Lg Display Co. Ltd. Q1 2009..

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LG Display Co. Ltd. Q1 2009 Earnings Call Transcript

April 17, 2009 | about stocks: LPL

LG Display Co. Ltd. (LPL)

Q1 2009 Earnings Call

April 16, 2009; 8:00 am ET

Executives

Kevin Choi - Vice President of TV Marketing Department

Davis Lee - Vice President of IT Marketing Department

[C.S. Chun] - Vice President of Mobile Marketing

Y. H. Jeong - Senior Manager of the Market Intelligence Department

C.H. Lee - Senior Manager of IR Team

Analysts

Brian White - Collins Stewart

Andrew Abrams - Avian Securities

Jeffrey Toder - RBS

Jae Lee - Daiwa Securities

Sanjeev Varma - Daiwa Securities

Jeffrey Soo - Merrill Lynch

Presentation

Operator

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 2009 first quarter earnings results by LG Display. This conference will start with a
presentation, followed by a divisional Q-and-A session (Operator Instructions).

Now we shall commence the presentation on the fiscal year 2009, first quarter earnings results by LG Display.

C.H. Lee

Welcome to LG Display’s first quarter 2009 conference call. I’m C.H. Lee, Senior Manager of IR Team. On behalf of LG
Display, I would like to welcome everyone to our global quarterly earnings conference call. I’m joined by Kevin Choi, Vice
President of TV Marketing Department; Davis Lee, Vice President of IT Marketing Department; [C.S. Chun], Senior
Manager of Mobile Department and Y. H. Jeong, Senior Manager of the Market Intelligence Department

We have around one hour for this call. We will spend the first part of the call explaining key issues for the quarter, which
correspond to the slides available on our website. Afterwards, we will take your questions.

Before we move into our earnings results, please take a minute to read the disclaimer. We are reporting in consolidated
Korean GAAP. US GAAP numbers will be posted on our website in the near future. I’ll start with the first quarter 2009
earnings results, followed by the performance highlight and outlook. Afterwards, we will take your questions. Please turn to
the next slide.

1／13 2009/5/4 下午 03:54


Firstly, we will present our earnings results from the first quarter 2009. Please turn to the next slide. Revenues in the first
quarter of around KRW3.7 trillion are down 12% quarter-on-quarter and down 9% year-on-year. COGS per square meter
in US dollars decreased around 10% quarter-on-quarter. We recorded an operating loss of KRW 412 billion. Our EBITDA
margin was about 4%. Next slide please.

As of March 31, 2009, we have around KRW 3.6 trillion in cash. At the end of the first quarter, our finished goods inventory
level for largest [tenants] was very tight, of less than two weeks. The inventory level of post TV and IT at the end of the
quarter was less than two weeks.

Our liabilities to equity ratio, was 110% and current ratio was 130%. Our debt as of March 31 was approximately KRW 4
trillion, which was slightly increased from the previous quarter; however, it was mainly from the [40%]. Our net debt-to-
equity ratio as of March 31 was 5%. Please turn to the next slide.

Cash at the beginning of the first quarter was around KRW 3.4 trillion. Cash flow from operating activities was KRW 1.1
trillion. Cash flow from investing activities was negative KRW 1 trillion. As a result, cash at the end of the quarter was
increased KRW 140 billion to around KRW 3.6 trillion. Next slide please.

Now I’d like to go over our performance highlights. Next slide please. During the first quarter, our shipment decreased
about 3% to 3.8 million square meters. Compared to the end of Q4 last year, our Q1 ASP stabilized without further decline
and in case of some models to ASP even slightly increased. However on average, ASP of per square meter decreased
about 12% quarter-on-quarter to USD 659. For the TV segment, the average ASP per square meter in the first quarter fell
15% and for IT, it fell 8%. Please turn to next slide.

