LG Display Co Ltd (LPL) 2010 Q4 法說會逐字稿

Good morning and good evening. First of all, thank you all for joining this conference call and now we'll begin the conference of the fiscal year 2010 fourth-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 fourth quarter earnings results by LG Display.

Good evening, good afternoon and good morning from wherever you're calling, wherever that applies. My name is Anthony Moon. Again, I'd like to welcome you to LG Display's fourth-quarter results conference call for 2010.

Now, with me, here, is our IR staff as well as the new representatives from the TV Marketing and IT Marketing. With us is J S Park, who heads up the TV Marketing Department, and Seong Lee who is now the Vice President of IT Marketing.

As the operator just mentioned, before we go into the Q&A session, allow me to highlight some of the key points from our fourth quarter results and touch upon our outlook for the first quarter of 2011.

If you move to the next page and look at the disclaimer, I encourage you to take a few seconds to look over that page. I would like to remind everyone that the results are based on IFRS accounting and the results placed in this presentation are still unaudited.

Moving right along to slide number three, fourth quarter sales grew 10% year on year, but fell 3% Q on Q as ASPs continued to decline in the fourth quarter. Looking at our two main parts in the fourth quarter, TV prices fell a bit more than the IT.

In the fourth quarter we registered an operating loss of KRW387b as we recognized KRW238b in expenses from the EC fine in the fourth quarter. Without recognizing the fine, our operating losses would have been a much lower KRW150b.

Now, despite the losses recorded in the fourth quarter, for the full year, sales grew 27% year on year to KRW25.5 trillion, and operating profit reached KRW1.3 trillion, up 30% year on year. For the full year this was achievable as we increased the proportion of higher value-add products, such as AH-IPS panels and LED TVs throughout the year, plus the introduction of the super high resolution display for smartphones.

Moving on to slide four. As of the end of 2010, we had KRW3.1 trillion in cash and cash equivalents. Our inventory declined to KRW2.2 trillion, which is an 11% fall from the previous quarter. Our current inventory situation I would describe as being very normal, somewhere between two weeks to three weeks. While our debt levels have increased a bit, our net debt to equity is still a very manageable 14%.

Moving on to slide five and our cash flow. Cash flow from operating activities resulted in a cash inflow of KRW1.7 trillion. Cash flow from investing activities resulted in an outflow of KR2.1 trillion, resulting in net cash outflow of KRW416b. Now, note that our CapEx for the full year of 2010 amounted to KRW4.9 trillion.

Moving on to slide number six. Our panel shipments increased 10% while our overall ASPs fell 10.7%. As I mentioned a bit earlier, prices dipped slightly more than what we had expected with TV price -- with TV panel prices falling a bit more than IT panels.

Moving on to slide seven, if you look at our mix, you'll see that TV represented 56% of our total revenues, followed by monitors at 19%, notebook PCs at 17% and applications at 8%. The fall in TV portion is more due to the ASP decline than an actual decline in output of products. The larger portion of notebook PC is a reflection of the rise in tablet PC panels for us.

Applications, which is mostly mobile displays, handphone displays, remain relatively high at 8% as demand for the super high resolution panels from smartphones remain strong.

Moving on to slide eight and looking at our capacity. Our input capacity remained relatively unchanged in the fourth quarter as we had very little or no new capacity coming on in the fourth quarter, though a small incremental increase is from our P8-2 which, as you know, began to ramp earlier last year.

Now, looking to this quarter -- 2011 first quarter, we are expecting our shipments to decline in the high single-digit range sequentially, due mostly to the seasonality of our industry. We expect TV panel prices to decline a bit more but at a much decelerated pace compared to our fourth quarter.

On the IT panel side, we actually believe panel prices will remain very, very stable in the first quarter.

Within the whole food chain in panels, we see very little excess inventory throughout the food chain. As set manufacturers continue to reduce their inventory of last year's models and start to introduce new models later this quarter, we do expect demand to improve in the latter parts of this quarter.

We expect our CapEx, in 2011, to hover around KRW5 trillion on a cash-out basis. That includes our investment in our third -- excuse me, our fourth Gen 8 in our new P9 facility, and there is some amount of (inaudible) CapEx included as well.

