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Executives

Kim Hee Yeon - Head, IR Team

Sang Lee - Vice President, Market Intelligence Department

Kevin Choi - Vice President, IT Marketing Department

J.S. Park - Head, TV Marketing Department

Analysts

Nicolas Gaudois - UBS Securities

Brian White - Topeka Capital

Ben Lu - Seligman Investments

Matt Evans - CLSA

Arthur Lai - Citi Research

Kyung Min Kim - Hyundai Securities

LG Display Co., Ltd. (LPL) Q4 2012 Results Earnings Call January 24, 2013 8:00 AM ET

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 2012 Fourth Quarter Earnings Results by LG Display. This conference will start with a presentation followed by a division of Q&A session. (Operator Instructions)

Now, we shall commence the presentation on the Fiscal Year 2012 Fourth Quarter Earnings Results by LG Display.

Hee Yeon Kim

Good morning, good afternoon, and good evening. Welcome to LG Display’s fourth quarter 2012 conference call. My name is [Hee Yeon Kim], Head of the IR Team. On behalf of LG Display, I would like to welcome everyone to our global quarterly earnings conference call.

I’m joined by my colleagues at IR team, as well as representatives from Market Intelligence, TV marketing, IT marketing. Sang Lee, is Vice President of Market Intelligence Department; Kevin Choi is Vice President of IT Marketing Department; and J.S. Park is heading up the TV 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.

All the information beginning with financial statement for the year ended December 31, 2012 LG Display is required to give effect to the amendments to K-IFRS No. 1001, Presentation of Financial Statements, in preparing its financial statements.

LG Display presents operating profit or loss as an amount of sales less cost of sales and selling and administrative expense, including research and development expenses, on the face of the statement of comprehensive income. We have applied the amendment retroactively and reclassified the statements of comprehensive income for the years ended December 31, 2011.

This conference call will take about one hour. Before we go into the Q&A session, please allow me to highlight our fourth quarter results, performance and first quarter outlook.

Moving on to the revenue and profit on the next slide. With the strong seasonal demand for all product segments and especially due to the significant shipment increase of Smart devices, the panel shipments rose by 10% Q-on-Q in fourth quarter.

The differentiated specialty product portion from FPR 3D to Smart device continuously increased in fourth quarter with about 10% point increase Q-on-Q. We recorded the highest quarterly revenue at KRW 8.7 trillion, up 15% Q-on-Q and operating profit increased to KRW 587 billion in fourth quarter from KRW 297 billion in third quarter.

Overall panel prices -- price maintained a stable trend in fourth quarter with blended ASP rose by 9%, as the differentiated specialty product portion increased by almost 10% point Q-on-Q.

Operating margin was 7%, while we recorded EBITDA margin of 21%. If we apply the prior year accounting method, operating profit was KRW 525 billion in fourth quarter. Income before tax was KRW 503 billion and net income was KRW 319 billion.

Moving on to slide four, looking at our financial positions and ratios. At the end of December 2012, cash and cash equivalent recorded KRW 2.7 trillion. Although Q4 shipments increased by 10% Q-on-Q, the utilization rate maintained at the similar level compared to Q3. Thus inventory decreased by KRW 300 billion Q-on-Q recording KRW 2.4 trillion.

Our debt recorded KRW 4.5 trillion about KRW 200 billion reduction from Q3 and net debt-to-equity ratio declined to 18% from 22% in Q3. The current ratio rose to 97% improving the balance sheet.

Moving on to the slide five, looking at our cash flow. Cash at the beginning of the quarter was KRW 2.5 trillion. Cash flow from operating activities resulted in cash inflow of KRW 884 billion.

Cash flow from investing activities resulted in outflow of KRW 603 billion and cash flow from financing activities resulted in outflow of KRW 127 billion. As a result, the net change in cash was inflow of KRW 154 billion.

Moving on to slide six, I would like to go over our performance highlights. During fourth quarter, our shipment increased by 10% Q-on-Q to 10.1 million square meters, while ASP per square meters increased by 9% Q-on-Q to US$802. This ASP increase was mainly affected by 10% point [total] increase of the differentiated specialty product portion in fourth quarter.

Moving on to our product mix. During fourth quarter the TV segment represent 43% of our revenue, monitors at 16%, notebook PCs at 10%, tablet PCs at 17% and mobile applications at 14%. The tablet PC and mobile segment rose instead in fourth quarter, driven by the significant volume increase in fourth quarter.

Moving on to slide eight and looking at our capacity. Our producible capacity decreased by 2% to 11.8 million square meters in fourth quarter, since we utilized some capacity for R&D activities during fourth quarter.

Next we turn to our outlook section. Due to the low seasonality and inventory corrections by some customers, we expect the shipment decline in first quarter is likely to limiting percent level.

Regarding the first seasonality, shipments marked segment would show significant seasonal demand decline as its growth rate [dramatically] dropped down. Compared to the past years where it showed very steep growth rate.