During the first quarter, the TV segment represented 56% of our revenues, followed by monitors at 23%, notebooks at
16% and applications at 5%. Next slide please. We have successfully started mass production at our Gen 8 plant in March
and the ramp up is right on track at the moment.

Our average utilization rate in the quarter was 93%. The total production capacity slightly decreased during the quarter.
This is from the 18 month retooling activities, solid at the end of last year, as well as the reduced calendar days compared
to the last quarter. Next slide please. Directly, return to our outlook section. Next slide please.

In the second quarter, we anticipate the market to improve due to the strong panel demand, especially for the TV
segment. Also we expect the IT panel demand to increase gradually due to seasonality, as well as the demand increase
from some makers. We expect our quarter shipment to increase by a mid to high 20%’s. The shipment for both TV and IT
segments are also expected to be at this level as well.

In case of ASP, we expect a gradual increase during the quarter. COGS reduction per square meter in the second quarter
is anticipated to be a mid single-digit percentage. Our CapEx for 2009 is estimated to be around KRW 2.5 trillion.

Thank you. This ends our presentation for the first quarter 2009. We are glad to answer your questions now.

Question-and-Answer Session

Operator

(Operator Instructions) Your first question comes from Brian White - Collins Stewart.


I’ve got a question on a couple of things. Number one, when we look at inventory out in the channel for IT and LCD TVs,
how many weeks are we talking right now?

Davis Lee

Okay, Davis Lee from IT Marketing Department. First IT side notebook; during the first quarter, industry consumed a lots
of carryover inventory from the fourth quarter and now we believe it is around 23 or 24 days judging from the customers
PSI in quotations. So if it is 23 days, that means less than four weeks, which is very healthy, better healthy situation, but in
case of IT side, the inventory tightness is a little bit more severe. According to our calculation it is around 17 days or 18
days.

Since, our customer was very concerned about the first quarter projection of this year; they reduced their inventory quite
aggressively. So as a result of that kind of inventory recession activities, now the industry’s inventory level is very healthy;
that I can summaries. Kevin.

Kevin Choi

This is Kevin Choi, speaking for LCD TV area. LCD TV inventory level, there is two different kinds of inventory level; one
is, the retail channel inventory and the other is TV producers inventory level.

Retailers inventory, it depends on different retailer, but normally they think that about four weeks inventory or three to four

2／13 2009/5/4 下午 03:54


weeks inventory in normal, but most of them, the inventory level is about one to two weeks short right now and the TV
producer also, compared to their normal inventory, it depends on different company, but one to two weeks short right now.
So, all together average wise I think there’s two to three weeks shortage situation right now. That’s the inventory situation.

Brian white - Collins Stewart

Okay. When we look at pricing, where do you expect the biggest increase in pricing in the second quarter versus the first
quarter in terms of market TV versus IT and in terms of sizes? I think the smaller size is tighter than the larger, but you
could add more color on that. That would be great.

Kevin Choi

TV side, most severe shortage was in 32-inch area in the first quarter and now we are experiencing 32-inch and below
also 42-inch and 47-inch; all models is the shortage situation. Since February started, initially January 32-inch and below
the shortage happened. February and March came, not the small one or bigger one, all the models right now are in
shortage situation. So we start increasing the price of 42-inch and below, but from April, we actually start 42-inch and that
kind of and above; that’s also starting right now.


What type of increase should we think about for the TV market in the June quarter, a low single digit price increases?

Kevin Choi

It’s hard to tell because it just increased right now, because still we are doing the monthly price negotiations. So May, June
still is too far, so maybe, but its not low single digits. I can tell its not low single digit.


Meaning it will higher?

Kevin Choi

Higher than low single digits.


Just finally, when are you going to put up the US GAAP results? I don’t see the US GAAP results this morning; only the
Korean GAAP.

Davis Lee

Yes, we know that. Actually we’re going to post it in May presumably. So, if we post it on our website, then I will let you
know. The IT side pricing issue, we need to have two perspectives in case of IT pricing.