If I may make one comment, last year we expanded our market share and we were able to bring new differentiated products to the market; in particular, our AH-IPS panels for tablets and other IT products. We also introduced a super high resolution IPS display for the smartphone market and now we plan to expand on those differentiated products this year by introducing our new 3D TV, which we call, internally, FPR; FPR stands for Film Patterned Retarder. We basically put a film in the panel to create the 3D imaging. Now, in the market, some would call our FPR 3D cinema 3D, comfortable 3D or true 3D. Whatever it is called, we think it is the next generation of 3D displays to come out and we have high hopes for this product to be very differentiating and capture a large market share within the 3D TV market demand.

With that, I'll end my summary of fourth quarter and outlook for first quarter and be more than happy to take any questions you may have. Operator, if you can open it up for questions, please.

Now Q&A session will begin. (Operator Instructions). The first questions will be presented by Mr. Brian White from Ticonderoga Securities. Please go ahead, sir.

Hi, good evening. When we think about the outlook for the March quarter, you're saying total shipments down high single digits; how should we think about TVs versus IT?

We think TV shipments will fall a bit more than IT, so when I say high single digit, of that we think much of that will be TVs.

So, should we think TVs will be down more than high single digits?

Yes, that's correct.

Okay. And, in terms of the tablet market, what are your expectations for tablet at units in 2011 for your Company?

I'll pass that on to Seong, if I may.

Your question is for the unit growth for the whole year or for the Q1?

Yes, for the whole year for LG Display.

We are planning about five times growth in terms of the units for tablet smartphone area. Internally, we call it smartbook but in the industry it is called tablet. (Multiple speakers).

What did you ship in 2010? How many units?

We are expecting -- we are planning to ship around 80,000 -- 80m units to PC makers and mobile makers.

Okay, that's great. And, then, when we think about just the tone in the TV --?

I'm sorry; can I make a correction on that? That's our expectation for the overall market; that's not just us. I think your question --.

The overall market so how about LG Display?

It's difficult to give you our -- because, right now, we really have just one real customer and we're expanding that but because we're -- most of our parts go to one particular customer, it's difficult to give you exact number of how much we plan to ship this year. I hope you understand.

Okay. No, I understand, that's fine. When we think about the tone in the TV market -- I just want to get the tone straight because I've seen some articles out this morning and it's saying no immediate recovery, TV demand shrinking significantly. I just want to be clear; what are we seeing in the TV market? What was the sell-through for the holiday? And what was the TV sell-in for the Chinese New Year, so far?

Chinese New Year isn't until next month so I would describe, well, the build up to the Chinese New Year, compared to last year, I think it's a much -- I want to use the word reduced but not as aggressive as last year.

Okay, yes.

And a lot of the set manufacturers in other markets, they're still working through some LED inventory.

Okay.

And the replenishment of old models to new models, I think, will happen sometime in the second half of this year.

And, so, you're just saying they're working through LED inventory because the holiday sell-through in the US and Europe and elsewhere wasn't that strong, is that what you're saying?

Can you give me just a second?

Sure.

This is JS.

Yes.

The sell-through last Q4 was good. It's over there I think they are higher than our expectation and, according to GfK and [NPD], in North America's Q4 growth rate was YOY base high-teen percent in Europe, [from middle] to high percent, and LED inventories just from us Q2 and Q3, Q2 was shortages and everyone want to purchase LED because they can sell and they want to sell more LED. But that impact on Q4 I think that there is no big problem in LED inventory now.

Okay. So, the sell-through, you thought, was okay or good and then they had too much inventory going to the holidays so you're going to work it down.

Yes.

Okay, thank you.

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

Just a little follow-up on what we've already talked about. Just your general feeling on what's going on in the industry, particularly in the TV space but not only in the TV space. Is the standard practice for you guys to back away -- and the rest of the industry just to back away until after the Chinese New Year? And expectations built in for things to get better in the second quarter timeframe or are you working that theory off of very specific customer requests that are timed that way?

I think you answered the question yourself. It's a combination of both. There is the combination of seasonality and then a lot of our customers, their plan is to introduce their new models for this year, sometime later this quarter.

Okay. So, the planning comes from the brand side and that's relatively typical for brands in terms of timing. So, this isn't unusual in the sense that anything has changed other than maybe relative to last year's very strong period.

Everybody -- this is JS. Everybody is very interested in the Chinese market now. According to AVC, one of the most important famous Chinese research company, they're expecting this January and Lunar Year, big holiday, in China their forecast of this year minus 9% YOY base. But actual research was around 14% growth rate; it's a positive growth rate. So we expect at least 1m TV sets will be sold this new season so I think most of Chinese set maker need more panels after new holiday season. So we expect more volume from March for their second big season to May 1. They are preparing from March and April.

