LG Display Co Ltd (LPL) 2010 Q3 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 third 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 third quarter earnings results by LG Display.

Hello. My name is Anthony Moon, Head of the IR Department here at LG Display. On behalf of LG Display, I'd like to welcome everyone to our global quarterly conference call. I'm joined here by our IR staff as well as always, Kevin Choi, Vice President of the TV Marketing Department. Unfortunately, Davis Lee could not join us from the IT Marketing, but Stanley Park from IT Marketing has offered to join. So he will be more than happy to take your questions on the IT.

Again as the operator just mentioned, before we go into the Q&A session allow me to give you the highlights of our third quarter results and touch upon our outlook for the fourth quarter and the rest of the year.

Before we move on to the earnings results, please take a minute to read the disclaimer. I would like to remind everyone that the results are based on IFRS accounting standards and the results are unaudited.

Moving straight on to revenues and profits, our sales grew 4% sequentially and 15% year on year to KRW6.7 trillion, as our shipments increased 12%.

Unfortunately, operating profit fell 75% sequentially and 73% year on year mainly due to a sharp drop in panel prices and a rise in depreciation cost on our side as our P8E or our second Gen 8 and our [AP2], our LTPS fab came -- were fully operational in the third quarter.

Although average panel prices fell over 13% in the third quarter, our cost cutting efforts and increasing portion of premium products allowed us to maintain operating margins of 3% in the third quarter.

Net profit came in higher than the operating income, mainly due to FX translation gains in the third quarter as the won appreciated.

Looking at our financial position and ratio, as of September 30, 2010, we have KRW3.1 trillion in cash and cash equivalents. Inventory was KRW2.5 trillion, a slight increase from the previous quarter. But the days of inventory remained relatively unchanged from the previous quarter.

By adjusting our utilization ratio -- excuse me, our utilization in the fourth quarter, we plan to reduce our inventories provided now. With that said, I will say that our inventories are slightly above normal, somewhere between three to four days above normal. Again our plan is to reduce that, the number of days outstanding in the fourth quarter back to normal.

Moving on to cash flow, our cash flow from operating activities resulted in a cash inflow of KRW1 trillion, while our investing activities resulted in a cash outflow of KRW1.5 trillion. That resulted in a net cash outflow after CapEx of KRW447b.

Looking at our shipments and ASP, during the third quarter our shipments increased 12% sequentially to 7.2 trillion -- excuse me, 7.2m square meters. Our ASP on a per square meter basis fell by 10% to 778m -- excuse me, $778.

While panel prices fell closer to 14% on a like-on-like basis in the third quarter for us, our average blended ASP fell less than 10%. This is mainly due to a shift to higher value-added products, including LED TVs, higher resolution displays for mobile devices and panels for the tablet PCs.

Looking on to our revenue mix, you'll see that our TV portion of total sales rose to 58%, as much as the 12% growth in the third quarter in terms of area shipment was led by TV. IT fell to 34% and Mobile and Applications rose to 8%. So again the IT portion falling is due to a sharper fall in the panel prices for IT and relatively slower growth in that sector.

Our capacity increased by 20% in the fourth quarter as our P8E or our second Gen 8 was fully -- was operational for the full quarter in the third quarter. But again our shipments increased by 12% as our utilization remained close to 90% throughout the quarter.

In regards to our expectations for the fourth quarter, we expect our shipments to increase mid single digit level. We do expect pricing deterioration to slow down or decelerate. While we expect further price erosion on TV panels, we are seeing signs of stability on the IT panel side. And we are cautiously optimistic that we could even see prices rebound for IT panels in the fourth quarter.

In regards to our CapEx guidance, you will note that we have lowered it from last quarter. Our guidance last quarter was slightly over KRW5 trillion. Our new guidance is somewhere in the mid to high KRW4 trillion level. And that is mainly due to many of our equipment for our third Gen 8 or P8E fab coming in at the end of the year. And the payment on a cash out basis for that equipment will -- it looks like it's going to be pushed to 2011 rather than 2010.

The one key point I would like to mention to you is at this point in time, there is no slowdown in our facility investments for this year and next year. It's just the timing of the equipment coming in.