First is the second half of industry experienced the unprecedented price drop in a very short period of time and the
manufacture of the display suffered a lot of the losses. The majority of those suppliers of pricing is way under cash cost
and since economic the downturn has been more than three quarter as of today; I don’t think that the industry can no
longer afford that kind of price erosions.

So that is the supplier side, but the demand side is, as we have experienced in the TV case, the IT side tool have to have
that kind of the demand increase; especially during the first quarter we experienced stronger than the expectation upside
in monitor side. The notebook side; usually notebook follows the pricing off monitor, two month or three month behind.
Now the industry’s inventory level began to get to normal. We are seeing some of the upward pressure for notebook side
too.

So short term point of view, since the IT side profit margin is lower than the TV side, the upward pressure for IT side is
going to be bigger than the TV side, that I can tell you; explain you like this way.

Operator

Your next question comes from Andrew Abrams - Avian Securities.


I wonder if you could give us a little help on the CapEx for 2009. If you could break it out in terms of where you are going
to be spending and how much of that 2009 number represents 2008 spending that might not have happened and that got
pushed into 2009?

Davis Lee

3／13 2009/5/4 下午 03:54


Yes, we actually guided KRW 2.5 trillion for our 2009 CapEx. So, around KRW 1 trillion for the Gen 8 and Gen 6 extension
and another KRW 0.6 trillion were for the LTPS investment and the other around KRW 1 trillion were for our maintenance
CapEx. So that is the breakdown of our investment at this moment.


Is there any of that that got pushed from 2008 into 2009 even earlier in the year?

Davis Lee

Yes, it was already reflected in the numbers.


Okay, so it hasn’t changed from what you already had?

Davis Lee

Yes

Operator

Your next question comes from Jae Lee - Daiwa Securities.


I just have a quick question regarding your net losses. I noticed that it has narrowed quite substantially compared to 4Q
’08. So, could you go over like what are the major items for the non-operating side, like acuminate the losses and also like
FX related?

Davis Lee

Yes, do you mean the difference between our operating profit and the net income?


Yes, that’s correct.

Davis Lee

Yes, the main reason is coming from the deferred tax asset increase which affects the tax expense actually. So, if you at
our PL, it is actually the positive effect on our net income. So this quarter actually, deferred tax asset has been increased,
effected by our net loss as well as some tax credit for our investment.


Alright, but in 4Q ’08, things like agreement losses were quite substantial, but just looking at the pre-tax loss margin, the
first quarter I guess like pre-tax losses were much smaller than the 4Q ’08? So it doesn’t mean that agreement losses
have declined quite substantially?

Davis Lee

Actually our price fixing rate expense was reflected as non-operating expense at that time, so that is the difference and our
net operating income and net operating expenses, actually it doesn’t make any big difference at this quarter.

Operator

Your next question comes from Jeffrey Toder - RBS.

Jeffrey Toder – RBS

First question, you mentioned how we’ve seen inventories rundown to abnormally low levels and we’ve seen a pickup in
utilization rates, both of your company and other panel makers. How much of that do you think is related to moving
inventories back up to normal levels and how much of the demand that we’re seeing do you think reflects the end
markets?

Kevin Choi

I think the TV side, our inventory level I think that we need to go back to normal inventory level. I think that we need about
one week. About one week we need to increase our inventory level to go back to normal.

4／13 2009/5/4 下午 03:54


Jeffrey Toder - RBS

Do you think that sign of return to normal inventory level has already been reflected in the orders that customers have put
into panel makers?

Kevin Choi

Still, that May, June customers order is continuously changing, the modern mix is also changing, so it also continuously
changing right now. So I cannot immediately tell you; at the end of June the exact level, I cannot immediately say right now,
because the mix always change and the area also change.

Jeffrey Toder - RBS

But, why do you think that?

