to be increased. So we have certain leadership in the Notebook market, so if we do not invest in our Gen 6 extension we are going -- that kind of leadership position is at risk; so that is the first motivation.

And the second one is, the 16 by 9 initiative which we are leading the industry for the standardization, so Gen 6 line is most flexible line in terms of Notebook support and also coming 16 by 9 format in Monitor demand.

And on top of that, LGD is one of the first companies in the industry who produce Notebook panel out of Gen 6 Fab, so we want to keep the kind of initiatives and leadership in the industry. That is exactly why we decided to invest in Gen 6 extensions.

And this is Thomas again. Let me just add a couple points -- more points. So -- we sold Monitor -- for Monitor we have not been able to meet all the customers' demands. So if Gen 6 extension is mainly used by Notebook PCs then we have much more room to produce Monitor and deliver what customers need.

And the other point is that if we make a decision to invest now, as we discussed earlier, that the mass production is likely stopped in the first quarter of 2009, and there is a ramp-up schedule. So ramp-up schedule, when it is fully ramped up it's going to be the end of the year, end of 2009. So at the moment we know we definitely did -- do a lot of forecast in terms of the second half of the year and 2009, but going forward the business goes on, so we definitely make a decision to invest for the future.

I can understand your components in Notebook size, but you said that you weren't able to fulfill some of your clients needs on the IT panels in 2Q, but yet your inventory went up. Can you explain how that works?

Again, this is Davis Lee. Let me comment on that portion. Usually, if you look at the first quarter at one week level is really, really high inventory situation; it barely meets the customers' needs level. Now our second quarter and two weeks is back to normal situation.

We see some of the inventory the issue in the industry, but as we announced -- explained during the presentation, some of the -- IT side inventory will be cleared during June and then July timeframe. That will help the industry inventory situation and bring the market back to a normal position. That is the way we understand it. And, as Thomas explained, we have all the internal guidance to keep our inventory level healthy.

Okay, thank you.

You're welcome.

Thank you.

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

Good evening. I have a couple of questions, first, on the CapEx number. It seems that all of the 6G CapEx number is being put into 2008, so the increase or the cost of 6G is about 1.4 trillion, and that's about in line with the increase. Does that mean there's a sharp drop in spending as we go into 2009? And also does that indicate a very high level of spending in the second half of 2008?

Actually, -- this is C. H. Among the CapEx we commented it was KRW1.4 trillion --

Right.

-- and some portion has been moved to 2009. So it is true, as you said, most current CapEx will be executed in this year, so that's why we have increased our CapEx a lot compared to the previous communications.

And have you changed? I think in the local meeting, did you mention that you've changed the way you are disclosing or giving guidance for CapEx on a delivery basis now instead of a cash-out basis?

We actually guide the delivery base CapEx, but when we are communicated in the analyst meetings in mid June -- mid May, we at this point communicated in a cash-out basis. So it was a KRW33.6 trillion.

Right.

So now it is KRW4.5 trillion, but if we applied the cash-out basis it will be around KRW3.8 trillion, so a little bit different, but not too much.

Okay, so KRW3.8 trillion on a cash-out basis.

Right.

Okay, got it. Okay.

We were talking earlier -- I guess there were some questions about your capacity conversion factor. My numbers or my calculations actually show that it was pretty low in 2Q at around 0.64, and it looks like your increase in shipments that you planned for this quarter is primarily driven by a sharp increase in the capacity conversion factor. Can you maybe elaborate on why that number was low in 2Q and why you expect that to increase in 3Q?

What was the number you were quoting?

0.64.

64?

Yes, 64% or 0.64 times.

I think we need to have a pretty -- we need to have a clarification in terms of how you came up with 64%.

I used shipments as a percent of input capacity.

I don't know, I'm not sure whether we are talking the same numbers. I think, Jeffrey --

Yes.

-- maybe can we -- because, again, if we don't know whether we are talking about apples-to-apples numbers, I think it is not really helping discussing that. So can we move on to the next question and definitely we can see each other again in the near future, so we'll definitely clarify that?

Okay, let's move on to the next question then. First, your CapEx guidance for pricing is down low teens for the quarter. Can you break that down between TV and IT panels?

Yes, this is C. H. TV will fall down high single digit and the IT side will be low teens percentage down.

IT is low teens.

Yes.

IT is low teens and TV is high single digits; doesn't that give you low double digits rather than low teens?

No, it gives low teens in total average; we're talking average.

Okay, so it has to be really low teens, like 13. Okay, fair enough.

