LG Display Co Ltd (LPL) 2011 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 begin the conference of the fiscal year 2011 third-quarter earnings results by LG Display. This conference will start with a presentation followed by a division and Q&A session. (Operator Instructions). Now, we shall commence the presentation on the fiscal year 2011 third-quarter earnings results by LG Display.

Welcome to LG Display third-quarter conference call. My name is Hee Yeon Kim, Head of the IR Department. On behalf of LG Display, I would like to welcome everyone to our global quarterly earnings conference call. I am joined by our IR staff as well as a representative from TV Marketing and IT Marketing. JS Park is heading up the TV Marketing Department. Sang Lee is Vice President of IT Marketing Department. Next slide, please.

Before we move onto the earnings results, please take a minute to read the disclaimer. I'd also like to remind everyone that results are based on the consolidated IFRS accounting standards. And this is not audited numbers. Next slide.

This conference call will take an hour. Before we go into the Q&A session, please allow me to highlight our third-quarter year 2011 results, performance highlights, and outlook, followed by future management focus.

Moving onto revenue and profits on the next slide, revenue in the third quarter was KRW6.3 trillion, up 4% quarter on quarter. Despite the global economic downturn, with higher value-added product, such as FPR 3D and smart book, panel shipment rose by 9% quarter on quarter. However, due to the continued uncertainty in the demand outlook, the blended ASP fell more than expected.

In addition, nonrecurring loss, such as unrealized foreign valuation loss and the reserve for antitrust increased the operational loss to KRW492b. The operating margin was minus 8% and EBITDA margin was 7%.

After taking out the nonrecurring items, the adjusted operating loss was KRW260b. Loss before tax was KRW695b. Net loss was KRW688b.

Looking at our financial position and ratio, we have KRW2 trillion in cash and cash equivalents. Inventory fell by KRW450b to KRW2.4 trillion with active inventory adjustment during the quarter.

Utilization ratio and the standard of normal inventory holding period was reduced in order to maintain [ahead] inventory level.

Our net debt-to-equity ratio increased to 25% due to slight increase in cash, which is on manageable level.

Moving to slide five, looking at our cash flow, cash at beginning of the quarter was KRW2.4 trillion. Cash flow from operating activities resulted in cash inflow of KRW867b. And with active inventory adjustment, cash inflow from working capital was increased by KRW289b. Cash flow from investing activities resulted in an outflow of KRW947b, and cash flow from financing activities resulted in an outflow of KRW252b. As a result, the net change in cash was outflow of KRW332b.

Moving to slide six, I would like to go over our performance highlights. Looking at our shipments, it increased by 9% quarter on quarter, recording 8.1m square meters. Blended ASP fell 5% quarter on quarter. With the global economic downturn, the demand uncertainty persisted throughout the channel. This resulted in lower than traditional 2D shipment growth and seasonality and [deeper] panel price for the third quarter.

Moving onto our product mix on slide seven, in third quarter, the TV segment represents 47% of the revenue, followed by monitor at 90%, notebook at 14%, smartbook at 11%, and mobile and others at 9%. The percentage of revenue for each of the product mix is similar to the last quarter, but the smartbook and mobile based on our AH-IPS technology showed a continued increase in portion by 1 percentage point each.

Moving onto slide eight and looking at our capacity, our capacity increased just slightly by 3% quarter on quarter due to increased working days compared to the previous quarter.

Next, we come to our outlook section. In the first quarter, we expect our total shipment to increase by a low-single-digit percentage. Demand outlook is still uncertain. However, as the panel makers' profitability concerns become severer, we expect the price fall to be limited going forward.

Lastly, we turn our attention to the management focus on the next slide. We'd like to firstly turn your attention on the issues regarding third-quarter results. The posted operating loss stands at KRW492b due to the nonrecurring items, as I mentioned before.