I'll end it there and I'll open it for Q&A. Again I'd like to remind everybody to give everybody equal opportunity to ask questions, I would like to ask everyone to keep the questions to three. Thank you.

Now Q&A session will begin. (Operator Instructions). The first question will be provided by Mr. Brian J. White from Ticonderoga Securities. Please go ahead.

Hi, good evening. When we look at operating margins this quarter, we're down pretty significantly and the lowest since first quarter '09. Could you just parse out what drove that, number one? Number two, when we look at the fourth quarter, can we see improvement in operating margins?

The major cause of the operating margin fall is basically ASPs falling. Again like-on-like ASPs fell close to 14%. Our blended average fell 10%. That combined with the increased depreciation expenses as our new facilities came on line; those are probably the two most -- biggest culprits.

Now as to fourth quarter, we don't give earnings guidance. But because ASPs were falling on the third quarter basis even if they -- if the prices stay where they are now and don't move, ASPs on an average basis in fourth quarter will be lower than third quarter. So to say fourth quarter, whether we will see an improvement on the third quarter, I think is difficult at this time.

Okay.

And then when we think about -- your inventories went up 18% sequentially. When we think about the fourth quarter, you said inventories will go down. Number one, how much on a percentage basis do you think we'll see a decline. Number two, what type of cost-down are you targeting in the fourth quarter?

The inventory levels right now I would say we're about three to four days above where we would like to be. So in that terms, our target is to reduce it by that amount sometime in the fourth quarter by adjusting our utilization.

As to cost-down, our internal target is to be similar to third quarter, where we got about somewhere between 5% and 6%. But that will be -- some of that will be dependent on our utilization ratio. So actually as our utilization ratio falls, actual cost goes up. So if we're forced to reduce utilization a bit more because demand is very low, then our costs will go up (inaudible). Also the currency has a factor in our costs because much of our raw materials is either -- the payment terms are either in US dollars or yen based.

Finally, just how successful have you been in decreasing glass pricing?

Sorry, that is a very difficult question for me to answer and I would just sidestep that one. I apologize.

Okay, thank you.

The next question will be presented by Mr. Andrew Abrams from Avian Securities. Please go ahead, sir.

I wonder if you could talk a little bit about the part that helped you on the blended ASP. You mentioned tablets and LED. I wonder if you could give us some -- where you were on LED penetration for third quarter, where you think you'll be on fourth quarter and how much of the tablet business really affected that, not the LED side, but the general ASPs?

In the second quarter, our LED portion of TV was slightly below 30%. In the third quarter we got to about mid 30% level. As to tablet PCs, because effectively we only have one customer, it's difficult for me to say how many units we're shipping. But it has become a significant portion of our IT business right now, the tablet.

Would you expect that tablet business to be one of the reasons or a significant reason why you expect your IT side to be relatively stable on pricing? Or is this outside of that tablet business?

It's outside of that. We're seeing -- and I think Stanley will add some more on that. But I think it's beyond just that.

We feel that because of the supply has been reduced for the IT field, so the -- most of our customers does not expect further price drop. So their request for the price has been quite stabilized. So that's why we see in the fourth quarter the IT price drop will be slowed down or stopped.

Okay. And on the capacity side, you obviously moved up pretty substantially because of P8E. What's your expectation for production capacity by area for fourth quarter?

There won't be a huge amount of increase in fourth quarter.

I'm sorry, I missed what you said.

There won't be -- our second Gen 8 isn't completely fully ramped yet.

Oh okay. So you won't see a big move up in the fourth quarter. You expect the next Gen 8 to be operational in first quarter of next year?

That's the timing -- timeline right now, yes.

And would you expect the increment to be about the same as what we saw between second quarter and third quarter for the new facility as it ramps up?

No, no. The new facility is half the size.

Half the size, okay. Great, okay. And do you have a general target yet for your LED penetration rates for -- I'm sorry, on what you mentioned before on the LED side, your 30%, was it for the TV side or is that an across-the-board number?

For TV.

TV side, okay. And do you have an across-the-board number where you're including monitors and notebooks also?

Notebooks we're almost close to, very close to 100%.

Right.

Stanley, on monitors, what is it, 30%?