Kevin Choi

It depends on the market situation. If the situation is really, really even in end of June, still a bit shortage situation, then our
inventory situation maybe also several days short when we end it. So, it depends on the market situation.

Jeffrey Toder - RBS

I guess my question is that looking at low inventories at a time when either the industry is running at full utilizations or hasn’t
changed the utilization is quite a valid metric, but looking at low inventory levels when we’re seeing production and panel
makers already ramp up, it seems to be electing important signal, than it would be in other circumstance; is that fair?

Davis Lee

Let me answer your questions; this is Davis Lee. Earlier I explain that industry cleared most of those inventory issues and
now their inventory, customer side, is the tide and better than normal situation. On the other hand, our side inventory level
is very low, less than two weeks. In some monitor case, we are seeing some of the lower than 10 base DSI tool from
time-to-time.

So judging from that kind of facts, we too believe that the current inventory level is going to be tight throughout the second
quarter, even without the customers, the bigger demand during the first quarter, inventory level reduced.

The fact that the customers inventory hasn’t been increased, on the other hand reduced, that tells that the demand is
increasing. Even though we cannot tell you for sure where it is, the demand is out of just the general staffing or real sell
through, but the inclining tool I believe that it’s more of those demands clearly from the demand side.

Jeffrey Toder - RBS

Now, just back to guidance for a minute, you guided for a gradual increase in prices, what does that mean? Does that
mean you expect prices to continue to rise sequentially throughout the quarter or you’re looking for an overall increase in
prices on a quarter-on-quarter basis?

Kevin Choi

It gradually means that monthly continuously price increased the possibilities very high.

Jeffrey Toder - RBS

Okay and if we were to think about that as ending up as mid single digit increase on a Q-on-Q basis, would that be a fair
assumption?

Davis Lee

No, it is very difficult to say; that’s why we give our guidance as it’s like this description. So it is definitely the pricing were
improved definitely, but we cannot say exactly. That is what we are saying at this moment, but actually considering the
current market situation, that do not meet our customer demand fully actually, so our pricing pressure is very high at this
moment.

Jeffrey Toder - RBS

Right and there are actually a lot of orders coming to other panel makers, who have lowered utilization rates as well? Okay
and you didn’t give any guidance on margin this quarter following the program, as well as the last quarter. Can you kind of
give a range of where you think you might be on your EBITDA margin?

Davis Lee

5／13 2009/5/4 下午 03:54


No. Actually, we didn’t provide profitability related guidance last quarter and at this quarter also. So, this means that this
industry is much more volatile and it is very difficult to stay at a certain range or specific numbers. So please understand
our difficulties in forecasting that numbers.

Jeffrey Toder - RBS

That’s okay, that’s our job to do, forecast anyway. Okay and your cost improvements missed your guidance a little bit and
that’s kind of the second quarter that you’ve missed. Is there any reason you could point to for that?

Davis Lee

No, actually we guided low teens in the first quarter. So yes, exactly we’re also [Inaudible] the percentage; it is almost the
same with our guidance actually.


Okay and what is your currency forecast for 2Q versus 1Q?

Davis Lee

It is almost the same, but our Q2 guidance assumption was around 1400; 1350.


1,350 for 2Q?

Davis Lee

Yes.


What was your 1Q number?

Davis Lee

1Q actual number was 1400.


1400, okay and so when you gave your guidance for costs, those are the numbers that you used to translate to US dollar?

Davis Lee

Yes, it was. Yes, right.

Jeffrey Toder - RBS

Okay and what is the capacity of P8 at forecast at the end of this or your 8.5G end of this quarter?

Davis Lee

When we had a Korean conference this afternoon, also we communicated we would approximately adjust our Gen 8
facilities capacity spending on market demand actually. So, it is quite depending on our market development actually.

Jeffrey Toder - RBS

Okay and 6.5G starts this month, right?

Davis Lee

Yes.


6G extension?