The nonrecurring items include two parts. First, additional allowance for antitrust reserve as the possibility of order payment has increased. And second, unrealized net foreign operation loss. With a sharp rise in the exchange rate at the end of the quarter, factors such as customer advance payments and antitrust allowance based on US dollar were affected and deepened the deficit in the income statement. However, most of our US dollar debt is long-term debt with a three- to five-year maturity period. And because of that, on the flip side, it's passed over to be a valuation gain if won/dollar rate would be weaker.

Going forward, the visibility is still low. With uncertainty in the economic outlook, consumer spending freeze looks like to continue till early next year. However, the inventory level throughout the whole channel is kept low from panel makers to the retailers. And combined with a limited capacity increase in year 2012, we believe the industry will recover in the middle of year 2012.

Under assumption that economic downturn is likely to continue for foreseeable future, we at LG Display will focus on the following two action points. One is the tighter cash flow management with the conservative CapEx and operational efficiency. Second is profitability improvement through further product differentiation. On top of our existing FPR 3D, tablet, smartphone technology, we will release touch total solution and OLED TV next year. By doing this, we will show you rapid and wide recovery.

With that, I will end my summary of third-quarter results and management highlights and would be happy to take your questions. Operator, proceed to Q&A session, please.

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

Yes, good evening. I'm wondering if you could talk a little bit about utilization rates, how it trended in the third quarter, where we are now, and what you expect for the fourth quarter.

In third quarter, our utilization ratio reached 70%. It is likely to be mid-80% in Q4.

Okay. And during the third quarter, did utilization tick down each month because I know you had a goal of 100% by the end of the third quarter. So --

Yes, we maintain the similar range of mid-70% every month. So, the average number should be same as its number each month, utilization ratio. We don't have any sharp increase or sharp decrease during third quarter.

Okay. And how should we think about CapEx and capacity expansion in 2012?

In next year, our capacity increase should be limited to mid-single digits in terms of input capacity because we have existing P98 fab, which is delayed to summer next year. So, we have to include this kind of capacity increase. However, without this P98 fab, we don't have any plan to increase our capacity related to LGD side.

So, with this kind of assumption, our CapEx next year actually new equipment delivery-wise, our CapEx should be at around KRW2 trillion next year. However, as we mentioned before, we delayed our P98 CapEx to summer next year. We have to pay some money next year. It means our cash flow basis CapEx should be -- should around be KRW4 trillion.

Okay. And what are we doing this year? What's the CapEx this year?

This year, cash flow basis KRW4 trillion, which is reduced --

Okay. Thank you.

-- from the original CapEx, KRW5.5 trillion.

Okay. Thank you.

The next questions will be presented from Mr. Matt Evans from CLSA. Please go ahead, sir.

Thanks. Thanks for the call. Thanks for taking my question. I'd like to ask about your touch strategy. Could you explain a little bit about whether you're doing on-cell as well as in-cell, and when do you think it will be sort of commercialized? And can you give us any sense of the volumes you might do or whether there's confirmed clients for that or it's something that you're pitching to clients now and you hope to get orders from them in three months or six months? These sorts of things would be very helpful. Thanks.

We have three solutions for the touch side. One is an add-on part, which is similar as existing type. And second and third on is on-cell and in-cell type, as you mentioned. For the add-on touch side, we already start the business with some of our tablet customers. And then in the middle of next year, we might release in-cell or on-cell touch solutions. But, we cannot mention about our customers and right timing by now. Please understand this situation.

Just trying to understand if you can do in-cell, why is there on-cell as well? Is that because you need to see which one turns out to have better yields or they're on different tracks in terms of timing to commercialization or different type of touch with different products?

We are ready two kind of solutions, but choice of two kind of solutions will totally depend on customers' appetite and customers' need. So, actually, we have the various kinds of customers in [end-end] solutions. We did --

I'm just trying to understand maybe what type of product might work better with in-cell and what type of product might work better with on-cell.

It's difficult mention right now. Please understand.

Okay.

But, anyway, the mobile and small-size -- small and -- mobile and medium-size, we will deliver touch total solutions next year. And also, then we will add the [online answers].

So, it's both mobile and smartbook. Is that basically?

