LG Display Co Ltd (LPL) 2010 Q1 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'll begin the conference of the fiscal year 2010 first quarter earnings results by LG Display.

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 2010 first quarter earnings results by LG Display.

Hello, everybody.

Welcome to LG Display's first quarter 2010 conference call.

My name's Anthony Moon, Vice President and Head of the IR Department.

On behalf of LG Display I'd like to welcome everyone to our global quarterly earnings conference call.

I am joined here by Hyun and Kim and the rest of my IR staff, as well as Kevin Choi, Vice President of TV Marketing Department.

Unfortunately, Davis Lee, who is in charge of the IT Marketing Department, is on a business trip so he is unable to join us at this time.

Before we go into the Q&A session please allow me to highlight some of the key points from the first quarter results, and touch upon our outlook for the second quarter of this year.

Next slide please.

Please take a minute, or less than a minute actually, to look at our disclaimer.

I would like to remind everyone that our first quarter results are unaudited and based on consolidated IFRS accounting standards.

For the convenience of our audience, our previous period accounts, both on the balance sheet and earnings statement, we did convert to IFRS and it is in the back of the presentation.

Next slide.

Our conference call will last for about an hour and I'd like to discuss the results at this time.

Next slide please.

Despite first quarter traditionally being a low quarter for not only ourselves but for the industry, we did record a revenue of KRW5.9 trillion, which is similar to the last quarter but is 66% higher than the same period last year.

Operating profit grew by 52 -- excuse me, 152% Q-on-Q, coming in at KRW789b.

Operating margins reached 13% and EBITDA margin of 24%.

Thanks to the stable demand from the US and Europe and strong demand from China, prices -- panel prices in the first quarter stayed relatively stable and were slightly up.

But we were able to mark a better than expected operating profit by expanding our high-end product mix and continuing on with our cost cutting effort.

Note that on a US dollar basis our cost of goods sold on a per meter square basis fell 5% in the first quarter.

Next slide please.

As of March 31, 2010, we had KRW3.1 trillion in cash and cash equivalents.

If we look at our inventory, it came in at KRW1.7 trillion, a slight increase over the previous quarter but the number of days of inventory remains at less than two weeks, which is below our normal levels.

Switching to the financial ratios, you'll see that our net liabilities to equity ratio is still below 70%, and our net debt to equity ratio fell to 5%.

Next slide to -- you're looking at our cash flow.

Cash flow from operating activities resulted in cash inflow of KRW955b.

Taking out the investment and other activities we still resulted in a positive free cash flow of KRW184b in the first quarter.

Next slide.

During the first quarter our shipments decreased by 1% sequentially to 6.2m square meters while our ASP per square meter increased by 4% to $838.

The rise in price reflects the strong demand in the first quarter for panels.

And, in particular, prices for IT panels were slightly better than the price increases for TV panels in the first quarter.

And that leads me to the second chart where it shows our product mix, and you will see a -- the TV portion coming down from 56% in the fourth quarter to 54%.

That has to do more with increase in prices of the IT side, monitors and notebooks, than a significant drop off in volumes on TV side.

Moving onto the next slide, please, looking at our capacity.

Our capacity did decrease by 2% in the first quarter.

Mind you, our capacity is measured by the number of days that we have working, so the number of -- the shorter month in February resulted in this 2% decline in capacity.

We were still running a full utilization throughout the first quarter and we were still short of what our customers were demanding throughout the quarter.

Now going into the next slide, and giving you some -- the outlook for the second quarter.

We do expect our shipment to increase in the low teen levels.

With respect to ASP, due to the tightness in supply we expect a flat ASP both on the TV and IT panel side, and our cost of goods sold probably remains fairly similar to the first quarter.

As to our CapEx now, our CapEx has risen to slightly over KRW5.5 trillion.

That is the reflection of our planned investment in what is, we call the P8-extension plus, or the addition to the -- our new Gen 8 facility which will come on line in May of this year.

As well as, it does include some cash outlays for what was announced today for the building of our P9 facility.

Now, mind you the P9 facility is just the structure.