And that panel demand, would that be new model panel demand or is that --?

That's right, yes.

That would be new panel, right.

And also our FPR demand is increasing.

And that's particularly on the TV side that you're talking about, I assume.

Yes.

Okay. And on the IT side, other than the change in the mix between 10-inch panels and, maybe, 15-inch or 16-inch panels, is there any change in the general tone of the IT market? Have you seen interest in orders picking up as we get through Chinese New Year or is it pretty typical seasonality?

(inaudible) the conventional size of the notebook PC panel is in line with the normal conventional seasonality, but when it comes to a 10-inch or smaller, such as 8.9, 9.4, 9.7, 10.11 categories, as you know very well, currently demand for smartbook tablet is dramatically increasing right now and many makers are planning to roll out the new model from February to April time zone. We believe the panel for tablet, panel for smartbook will be very much increasing but when you have normal conventional size such as the 14, 15.6, that category will still remain solid in accordance with the mobile conventional seasonality.

So you would not expect the tablet business to decrease what would be considered your normal notebook size business. This is -- you expect that to be incremental.

Yes, that's right.

Okay.

Most of the feedback from our customers, from the market, is tablet is perceived as a second device in addition to a normal traditional notebook so there might be some cannibalization but not that much. We believe those two device, notebook and tablet, will remain as a complementary relationship.

Got it. And the decline that you're looking for in square meter area in first quarter, would you attribute some of that to the smaller size -- the volumes in smaller size panels, meaning the 9.4s and 9.7s, as opposed to larger panels or is that just built in to your -- not part of your expectations for lower area -- square area?

I think the (inaudible) Q4 last year current mature outlook in terms of the area base is a little smaller than the low one-digit percentage of decrease, is very normal, is very seasonally adjusted normal level. It has no question with the unit base of tablet increase so I think that everything seems okay.

Okay, terrific. Well, thank you very much; I appreciate it.

The following questions will be presented by Mr. [Richard Clode] from Moore Capital. Please go ahead, sir.

Hi, good evening. I just wanted to understand, I think on your Korean conference call you talked about TV panel prices stabilizing and maybe recovering in February and March. Could you talk a little bit about how the inventory correction has impacted panel demand and how that maybe comes back once, as you said, LED inventory is cleared; how that impacts panel demand coming to you as a panel maker?

Yes, I think -- I'll touch upon this and I think JS has more to add. I think basically what we're seeing in the market is, there's some still old models from last year that remains at, I think, some of the set manufacturer want to clear before they introduce new products. And, then, in particular regions, such as China, after Chinese New Year, I think, assuming Chinese New Year sales is okay because, again, inventory build before Chinese New Year I don't think is excessive. Then China starts to rebuild for the May Day holiday, which is also very, very large. And then you had that coupled with new launch of new models from other set manufacturers, plus, for us in particular, our new FPR 3D product -- TV; I think that's what's going to really drive us in the second half of this quarter. JS is explaining that.

This is JS. Total inventory of TV panel is normal level but LED is around one to two weeks higher than normal end of Q4 last year but lamp models are around one week shorter than normal number, but lamp market is around 60% -- 60%, 65% so total inventory is -- we don't concern about inventory.

Also, set makers reduce their purchasing, especially LED, and they are increasing their lamp purchasing now, so from January and maybe February there is no additional or excessive LED inventory. And the channel in (inaudible) maker is -- inventory level is stable and normal level.

Can you quantify the uptick? I think some people look at 2011 and say, look, TV growth is x; it's like 12% and supply growth is 50% and 60% so that means an oversupply but, given the inventory correction we had in the second half of last year, does that mean that, in terms of on a quarter-on-quarter basis if we look at panel demand, it actually increases as we get out of this inventory correction and go into Q2? How much panel demand increase can we see? Because, I think we just look at the TV side. What do you see as a panel maker?

Could you give me just a second, please?

Sure. We're looking at end demand and we're seeing TV demand so when people look at 2011 they say, TV demand is x and supply is a bit more but given we had such a big inventory correction in the second half, as a panel maker, what uplift are you going to get in panel demand once (multiple speakers).

That's a very good question. We concur with you. I think we think the overall TV demand this year is probably a mid single -- excuse me, mid teens area this year, as well. Throughout the year, we think second quarter will be a little bit better, third quarter even better than second quarter looking at the relative inventories and the demand from our customers. To give you a degree of how much, right now, it's a little difficult for us to gauge but we do expect things to turn up.