Yes, this is Sang Lee. Basically, touch solution will be applied to both smartbook, tablet, and the smartphone. Right now, we are making our efforts through the in-house total touch solution. As Ms. Kim mentioned, we are ready to supply (technical difficulties) will start in house, very competitive total integrated solution based on our in-house capabilities.

Next step will be in-cell and on-cell, as you mentioned. But, we feel the timing will be very critical to determine the time to market. Still, we have a lot of some technical and also cost hurdles. I believe our competitors are the same.

Yes.

So, in-cell and on-cell is the way to go. We understand that. And also, we are preparing. So, it is going to be some time the second half of next year if it works.

Okay. I'll go back in the queue. If there's any time at the end, I'll ask a follow up. Thank you very much.

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

Hi. Thank you. Can you talk a little bit about any impact that you are expecting from the problems with hard drives, the flooding? Is it going to slow you guys down in terms of production? Are you getting feedback from your customers on the monitor and notebook side?

Yes, as you know very well, currently, we are also very closely monitoring the situation in Thailand, the flooding and situation. According to our internal checks, still some potential risk in the first quarter of next year, not this quarter because many of our customers still have some (inaudible) stock. But, if the issue arises, we believe it'll be very minimal, less than 3% to 4% for the total demand for next quarter.

Got it. That would be first quarter of 2012 you're talking about.

Yes, if we are --

If there is, right.

-- some issues for this line.

Okay. And if you could talk a little bit about how you're going to be spending the dollars -- I don't need as much on the cash side, but the CapEx dollars for 2012, how does that break down between the new fab or the new line and maybe LTPS and OLED and other spending process.

Actually, if we look at our delivery basis CapEx, as I mentioned in my presentation, would be KRW2 trillion. Among then around 25% for new investment for new technology, but the remaining CapEx will be related to [background noise] from this year.

I'm sorry. I missed what you said. That was for the new line and the G8 fab.

Yes, gen 8 fab and some oxide LTPS and OLED, which was --

So, oxide and OLED would be in that 75%, and the 25% would be for new (inaudible).

Yes, it is splitted in the 75% and 25%. So, if you look at only for the new technology for the oxide OLED in this kind of situation, they should be around 30% to 40%.

Got it. Okay. And can you talk a little bit about what you guys see in terms of overall industry capacity, not only yourselves, but I mean, I'm sure you're aware of what other people are doing. Are you expecting on an overall basis capacity, a substantial capacity change in 2012. And also in terms of what the fabs are being used for, what would you expect your TV mix to be in 2012 on an overall basis?

Next year, industry capacity growth should be mid- to high-single digit based on our existing assumptions. And also, we think TV mix should be similar as this kind of situation because, although our mobile and smartbook demand is quite strong, our FPR TV demand should also be quite strong next year. So, we don't expect any significant mix change next year.

We have every -- if new product segmentation or specialty product in each application. In TV, that's FPR 3D. In monitor, that's IPS monitor and SPI monitor. In case of notebook, we have the (inaudible) notebook. And also in the mobile and tablet side, we have iPad and smartphone based on AH-IPS technology.

Got it. And do you -- you just showed an OLED product I think it was yesterday. Can you just talk a little bit about what that product actually is and what stage you're at? Are you actually selling them, or are you still in the developmental stage?

We will release big-size OLED television in the middle of next year is our plan for the OLED TV roadmap. And actually, we already decide our backplane technology for our OLED that's oxide based. And in case of our (inaudible) methodology, we are considering some solutions. We will finalize one solution at the end of this year.

So, it means we are in tread with our product schedule, development schedule for our OLED TV. You might see our television in the CS show. And you might see the real OLED TV in the middle of next year in the retailers.

Okay. So, on the TV side, you should see something by kind of the middle of next year. What about on the phone or tablet side? What's your schedule there on OLEDs?

For small size, we don't consider OLED solutions because, by now, our technology AH-IPS is superior to OLED in terms of resolution and better consumption. Although OLED has a strong point, mobile is not that efficient to reveal the strong point of OLED. And also, OLED weakness such as better consumption or resolution is a critical point for the mobile solutions. So, we will not release OLED mobile or tablet for the time being.