Davis Lee

Yes, right.

6／13 2009/5/4 下午 03:54


Jeffrey Toder - RBS

What is the initial capacity?

Davis Lee

It worked up from 15K actually.

Jeffrey Toder - RBS

I’m sorry I missed some of the explanation on taxes. I guess the biggest issue is how should we think about taxes for the
current quarter? Not the first, I don’t need an explanation of the first quarter.

Davis Lee

Actually we will have some tax credit for our investment and also the other part was our profitability related. Actually if we
realize loss then we will have another tax benefit for debt, but it depends on our profitability, but I think we will have some
tax credit for our investment. Actually we have invested a lot this year, especially for this quarter and the last quarter. So,
we will have some benefit.

Jeffrey Toder - RBS

Just for the investment tax credit side of it, what kind of number are we thinking about, $50 billion or a higher number?

Davis Lee

No, it is very complicated to calculate certain numbers, so…

Jeffrey Toder - RBS

I realize that. It’s hard for us as well.

Davis Lee

Yes. So, we need more time and more effort to come out with the numbers. So we didn’t have the fixed numbers at this
moment.

Jeffrey Toder - RBS

Okay and do you think if let’s say all the major producers were running at 100% this quarter, what do you think the
supply/demand balance might be; and that’s just the five biggest producers, the rest of the guys are doing whatever
they’re doing now; so yourselves, Samsung, AUO, CMO or maybe Sharp?

Y. H. Jeong

This is Y. H. Jeong speaking. In Q2 we think of the average utilization in this industry for all the panel makers and all the
path around 80% to 85%; 1which is high supply and demand. So, maybe I think it is more than 5% in utilization, it could be
balanced we think.

Jeffrey Toder - RBS

Okay, so if it’s 80% to 85% now and a run up to say 85% to 90%, you would think we’d be balance; and if we run up to
100%, then we’re obviously being over supplied?

Davis Lee

But currently it has the component shortage in the industry, including the drive IC and PCB and other some components.
So also the profitability issue supports some suppliers. So, these factors are the limit, the increase of the utilization footing
we think.

Jeffrey Toder - RBS

So, you think that 80% to 85% is the maximum the industry can support right now; right?

Davis Lee

That’s our estimation.

Jeffrey Toder - RBS

That’s your estimation. Now, the component shortages should work their way through, right, because that’s just a matter of

7／13 2009/5/4 下午 03:54


time, especially when you’re talking about drive varieties. I mean there’s obviously a time lag?

Y. H. Jeong

We are getting data over time we think, but also another possibility from the glass. The industry, the utilization is increased
higher than the expectation planned. So we understand some surprise cannot meet the current utilization increase.

Jeffrey Toder - RBS

So you think that there’s not enough class to meet the utilization increase.

Davis Lee

For Q2.

Jeffrey Toder - RBS

Is that a structural issue do you think or just a temporary issue, because…?

Davis Lee

For the glass, it takes a long time to be the operation from some dip here and some [Inaudible]. So I understand it takes
three months or some cases four months. After deciding the operation it takes a long time. So it takes around that the one
quarter.

Jeffrey Toder - RBS

Now that’s obviously not an issue in Korea. So you secured all of the glass necessary to ramp up your facilities and
Samsung obviously has this well, so do you think that’s issue in Taiwan then?

Davis Lee

Yes, I think about Korea makers, the utilization is inline with our original plan, so it don’t make any problem.

Jeffrey Toder - RBS

So, you don’t expect that the glass shortage will affect any of your plans?

Davis Lee

Yes

Jeffrey Toder - RBS

Okay and so therefore you must think that it will affect the Taiwanese? Well, it’s always the Koreans, the Taiwanese and
the Japanese, right.

Y. H. Jeong

We don’t want to mention a specific name or country or a corporation here.

Jeffrey Toder - RBS

But it’s fair to say that you don’t think that you will experience any problems with your glass supply?