As to when we will put the equipment, what generation equipment will be put into that equipment has yet to be decided.

But it is just the building itself at this time.

I'll stop there and I'll be more than happy to take any questions that you may have.

Operator, can you open it to -- for questions please?

(Operator Instructions).

The first question will be provided by Mr.

Matt Evans from CLSA.

Please go ahead, sir.

Hi, good evening.

Thanks for the conference call and congratulations on a good quarter.

I saw -- thank you for providing the restatement of 2009 on the IFRS basis.

Our pleasure.

Some companies in Korea haven't done that and it's caused confusion, so that's very helpful.

I notice that the net income doesn't change very much versus the Korean GAAP.

Right.

But the OP is very different.

My understanding is that's because the ForEx translation gains and losses move to the operating line from the non-operating line, is that correct?

That is correct.

That's the vast majority of it.

Okay.

(Multiple speakers).

Revenue is slightly lower I think under IFRS.

Is there any other things we should know about?

Our JV with [Riken] JV, under IFRS that is not included.

Okay.

And on the shipment growth in the second quarter, I'm surprised and impressed that you'd be able to put out another 10% plus quarter given your capacity plans.

So it sounds like some of the ramp has been pulled in?

Is this -- it's maybe the Gen 8 extension is ramping quicker than previously expected?

Or do I -- am I understanding that correctly?

No, I don't think so.

We haven't made any major changes in our ramp plans for our second Gen 8.

It will start in May and it's well on course and that itself will give us, allows us to increase.

As well as, mind you we, remember we, because of the number of days we lost about 2%.

Right.

We'll gain that back.

Okay.

So if you adjust for those days it's actually probably closer to 10%.

Okay, so the capacity, the like-for-like basis the capacity growth is something like 5% to 10% Q-on-Q, is it?

(multiple speakers).

Closer to 10%.

Okay.

And on the OLED investment, is this additional to the OLED line that comes on in the second half of this year?

No, that was originally announced already.

Okay.

And then finally on the new CapEx for next year that I think you filed today, my understanding is that's just for a shell and doesn't, will not relate to any equipment delivery.

Is that --?

That is correct.

The reason we're building the shell first, because when you -- when we do the foundation work and put in the building it takes about a year and a half.

Okay.

We just want to be better prepared for changes in or a potential increase in demand that may arise quickly.

Some people are going to interpret this that have implications for, or read into it what's going to happen in China, can you comment on the Chinese (multiple speakers)?

We're still waiting for the approval from the Chinese government.

While we're confident, we still have to wait.

This shell is really, it is in preparation for a potentially unexpected demand increase.

And the reason we, I say that, is because if you look at developed markets as only place of growth or where the majority of our products went in the past, now, emerging markets this year will probably account for about 40%.

And the emerging market portion will continue to grow because they're growing much, much faster than developed markets.

So, and when the swing, much like China when you saw that swing happen when consumers switch over from CRT to LCD, it doesn't happen very gradually and slowly, it happens rather quickly.

So that's what we're preparing for potentially.

Got it, okay.

That's very helpful, thank you.

Thank you.

The following question will be presented by Mr.

Dan Malkoun from Moore Capital.

Please go ahead, sir.

Hi, Anthony.

Just a quick question.

Did you give depreciation for this quarter and then what you expect it to be next quarter?

Give me a second.

Sure.

And then while you're looking for that I'll ask another question.

On the shipment guidance for 2Q, how does that break down between TV and IT?

I'm sorry, I didn't catch the second question.

Can you say that again?

Yes, sure.

Just the shipment guidance for low teens growth, how does that break down between IT and TV?

Okay.

Let me give you the depreciation first.

Sure.

In the first, it was about -- first quarter depreciation was KRW600b.

Pardon me, KRW600b.

Increase is roughly about a little less than 10% in the second quarter.

Okay.

And does that go back to --?

Will that go back to the KRW700b range as you get into third and fourth quarter?

Or --.

Right, right.

Right.

Okay.

So you still I think the last time you had talked about a similar depreciation year-on-year for the full year, like KRW2.8 trillion roughly.