And then on the production side, if you look at your guidance for 3Q, and I understand that you have a big increase in your output, you have got your inventories which have gone up a little bit, you have prices that are already weakening, normally this doesn't sound like an environment where you would want to increase your output very substantially. You've talked a little bit about China demand in October and in, maybe, January. Can you bring that down to maybe what you see in the third quarter and why you're so confident that you'll be able to increase your output by over 20%?

Kevin?

Yes, normally the TV market the second half demand is much stronger than first half, and when we expect -- after we finish first quarter we expected that some of the third quarter demand is coming in to second quarter but, actually, it was not happening because of the China situation. So we think that China market second half is just a normal situation, so they didn't pull in their purchasing in the second quarter so their third quarter should be normal.

So we think that from August the demand will pick up and, especially the China market, the second half demand is normally much higher than the first half, so that's normal, not the exceptional case.

Okay. And what percentage of your sales go into China?

Our percentage of sales China is normally about -- normally about mid teens in third quarter level, yes.

Mid teens of total or mid teens of TV?

Mid teens of TV.

Mid teens of TV, okay. So it's high single digits overall, roughly. Okay. I think that that covers most of my questions right now.

Okay, all right.

Just one final, I guess there was guidance of EBITDA around 30%, or can you just elaborate as to what you said at the local meeting today on your EBITDA guidance?

It was low 30s.

A low 30s EBITDA?

Right

Okay, thank you very much.

Right.

You're welcome.

Goodbye.

The following question will be presented by Mr. C. J. Muse from Lehman Brothers. Please go ahead with your question.

Yes, good evening. Thank you for taking my question. A couple of quick questions here. I guess first off, and I apologize if you've already gone through this, could you tell us what your inventory days were for both TV and IT exiting Q2 and where you think that will be exiting Q3?

Yes, our TV inventories we normally communicate with our finished goods, so it was slightly over four weeks in Q2, but we expect it will go down a bit or at the same level -- below the same levels.

Do you know the IT side?

IT side, so, it was about two weeks in Q2, so also we expect some improve in inventory in Q3.

Okay. And then on your shipment guide of low 20s, what assumption are you making in terms of your utilization rate there? Are you assuming that you continue to run full out, or are you tempered a bit?

We assume this full utilization at the moment.

Okay. And in terms of your -- the outlook again of the low 20s shipments, can you talk about the seasonal pattern that you expect there, considering the likely weakness that we're going to see on the IT side for at least another month? How do you see that spread out over the next three months?

Okay, this is Davis. To answer your question, typically, IT side is -- first half is about 44% or 46% demand happens during the first half. The second half is about 54% or 56% demand level. As we already explained, June or July there will be slightly -- industry will have a slight adjustment of the inventory, but that kind of inventory clearance will be finished by end of July. So we expect a hefty rebound of demand from the August onward until November; that is our projections.

So combined with the TV side, the seasonality which is much bigger than the IT side and now it's at typical 45 to 55 percentage of the seasonal demand. We expect that our -- the output growth is about 20 plus percentage.

That's very helpful, thank you.

And last question here, on the TV side, can you comment about what trends you're seeing outside of the U.S., and then how concerned are you about where we are in the U.S. right now? And if you could provide any color on what the decline has been in terms of the average size, that would be very helpful. Thank you.

Kevin?

The U.S. market -- the large size -- second quarter of large size a little bit slow down compared to first quarter and -- but, still, 32 inch kind of size and 37 inch that -- 37 inch is also a little bit slow but 32 inch is okay. So below 26 or so second TV demand, somehow there was two TVs, three TVs, so second TV demand is pretty strong. And we think that also in next year it will [be] continuously strong.

So (inaudible) wise it's okay, but area-wise it's a little bit smaller than (inaudible). The second half we think that pricing is going down, set price is going down, so I think that big TV the demand in the second half will be pick up. So we think the second half is okay. That's our view in the U.S. market.

And outside the U.S.?

And outside of the U.S. market, euro market we think that also 46 inch, 47 inch kind of big screen TV is a little bit slower than expectation, but 32 inch and below size is pretty strong in Europe. So I think that area wide in Europe is -- I think that compared to expectation, we think it's okay. So the TV market as a whole, China market is -- was slow in first half; we think the second half it will come back.

And another good thing for the TV market is the emerging market. The emerging market situation is okay. [British] market TV condition growth ratio is very high. So we think that will also help in the second half. So we think second half TV market condition is okay.

Great, very helpful, thank you.

Thanks.

The following question will be presented by Mr. Tony Tang of Lusight Research. Please go ahead with your question.

Hi again, sorry, I have one follow-up question. I'm just trying to get some ideas about the COGS per square meters for the last --

I'm sorry, we didn't hear your last statement. Can you repeat?

The COGS per square meter base.

COGS per square meter base?

(Multiple speakers) what was it?

Right. It's mid to high single digit down.