Similar.

Is it somewhere between 30% and 35%.

Similar, similar to TV.

It's similar to TV. Okay. And do you have an expectation for 2011 on where you think those numbers will be on a general basis?

Industry wise I think the TV industry will be half and half. Lamp is 50%, LED 50%.

Got you. And on the IT side it would be obviously higher because notebooks are really up there but what about on the monitor side?

I think monitors will probably be similar to TV as well.

Got it, terrific. Thank you very much, I appreciate it.

The following questions will be provided by Mr. Jeffrey Toder from RBS. Please go ahead, sir.

Hi, good evening. First question is on OLED. Could you maybe go over your strategy both in small and larger sized OLED?

On the larger sizes, we think OLED, AMOLED TV will start to become a product for the mass market, probably starting around 2013 is what we're thinking. So for that time frame internally we're studying various production technologies as well as which generation of fab we should go with. And I would say sometime within the year or early next year we'll come to a conclusion on this.

But to say right now, which way we're doing, what we're -- which direction on technology or fab is a bit early to say right now.

As to Mobile, to be honest we're concentrating most of our efforts on TV. So that -- the reason being because we have IPS and demand from our customers for the IPS technology for mobile devices is increasing with not just one customer, but other customers as well.

Just on, still on the OLED side, if you're moving into the TV market, obviously it'll be a larger generation fab. Would you build a new fab or put the facility in a new shell? Or would you convert one of your LCD shells to doing OLED?

Again, various options are being discussed right now and we're trying to find the best solution because I think you and I would agree OLED has the viability but it's a cost issue. And that's what we're working on, how do we make this cost effective and cost competitiveness with CCFL. So for me right now to say we're going to do one direction or another, I'd be misleading you, because we haven't really made that decision yet.

Okay, thank you. Okay, second question on the cost side, you talked about the depreciation. But even if strip out depreciation we still see that costs are up about mid 3% range in third quarter. I was wondering if you could talk about what was driving that side of it?

Well, mind you there's a mix change involved in there as well. If you look purely on a per square area basis, always TV is the lowest, followed by IT and then Mobile. Remember Mobile mix, what we have described in our presentation as Application, most of that is Mobile devices. The mobile devices on a per square inch basis is the highest. So if that portion increases, you actually see an increase on a per square meter basis.

So if we still -- you gave us a number of panel price excluding mix. Do you have a change in costs that also excludes the mix change?

About 5% -- 5% to 6% cost reduction actually on our side.

For material costs.

No, overall.

Non-depreciation costs would have been down 5% to 6% if it wasn't for the change in mix. Is that correct?

Quite right. Correct.

Okay, thank you. And last question, just on utilization rates in fourth quarter. If we think about what you said about reduction in inventories, you're around 40 days of inventories now. If you bring that down by about four days, your revenues sounds like they're about flattish, just with ASP versus volumes. So it sounds like you'll have to have a lower utilization rate also considering that you have a higher production base going into fourth quarter. Is that fair that we might see a sub-90% utilization rate in order to reach your goals of reducing inventories?

It depends on what end demand looks like. But I don't rule that. Again it will depend on our end demand.

Okay, great. Thank you very much.

The next question will be provided by Mr. Steven Goulden, Nevsky Capital. Please go ahead, sir.

Hi there. Thanks for taking my question. Would you be able to talk about what your expectations are for 2011 in terms of TV demand growth and also what you expect from the industry in terms of supply?

And would you also be able to talk about utilization rate discipline, what we've seen over the last quarter from the Korean and Taiwanese panel makers in particular? And what you expect to see going forward as panel prices normalize.

First on what we expect for next year, I think, Kevin.

For TV industry growth ratio regarding your question, I think that most of the industry people are expect about around 15%, 16% that range. So that's kind of, I think, the number people are now talking about. So that's the number we are also thinking about.

Another question --?

You mentioned about the utilization.

Yes.

When the results finally come out we'll see. But I think it's a fair guess to say that the Taiwanese competitors' utilization probably in the third quarter was lower than the Korean manufacturers. As prices continue -- if prices continue to fall I think that you will see more utilization cuts in the fourth quarter. That's what we would expect if prices continue to fall, which -- for some products, which we do expect.