That -- that's still the same, it's just going to be the timing maybe has shifted a little bit more towards third and fourth quarter?

Yes, that's correct.

Okay.

Will change.

Great, thank you.

And then on the shipment?

On the unit, on the shipment side, because much of our new capacity is from Gen 8 and that is dedicated for TV, so TV will be a bit higher.

Okay, great.

Thanks.

And then just what's your assessment of the China market right now?

Obviously there's been a lot of different -- a lot of noise that's come out of that market recently, just about some of the March numbers look like they were a little bit slower, or there were some -- a little bit of a post-Chinese New Year hangover.

What's your assessment now as you're sitting here in April?

I'll defer to Kevin.

China market situation, we think that January, February sales, the actual sales of TV in China market was pretty good.

One of the issues in China right now is that local Chinese company they actually purchased a little bit higher numbers in January, and then after they finished their Lunar New Year sales, they had a little bit higher inventory.

So I think that they did adjustment in March and also April right now.

And so I think that after middle of May China market inventory situation will normalize and then -- but in this case we already had a shortage issue in first quarter.

So our Company case already shipped our volume shipment from China to other customers, like in the US market and Euro market we need to ship more so we already shipped our capacity to US market and the Euro market and other countries.

So our Company case, actually the shipments to China it's already all adjusted so we don't have issue in second quarter.

Maybe some company who is more, rely on China market more, then they may have some inventory issue in April and maybe middle of May.

I think that the industry, they may all adjust their production quantity or they may actually slowly are adjusting their (inaudible) also.

But it depends on their total inventory situation.

But, until end of March, still the worldwide total demand and supply was that demand was bigger, so I think that inventory situation should not be a big issue right now.

Okay.

So for you guys it's been soaked up by demand elsewhere in the world.

For other people that maybe have more exposure to directly the Chinese market you think it's -- it could be a problem that lasts maybe through May and then gets cleaned up by then?

Right.

Okay, great.

And then, and from a pricing perspective then in terms of your guidance, your, the flattish ASP guidance you're giving, does that assume then that we get some kind of a dip here intra-quarter and pricing, but then that pricing goes back up as you get towards the end of 2Q?

Or how do you think about the linearity of that for the pricing for the quarter?

I know some of the published numbers that have come out through those pricing tracking agencies, but as of yet, for our standpoint, we have yet to see price adjustment as of yet.

Okay, great.

And lastly on the COGS, did you say COGS per square meter will be flat Q-over-Q in 2Q?

Or did you say the climb will be the same as it was?

No, no.

I think we're looking at, for second quarter, safe to say, flat from first quarter.

Flat.

Flat okay.

Quite flat, no change.

No change.

Got it, okay.

Thanks so much, guys.

Sure.

The following question will be presented by Mr.

Vivek Doval from Boyer Allan.

Please go ahead, sir.

Hello.

Thank you, Anthony, for taking the call --

My pleasure.

-- the question.

Congratulations on a good set of results.

First question is actually on your supply chain.

When you are actually looking at the supply chain for panels and substrate glass, IC drivers, etc., are you actually sensing any constraints at this point of time?

And also your expectations for the remainder of 2010.

Right.

I would say glass, polarizer, IC drivers are a bit tight.

I don't think it will be a major concern in the second quarter, just because much of our supply chain management has been very well kept.

But for the whole industry I think it can be very, very tight for some players in the second quarter.

And I think that gets a bit more acute as we go into the third quarter, because we do expect third quarter demand to be fairly strong.

For our part, I don't think it will impact our ability to turn out the number of panels that we plan to in the second quarter.

Right okay.

That is definitely very useful.

And one of the things is that you actually talked about normalization of inventory that is being done by some of the Chinese OEMs.

I don't know whether you've had the chance to actually look at some of their sell-through numbers of their TV sets in March, and there seems to be a slowdown there itself.

Do you actually sense any slowdown inherently within the Chinese TV market?

No, we don't see the slowdown in China market.

Actual, the market sales is okay.

I think that the only issue is that they need some time to lower their inventory so it's just their higher inventory.

So I think that market sales is okay.

Right, okay.