If we think -- real value for the mobile solution is not an OLED but they should be the flexible plastic. In that area, we are developing.

Got it. Great. Thank you. Also, how much US dollar debt did you say you had? I couldn't hear what the number was.

In terms of won base that's around KRW2 trillion.

Got it. Great. Thank you very much.

The following questions will be presented by Mr. Arthur Lai from Citi Securities. Please go ahead, sir.

Hello. A question on touch panel. So, you mentioned that next year with the KRW2 trillion. And will it -- the CapEx including in-sell, on-sell capacity expansion?

Actually, the CapEx for the touch side is not a big issue for us. It is a very negligible portion.

And how we can expect your touch capacity for next year?

At this moment, we are still in the middle of reviewing the next year's budget plan. And currently, we are expecting somewhere between 5m to 8m units of capacity for tablet and, also, several millions of monthly capacity for smartphone area.

Okay. Thank you.

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

Hi. Thanks for taking my question. Just two questions. For your three key results, can you talk about what sort of cost declines you saw quarter over quarter? And for the fourth-quarter shipment guidance, can you also discuss how much of that is coming out of inventory versus the utilization increase and actually increasing the output?

Firstly, in terms of cost of reduction, our extra cost of reduction was 5%. However, we have to reflect utilization adjustment and FX rates. With this kind of adjustment, our third quarter cost or reduction turned 2%. Is it an answer for your question?

Yes, and then just the outlook for 4Q, how much of that is coming from inventory versus the utilization increase and actual increased output?

Yes, actually, to understand the Q4 production inventory and our shipment, I think it should be better to understand the second quarter and third quarter relationship. If I look at our shipment growth in third quarter, that was 9%. But, even in this situation, our utilization ratio reduced to mid-70% from mid-80% in second quarter.

In this, third-quarter shipments came from the production plus inventory adjustment, inventory clearance. However, we are now reaching to the lowest level of our inventory. It means, we don't have any room to reduce our inventories. So, going forward, our shipments will mostly relate to our actual product. The most of our actual shipments will come from the actual production.

Got it. And then just one -- sorry.

So, our inventory will be remained at the end of the third quarter range. However, at the end of Q4, that's in December, we will adjust our inventory to maintain our new number of inventory holding periods. So, in this, total amount of inventory should decline quarter on quarter.

Got it. And then just a quick follow up. For the 20 of this year's CapEx, can you talk about what the split is between LCD versus LCTS and OLED?

In case of LCD, that's around 45% or 50% and 35% for new technology, and the remaining is maintenance CapEx.

Got it. Thank you.

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

Okay. It's a little difficult to hear everyone today. So, I'm going to ask a question. I know you answered it, but it was difficult to hear. The cost reduction in the third quarter, what was that, the cost down? And what are you expecting for the fourth quarter?

Our actual cost of reduction was 5% in our internal books. However, in the financial statement, our cost of reduction was 2%. The gap came from the utilization adjustment and FX impact. So, if we take out utilization adjustment FX impact, we will try to get a similar range of cost of reduction. But, however, we also increased our specialty products in Q4. But, this kind of specialty product cost effect is higher than the commodity products. So, actual cost will increase.

However, as I mentioned before, if we take out this kind of utilization effect and mix impact, our cost of reduction should be similar at third quarter.

Okay. Specific to tablets, how many units of tablets are you shipping in 2011, and what's your goal for 2012?

Still we have about [a quarter] at this moment but approximately over 40m for this year and next year more than 70m.

And with the -- your biggest customer -- with your biggest customer will you maintain your share in 2012 or might that go down?

Yes, we believe we can maintain our market share for the number one customer even in year 2012.

Okay. And finally I didn't hear the comment around the China fab. Where are we in investing in the China fab, when does it open?

For the China fab we can't deliver official comment. Actually China fab ramp-up schedule will depend on the market situation. It's not that easy to announce we will be very aggressive to invest the China fab. Anyway we will wait and see the market conditions.