You talked about demand increase and capacity increase. It's true, capacity is probably increasing somewhere between 15% and 17%, somewhere in that area, this year, overall. But much like last year, I think our industry, both ourselves, our competitors, will try to maintain utilization to regain some balance in supply and demand.

But I'm thinking, on a quarter-on-quarter basis, supply is fixed and you adjust utilization, but in terms of the inventory correction and then maybe inventory correction stopping, your panel demand will actually increase quite a bit if your customers stop drawing down inventory. So, on a quarter-on-quarter basis, maybe TV will grow 5% but your panel demand will actually grow 10% or 15%. Is that how we should look at Q2?

I think Q2's demand will grow because of -- I just explain more detail things of compare last year and this year. Last year the growth rate was around 40% in terms of (inaudible) worldwide. Except Japan, around 25m (inaudible) -- around 25% because Japanese government [subsidy program] in Japan total TV is around 10m to 11m every year. Last year's demand was 25m and we expect half -- over 50% down so that impact will last last year and this year. So, including Japan already we explained low teens but excluding Japan we expect around 20% growth rate. 20% growth rate is still quite huge and I already mentioned set makers still holding LED inventory from Q3 and Q4 so they are quite conservative to purchase LED panel right now. But they need --- they want one more lamp panel now so we feel a little shortages in lamps. So, after clearing their current inventory, especially LED set inventory, they start to purchase again and I expect that time is March and April.

Okay. (Multiple speakers). And just as a final question, your P9 investment, I think in the past you'd got some prepayments to fund new technology investments off particular customers, did you get any prepayment to fund this investment, given its particular technology is for tablets only? Did you get any help with the funding for that capacity?

No. This is all us.

Okay, thank you.

Thank you.

The following questions will be presented by Mr. Olga Levinzon from Barclays Capital. Please go ahead, sir.

Hi. Thank you for taking my question. The first question and it extends off of the last one, within your outlook for the high single-digit panel decline in 1Q, can you talk about which month do you expect a stabilization and an actual increase in demand, both on the IT side and on the TV side? And, off of that, do you expect to have your internal orders of components, whether it's glass or LEDs, pick up earlier than that or are you on a minimized inventory time?

Well, I think, as JS mentioned, on the TV front, we're expecting our demand to increase from month of March, at the latest April, at the very latest. Our supply-chain management, we're building -- we've also built that into our assumptions when we are procuring our components for that. And IT side, as someone mentioned, IT follows a regular seasonality where it's the low period now except for tablet PCs while our tablet PC demand continues to increase incrementally. So, going back to your question about supply chain management, we are assuming things to start picking up in second half of this quarter.

Got it. And then in terms of the capacity as you're planning in light of the KRW5 trillion CapEx guide, can you talk about you expect your capacity to be exiting the year for P8E and P9?

Oh sorry, I just wanted to make a note, I forgot, everybody, sorry. We changed the naming of all of our Gen 8 fabs. We are calling our first Gen 8 P8-1, our previous one P8-E, p8-2 and our third one P8-E+ we've changed to P8-3 to add more confusion to what's already confused out there.

However, our target is to, as of right now what I say now can change depending on market situation. But we are looking to ramp our P8-3 sometime in the second quarter. Whether that's early second quarter, the second half of second quarter again depends on market condition. And the capacity of that is 68k.

Now P9, I get confused with the numbers again, P9-8 because it's in our P9 facility Gen 8 that's a [60,000k] facility. It will be completed within the year.

As to the starting of that ramp very difficult to say right now. If everything turns out great, if market demand is far better than what we expect we'll start ramping as soon as it's completed. If market conditions are not the greatest we will be very, very flexible much like when we ramped up our P8-2 last year. If you recall we did delay, we did slow the ramp a bit because the market situation did not call for it. So we'll be very flexible on both of those.

Got it. Thank you.

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

Hi, good evening. I have three questions. First, I understand that you have a fairly aggressive cost-down target for second quarter -- excuse me, first quarter, which is high single digit reduction in cost. Can you maybe talk a little bit about how you would achieve that?

Yes. Before we go onto your other questions perhaps I should answer that first. A lot of it is internal. If you exclude depreciation, you exclude labor, you exclude depreciation, we still have about 14 -- 13%, 14% in what we call internally overhead costs, basically [remaining] costs. And in there well we think there is a lot of room to lower that overhead cost in [main] portion.