Now you mentioned about prices stabilizing. If prices stabilize or start go up, naturally we will see utilization incrementally increase to meet that. But I think that it's way too early to discuss prices rebounding. I think in the fourth quarter, we will get very close -- we will probably hit bottom in terms of pricing. But as to how long we'll be there, that's the question. And we're cautiously optimistic sometime in the first quarter or second quarter next year, we will see prices rebound. But again it really depends on a lot of macro issues.

It all depends on, we think, fourth quarter retail sales. If fourth quarter retail sales is the pretty okay, then I think that first quarter next year we have a chance. It all depends on fourth quarter retail sales.

Okay. Sorry finally, you gave me your estimate for TV shipments for 2011, 15% to 16%. In the IT space what are you forecasting?

For the monitor, around 3% quarterly growth and for the notebook PC, we see around 30% growth, mainly due to the smartbook growth.

Sorry, that's 3% year on year monitor and 30% in notebook panels.

Right.

Mind you, the notebook panels is including the tablet PCs as well, what he referred to as -- internally we refer to the tablet PCs as the smartbooks internally in LG Display.

Okay. Great, thank you very much. That's very helpful.

The following questions will be provided by Mr. Chris Muse from Barclays Capital. Please go ahead, sir.

Yes, good evening. Thank you for taking my question. I guess I have a utilization rate question, I was hoping to ask it a little different way. When you think about the little bit of excess inventory that you have in the capacity that you've brought on, I guess the question is -- the way I'd like to ask it is do you plan to reduce your panel starts in Q4 relative to Q3, overall in terms of square area.

I'm sorry, panel starts?

Yes.

You mean panel shipments?

Panel starts. So glass starts, utilization.

You mean inputs.

Yes, exactly. The inputs, right.

Our guidance is area growth to --- growth about 5% in the fourth quarter. So to meet that output, or whatever you want to call it, input, output, we will increase about 5%.

But the plan is also to drive down your inventory internally so I would think some of the sales would come from that as well, right?

Right.

So then your input should actually be less.

Or about flat sequentially, possibly.

Again it depends on how demand, end demand looks like.

So the plan right now is flattish. And then I guess when you're looking for that signal as to whether to ramp it up or ramp it down, what are you looking to? Are you waiting for greater clarity on Golden Week? Are you waiting for Black Friday in the US?

I think Kevin hit it right on the nose. It depends on Christmas sales, end of the year sales.

So if that's the case, then it doesn't seem like you could do anything utilization-wise in Q4, because that's almost the last day of the quarter. So I guess the plan is to run through --

(Multiple speakers).

Yes, to meet Christmas demand, we can't do it now. I think and Kevin can discuss more. What we're discussing is if Christmas sales is very well, the seasonal sales, then I -- because inventory in the channels is quite normal. Everyone is carrying less inventory than what is normal for this time of the year. The new inventory levels are lower than what is traditional for this time. So if sales go through during Christmas, what we're looking for is a restocking period, sometime in the first quarter.

Okay. And if you were to see weaker pricing, I would imagine that's particularly more on the TV side, rather than IT. How would you adjust your utilization? Would it be more geared towards the Gen 8s or would you go with the lower sizes?

We don't make a lot of TVs on the lower Gen, generation.

Okay. So your decision, if you get -- if things are a little bit more conservative, you would be cutting utilization on fab Gen 8.

I can't say that definitely. But if TV demand isn't there there's no -- we're not going to stockpile on inventory on TV or IT at this point in time. We would have to adjust the utilization rate.

Sure, it makes sense. And then bigger picture, can you talk a little bit about the roadmap that you have to drive down the components/material costs over the next two, three, four quarters? What kind of cost savings are you modeling internally?

Again for next quarter, we're looking at similar cost reductions to this quarter.

Instead of talking about component price reductions per se, what we're doing is coming out with more cost effective products, both on the LED side and the lamp side for TV and IT. So I don't want to concentrate all of our cost-cutting efforts on driving down component prices per se, but redesigning our products, or coming out with new special applications. For example, LED up to now was always -- most of it has been on the high end, high spec products. Now we're starting to make LED TVs for the mass market as well.