Sorry, can you say again?

Mid to high single digit down.

No, I want the second quarter numbers.

Second quarter numbers, it increased by about 5%.

5%, okay. So am I right your conversion factor is actually around 72% [quarter on] quarter?

With the CCF in second half -- second quarter, are you asking whether there was a 72%?

Yes, is that around (inaudible)?

Yes, I gave a range of the low 70% range, so that's the number we have.

Okay, so you did have the inventory increase over the quarter and then does that include transfer to almost 380 square meters inventory? Is that correct?

This is C. H. How -- where did you get number?

Well, I take the dollar amount of the change of the inventory and then convert that to U.S. dollar, and then divide by the COGS based on per square meter, then roughly [it was] 380,000.

So, at this point we don't have such a data in front of us so, I'm sorry, we cannot verify the number.

Okay, okay. All right, thanks a lot.

Right, thanks.

The following question will be presented by Mr. [Len Erik] from Goldman Sachs. Please go ahead with your question.

Okay, thanks for taking my question. My first question will be, I guess, the Company's guidance for second half is quite positive. Is that based on industry or market's historic or seasonal pattern just kind of projection, or we have certain come this level by already securing some order from clients for second half?

Yes, I am (inaudible) actually in the first quarter we had to make our (inaudible) for TVs by low teens. Already we delivered our guidance and IT also will increase the demand low teens due to seasonality, such as back to school and the (inaudible) the Christmas season.

So (inaudible) are being used in the inventory levels from -- are happy except for their inventory as of end of June to the normal level, that is, Monitor four weeks and the Notebook, three weeks until August. And then maybe a slight demand in terms of a pattern is expected to be tight again from September. So we're already slight demand there with (inaudible) of the third quarter, but a little bit tight again from the end of the third quarter to November.

Okay, if I understand what you mentioned correctly, that means we think the inventory will be digested in July and then from August the customer will come back to review the inventory for back to school --

Yes, that is exactly what we said.

Yes.

Then September will be a shortage month again and it will last for the -- into the Q4, am I right?

Yes, right.

Okay, thank you.

My second question is actually the Company has mentioned that from last year the Company keep emphasize profitability, and for many times the Company has been suggesting that the strategy will move from competing for market share to maintain profitability or increase profitability. Is this strategy still valid for the Company, given that we have an increased CapEx number?

What if the CapEx number -- what if all of those capacities coming into the market that makes them oversupply situation and we may have to grow our business at expense of profit, where that leads us to some consideration for capacity fall back or utilization -- or lower our utilization? What -- is there any change of strategy at this moment compared to the same time last year?

Okay, this is Thomas again, and I definitely can say that there is no change in strategy which is of a profitability focus. However, one thing you -- we need to remember is that this the competitive world and we need to compete, and also we have customers that we need to deliver what customers is looking for, what they need. So we definitely need to maintain our market share.

Rather than going into this world with the market share war, getting into market share battle, we try to sustain our market share. At the same time, we try to focus our profitability while satisfying our customer needs, and that's exactly what we are doing. So as we explained earlier, our CapEx increase doesn't mean that all of a sudden there is market share gain; it's not fair. So it is a still value strategy which is maintained.

Thank you. My understanding is the Company used to mention some criteria to judge if that's the timing for some capacity cut back, considering some market circumstance. So, again, follow up my last question, my question is if -- or under what kind of situation will the Company consider to pull back or trim our utilization in the near term? I know that Company mentioned that we would keep utilization at 100%, but what if there is any accident or any change of market situation? Will the Company consider to make some changes or adjust the utilization (multiple speakers)?

Yes, definitely we will do that. Definitely when the market situation is not good, which is converted into our inventory situation, because when the market is not good it means that we may have inventory problem. If that's the case, we're not just going to build up -- keep on building up the inventory, so the Company will definitely look into the situation. And by managing our inventory, that means that we need to manage what we input.

Okay, thanks a lot. I think that's all from me. Thank you.

Okay, thanks. So we have time to take about one more question.

Currently, there are no participants with questions. (OPERATOR INSTRUCTIONS). The following question will be presented by Mr. [Ackerwal Hosh] from Lehman Brothers.

Hi guys, on the credit side at Lehman Hong Kong. Just quickly, can you remind me what's the CapEx guidance on a cash basis for next year, for 2009?

In 2009, so we are now planning to set up our business plans, so it was not fixed yet. So it is very speculative at this moment, but we are expecting it will be around KRW1.5 trillion to KRW2 trillion range.

Okay, that's fine. Thank you.

You're welcome.

Right, thank you. So, on behalf of LG Display, we thank you for your participation in our second quarter earnings conference call. If there are any further questions, please contact either myself or my colleagues. Thank you.