Also when we -- I don't know if I mentioned to you before our business model called M+S, module plus set where we get together with a certain manufacture to introduce the new product. And by that new business model, we are also reducing cost. And that will have more and more of our products go out through that business model, so that will help us to reduce cost.

Of course, there will be certain portions of component cost reduction we have built into our cost reduction as well. But, as to say how much, what portion of the component cost reduction I think it's difficult for me to say here. Also mind you with our LED TVs we'll --- most of our products have gone to this new 2 bar model so that will help us reduce costs as well.

Okay, right, yes, 2 bar models are in mass production that's correct. Can you explain a little about the M+S saves costs?

In the past what we -- what happens usually is we send the panels to the set manufacturers, they put on all of their components and we have all of our components in the backlight, PCB board and what have you, other circuitry, other microchips what have you.

Now, through M+S we put it all together. Instead of having two chips we reduce it to one. Instead of having three or four PCB boards we reduce to one or two. And that allows us to in some of our models to reduce costs anywhere from 5% to 10% on the end product on some of these models.

Okay. So basically it reduces the total number -- it doesn't reduce --?

Right, it (multiple speakers).

Components per model, but it reduces the amount of different types of inventories you might need to carry and you can get better costs on (multiple speakers) production.

There is also logistics cost savings, there is overhead costs savings. Just give you a simple example, when a panel leaves our factory it has to be inspected, when it goes into a set manufacturer it has to be inspected. We get rid of all that because we are all together.

Okay.

So you carry less inventory, less overhead.

Okay. And going forward for the year, again great number, a great guidance for the first quarter. How should we look at the full-year cost reduction?

It's -- I think our CFO mentioned as well it's difficult to say, but -- because we all have -- there is a lot of moving parts in there, but we always try to target somewhere in the mid single digit area per quarter.

Okay, mid single per quarter. Okay, great. Second question, you mentioned that your --.

I thought that was the third question.

Excuse me?

I thought that was the third question. I am sorry, go ahead.

No, that was only the first question (multiple speakers). The second question is on tablets you said your forecast was 80m units for global supply -- for global demand. How do you derive the forecast? What are the basic metrics that you look at to come up with that number?

Well, we are talking to -- I'm sure someone will add on to what I say, we talk to our customers, we look at overall demand. We, now you may think the numbers were including all the different sizes that someone mentioned not only 9.7, there is the increase in 7-inch market. We talked about 8.9-inch markets. So there is going to be a lot of different varieties coming out. I don't know if you have anything else to add to?

I think as you know very well this is solely from IT marketing. Tablet, smartbook area is not the existing market as you know very well, this is the -- some creating market. Unlike the other global conventional product this is not just for hardware, it is going to become new biggest seller including carrier service, hardware and also operating system such as Microsoft Windows, Google the Android, and also Apple's own OS operating system.

So I think we are working with right now the leading operating system companies, and also working with the set makers to how we can create, how we can expand this market. I think the 80m is not an easy one. It's a very challenging target. But by working with the other -- our current partners we believe this market can be created as they -- through the numbers I just mentioned.

Okay. What share of this market are you targeting for this year?

Shall I get this?

Yes.

Somewhere between 50m to 60m. I believe you think it's very challenging but we are targeting a very aggressive number at this moment.

Okay.

Can we go to the next question please then?

Okay. My last one just what are your plans on OLED? And if you look at your CapEx budget how much of that is dedicated toward OLED this year?

Our OLED strategy again I think we -- I'll repeat it. On smart devices we were planning to have the majority of our smart device, smartphones with AH-IPS, so we are not going to be a huge player in the mobile smartphone market with (inaudible) mobile, it will be AH-IPS definitely.

Now we are preparing for the TV market. There is -- we are making some investments this year, roughly in the -- all of our total CapEx somewhere in the mid teens area is where our OLED CapEx is this year in preparation for TV.

Now again, we think the TV, OLED TV market will start to take off in 2013. And in 2012 we probably need to build something very large in preparation for that market, but as of now not too much CapEx into AMOLED.

Okay, so next year we should see a bigger number for an OLED-dedicated fab up in Korea, is that fair?

I can't say for certain, but I would say that's more likely than less likely. Okay, Jeff?

Great, excellent thank you very much.

Thank you. And that was more like 12 questions than three.

The following questions will be presented by Mr. Yonghi Li. from Credit Suisse. Please go ahead, sir.