Excellent. Thank you very much.

The following questions will be presented by Mr. Ben Lu from J&W Seligman. Please go ahead, sir.

Hi, guys. I have a few questions. One just a quick housekeeping question, Anthony, how much is your capacity on a square meter basis including Q4?

That's difficult for me to say right now because as of right now where our Gen8 -- P8E is right now there isn't a huge plan to further increase the ramp on that. But if demand comes out very good for the TV side we may, but as of right now not very much.

Okay, got it. And then when you talk about the inventory, the three to four days, is that in final set or that in raw materials?

Finished and semi-finished mostly.

Got it. And Anthony I think at the local meeting I think you guys had commented that there's still some excess inventory at some of the distributors. Can you comment on how much that is?

Kevin could add but not at the distributor level, no. There's some at the set level, yes, but not the distributor level.

Okay. Because I thought you said earlier that the inventory in the channel is lower than normal.

What I would describe as the new normal. But no, distributors I would say is normal. The only one --

What we explained was that distributor area inventory level for TV is normal level right now. But August to September, distributors they adjusted their inventory so they reduced their purchasing quantities. So that's why set maker has the inventory right now. So I think the October, November the set-makers' inventory will be adjusted. Then I think that December time frame I think the industry -- the inventories are all normalized. That was my explanation.

Okay, got it. So it sounds like there's still a little bit of set inventory in the channel even though panels are still below normal?

Panel is -- I think that the panel makers always adjust their input glass and output [glass]. So panel side there's not that much in inventory. Panel side is okay. But set side we think there's some inventory. But that's less than one week inventory, so it can be adjusted in October, November.

Got it. And then one last thing is, if I think about your guidance for 5% shipment growth in Q4, and most of the panel shipments for Christmas is already done, where is the demand coming from? Have you begun to see any China restocking demand post Golden weekend, or have you not started seeing that?

China market demand actually will pick up from November. They are start pulling in panel to prepare their January, February sales. So we expect from November, China the demand will pick up. And I think that October sales were -- all the October Chinese holidays sales was good. So I think that November, December, China market the demand will be pretty good demand.

Okay. So your 5% shipment guidance for Q4 is coming mainly from China and not from any other regions?

Well [November] the rest of the world as well.

Because October, November still we are shipping for -- October shipment is -- October, November, until middle of November, the shipment is targeting Christmas period. So normally October, until mid of November, the -- actually shipment is actually the biggest shipment.

Got it, got it. Okay. And then just to -- I apologize, one last question. Just to clarify on this utilization part is you said you guys have about three to four days of extra inventory. And it sounds like maybe there's another week of extra set inventory in the channel. And right now the question mark is still out there in terms of what sell through will be. Why wouldn't you be cutting your utilization lower versus what you achieved in Q3?

No. Again I don't rule out that possibility. If it doesn't look like we're going to meet our 5% growth limit -- our growth target for the fourth quarter, then we will most likely have to cut utilization a bit more. You're right.

Okay. Great. Thank you, guys.

The next questions will be presented by Mr. Yair Reiner from Oppenheimer and Co. Please go ahead, sir.

Yes, thank you. Just to follow up on the prior question about channel inventory, can you give us a sense of how the inventory differs with respect to LED and CCFL backlit TVs?

I think the LED inventory is higher than CCFL inventory.

Okay. And then how does that fact reflect the sell through and what does it tell you about the degree to which maybe the industry has been a little bit too aggressive about promoting LED TVs this year? Or do you think it's a matter of getting those price points at retail down to where you start seeing more elasticity?

We expect that normally the LED versus lamp set price gap used to be 50% higher in second quarter. And in September that changed to about 40% higher. And as of now in October the percentage gap is 25% to 40%. So we expect holiday season the gap will be about 30% or lower. So because the industry wide LED set inventory is higher, I think that during the holiday period I think that the promotion will happen with about 30% or below 30% gap. Then I think that this LED inventory issue will be cleared in this holiday sales. So when we start next year business I think the industry wide could be healthier than as of now. So I think that this LED inventory situation will be cleared before the end of this year so that is --

Regarding the price also set maker is promoting the LED product so when the price gap narrows down I think the consumer will start buying that. Example is that in the China market, all the October, China broker companies they promote LED because they had inventory. When they actually reduced the gap from 50% to 30% actually sales increased quickly. So the proportion of LED suddenly changed to 25% to 38% during that period. So I think that if the worldwide holiday sales, set manufacturer or brand people, if they reduce the gap to around 30% or below 30%, definitely the LED penetration ratio during that period will be pick up. That's what I'm expecting.