And finally, just recalling from the last conference call after the Q4 results, you had pointed out that you'll actually see a positive ASP impact coming from LED TVs.

Now when we actually look into Q2 and when we see your guidance of flat ASP, obviously the proportion of LED TVs is actually rising in the mix so shall we actually assume that on regular LCD panels we will probably see some decline to offset that?

I apologize, your question was you think our LED portion will drop?

No, actually from the last, in the last conference call you had actually said that the LED, LED LCD ASPs are actually higher.

Right, right.

Right?

So if you assume that the overall ASPs are going to be flat, and the LED LCD ASPS are higher, then that would assume that the regular LCD ASP should be falling.

Well, we -- partly.

Partly, but when we give our guidance it's we try to be conservative and it's -- we do expect our LED portion to increase quite a bit in the second quarter actually.

Right okay.

Well, that is very useful.

And finally, can you just update on what your current expectations are on the LED TV market and the traction that we have seen so far in 2010?

Is that --?

I'm sorry, can I go back to your original question about ASP?

Yes.

What I meant to say is that when we gave our guidance for the second quarter it doesn't take into account the mix change.

We're talking about a like-for-like price change.

Right okay.

And when you say it's a like-for-like change, so that would be on LCD panels ex-LED or would it be on something else?

Well, think of it -- think of it as this.

If our mix did not change at all, if we take -- we took the same proportion of LED in the first quarter and second quarter, the ASPs would not change very much over (multiple speakers).

Right, right.

That's --.

So the proportion of, assuming the premium on LED is maintained and our portion increases, we -- there is a small potential for our ASPs to actually increase a little bit.

Got you.

That is very useful.

Okay, fine.

And then finally, just in terms of the LED TV market, what are your current assumptions for 2010?

For the overall market you mean?

That's right, yes.

We expect this year, industry, for us we expect to reach about 28% this year.

And the market probably somewhere between 20% and 25% of overall TVs.

And that is based on a TV market of about 180m odd?

Or rather a flat panel [TV market]?

We are looking at about 200m this year.

What you -- what you are saying, 185m is the sales shipment or a panel shipment?

Which one?

This is on TV, TV shipments.

TV set shipment, right?

Yes.

Oh, sets --

TV set shipment base 185m (multiple speakers).

Yes, 185m, that is correct.

Yes, between 185m, slightly higher than that.

Yes.

Okay.

Thank you both.

The 200m I was mentioning I was talking about panel sales, direct selling.

Yes.

Okay, great.

Thank you very much.

The following question will be presented by Mr.

Oppenheimer.

Please go ahead, sir.

Hi.

Thank you for taking my questions.

And congratulations on the quarter.

Thank you.

So my first question is it seems like your Gen 8 extension will be coming up a little faster than expected.

Do you have an updated estimate on what the capacity of that will be like for year end?

Or the coming quarter?

By year end the development of the ramp will depend on what we perceive the market to be or what our customers are demanding from us simply put.

At this time in frame I would have to say ramping will probably be close to full ramp by the end of the year.

But, again, we will adjust that ramp according to demand.

In the second quarter, I think we'll be somewhere close to about 30% in the second quarter.

Okay.

So maybe average of 15% in the second quarter?

Just because you're starting in May.

Because we're starting in May you mean?

Yes.

When I talk -- when I talk about 30%, I'm talking if you take the two months as an average of two months.

Not for the full quarter, right?

Okay.

And in the past you provided your capacity conversion rate.

Don't suppose you -- would you be willing to share that with us this quarter?

In the first quarter it stands at about high, in the high 70s.

Okay, great.

And when we start looking to the end of this year and beginning of next year, it seems like we have more than a few Gen 8s coming on line towards the back half of this year.

And it seems like that might impact the supply, demand balance for beginning of next year.

I mean what are your thoughts on all these Gen 8s coming on line?

And what are your thoughts on, say, the China Gen 8s, like [Bo] and maybe InfoVision or TCL?

Yes, capacity wise this year it's growing somewhere in the mid 20% level this year in capacity.

Is that -- sorry, is that raw capacity or is that effective capacity?

Effective capacity.