Hi, good evening. Just a follow-up question on the CapEx breakdown, you mentioned that you will spend mid teens on OLED but of the KRW5 trillion that you plan to spend in 2011 can you give sort of breakdown how much spend for the P9 and maintenance and OLED (multiple speakers)

I knew this question would come. P9 is about 28%, P8 is another 28%, then maintenance CapEx, the remaining 28%, all split among those three evenly then the remaining is the OLED that I mentioned.

Okay. That answers my question thank you.

Thanks.

The following questions will be presented by Mr. Ben Lu from Seligman Investment Securities. Please go ahead, sir.

Hi, Anthony. Thanks for doing this call and taking my questions.

Hi, Ben.

Just as a quick housekeeping follow up to that, OLED that is still on 4G right now.

That's correct 4.5, yes.

It is at full capacity yet?

No, not yet not completely. You mean full ramp you are talking about.

Yes.

No, no, not yet we are still in the process. We just started at the beginning of the year remember.

And remind me again what is the full capacity, is it like 12k?

It's 4k now, it's increasing to 12k by the end of the year.

And that's what the capacity CapEx is for right?

Well, that plus preparation for TV a little bit this year.

Okay, great. And remind us again what is your guidance for Q1 utilization? I think in the Korean analysts meeting you had said --?

Utilization?

-- it would be flat for Q1, but I just wanted to clarify.

Yes, we are -- at this stage I would have to say we are probably holding similar to Q4 where it was high 80 percentile range.

Okay. So the input capacity -- input utilization will be flat versus Q --

Yes, unless things really turn around I would have to say yes.

So if you're assuming it's down in Q1, your utilization is flat, would that imply that your own inventory will increase in Q1?

No, that's (multiple speakers) -- yes, good question Ben. Mind you that's on the anticipation that we start to see things really start to recover from second half of this quarter.

Okay.

Sometime in March, we think that then, for example some of our strategic parts like the AH-IPS for the table PCs, again our FPR on the TV side, the 3D TV. So we are seeing continued momentum on those products, so that's our anticipation. We may need to build some inventory for strategic parts by the end of the quarter. But again I want to note if that doesn't come around we will have to adjust our utilization a bit more. We will be very, very flexible much like we were in the fourth quarter in the first quarter.

Got it, okay. And can you remind us again what was the LED mix in Q4, and will it decline in Q1 with more CCFL purchases?

I think we were a little over 30% in the fourth quarter. I think we will be somewhere in the mid-30% type range in the first quarter I think, possibly.

And that's even with greater CCFL purchases?

Let's see, but that's what I think we can achieve.

Okay. And the other thing is on FPR do you have any expectation what percent of your unit -- TV panels will be on FPR? And wanted to understand that a little bit more, there has been some talks primarily from the Japanese that LG Chem's 3D film still has a lot of yield issues and that there will be challenge to provide you with enough supply. Can you comment on that?

It's very difficult for me to comment on that. I think, no, they are coming along very, very well. We are happy with their performance now. And I think they are ramping their capacity. So I think they'll be able to meet our demand fairly well.

Okay.

Before I hand it over to JS to answer the 3D, FPR 3D we think the 3D market this year will be -- total 3D market this year will be about 15% of overall TVs sold roughly. And JS may correct me on that, because he probably has updated numbers, but I think we can tell you we are targeting at least 50% of that market. JS, do you have anything to add?

There are lots of demand forecasts from research companies and [panel] makers, set makers. Set makers target this year 3D total number is around 50m. And panel makers also, research companies forecast this year around 15m to 20m, our focus around 30m.

So the research companies forecast, they just think SG type and LED type FPR, they don't think lamp type FPR. And also they think that the cost, the 3D cost is quite high. But we think because of lamp type and the low cost model and LED type of FPR we think that 30m is possible. And our target portion -- total FPR portion in our total sales is around 20% to 25%.

Okay, great. I was at CES and I saw your FPR panels and I've got to say that I was really impressed by it.

Thank you.

And I've got to imagine that you would be able to price this at a premium. But I want to understand how you guys are willing to potentially sacrifice that price premium to try to open up the market a little bit more.

Yes, as JS just mentioned, because this is a new product and a new technology, without going into the segment -- set manufacturers and stepping on their toes, because it's a new product and new technology we think the market will receive it very well. The one thing I will say I think it will be additive to our margins. They will -- I think this product will improve our overall profitability.

Now as we expand the market, as JS just mentioned, FPR doesn't have to be LED backlight. It can be lamp, or it doesn't have to be 240 hertz, it can be 120, it can even be 60 if people want it.