Thank you. That's very helpful. Now you said that next year you expect industry wide LED TV mix to be about 50%. What do you think it's going to be for LG Display?

Normally our company about 10% higher than industry average.

Okay. And then my last question, can you give us a sense of size migration for TV that you've seen over the course of 2010 and also if you could size migration for IT. I have a sense that has slowed or maybe even reversed, but if you guys could give some confirmation of that. Thank you.

Size migration always change to big size. So every year our big screen size proportion is increasing. So next year also our big screen size proportion will be continuously increasing.

Do you have an estimate in terms of average TV diagonal size kind of in '09 and how that's progressed over the course of 2010?

Can I get back to you on that?

Yes, sure. Thank you.

The next questions will be provided by Mr. Steven from CLSA. Please go ahead, sir.

Hi. It's Steven Fox from CLSA. Just one clarification on your production plans for the fourth quarter. Would the month of December include production for Chinese New Year, and is that impacting your growth outlook, or is that still too soon to say?

Can you give me just a second please?

Sure.

Yes. As Kevin mentioned the Chinese New Year demand will start to come in sometime late November and December time frame.

So that production is baked into your 5% guidance I would assume then?

Yes, some. Yes, right.

Okay. And could that number still adjust depending on Chinese demand for this quarter and what you just saw in Golden week, or is it probably pretty well fixed?

No, it's not fixed. We will have a better number as we get closer to December. But that's what we've put into our plans for the fourth quarter. But as we get closer to that date, then we'll see how much the Chinese local brands actually want to sell into the market.

Great. Thank you very much.

The following questions will be presented by Mr. Brian J. White from Ticonderoga Securities. Please go ahead, sir.

Yes I just want to -- I think I missed, what are you looking for in terms of TV, notebook and then PC growth next year from the panel industry?

I think we mentioned it --

I think we already mentioned it --

TV, 17%.

Mid-teens.

Mid-teens, for TV, somewhere around there. And then monitors low single-digit. And then notebooks close to about 30%, but that includes the tablet PCs as well.

And what percent growth do you expect from the tablet market?

It will be slightly lower than 300%.

Lower than 300%.

Yes.

Lower than --

Okay. And when we think about the March quarter, how are you thinking about pricing going into March quarter. I mean it's a seasonally soft period of the year from a US, European standpoint. China has the New Year, but you're building that quite a bit in the fourth quarter. So how should we think about the March quarter?

Yes. Kevin was just talking about this about ten minutes ago. He said if holiday sales are very good, the consumer does come back, then the set manufacturer, the distributor gets more confidence about the inventories, or the low inventories they're holding and then they start to order. So if everything plays out as we hope it will, again we're cautiously optimistic, in the March quarter of next year we'll see prices rebound.

Maybe if you have a chance to meet our IR people early January, just right after Las Vegas, so they can give you answer.

That's great. And when we think about the US, the TV market has seen about five consecutive months of year-over-year decline. It's clearly in a recession. Why do you think that's going to change in the holidays?

I think we're hoping that there will be some promotion period that time. While we're sitting on a little bit excess inventory, we mentioned that set manufacturer also sitting on excess inventory. So (multiple speakers).

When I look at the market, critical factor is the US market, because China market is on track right now. So we expect this year China market can hit [35m]. Next year I think trend-wise it's okay. So China market we think it should be okay. But European market also, EU, still when we look at the number, YoY growth ratio when we look at that, it's on trend also.