David Lee

Actually as Y. H. Jeong said, we actually maintain higher utilization rates than any other companies in Korea, so the glass
makers in Korea also they have some maintained very well their performance and they will not have any problem at all.

Operator

Your next question comes form Brian White - Collins Stewart


Just on the glass shortage, in terms of pricing, will glass pricing actually go up quarter-on-quarter or will we just see a less
of a severe decline versus the March quarter?

Davis Lee

8／13 2009/5/4 下午 03:54


I understand your question, but it is not appropriate to mention about it here. We, actually our direction for cost reduction is
to cut every cost, including every major item. So that is our direction anyway.


Okay and then when we look at units or rather volume in the June quarter, you gave us kind of an overall volume change
quarter-on-quarter, which looks very strong. Could you just provide more granularity on how that might look between TV,
notebook and then monitor?

Y. H. Jeong

Yes, actually if you refer to our guidance actually, our shipment will increase with high 20%’s across all items including the
TV and IT area also. So you can refer to that numbers.

Davis Lee

If I may add something on that comment; it is quite a sensitive issue for LGD at this moment to specify the incremental
volume during the second quarter, but I can recommend for you to do the easier methods, also Gen 8 incremental
capacities mainly for the TV and the Gen 6 extension is for the IT side. So that is the kind of a simple rule of thumb for you
to have some projections. At this moment, unfortunately due to the tight supplies, it is a price sensitive issue to disclose
specific numbers of increase in each segment.


Okay, that’s fair. What are your general; just if you could provide some color on the TV market in terms of strength by size.
That would be 32-inch in under strength that you expect in the June quarter versus 42-inch to 47-inch strength?

Kevin Choi

Generally speaking, because of the economy recession, many people say that 32-inch below area is quite strong and
another thing is that in China market, because of the government support, that 3500 RMB that’s normally covering 47-inch
and below size. Higher than 43-inch price is higher than that; so to get the benefit from that government support, that kind
of size product also the number can be increased.

When we look at our customer only, our customer only situation is always different, because this year after first quarter
when I look at that, our customer market share in the 42-inch and 47-inch, that area is continuously growing right now. So,
our company case is always different with worldwide market situations; so that’s our situation.


Okay and then who were customers that generated more than 10% of sales in the March quarter?

C.H. Lee

Okay, this is C.H. Lee. I will explain more detail; as electronics actually represent between 35% to 40% on a revenue basis
and then AmTRAN is also around 15% on a revenue basis and also we have Philips.


Okay and that’s for total revenue or just for the TVs?

C.H. Lee

Just TVs.


Okay and do you have a total revenue number?

Davis Lee

No, we don’t at this moment.


Okay, and just finally on the tax rate, what’s a reasonable rate whether it’s a positive impact or a negative impact for the
June quarter? I think some of us have been using a 20% rate, is that reasonable?

C.H. Lee

9／13 2009/5/4 下午 03:54


Yes, but actually our statutory tax rate will be around 24%, but this year actually as I said, they all go by some tax benefits
from our investment. Actually it will be below 20% I guess. So as I said before it was decided yes, so we need more time
and effort to calculate that number.


Okay and in the June quarter, it sound like there is a possibility you could be profitable, is that a reasonable statement?

Davis Lee

We cannot say at this moment profitability wise. So anyway we will, every tax like every other panel makers will make every
effort to be profitable, but we cannot say at this moment.

Operator

Your next question comes from Sanjeev Varma - Daiwa Securities.


My first one is on China demand side. Could you give a little bit of color out of your total TV panel shipment last quarter?
How many percentage has gone to China?

Kevin Choi

This is Kevin Choi from TV. The regional specific shipment information, I think that it is not appropriate to release that
information now.


Okay and basically my thought was like how China markets you think that will grow for you in second quarter from first
quarter level, given all these measures or government stimulus packages are there now? Quantum and what is the quarter-
on-quarter increase on the China market you are looking at in the second quarter compared to the first quarter?