The panel prices slightly declined in second product or segment. When we think that overall price decline would be marginal, we will flexibly control our utilization rate to effectively respond to the market demand.

Due to these factors, profit decline is expected in first quarter compared to last quarter. But we will try to maintain our profitability implant by continually expanding the differentiated specialty for the full year and aggressively reducing cost.

Next, I would like to touch upon our business strategy going forward. As we look at our overall market environment in 2013, it is difficult to expect the supply-demand situation to be meaningfully include compared to 2012. We expect the continued risk demand trend in 2013. However, the industry supply increase would be also marginal this year.

Regarding the demand flow this year, we expect that as there are low seasonality in first quarter, the demand would have improved from the miserable second quarter. As a barrier to set makers, we will launch new product line up.

In addition, several companies will execute fab conversions in second half, which would have a positive impact on the supply side. With the seasonality in demand, the supply-demand situation would be better in second half compared to first half.

Under this circumstance, we will continually focus to maintaining at the high quotient of the differentiated specialty product to improve profitability and enhance the business structure. We believe LG Display is well positioned to highlight its technological competitiveness such as IPS, FPR 3D and WRGB OLED technology.

In high resolution and bigger size panel which are the growing trends in the electronic industry. We will fully leverage this advantage to strengthen our differentiated specialty products right now.

We expect that specialty product portion to be increased to about 70% of our revenue this year from 50% last year. With this effort, LG Display is committed to maintaining this differentiated competitive edge in the industry.

This ends our presentation for fourth quarter 2012 earnings. And I would like to take your questions. To use the time efficiently, please limit to three questions per person. Operator, please proceed to Q&A session.

Question-and-Answer Session

Operator

(Operator Instructions) The first question will be presented by Mr. Nicolas Gaudois from UBS Securities. Please go ahead sir.

Nicolas Gaudois - UBS Securities

Yeah. Hi. Good evening. Thanks for taking my question. First one is you mentioned main presentation in Korea running out plastic OLED in the second half of the year. Maybe if you could elaborate a little bit if you expect this to be, in addition, to high volumes and across one or more customers basically and what you’re trying to achieve in terms of differentiation by using your best [call it] if it’s -- for instance, unbreakable characteristics. Thank you.

Hee Yeon Kim

We are planning to start to meet production with the plastic OLED in small and medium sizes in second half of this year. But the capacity of the plastic OLED is very limited. So we can -- we can expect that we can support just one or two customers of the one or two models.

And the differentiated point for plastic OLED if the initial stage could be unbreakable and it could be very clean and it could be very light. So that is very differentiated point from the (inaudible).

Nicolas Gaudois - UBS Securities

Okay. Great. And second question is on your comment on the industry outlook. I mean, you talked about fab conversions potentially helping supply in the second half of the year. I guess, we are aware of your own conversion to TPS. Also, of course, you talked publicly again that yeah about target volumes for TV OLED market in 2014-15 so potentially but could drive some conversion.

But do you think this is sufficient on your side plus maybe your competitor doing something visibly similar to actually really take out meaningful capacity and how do you look at vis-à-vis improvement in efficiency and year-over-year Chinese panel vendors on the other side? Thank you.

Sang Lee

This is Sang Lee from Market Intelligence. Besides the OLED, there are many -- a bunch of new technologies coming on which will make many panel makers make a line conversion. If you look at the current IPS high resolution such as Ultra HD, I believe there will be some kind of some line essential reduction in the second half of this year. So it is not only for LG Display, it will be about the whole industry. Did I answer to your question?

Nicolas Gaudois - UBS Securities

Yeah. No, I guess, so we see it completely depends of the adoption of Ultra HD and I think we all agree about Ultra HD prices are fairly elevated. I would also suspect the Chinese vendors are not going to do any UHD for panel making of course. So in terms of modeling of supply, you think that’s sufficient to offset increase supply that we -- new comers basically the Chinese vendors? Thank you.

Hee Yeon Kim

I thought we are missing your point of question. Can you repeat your questions, please?

Nicolas Gaudois - UBS Securities

Yeah for sure, so on top of earlier you just mentioned UHD TV sets are coming in at fairly high price premium plus not old panel makers would like to redo UHD. So I was just asking clarification whether in your modeling, when you model supply, you still think these facilities sufficient to offset the increase in output, we should expect to see from Chinese panel vendors plus potentially high utilization rates as well for Taiwan plus Sharp as well. Thank you.

Hee Yeon Kim

Simply not only Ultra HD but also IPS and high resolution for notebook, monitor, there are several technologies that required line conversion. Anyhow, we believe the supply will be in very tight situation for the second half of this year because of those kind of some supply issue and also some seasonality issue.

Nicolas Gaudois - UBS Securities

Okay. Fair enough. That’s helpful. And just lastly, a clarification on your assumptions for that, what is the underlying LCD TV units growth rates you’re using in your model right now for 2013. Thank you.