Okay.

But I think throughout the year, as it is now and probably gets more severe in the second half, I think the component shortages, and will be a key factor in whether we actually see all that effective capacity being utilized at 100%.

And not all the components that you hear about, so glass, polarizer, IC driver, I think will continue to be in tight supply, probably even tighter supply as we go into the second half.

And, as you just mentioned, without those 8 Gen, Gen 8s coming on I think it will put a lot of pressure on the supply chain for components.

Right.

I guess what I'm trying to ask is do you have a sense of which fabs do you think might be more likely to be pushed out?

Like do you think the China players are just they're going to build their fabs no matter what and then maybe some of the other, your competitors might (multiple speakers) --

Those -- yes, those don't come on, a lot of the China capacity doesn't come on until 2012.

Right.

I guess Bo said the second half of 2011.

Yes, well I think it's sometime in the end of 2011.

Right, right.

So I mean do you think those guys are, and I guess you're not really worried about looking that far out, but --?

No, we are.

But I'm sure, as we have, I'm sure they have acquired their source of glass and other components for -- by then.

If you look at all the Chinese capacity, from what we can gather it looks like it'll be somewhere between 13%, roughly about 13% of global capacity.

Right.

So I wouldn't be too worried about it.

I think we're still going to see about 15% per annum growth for the next three years on LCD.

That's what we're expecting.

I mean do you have any thoughts on any kind of competitive edge in profitability between the China players and --?

No, I would prefer to refrain from commenting on that.

Oh, of course, I'm sorry.

Thank you for taking my questions.

If I may I'd like to remind everybody, I forgot to remind, if we can keep it to three questions that would be great, just to give everybody an equal opportunity to ask questions.

Thank you.

The following question will be presented by Mr.

Olga Levinzon from Barclays Capital.

Please go ahead, sir.

Hi, this is Olga Levinzon, thank you for taking my question.

I guess given your comments about area expansion, can you talk about what your overall - assuming no component shortages or limitations - what your area growth would be for this year.

And given the strong driven seasonal, 1Q and 2Q, what that would imply about the third quarter growth.

This year we're expecting close to 30% area growth for us.

And how would, given what you've seen and what's implied by your guide, what would that imply about the third quarter?

I'm sorry I may have misunderstood your question.

30% was for the full year.

Right, so I guess my question is given that 1Q shipments were well above the seasonality --

Oh right.

-- and the second quarter is really strong.

Look because of the ramp schedule of our second Gen 8 the biggest increase in our capacity Q-on-Q basis will be in the third quarter.

And what kind of ramp would that be from a percentage basis?

Probably close to about, roughly about somewhere about 20% level.

Got it.

And then in terms of your comments on slight inventory build at the Chinese local players, is that more skewed towards the TV side or the monitor side?

TV side.

TV side.

And you expect that to resume in May?

Yes, I think, Kevin?

Probably a month or a little over that to clear through.

Got it.

Thank you.

Thank you.

The following question will be presented by Mr.

Benjamin Lu from J & W Seligman.

Please go ahead, sir.

Hi, Anthony.

Congrats on a good quarter.

I'll be quick with some of my questions.

Just a couple of housekeeping.

Did you comment on what your Q1 LED mix was?

Close to 10%.

Okay, because I think your internal target was 15%, are you still struggling with LED component shortages?

LEDs have been a little tight, but one of our major suppliers, our affiliate has improved quite a bit these days, and we expect to double those numbers in the second quarter.

Okay, so Q2 should be about 20% or so?

Yes, should be above.

Yes.

Okay.

And also can you talk about the panel price premium of LEDs versus CCFL currently and where do you see that by the end of the year?

Well, we're still hovering at about 30% which is surprising in itself to be honest with you.

We didn't expect it to be this high right now.

I think it's premature for me to say where it will be at the end of the year.

Okay, but can you then maybe, Anthony, comment on your cost down efforts on LED, whether it's going to two size or reducing the number of LED tips per TV even further.

No, we're still on that schedule that I explained before, we're using four bars now soon we'll go to two bars within the year.

Do you have any, okay.

So two bar more by end of the year.