So with FPR, the beauty of FPR 3D for us is that we can do the whole gamut of product segment -- market segment, high end, mainstream and also later on to spend market more, low end as well. So -- but at the beginning I have to say we will be positioned as a premium product, very much so at the beginning.

Got it. And sorry, can I ask one last question, Anthony, I think a previous caller earlier had laid out a scenario where Q2, let's say, TV demand -- TV unit demands may be up 5% and panel shipments might be up 10% on the assumption that TV set makers work through inventory. Is that -- my thinking on that, my question to you, Anthony, is that I thought that would imply that TV set makers would want the inventory to go back to the historical normal levels.

But I wanted to ask you if given all the challenges we've seen in the past few months is there a "new" level of normal inventory where even if they worked down the inventory going forward they may not want to rebuild their inventory again?

That's a very good question. I want to apologize to the earlier person. I am glad you asked that question, because if you didn't I was going to mention that. Going back to that earlier question, there is that potential. I think the earlier person was asking based on what we expect for this year could we have on a purely higher demand in a certain short term period going from first Q to 2Q. And I think there can be.

Unless you see a scenario where the US economy just drags on and on very, very slowly and there is no improvement, then set manufacturers may want to keep their inventories very low. But as of now all indications are they are looking to rebuild their inventories back to normal levels at -- towards the end of this quarter.

JS, would you agree?

Yes.

I guess the question I wanted to ask was what is normal? I guess we can see like you said acutely strongly demand if they want to bring it back to the old historical normal levels of four to six weeks, but maybe they view three to five weeks as the new "normal" levels.

I'll mention it this way, six weeks is what we consider normal. I think that's what generally many of our set manufacturers -- not set, excuse me, distributor's inventories.

Now that six weeks depends on how much sell-through they are having. Remember if they are having 10m sell-through then they will have six weeks to sell 10m. If that falls to 5m they are going to have six weeks to carry 5m.

So if things start to recover, demand starts to recover then you'll see the inventory will perhaps maintain the six weeks, but the absolute number is going to increase.

Got it, okay.

Got it?

Thank you for clarifying.

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

Yes, just a couple of clarifications. On the March quarter you said the TV market will be down more than the high single digits, and notebooks will be down less. How should we think about tablets in the March quarter?

Sorry, you mean -- when you mean March quarter you mean this quarter right?

It's the March quarter, yes.

We can't separate it out, but it's going to be -- as Seong mentioned business of new product has continued to grow. It is -- from our expectation it is growing quite significantly. To give you exact number is a little difficult, but it is substantial, it is quite --.

So it will grow substantially versus the fourth quarter? The first quarter will be (multiple speakers).

Yes, that's true, yes. We think -- we believe so.

Okay. And I just want to be (multiple speakers). I missed the utilization rate. Where were we exiting the December quarter, and what was kind of the high and low point of utilization in the December quarter?

We -- for the full quarter -- in fact, let's say the average for the first -- fourth quarter we were at high 80 percentile range. I would prefer not to give it on a monthly basis. I don't want to get into that habit. The first quarter (multiple speakers).

But where you -- let me ask you this, where you lower than high 80% at some point in the quarter?

Yes.

Okay, yes.

In the first quarter we plan to maintain that level right now as we -- the market we see right now I think it's safe to keep it at that level.

Keep it at that level. And then as we -- just kind of big picture, as we see the TV market growth start to slow, I know display search has 13% growth, and then we look at notebooks, PCs, we put in tablets and all the other consumer electronics, maybe you get the 14% growth in panel demand. And then we get maybe an 8% decline, 2% per quarter in ASP, now you are looking at kind of a 6% growth market and that probably decelerates in 2012. So how does LG Display turn in attractive growth rates in that type of environment? We are slowing right?

Because -- if I may answer that question because last year our unit shipments grew a little over 30%, our revenues on a US dollar basis also grew at that level. Now ASPs did decline absolutely, but in my earlier comments at the beginning I described -- I talked about our mix change, moving up the value-add chain with new products.

Last year we did it with AH-IPS panels for tablets, we did it with high-resolution displays for mobile. This year we are expanding that to, on the TV side, to the FPR 3D. There is going to be a continued mix change to higher value add. So I think this year we'll be more -- we'll be able to more than offset the ASP decline. That's our target this year.

Okay. And just on the inventory in the March quarter, you did a good job in the December quarter and inventory went down nicely. Will that also decline in the March quarter, your inventory?