Kevin Choi

I think that the important issue here for us in China market is that we want to continuously support our customer in China
and the China market growth ratio, we are expecting this year China markets growth ratio is at a 60% level. Then if our
customers want to grow that kind of percentage level, basically we want to support that, so that our customer can keep
their markets shares in that country; that’s our basic position.


Then the second one is that LED backlight, can you make some comments on what was the percentage of your notebook
panel shipment; you have done it already backlight on the first quarter and what is the status on the TV side?

Davis Lee

Okay, this is Davis Lee from IT Marketing. Notebook side, we are seeing this year about 60% LED transition, but given that
most of the new program or new product introduction is really based on the LED backlights in case of notebook, so as we
move on towards the second quarter and the third quarter more repeated transition through LED backlight will happen in
the notebook side and our internal market share is also inline with that; a little bit bigger than industry total transition ratio.

In case of monitor, only during the fourth quarter guidance we explained that monitor market will also have LED backlights.
Time LED between the notebook and the monitor side is about a year. So, that means that the premium for the LED
backlight is going to be reduced. So sometime next year, that so called clarity between early backlight and LED backlight
might have produced some major model; that’s our expectation.


On TV side?

Kevin Choi

TV side is just starting right now. So, it’s still too early to say, but we think that we are just following the market average
percentage.


Do you think that TV will account about 5% of the early to backlight for your TV panels or it will be lower than that?

10／13 2009/5/4 下午 03:54


Kevin Choi

Lower than that, because this is just a new market, so still that total volume in the market is not yet big and it’s a premium
for TV set right now, compared to even highest priced TFT sale model. LED TV set prices are still almost at 40%, 50%
higher price, so still there is a big price gap. So I think that this year the number should be very small number. We are
expecting the next year, when the price gradually goes down then the volume will pickup.


Under notebook, when you exit fourth quarter, is it fair to say that it will be more than 70% with that LED backlight; the
average 50% for the whole year?

Davis Lee

Are you talking about second quarter 70%.


No, fourth quarter Q4 ’09?

Davis Lee

That’s very much possible, since every new product development or new program, which we are designed in, more than
95% is based on LED backlights. So, unless it is high necessary, all the notebook panels are already transitioned to LED
backlight. In case of some special category of products, already LED transition has already happened, that’s fair to say.

Operator

Your next question comes from Andrew Abrams - Avian Securities


Just a couple of follow-ups; on the gross margin, I know it’s a difficult issue. I’m trying to understand what you would
consider the more sensitive part of the gross margin; would it be pricing on a panel basis or would it be your cost
structure, your ability to change your cost structure in order to keep your gross margins up? Is one of those factors greater
than the other?

Davis Lee

The cost reduction is getting stronger and stronger actually considering current market situation, but we think we now are
trying to see more potential on the pricing side.


Back to the LED backlight side; if you could just give a little color for the way that you are doing your notebook backlights;
let’s use a 154 notebook as an example. I assume you’re doing at least one light guide, maybe two light guides. What’s
the total number of LED’s that you wind up within a 154 notebook?

Davis Lee

I don’t have the exact data with me now, but again as I explained to you, the 15.4 cases, already in the industry is
crossover; I call it crossover to 15.6 from 6 April to LED backlight; already that crossover is happening now. So moving on
toward the second quarter, I think the LED portion is going to be higher than I expect.


Okay and as far as LED production, are you doing any internal production or do you expect to be doing any internal LED
production during this year or next year or is this all going to be bought in the open market?

Davis Lee

I will pass that question to C.H. Lee to answer.

C.H. Lee

Yes, we actually are focusing on three kinds of methods to cope with the LED light sourcing related problem actually; not a
problem at this moment. First one is we are using the vertical integrated pattern like LG Notepad actually.

