Welcome to LG Display's First Quarter Conference Call. My name is Hee Yeon Kim, Head of IR department. I would like to welcome everyone to our global quarterly earnings conference call. I am joined by our IR staff as well as representatives from TV Marketing and IT/Mobile Marketing. J.S. Park is heading up the TV Marketing department. [Seong Choi] (ph) is heading up the IT/Mobile Marketing department. Next slide please. Before we move on to the earnings results, please take a minute to read the disclaimer. I would like to remind everyone that results are based on consolidated K-IFRS accounting standards and are unaudited. Next slide please. This conference call will take about an hour. Before we go into the Q&A session, please allow me to highlight our first quarter results, performance and second quarter outlook. Moving on to revenue and profits on the next slide. With the weaker seasonal demand and inventory adjustment by some customers, the panel shipments declined by 19% quarter-on-quarter and there was some limited ASP decline in selected products. Due to these shipment and ASP changes in the first quarter, we recorded the quarterly revenue at this point KRW 8 trillion, down 22% quarter-on-quarter. Although there was shipment decline in first quarter, we managed to remain (indiscernible) with operating profit of KRW 151 billion by maintaining our differentiated specialty product portion at around 60% of our revenue. Operating profit and margin was 2% while we recorded EBITDA margin of 19%. Income before tax was KRW 41 billion which reflected ForEx related provision loss and interest expense. Net income was KRW 3 billion which included the one-off differentiated a deferred tax asset adjustment and this reflects the new tech policy of the government. It had recently raised the minimum corporate tax rate to 16% from the…

(Operator Instructions) The first questions will be presented by Mr. Brian White from Topeka. Please go ahead sir.

Just one comment, the press release doesn't seem to be out in the website, doesn't appear to be working. So, a lot of people aren't getting your financials for this call. My question is, when we look at the second quarter, you talk about 5% to 10% growth. Could you really write that down between smartphones, PCs, TVs and tablets, and what will be stronger, what will be weaker?

Firstly, sorry for the inconvenience for this conference call, and then actually our guidance for the shipment was mid to high single-digits, not 10%, and among the application, actually TV growth should be much higher than our average guidance and then the others would be relatively lower than our average guidance.

Okay, and could you talk a little bit about what you're seeing in terms of the ramp for the May holiday in China and also 4K TVs?

4K TV in China, we're going global, okay. May 1, holiday in China, we expect around 10% worldwide growth rate, Q1 is over around 40%, so YOY growth rate, so we expect China's this year first half demand growth rate much higher than our expectations. So we expect May 1st holiday demand is okay where maybe we're good, but better than our expectations.

Okay, and how do we think of 4K in total, globally, what are you thinking there?

Previous forecast was small because the cost portion of UHD panel and set price, but recently lots of people started to talk about local solution of UHD and some other panel makers, so as people start to say 2 million or 3 million, or even 4 million demand will be possible this year but our Company thinks around 1 million UHD TV panel will be shipped to the market. Still we think for higher possibilities, we're watching but considering the total cost of UHD, even low-cost models, and also the set price for UHD, we think around 1 million, we just start, but even 1 million is much higher than our previous forecast.

Okay. and I just want to be clear, when you look at that 1 million, is that 4K only or do you consider 4K2K in that number?

4K2K, yes.

The next questions will be presented by Mr. Jerry Tsai from HSBC Securities, Taiwan. Please go ahead sir.

For Yeon, could you share any color of panel price change for first quarter and second quarter, apples-to-apples comparison please?

In case of apples-to-apples comparison, as we already guided, there is some price fluctuations as well as there is some price erosion in the first quarter in some limited applications, and this kind of pattern will be similar in second quarter as well. We don't expect any overpriced decline in first quarter – we didn't expect any overprice decline in the first quarter and also we are not expecting any overprice decline in second quarter as well. With limited application area, we are expecting some price fluctuating.

So, just let me make me more clear, so you think the price fluctuation would be relatively stable, right?

Yes.

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

Couple of questions. First, utilization rates, you said that it will remain the same in second quarter as first quarter, can you tell us the first quarter utilization rates?

It was low 90%.

Okay, so just to think about these numbers for a second, your capacity has been declining because of the conversion of line 6 as you mentioned, do you expect your capacity in the second quarter to be flat versus first quarter or is it still falling?