Yes, sometime within the year, yes, our plan is to go to two bars.

Got it.

And then just for clarification, again I know you've said this before so I apologize.

The COGS per square meter that excludes the depreciation and is on a like-for-like basis, correct?

Yes.

No, excludes depreciation, no, no, no.

COGS includes everything.

Okay, so sorry, I apologize.

It includes depreciation.

Yes, yes, yes.

But it's on a like-for-like basis, COGS per square meter?

Right, right, right.

Can you comment on what the COGS per square meter did on a blended basis in Q1 and your outlook for Q2?

Because I think in the past you've said LED has a higher cost so on a blended basis it increases the cost a little bit.

You're putting me on -- you're going to get me in trouble.

I apologize.

On a US dollar basis in the first quarter it fell 5% and that's the blended.

So okay, so it includes LED mix?

Yes.

Okay, got it.

And the guidance for next quarter flattish also includes LED mix?

Right.

So presumably then on a like-for-like basis your COGS per square meter is declining given that you're doubling your LED shipments.

Well, there is other things where we're saving COGS.

Our depreciation is actually going up as well in the second quarter.

Okay.

So there's other things we are trying to do to reduce our COGS.

Don't think of it just pressuring our component suppliers because I don't think that's a good strategy these days, especially in the tight situation.

I think, the ability -- who gets stable sourcing of components for the rest of the year I think will be leaps and bounds above the competition this year.

That's the name of the game for LCD makers.

Got it.

Okay thanks.

And then my last question, Anthony.

I know there's been a lot of press comments about how you guys are supplying the panels for the iPad.

Can you comment on whether that's IPS or AFSS?

I'm sorry.

Comments relating to our suppliers and what panels we supply I have real trouble discussing.

Okay, then maybe if you can comment conceptually about what do you think the demand would be for AFSS technology.

Sorry, Ben, I apologize.

Okay.

All right, Anthony, thank you so much.

Bye.

The following question will be presented by Mr.

Eric Lee from BarCap.

Please go ahead, sir.

Hi, Anthony.

My first question is for the actual March quarter results, and also the June quarter guidance, would you provide the by applications, TV and IT Q over Q growth.

Yes.

I can't give you the exact numbers but --

Just roughly.

Yes, the majority of it will be from the TV side, because that is where much of our new capacity is coming from.

Okay.

What about the --

I would have to say a good -- over 60% is from TV.

Okay.

What about the March quarter actual results?

You had slightly declined overall.

Yes.

Is it because of the weaker China demand, that's why?

No, remember February only had 28 days.

We lost three days, three work days.

Okay, good.

And my second question for your June quarter it looks like a pretty strong Q-over-Q growth.

Do we have to worry about potential double booking?

For instance, your customers are giving you more volume for better pricing or so.

Maybe when the demand weakens they would cancel it.

Do we have to worry about that?

No, we track that very carefully.

We have a system in place.

That's unlikely.

The system is a supply chain management system?

Right, right.

Okay I understand.

Thank you very much.

That's it.

The next question will be presented by Mr.

Dan Malkoun from Moore Capital.

Please go ahead, sir.

Yes.

I just had a question on the OpEx.

Dan, can you speak up a bit.

Hello, I just had a question on the OpEx.

If I look at the-- I'm just going through the restated numbers here.

It looks like your -- I guess the SG&A expense went up, started to go up in the third quarter of '09.

Where do you expect that to go from here?

Because it stayed kind of high in that KRW450b range in the first quarter, correct?

Oh, you mean under the new accounting?

Under the new accounting, yes, exactly.

In the third quarter of last year that was the differential from Korean accounting and IFRS in the third quarter last year, that's mostly from the provisions we made if you recall.

Okay.

Set aside provisions for potential lawsuits if you recall.

Oh okay.

Are you not going to report in Korean accounting anymore?

No, we are not.

Okay, so these are the numbers.

Right.

So I guess my question, Anthony, is just really what is the steady state, what that steady state number should be.

Is it closer to the KRW450m number -- KRW450b number?

It's going to be a bit difficult for you to forecast it.