So they’re also producing some kind of the notebook used, the LED product actually, and the other one where we
produce internally some kind of the LED product using some kind of chip which we have already some agreement to

11／13 2009/5/4 下午 03:54


purchase in January this year. So, that other one is to have some strategic alliance with our partners, like some LED
specialized companies. So that is our major method throughout our panels at this moment.


Would you expect most of it to be sourced domestically for you guys in the part that you do outside of your own
production. When that actually happens, would you expected to be domestically sourced to it really doesn’t matter to you
where it comes from?

C.H. Lee

Actually, the internal production where it happens in the overseas market, actually it will be in China in Nanjing, which we
[Inaudible], so it will be produced overseas actually. So, yes internal use will be some portion, but that portion will not be
increased in turn of the outside sourcing in Korea.

Operator

Your final question comes from Jeffrey Soo - Merrill Lynch.


I just have one quick question. I know you commented that for TVs especially inventory remains quite lean. I was
wondering if you could just share with us, what you’re seeing on the sell through recently of LCD TVs I guess in different
regions.

I think recently there’s been a lot of speculation or concern that sell through momentum is slowing down. If you could
share with us kind of what you’re seeing recently and then also how we should think about it going into second quarter and
how do you mange or try to think about this particular risk issue? Thank you.

Kevin Choi

First quarter sell through in North America is much higher than our expectation. Usually the North America LCD TV
penetration is pretty high, so normally people expect about lower than 10% growth, but actually in January, February
growth ratio is almost 35% higher.

So still even though NPD data is going down, but still that NPD data does not include Wal-Mart, Cosco and other
merchants. So, when we include that we still expect that March, the growth ratio is higher than 20% level. So the U.S.
market, the growth ratio is much higher than expectation and that’s kind of making big shortage in some U.S. market
retailers, the inventory situation.

In Euro market also originally, normally people expect about 10% growth ratio this year, but actually January growth ratio is
higher than 30% and March is still higher than 20% level, so continuously out performing compared to market expectation.

In China also, everybody knows that China market, the growth ratio is higher than 60%, almost 70% right now. Even Japan
market, the LCD TV Japan is the most highly penetrated over just the flat screen TV market and even Japan market
normally people expect 5% to 6% level YoY increase, but first quarter increase is higher than 20%. Actually TFT data
shows a 25% increase in the Japan market and even Korea market is also 80% growth ratio, which is showing right now.

So the first quarter is much higher compared to everybody’s expectation; because of that inventory level it’s much lower
right now. I also can say that last year November, December, TV manufactures didn’t buy enough panels because they
want to reduce their December ending inventory. So all the channels, the inventory level is very low in December, but
January, February, March, actual sell through number is a much higher than expectation. That makes the whole inventory
situation very tight right now.

Second quarter I think we already said that LCD is already fully loaded and another Korean company is also very busy, and
Taiwan company I think is between 80% to 85% operation ratios then. Those from 80% to 85% to 100%; even though I
think that the purchase is 100% still that cannot cover all those inventory shortage different. So I think that even end of
June still inventory situation is not fully clear; that’s what I’m thinking.


Okay and then just one follow-up. If that’s the case then in looking at there’s been, if we look at the whole TV market
growth this year, I think people are looking for minus 5% to plus 10%, but is that realistic to say that we probably can at
least achieve high teens or 20% year-over-year set growth?

Kevin Choi

Still I think that it’s too early to say that all these years the growth ratio of TV, what percentage of the growth ratio, but as of
now I can say that YoY, maybe it should be high teens. I think that even though we didn’t change our number yet, but

12／13 2009/5/4 下午 03:54


sooner or later in the market I think that even such a company we will announce that high teens is kind of a reasonable view
I think.

C.H. Lee

Okay, times up and on behalf of LG Display, we thank you for your participation in our first quarter earnings conference
call. If you have further questions, please contact either myself or my colleagues. Thank you.

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