In the second quarter, we think our capacity should be similar as first quarter and our utilization ratio also remains similar level of low 90%.

Okay, makes sense. And then just to return to some of your comments on OLED TV, you mentioned that you would come on line in mid-2014 and I think you said that it would start contributing to the business at that time. Could you give us some idea of what you're expecting on yields or profitability? Usually if a new product comes in, especially at a smaller scale, it might not be accretive to your earnings. So, you're obviously thinking about OLEDs differently, so if you could elaborate on that, that will be great.

It's actually very tough question for us now. As we mentioned it is very (indiscernible) it is very tiny form and scale. Actually why we are mentioning about our meaningful profit generation from the mid-year 2014, at that time, we will fully be ramping up – we will ramp up our new OLED facility with 26K. With this kind of meaningful production scale, we might be successful to get some meaningful profit generation. So right now, it's very difficult to mention about our growth target and the profit contribution at that time.

Okay then how do we think about – you mentioned meaningful a couple of times, so that means it's a number that we should be thinking about and including in our models, so how should we think about that number, what is meaningful?

Meaningful means actually with this meaningful volume scale at 26K from 8K, actually we are targeting our user ratio to be reasonable level, maybe similar to LCD, not exactly same as LCD, but anyway similar to LCD level with that time, we believe we can be successful to generate profit with this kind of volume scale.

Okay, let me ask it in one other way and then I'll stop on this topic. Do you expect your OLED profitability to be higher or lower than the Company average at that time?

At that time, that time means mid-year 2014?

Yes I guess, because that's when you're saying it will have a meaningful contribution.

We have usually higher than normal LCD but it's totally dependent on our yield improvement piece. Actually yield improvement piece would be in line with our initial forecast. Anyway there should be profit generation stage. But what we are trying to highlight for the OLED business, eventually, maybe in coming two to three years later, as OLED margin contribution or profit generation or profit margin start, should be higher than LCD.

Okay, thank you. Can I ask one question on CapEx or would you like me to re-queue?

Yes.

Yes, okay. So my question on CapEx spend is, so a lot of the CapEx for OLED is this year, roughly can you give some idea of what percent it is in 2013 versus 2014?

Actually, based on delivery basis of CapEx, maybe 50% of our capacity should be focusing on OLED or LTPS for the new technology development, and next year, the portion of the new development should be higher than this year.

Okay, so the portion of OLED – because LTPS will be completed this year, so the portion of OLED should be higher than it is this year or higher than 50%?

Higher than 50% next year.

Okay, and do you expect your CapEx level to be similar?

Anyway, CapEx should not be higher than this year, because we will be more focusing on the new technology instead of LCD side.

Okay, great, thank you very much.

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

I'm calling to ask two questions. First one is related to touch panels. You have mentioned that touch panel you think is a higher value product. Could you share any volume or revenue topic for this year and how much of the gross margin we should get?

On that 4-inch, unfortunately right now we don't have numbers because that kind of business will be materialized in the second half of this year and we try to choose various (indiscernible) solutions among our various kinds of touch solutions, so we will be more clear, guidance or clear numbers, maybe next earnings conference call. We just try to give you our directional position for the touch business.

Yes, thank you, and (indiscernible) solutions I think there is something so-called in-cell, on-cell, is that related to (indiscernible) process, right, and the other is more like discreet process from the touch panel makers. So which technology you will focus in the future and do you expect in-cell technology has size limitation? For example, rumors say that over 4-inch in-cell has technology charge. So can you comment with these two questions? Thank you.

For first question, actually as I mentioned before, we have lots of solutions for various kinds of applications. In case of smartphone related touch embedded solutions, mainly in-cell, and then in case of tablet or IC device, the touch solutions should be different because the cost structure and our customers' needs and demand are also differentiated. So in this, our question for touch business, we will be diversified based on application by application. And then your second question, where touch embedded solutions can be expanded to bigger size, especially for smartphone, we can deliver 5-inch or 6-inch in-cell solutions for smartphone. We don't have any issues for the adoption of touch embedded solutions for the smartphone for now.

Okay, thank you. And my last question is, can you comment about the cost reduction from the material for the second quarter or for whole year?