Only one issue is the US market. US market after May it showed minus growth continuously. But recently the rate of minus growth is improving right now. And also when I talk to retailers they don't know exactly what will happen in fourth quarter sales. But I think they are preparing the promotion to improve the situation. So US market is the market we are watching it right now. If US market retail in November, December is good, then I think that the situation can be changed because retailer actually they lower their inventory level and they were not sure about these holiday sales. So if holiday sales is better than their expectation, automatically their inventory level is low. Then I think that from January they have to increase their inventory level. Then additional order I mean --

Yes. And what do you think the chances are of that happening really? I mean the US market is clearly in a recession. We've got -- for TVs. And we've got a product, this December quarter, outside of TVs, that will suck a lot of dollars out of other electronic products, which is the tablet.

If I may add. I think -- and I don't mean to diminish the importance of North America or the US. I think what we're failing to realize is the TV market is no longer US-centric. Two or three years ago US, I'd agree, US was 35%, 40% of TV demand. Now North America is no more than 23%. China, which is about 20% of global TV LCD demand is growing 30% plus. Rest of the world, the emerging markets ex-China is growing close to 50%. So unless we see a major fall off in US demand in the fourth quarter, in excess of third quarter minus growth, I think we can reach our 5% growth sequentially because, as Kevin mentioned, we're watching US. It's an important market no doubt.

But the rest of the world, even Europe surprisingly, is resilient. Even post World Cup third quarter you've seen positive growth. So I don't know if you're based in the US and you're seeing a poor picture of consumers in the US which is no doubt, but other markets there is still huge amount of growth. Even Japan is growing.

Yes. No, I'm in the US but I go to China a lot. And what I've noticed is a good Golden week, but the growth rate in China has really been decelerating. Europe, probably next year won't be as good as this year. They've got a lot of problems. And Japan a lot of the stimulus goes away next year. I don't see why next year's going to be an attractive area for TVs.

You're moving from fourth quarter to next year.

That's why we told you next year we are expecting mid-teens growth. This year growth is 25%. Next year growth is mid-teens because of what you mentioned.

I think it will be tough. Thank you.

I disagree.

The following questions will be presented by Mr. Jeffrey Toder from RBS. Please go ahead, sir.

Hi. Thanks for taking my questions. I've got just a very quick one. Was there any inventory provision in the cost of goods sold in the third quarter?

Nothing more than the normal inventory adjustment for the prices decline, we mark-to-market.

But since prices fell very sharply, did that number go up maybe versus second quarter?

Yes, absolutely, because prices fell. Yes, yes.

Could you give us some idea of what margins might have been if you hadn't had that write-down?

Can you give me a second?

Third quarter.

In value it was about KRW100b.

KRW100b of inventory write-down.

That's mark-to-market.

For mark-to-market.

Yes.

Okay, excellent. Thank you very much.

The following questions will be provided by Mr. Andrew Abrams from Avian Securities. Please go ahead, sir.

Two quick questions. You talked about the CapEx change being a payment issue in terms of when the payments are actually going to be due. Is that push of payments for the Gen8 into 2011 a function of a slower ramp or is this right in line with basically where you thought you would be at this point?

It's really, really a timing issue. Much of the equipment for P8 -- third Gen8 was due to come in somewhere around November/December period. And there you got delayed by a couple of weeks, no more. So that was the payment period to 2011. So that's the real issue, nothing more, nothing less.

Okay. And just one kind of hard question to answer on calculating utilization rates. How do you calculate your utilization rate? I know you can do it on a square meter basis I guess, or there's a lot of ways to calculate that. Can you give us just a little handle on that so we're all talking about kind of the same thing?

On our table you'll see that it's on a per square meter basis. And if you look at our total capacity and our output that's how we calculate it.

Okay. So it's on a per square meter basis.

Right, right, square meter.

Got you. Okay. Thank you very much.

The following questions will be presented by Mr. Ben Lu from J&W Seligman. Please go ahead, sir.

Hi, guys. Thanks for taking my quick follow-up questions. Anthony, where is tablets included? Is it in your notebooks segment or other?

No, it's in the PC -- notebook.

Okay. So in your revenue mix you guys -- so it's in the notebook side. And what do you think the LED premium will be for panels as we go through this quarter?

I'll leave that to Kevin -- it's difficult to give you a number out there because we throw out a number there, it becomes a number. No, as Kevin mentioned, no doubt that the premiums on the LED TVs have to come down. In conjunction with that, panel price probably needs to come down as well, but as to what degree and how much I would prefer not to say at this time.