In number of -- again I have to go back to number of days, but I don't think we'll have a huge increase in the number of days, because again that's on the anticipation from March we do expect demand to increase.

So we are going to keep it at, right now our inventory levels are somewhere between two to three weeks, TV normal is three weeks, IT normal is two weeks. So we are going to keep those levels. Depending on what demand is, then our absolute inventory could rise. But in terms of number of days we plan to keep it at those levels. I hope that answers your question.

Okay. Yes, and just finally you got great cost down in March quarter, so how do we -- if we look at the components we should think kind of a mid-single digit decline for the component cost down in the March quarter?

Yes, I think earlier person asked the similar question. Right now -- I apologize but to talk about components right now is very difficult for me, because there are so many things -- we have so many suppliers and their livelihood depends on what happens to us. So, again, I apologize, that part I have difficulty talking about.

Okay. But with this what I'm trying to get at, when do you -- when can LG Display return to a profit. That's ultimately what we are looking for?

Good question. We rarely very, very rarely give earnings guidance. But what I can say is we are expecting our profitability, or the losses from fourth quarter and the first quarter to reduce significantly.

But part of it's, just to be clear, you're talking operating loss of KRW150b or total loss?

At the operating level.

At the operating level, so you could be profitable in the June quarter it's not a crazy statement to make?

June quarter?

Yes.

I hope so, Q2 absolutely.

Could you be profitable in the March quarter?

Again you are asking me for earnings guidance and I don't do that, sorry.

All right, thank you.

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

Just one clarification question, you were talking about the P9 Gen 8 construction, and did you say that construction would be completed this year?

That is correct.

Okay. And so your option on startup is some time in 2011 potentially although depending on what you see in the market you could push that through to 2012?

2000 -- oh yes, 2012, yes, sorry I got those years mixed up for a second. Yes, that's correct.

And what would -- given the way the construction is going what would be the earliest you could start that facility up if you (multiple speakers)?

Earliest -- the earliest.

Yes.

Some time in -- if we really, really pushed at -- put the metal -- pedal to the metal, maybe early fourth quarter maybe.

First quarter of this year we are talking about?

No, no, first part of fourth quarter.

Okay, got you, fourth quarter, okay, got it. And just a little more on the LED side, in the cost savings that come from going from 4 bar to 2 bar have you build into that both the cost savings from the reduced number of bars and the components associated with that? Or is there a substantial difference in the price that the component parts, meaning the LED side of it would be. Is it all coming from just the reduced bar count or is it coming from both the bar count and the cost of the LED?

Yes, again you ask the question about components, which is very difficult. But I'd say is while the number of chips, absolute LED chips that go in reduces the die gets larger. So don't take the same equation going from 4 bars to 2 bars you get a 50% reduction in absolute cost on the LED side. That's not the case because the die does get larger.

So into our model, our profitability model for LED TV is going, when this model comes out, there is certain component reduction calculated into it and also some -- cost or price concessions we've also modeled into it. But I won't go into the price concession unfortunately.

Got it. And so essentially what you're saying is that the output of the individual LEDs needs to go up to compensate for the lack of the other two bars.

Correct, correct.

Does the diffuser change at all because of the fact that you're only using 2 bars or does that stay roughly the same?

I'll have to get back to you on that. I apologize.

Okay, no problem. Thank you for the clarification.

Okay.

The following questions will be presented by Mr. Richard Clode from Moore Capital. Please go ahead, sir.

Hi, yes, sorry, just to clarify, you just said on Q1 that you think the operating profit should -- well, the operating loss should improve significantly. Is that the core operating profit if you exclude the EU fine from Q4, you think that your kind of core operating profitability can improve from the loss we saw in Q4?

Yes, that's not including the EU fine yes. That's our expectation.

Okay, so taking the one-off out you think that you'll improve your (multiple speakers).

Yes, well, we hope that's the plan, yes, that's the internal plan.

Okay. Perfect. Thank you for the clarification.

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

Operator, if there is no further question perhaps we could end the conference call now?

Yes, you can wrap up the conference call.

I'd like to thank everybody for participating in our conference call on the results. If there is any of your questions that we failed to answer or did not answer --- the answer was not sufficient enough for you, please don't hesitate to contact our IR department.

The next couple of weeks we will be on the road. We hope to see most of you during the MDR, please contact the relevant brokers if you would like to arrange a meeting. I hope to see you very soon and again thank you for participating.