Every quarter we try to reduce our material cost around (indiscernible) level.

The following questions will be presented by Mr. Jerry Tsai from HSBC Securities, Taiwan. Please go ahead sir.

Just one more follow-up question. About your first quarter performance, could you give more detail about your non-operating income?

Non-operating income means regarding profit size. Actually we had some FX related transaction loss because actually first quarter versus Q4 last year, U.S. dollar average rate remained similar. However, quartet end to quarter end, U.S. movements was about 4%. So because of this debt, actually our FX transaction loss related to our U.S. dollar debt has increased in first quarter. So that was reflected in our first quarter recording low (indiscernible) together with our usual interest expenses around KRW 400 billion. That's the main reason. Is it okay for your answer?

Yes, sure, many thanks.

The next questions will be presented by Mr. Brian White from Topeka. Please go ahead sir.

Just want to go back to CapEx. What did we say for CapEx growth this year and the actual number?

CapEx remained similar at around KRW 4 trillion.

Okay, and when we look at the second quarter, I know TV will outperform, what market do you expect to be the weakest in the June quarter?

Weakest means YOY or 2Q growth rate.

Quarter-over-quarter.

Quarter-over-quarter, so which market is the weakest one (indiscernible)?

(indiscernible) is regional basis, this market means U.S. (indiscernible) emerging market, which one is the weakest areas?

What's the weakest TV, PC, tablet, smartphone, what market will be the weakest quarter-on-quarter?

For this side, as I mentioned before, the small and medium-sized, demand is not that stronger nowadays and also small and medium-sized seasonality in Q4 was severe than other applications, so this kind of small and medium-sized demand meaningful increase should be in the second half of this year.

Okay, do you think it will go down quarter on quarter or just show very small growth?

In case of applications that we have diversified customer base, yes we can expect some – a moderate increase in [contribution] (ph) and while some applications, we don't have any diversified customers, yes we will have some quarterly decline.

Okay, just finally going back to the press release and the presentation, when will those be available?

We will check our system for that problem on our side. We are contacting with the networking system, the company, so we will get back to you when it's available by the web.

If you send your e-mail, we will directly send the materials.

Okay, thanks.

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

Could you tell us what the (indiscernible) capacity on the 6G conversion will be and what your target is for that?

That initial capacity for that LCD (indiscernible) is 60,000 to 70,000 which will be converted to 20,000 LTPS facility. It has already started from first quarter and it was the main reason for our capacity drop in the first quarter and it will be finalized maybe in Q4 this year.

Is 20,000 the suggested design capacity when you convert 6G, is that correct?

Yes, 20,000 is the LTPS design capacity at the conversion.

And so far this year that plan has not changed presumably, is it the same plan you had three months ago?

Yes, actually the migration schedule will remain same, however the level of ramp up and the ramp-up timing should be flexible based on our customer demand situation.

Right, so that the equipment move-in is already set, but when you ramp up the equipment, it will depend on customer demand, is that correct?

In terms of equipment (indiscernible), we finalize maybe second half of this year, and then the ramping up will be flexible.

Currently, there are no participants with questions. (Operator Instructions) The following questions will be presented by Mr. Dan Malcolm from Viking Global Investment. Please go ahead sir.

I just wanted to follow up on the earlier questions just in terms of the 2Q shipment outlook for mid to high single-digit growth sequentially, can you just break that out by the product mix of mobile, tablet, PC, notebook, monitor and TV, just roughly how you expect those to trend relative to the overall shipment guidance for 2Q?

Yes, actually continue to (indiscernible) for that, but in case of TV, yes tends to be double-digit growth, and monitors and notebooks, they should be similar with our average guidance trend, and the others, probably they should be similar to our average guidance but we might have – we don't have any chance to see that kind of foreign growth. I hope that should be enough for your answer.

Okay, yes. So small size, your expectation is that actually overall could actually grow sequentially in line with the guidance but maybe a little bit wider, and I think your point earlier was where you're kind of self sourced, you're going to have decline sequentially, and where you have, where you've got – in areas where you have multiple customers,, you should see growth, is that what you're, is that the right way to read that answer?

Yes.