Because now a lot of it has to do with the FX.

The FX related to accounts receivable and accounts payable.

Okay.

But because of the one movement in the first quarter, that's why you had that larger swing in the first quarter of this year.

Got it.

I was modeling like 4% or 5% of sales for the SG&A.

In the first quarter it came in at 7.6%.

Exactly.

And some of the portion of that is from --.

Is FX.

Yes, FX stuff.

Okay so in terms of modeling that, from a modeling, assuming FX is normal, is a 4% to 5% range still the right kind of range to think about?

If the currency stays the same, yes, I guess.

Yes, that's a fair - I know that's a big if.

And then I apologize because I know you've been asked this question five different ways from Sunday but I'll ask it again.

The first question I had, if I'm reading you correctly then, most of the growth in your low teen shipment growth is coming from TV.

That would imply that TV is going to grow more than the low teens, right?

It has to grow higher than the average, correct?

Absolutely, absolutely yes.

Okay, that's a fair assumption.

All right.

Thanks so much, Anthony, appreciate it.

The following question will be presented by Mr.

Benjamin Lu from J & W Seligman.

Please go ahead, sir.

Hi, I apologize, I just have one follow up question.

Just thinking out loud about the LED situation, I know that it's very tight right now and I know demand for LED TV is very strong and a lot of people are trying to shift away from CCFL.

I'm just curious if you look at a lot of the set makers and they're trying to grow their units very aggressively this year, but if they can't get all the LED panels that they want do you think they may then switch over to CCFL again just to gain unit volume share?

But given how a lot of CCFL makers such as if you look at Sangkin and others, have written down their capacity or taken off CCFL capacity do you think that we may actually see a situation where in the second half we could see shortages of CCFL panels?

I think that each company set up their business strategy and also this whole -- the product line is already launched in March, April in time.

So most of the store retailers, already they decide how many LED models they want to display, how many lamp models they want to display.

So I think that it may be difficult for them to change again in the short term period.

So I think --

Sure but what about the back half as we head into the holidays and they are looking for that big volume push.

It sounds like when you talk to Sharp and Samsung, sorry, not Sharp -- Sony and Samsung and all the others, they're looking for 60% or 70% unit volume growth in an industry that's maybe growing less than that.

And it seems like if they're targeting volume share in a situation where maybe they can't get as many LED panels as they want, do you think they may scramble to try and get CCFL for the back half which then may create a shortage of CCFL panels and hold up panel pricing even further in the second half?

I think that regarding LED I think that each company have their [SEM] line.

So I think that about three months or four months forecast they can confirm how many they can build.

So I think that based on that information I think that each set company prepare their promotion plans.

So I think the second half they will have some three or four month lead time and then they confirm the number and they set up their promotion.

So if they can get the LED then they can promote the LED.

If they cannot get enough LED they will promote the lamp.

So it depends on each company situation.

I think how they co-work with LCD supplier is the key.

Okay, but you don't think we can see a situation where CCFL becomes in shortage in the second half right?

No, I don't think so.

Okay.

All right, great.

Thank you.

The following question will be presented by Mr.

Yair Reiner from Oppenheimer.

Please go ahead, sir.

Hi, thanks for taking my follow up.

Just to confirm on the capacity increase, the extension.

Will that effectively pretty much double your Gen 8 capacity when fully ramped?

Yes.

Okay and then your next Gen 8 factory, that's going to be in Guangzhou, is that correct?

Or I'm sorry.

No, our next one is in Korea which is scheduled to come on in the first quarter of next year and that is 60k.

Half of our -- the one that's coming on line in May.

Okay, is that also going to be in Paju?

Yes.

And that's what you were talking about?

The factory T9 before.

Okay.

And my next follow-up question is, do you have an updated worldwide TV sell-through sales growth?

And then after that do you have any commentary on, do you think LCD TV replacement rate will be any different from CRT like-for-like?

Give me a second.

Sure.

We're looking for 186m this year for TV sales -- LCD sales, excuse me.

And that's sell-through or is that panels?

Sell-through.

Okay.

And any comments on the replacement rate?

I don't have the data with me right now.