Do you have plans to open it next year? You may not be aggressive but do you have plans to open or even that's unclear?

Let's put it this way, although we don't have any specific timing plans we don't know if that should be this year or next year, one clear thing is we don't want to increase global capacity. We are considering lots of solutions to meet two kind of conditions, building China fab, no increase of capacity. So we are finding the solution, that's the real situation.

Okay. And a final question, as we look into the fourth quarter what end market do you think will show the strongest quarter-on-quarter growth? TVs, notebooks, smartbooks, phones, what do you think will show the strongest growth quarter on quarter?

That's clearly smartbook and smartphone in Q4.

Great. Thank you.

The following question will be presented by Mr. Matt Evans from CLSA. Please go ahead, sir.

Yes, thanks. Just coming back to the touch, is there any -- so there's no CapEx basically related to that you're saying in 2012 because it's integrated into the backplane manufacture in the case of Intel I guess? Is that why?

Actually as we mentioned it will be negligible. Negligible means not nothing. So it's not zero amount.

So very small.

Very small because of the --- adjust the format process.

Okay. And earlier you mentioned some capacity numbers but those are your current capacity numbers, 5m to 8m per month for tablets, 7m for smartphones?

Yes, the figure that I gave you was the next year, yearly capacity for the year 2012.

Is that at the end of 2012 or that's the average for the year?

Average of the year. That's total yearly output for tablet.

Okay. And on -- for high end tablets what's your competitive advantage against Sharp now that Sharp is already doing oxide TFT tablet displays?

Actually they are developing but still not in mass production yet. We are also putting our R&D, the development for oxide for multiple areas for TV, also tablet, smartphone, all of these segments. But I think the most important one is the time to market. At this moment what we are putting our priorities to, how we can meet our customers the target cost and also product positioning. And at this moment we believe the HIPS is the solution for the time being. So we are currently leading as I mentioned with technology and also we are developing the oxide based products. So when the time comes then we'll do in time to market. We believe the time is not yet.

The time is not yet on oxide because you haven't -- you're not ready to make those yet, right?

In terms of the cost and also in terms of the customers' lead time.

Okay. All right. And on OLED, you mentioned in the local analysts' briefing that based on the targeted capacity in theory if you were 100% yield you'd be at I think 50,000 or 60,000 a month for 55-inch, six cuts per panel I guess times 10,000 or something like that. But what can we -- it sounds like that's quite -- you're setting expectations quite high, what should we think about for the realistic ramp-up and yield and so on? Should we really be thinking about 10s of thousands of units per month potentially by mid-year for OLED TV or is that just where you want to get to when you reach the capacity goal at some quarter later?

Actually by now we have 8K (inaudible) capacity for OLED in a generation. So in this we've got fixed costs for one model less, 48,000 production [a month] if our yield ratio would be 100%. That's correct numbers, correct situation. And then actual ramp-up or utilization, that should totally depend on the market situation anyway. One clear thing is that we will release 55-inch televisions in the middle of next year and then after checking out the market response, specifically price point versus where OLED TV value we will decide our mass production. So right now we don't have any mass production plan yet. Maybe at the end of next year we can deliver our clear plan for the mass production for OLED TV.

My point is though that even that 100% yield assumption is quite ambitious based on the experience with 4G. I know you're doing wide OLED so it should be easier but should we really be assuming you're going to immediately get 8K and get very high yield?

Actually I think there's some misunderstanding when you get some message. 100% is not our target, that's just assumption to make investors understand clearly.

But they're not going to understand it that way, that's the problem. That's why I'm just trying to be clear on this because everyone's going to start saying you're going to make 50,000 a month (inaudible).

We're saying -- we can say 80% yield ratio assumption, 90% yield ratio assumption based on our [best guess] but that's just kind of our assumption. But right now it's very early to mention about our yield ratio. We are not at the mass production stage. We will be maybe in the middle of second quarter we can deliver our yield ratio. So we (multiple speakers).