Okay, fantastic, thanks so much. And then just in terms of small size for the mobile area, what is your expectation just in terms of screen size as you go through this year, I assume everything you've been doing so far in that segment is 4-inch or do you guys supply for greater than 4-inch today and what's your expectation on what that will do the test of this year?

Maybe still our major portion for the size in mobile side is 4-inch but nowadays many customers in Korea and China players keep asking about bigger screen size such as 5-inch or 5.25-inch, even 6-inch. So this kind of bigger sized screen portion we are continuing to increase. And this kind of customers portion will increase from high single digits in Q4 last year and potentially it will be increased to double-digits among our total shipments.

Great, thank you, and then did you talk about 10% customers in the quarter, what they were in 1Q relative to 4Q?

Actually it was among high single digits, it will be close to over 20%.

I'm sorry, what will be?

Alright, please wait for the check-up.

Okay.

Malcolm, could you repeat your question because I couldn't catch your intention, what's the meaning of…?

So, did you have any 10%, how many 10% customers did you have in the quarter? I assume you had at least a couple of 10% customers.

On our total revenue?

Of total revenue, yes, 10% of total revenue or more and then if they were (indiscernible) this quarter, what were they last quarter, you know what I mean?

We only have two biggest customers, one is in Korea, one is in the U.S. Together with these two customers, sales contribution is already over 50%.

Over 50% with those two. And then we don't have any…

Yes, we don't have any double-digit sales contributor.

Yes, right, I was just trying to capture the change in the percentage of revenue for those two customers in Q1 versus in Q2. I mean sorry in Q4, I mean Q1 versus Q4.

Yes, in total, that was over 50%, but actually in Q4, our U.S. customer was higher among 50%, but in first quarter, our Korea customer is higher in terms of revenue contribution.

Okay, great. Thank you so much. I appreciate it.

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

Thank you for taking my questions again. I would like to ask a follow-up question on the high-resolution panel. You mentioned you believe high-resolution panel will be chain in the temp rate and in terms of the big brand technology, will you believe (indiscernible) rate will change to Oxide or LTPS from regional amorphous technology in 2013 from your end? Thank you.

Actually we mentioned about trying out high-resolution not just for the tablet, it's the overall trend for overall application from smartphone to television. If your question is related to specifically tablet size, actually in this year, with the higher resolution tablets, we are okay with just the part of what's existing on the (indiscernible).

So, (indiscernible) you don't have plans to use Oxide or LTPS to separate in this year?

Actually, we are developing that kind of tablet, that thing, but actual production decision-making will be done between costs increase versus customer value. Actually if you already know, if we migrate to Oxide or LTPS for the tablet side, the cost increase is meaningful, so we have to be balancing between cost increase versus customer value. So, based on this kind of to comp rate, we will be deciding the production timing for that kind of new technology.

The next questions will be presented by Mr. Dan Malcolm from Viking Global Investors. Please go ahead sir.

Just one last question, what's your expectation for depreciation for the year?

For the year, the depreciation expense will be around KRW 4 trillion from previous KRW 4.5 trillion.

So it's lower than previously expected and it will be roughly flat then from first quarter for the rest of the year?

(indiscernible) in the second quarter and third quarter, and then we'll come back to the first quarter level in Q4.

Thank you very much. I appreciate it.

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

Operator, if we don't have any questions, we will end this Q&A session.

Actually there is a person who is ready for his question. He is Matt Evans from CLSA.

Okay, we will.

Okay, so last question will be taken by Mr. Matt Evans from CLSA. Please go ahead sir. Matt Evans – CLSA: Does that depreciation number includes amortization, of KRW 4 trillion?

Yes. Matt Evans – CLSA: And you said that, I think in the local – I'm not sure if you – I couldn't quite hear what you just said but I think in the local meeting today, you said in 2Q it would fall about KRW 100 billion from the first quarter, is that right?

Yes. Matt Evans – CLSA: Okay, and then will be third in 3Q and then back you said to the first quarter level in the fourth quarter, did I hear you correctly?

Yes. Matt Evans – CLSA: Okay, thanks very much.

So, there are no questions further. We will end this conference call. On behalf of LG Display, we thank you for participating in our first quarter earnings conference call. Should you have further questions, please contact either myself or my colleagues. Thank you for your participation. Thank you.