Okay, thanks very much.

The following question will be presented by Mr.

Vivek Doval from Boyer Allan.

Please go ahead, sir.

Thank you very much for the follow-up.

Actually just a couple of questions.

First of all, increasingly TV companies, especially from Japan are talking about 3D TVs.

Does that have implications for the panel market and would there be a situation where you would require higher or different specs on panels required for 3D TVs and what that might actually do for demand and ASPs.

That is question one.

And second of all, just in terms of permissions and regulatory guarantees that you'd need to set up plants in China, where are we on that?

Can you give us just a second.

Yes.

The second question is just in terms of clearances that you would need to have to set up a plant in China.

I understand that you're required permissions from the Korean and the Chinese government, just a sense of where the company is on that at the moment.

As to China, but because we're still waiting for approval and what have you, it's very difficult for me to give you any kind guidance on regulatory issues or what have you.

At this point all I can say is we are still confident that we will have approval, but we still wait as well as all of you on word.

Okay, great.

And in terms of 3D TVs how does that affect the picture in terms of how much demand could actually be higher and in terms of ASP?

You mean 3D TV total volume for this year is not huge, so I don't think that that will give a big impact for our whole ASP.

Right, but just in terms of technology and the type of panels that are required, is it very similar to CCFL or is that more akin to (multiple speakers) panels?

There's two technologies for 3D.

There is one called, what's called a shutter glass and another one called the patterned retarders or what the market knows as active and passive.

For the shutter glass type or the active type, we as a panel maker need to make this 240 hertz refresh time.

So there is a premium charge for that panel.

As to the other technology there is a polarizer, another glass polarizer or film polarizer that's put in front of the TV.

So in both cases there is something that we do to the panel itself and there is a premium we charge to do that.

So I can say it does help our ASPs if more and more 3D panels are sold.

But as Kevin mentioned, this year I don't think it will be enough to really make a huge mark.

Right okay.

That's great.

And just finally in terms of your, you alluded to it, but just to be very plain.

In terms of LED chipset supply, that seems to be pretty tight.

But I understand that you are sourcing it from a couple of sources now, the LED.

Do you think you have enough capacity tied up for the entire year now?

We have more than a couple, we actually have more than four.

So we're fairly confident, while still, as you've mentioned there still remains some tightness and we're not getting all the amount that we would like completely, but I think the situation especially from our [previous] is improving quite well.

Great, thank you very much.

The following question will be presented by Mr.

James Kim from Nomura Global.

Please go ahead, sir.

Hi, Anthony.

Thank you for taking a question.

I understand there is a shortage on LED right now.

Could you maybe comment on when would be the earliest for us to see an ease in the shortage situation in terms of this year?

Well, at the beginning of the year we were hoping that it would ease up sometime as we get towards the end of third quarter, but we're not so sure.

Because the demand is increasing, it stays fairly high, while new capacity is coming on.

I think we may stay at this slight tightness situation throughout the year possibly.

Okay and could you give us maybe the LED mix in your second half?

Yes.

I think we'll be well over -- would be close to probably about 35% in the second half.

35% in the second half.

You mentioned 10% this quarter, roughly 20% next quarter, how about third quarter?

Yes, in the second half roughly about over, close to about 35%.

Okay.

And you know, how would the LED, how would your LED sourcing cost change over this year?

That I cannot comment about, sorry.

Okay.

And just one quick clarification.

On the China inventory problem you mentioned, is that on panels side or on the TV side?

Mixed.

So the inventory problem is both on the TV panels as well as TV sets.

Yes.

Okay, thank you very much.

Currently there are no participants with questions.

(Operator Instructions).

Operator, if there's no further questions, I think we could end the conference call at this time.

Operator?

Yes, sir.

If there's no further questions, I think we could end the conference call now.

Yes, you can conclude the conference call now.

Again, thanks for participating in our conference call.

I hope if there is any further questions that you have, please don't hesitate to give myself a call or email me or any of my colleagues.

We will be more than happy to answer your questions.

And as we will be on the road from next week, I hope we will be able to meet face to face sometime soon.

Thanks again.