Yes, I agree it's much too early to be talking about it, yes. Okay, I understand. All right, thank you very much.

The following question will be presented by Mr. Wamsi Mohan from Bank of Merrill Lynch. Please go ahead, sir.

Yes, thanks for taking my question. The question is on what percentage of your panels are you using glass that is thinner than 0.7mm? Can you please comment on that?

For that question, sorry I don't have that data in front of me. I will get back to you after checking out the number tomorrow.

Okay, sure thing. Thank you.

The next question will be presented by Mr. D. S. Kim from UBS Securities. Please go ahead, sir.

Thank you very much for taking my question. I have very quick three questions. Firstly could you please give us the portion of higher margin specialized product in second quarter, third quarter and outlook for fourth quarter next year such as SPL, 3D, smartphone and tablet?

And second question is if I understand correctly, utilization rate will likely increase sharply from mid-70s in this quarter to mid-80s in the next quarter whereas shipment guidance is only for low single-digit growth. Does that mean you will be restocking inventory towards the end of this year? If so, by how much?

And third one is, I missed the touch capacity number for tablet and smartphone next year so could you please repeat that again? Thank you.

The first question, our specialty product portion in second quarter, that was mid 30% and third quarter that was high 30% and in Q4 we are targeting near to 40%.

And second question, wait a second -- I cannot remember your second question. It's not a short question.

My second question was that utilization rate will likely increase sharply in fourth quarter versus third quarter but your shipment guidance is only for low single-digit so does that mean you'll be restocking inventory towards the end of this year or --?

I already gave you an answer. Actually you have to consider the inventory issue. In third quarter although our shipment increase was 9% our utilization declined by 10 percentage points. It means inventory adjustment, inventory clearance was a very big portion in third quarter actual shipment. However, in Q4 although we increased our utilization ratio that kind of increased production should be all shipment. So our inventory should be similar or a decline quarter on quarter.

Thank you very much.

And I think you also had a third question?

Yes, third question was about the touch capacity?

Yes, please.

The previous number that I gave, the 5m, 8m, that is our annual supply capacity for touch, smartbook, the tablet touch. So yearly somewhere between 5m to 8m. As I mentioned we haven't fixed next year's [plan] so still in the middle of (inaudible). And also for smartphone monthly several millions and also we are still [leaving] this figure as well. So at this moment it's very difficult to confirm that number so please understand that.

Sure. Thank you very much.

Currently there are no participants with a question. (Operator Instructions). The following question will be presented by [Mr. Conti] from Highbridge Capital. Please go ahead, sir.

Hi, thanks for taking my question. Can you talk a little bit about how we should think about your components, LCD components, meaning VLU glass, LED and so on just for pricing as well as inventory?

Component pricing inventory. Your question is related to component pricing and inventory?

That's right.

Actually I think pricing means you try to know our price pressure or price cost range?

Yes, because in the past you have mentioned about both margins being bad so there were limited amount of price pressure that you put on component makers. I'm just wondering whether that has changed and to what degree?

Actually we don't have any -- we cannot release the individual specific component price reduction but however in total our component price reduction was low single-digit in third quarter and maybe in fourth quarter as I mentioned before we try to achieve the similar range of cost reduction in Q4. However in Q3 we had 5% cost reduction that came from the cost reduction from the material price and then our overhead cost reduction and also our mix improvement was also one reason.

So for fourth quarter it's more likely to be low single-digit rather than be minus 5%?

We try to get a similar range for cost reduction.

Okay, thank you. And on whether component inventories is up, down or same?

Component inventory size, we think throughout the whole full chain from component LCD and set makers and retailers, inventory situation is very sound because -- not because of the demand situation but because of the (background noise) demand outlook. Every channel participant are very conservative to handle their inventory.

Okay, thank you.

The next question will be presented by Mr. Matt Evans from CLSA. Please go ahead, sir.

Thanks for taking another follow-up question. Sorry to ask you this question a third time but I just wanted to make it very clear. For next year you plan to ship about 70m tablets and of that 70m you think 5m to 7m will have the touch solution? Is that right?