Got it. And then my last question is on going back to utilization, I know the plan right now is to keep utilization roughly similar to Q3 to hit your shipment target. But how should we think about the utilization for your TV fabs, Gen8 etc., because my understanding is that you're still ramping your Gen5 and 6 for the tablets. I think Gen3 and 4 are already fully utilized.

No, we're not -- I think there's a misunderstanding. We're not ramping Gen6 or 5. They're just -- we're assuming they're -- we're converting them to do more of the [A8-IPS] panels. But we're not ramping. We're just assuming they're fully operational in our utilization calculation. As to our Gen8 further ramp up, that's because it's not fully ramped up, our second Gen8, P8E. That decision will be made within the fourth quarter depending on how TV demand is.

I understand everyone's concern about utilization and where we're going to go with utilization. I would encourage if I may, and I don't mean to mislead you, not to get overly hung up on the utilization ratio itself. We will adjust our output according to the demand. And in order to keep our inventory, we do continue to reduce our inventories.

So playing with the utilization numbers it's a little tricky right now because we --- if we -- let's say we ramp just our P8E to [forward] and then utilization comes down, so it's going to be a combination of ramp plus utilization. That's why if I do sound a little confused about utilization, because it's a combination of the two is what's happening in the fourth quarter much like what was happening in the third quarter. We were adjusting the ramp of P8E, that's why our utilizations on a monthly basis looked very different.

(Multiple Speakers)

Okay. All right. Thank you for clarifying.

I apologize.

Thanks again.

Currently there are no participants with questions. (Operator Instructions).

Operator, if there's no further questions perhaps we could end the conference call now.

There are two people are waiting for their questions.

Yes, please. We'll take the questions.

The following questions will be presented by Mr. (inaudible) from [Ochem Management]. Please go ahead sir.

Hi. Thanks for taking my question. I've just got a quick follow up on the cost issue. You talked about cost continuing to be down quarter-on-quarter going into the fourth quarter. But on a square meter basis, if we take in what's happened with the mix and the higher cost of the mix change during the third quarter, will that higher cost continue on into fourth quarter as well, so that we'll see maybe kind of, I don't know, flat per square meter quarter-on-quarter into fourth quarter?

I'm inclined to say not so, only because mix change of our products probably won't be as dramatic as it was in the third quarter.

Right, okay. And then I just have another small question on the balance sheet. Obviously you've had a cash outflow in the quarter and this has been financed by short-term debt. Is this a rolling facility or how -- if you could just give us some more details on it and what the terms of that is and those kind of things, that would be great.

I don't have that data right in front of me. I apologize.

Okay.

As to the terms and what have you, if I can get back to you. If you could send me an email, that would be great.

Okay, no problem. Thank you very much.

I apologize.

The following questions will be presented by Mr. Alberto Moel from Sanford C. Bernstein. Please go ahead, sir.

Hi, hello. I'll take the last question. So one question is very brief. In slide seven you -- actually slide eight you are showing quarterly production capacity for the different fab groups.

Yes.

Why is that number varying up and down across the quarters? Shouldn't production capacity be reasonably fixed across the quarters? Why is there variation? Of course P8 is being ramped up, but the other fabs have already been ramped up for many years, so why is that number fluctuating?

For example on -- I think you're referring to Q2 in particular. In Q2 we had the February shorter days this year.

Okay.

Q1, I'm sorry. Q1. And then also there was some little work we were doing to de-bottleneck some of our production processes. So that, when we work on the facilities to do the de-bottlenecking, that actually reduces our capacity a little bit because -- the theoretical or the effective capacity.

Understand. Okay. Thank you.

Currently there are no participants with questions. (Operator Instructions).

Operator, I think we'd like to end the conference call at this time, please, if possible.

Sure you can.

Thank you. Again, everybody, thank you for participating in the third quarter results conference call. There were some issues that seemed confusing in our answers. I do apologize. And if you send us the email or give us a call we'll try to clear up any questions that remained unanswered. We hope to see each and every one of you very, very soon. Thanks again for participating.