Okay, this is Lee. Let me make some corrections. As I mentioned we are still in the middle of leaving next year's budget plan. Still the quantity is not fixed yet so I gave you some ranges. Actually 70m is a somewhat aggressive number, I'd say it's going to be a little over 60m including (inaudible) and also the smartbook for IT makers and also mobile phone players. And among a little over 60m tablets, the 5m to 8m is somewhat small. That's for actually IT makers and also more than 10m for mobile phone and carriers so combining together there's going to be close to 20m. So I just want to give you some (inaudible) number at this moment. Please understand I cannot give you the exact number at this moment, okay.

Okay, so 20m for seven-inch to 10-inch basically?

Yes, that's right, seven to -- from seven to 10-inch inch category, that's right.

And could you give a similar rough guidance for the handset side? How many units total and how many touch -- with the touch solution?

Matt, for that kind of questions we will get back to you with our different sessions. Specifically we don't have that specific data yet.

Okay. I just wanted to clarify because there was a number given earlier and I didn't catch whether it was several million per month or 7 million per month.

Several millions per month.

Okay. Thank you.

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

Just a clarification here. When I asked tablet units I'm really specifically asking about tablets and not smartbooks. So when you said over 40m in 2011 is that tablets or does that include smartbooks?

Actually we call tablet as a smartbook. The smartbook means the tablet, the same device.

Okay. So tablets you're saying over 40m in 2011 and you're saying what for 2012? 60m or 70m?

60m. A little over 60m.

Okay, thank you.

Currently there are no participants with questions. (Operator Instructions). The next question will be presented by Mr. Steve Huang from Yuanta. Please go ahead, sir.

Thank you for taking my question. I just had a quick question. For our touch customers, I mean tablet customers, for their third-generation tablet will the TFT technology be based on amorphous or [oxidite]?

I think it is a little early to say whether it's going to be oxide or amorphous but at this moment we have some competence, current IPS technology we are applying to our current tablet will continue for the time being because it is very competitive and also it's satisfying most of our customers' requirements. We understand oxide can be a one-off solution in the long run but still there are many hurdles technically and also on the product side. But as I mentioned in the previous -- my statement LG Display is also developing oxide, preparing some technologies.

All right, thank you. For the second question, still focus on the third generation tablet, when do you expect the shipment to kick in for the assembly partners?

I think your question is about the third generation iPad 3 but that's the customer's issue. I feel it's not proper to mention about the timing. We don't know what timeframe they're going to roll out the product. But at this moment the only thing we can say is that we are currently developing and will be prepared to supply the panel as planned. That's all I can say.

All right, thank you.

Operator, if there's no question please end this conference call.

Here, one question is waiting for you.

Okay, we'll take. This will be the last question.

Okay. The last question will be presented by Mr. Matt Evans from CLSA. Please go ahead, sir.

The last one is on flexible and plastic substrate displays. How far away do you think you are from being able to start making those? Are they a couple of years away or one year, three years?

Actually we don't think one or a couple of years away because already we made the eBook concept with the plastic. So if there's strong demand from the market the timing for the plastic solutions will be near. Near means I'm not sure but anyway it exists in our 4.5 generation OLED fab. We are doing every effort to develop plastic solutions. Not flexible. Plastic should be first. And in case of flexible, flexible solution will be several years away.

Okay.

Plastic can be available replacing current glass cover so I think the plastic cover in the beginning will be available but still it takes some time. But not too far away at the moment.

So this would be, rather than thinking of it as a flexible display we should think of it as an unbreakable display? Is that right?

Not actually. Cover plastic is strengthening the device itself. So unbreakable device is supposed to be a plastic substrate but it will take much more longer time.

Okay, so you're talking about replacing the cover glass with plastic.

In the beginning, that's right.

I see. Thank you very much, that's very helpful.

We would like to thank you all for joining us today. If there's any further questions please feel free to contact our IR team. We wish you a good morning or a good evening. Operator, please close the conference session.