Hee Yeon Kim

In terms of the asset, we believe it will be mid single-digit, the growth and area base mid-single digit, the unit will be almost flat. That’s the assumption about what I just expect.

Nicolas Gaudois - UBS Securities

Sorry, the area growth will be mid-single digit and the units flat basically you said.

Hee Yeon Kim

Unit growth will be low single digits or mid single, somewhere between, yeah.

Nicolas Gaudois - UBS Securities

Okay. Okay. Thank you very much. Thank you.

Operator

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

Brian White - Topeka Capital

Yeah. I wonder, if you can talk a little bit about what you’re seeing for Chinese New Year in terms of customer expectations and what is the inventory situation right now for the Chinese New Year on TVs. Thank you?

Hee Yeon Kim

As you know, there are two different seasonality in the first half of Q1 which is the -- calendar New Year holiday season and also Lunar calendar holiday season in next months. As you may have heard, New Year holiday was not that bad. Actually, it was, I think about some -- our original expectation and also even though -- some of the local TV manufacturers stuck with the small inventories but we believe the situation purely depends on how they can promote with the lunar calendar holiday season, which is coming on next month.

Inventory -- we are sharing some inventories at some local manufacturers -- some TV suppliers but overall, situation is not that bad. And we are closely monitoring the holiday season, lunar calendar holiday season which will begin next week.

Brian White - Topeka Capital

Okay. And then how do we think about the cost down in the December quarter. What was your cost down and then how do we think about cost down for the March quarter? Thanks.

Hee Yeon Kim

Overall, the fourth quarter cost down is quite prepped. But in case of the cost improvement in [March deal] level, we achieved the low single digit percentage of the cost down. So we can continue this kind of a trend, low single digit percentage of the cost down can be continued in the first quarter.

Brian White - Topeka Capital

Okay. Thank you.

Operator

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

Ben Lu - Seligman Investments

Hi. Thank you, guys for doing this call and congrats on this quarter. I have three questions. One, you guys guided over KRW 400 billion for Q4 operating profit excluding charges. You guys reported KRW 587 billion. I know you guys changed accounting in terms of moving some of the FX and the provision to build all the key line. Can you provide a little bit about what was the core upside that you saw in the quarter? And then I have two follow-ups. Thank you.

Hee Yeon Kim

Actually, we gave the guidance over the KRW 400 billion operating profit but that was quite conservative at the time. But actually, we achieved more than our guidance. So the reason is the -- first reason is the decision of shipment is bigger than our expectations in fourth quarter and the second one is the, we can achieve the bigger sales in smartphone areas and tablet areas in fourth quarter. So, those two reasons are the key reasons to compare that with the operating profit in fourth quarter.

Ben Lu - Seligman Investments

Okay. Because I saw your Q4 guidance, I already assumed panel shipments will be up high single digits, you guys were up 10%, you talked about specialty mix being up about 10 points in Q4, and it sounds like that exactly what happen. So, I’m trying to understand where the upside came from?

Hee Yeon Kim

That’s correct. The shipment is recorded -- was recorded at 10% rather than a little bit higher than our guidance and our product mix is improved to meet 60% in fourth quarter. So that -- those two reasons are the main reasons to getting higher -- high operating margins in fourth quarter.

Ben Lu - Seligman Investments

Okay. Okay. Great. And then, you guy, if you have the mobile and tablet, that was about 31% of sales in Q4. Remind me, I think in the local media you guided that the mobile/tablet mix would be mid-to-high 20% level in Q1?

Hee Yeon Kim

Yeah. That’s correct. The high seasonality could be happen in first quarter especially in smartphone areas and tablet areas. So the -- our deferred revenue portions for both segments could go down to high 20% or in worst case not meet 20% in first quarter. But in overall in 2013 the portion of the both segments will be up to over 30%.

Ben Lu - Seligman Investments

Got it. But and if you look at your Q1 guidance, you’re looking for total panel shipments down about mid teens, a slight decline in ASPs, so it sounds like you guys are guiding mobile/tablet sales probably down maybe 30 plus percent, does that math sound right?

Hee Yeon Kim

Well, actually, overall, our shipments declined by mid 10%, that is based on incomes would be on area. So the tablet and mobile contribution to area is quite limited, so most of the decline is coming from the TV and monitors and laptop PCs, the larger side is [computer].

And of course, there is some decline is expected in tablet and mobile in first quarter. We can forecast the market of the tablet and mobile areas go down to double-digit growth decline in first quarter. So we’re going -- our overall shipments in first in tablet and mobile will follow the kind of market trend.

Ben Lu - Seligman Investments

Got it. Okay. And then my last question is DisplaySearch just I think earlier this week came out with the updated 2013 forecast. They said that 2013 area growth is only going to be 2.5% year-over-year and that TV panel units will actually be slightly down year-over-year. Do you agree with that forecast or do you think that’s a little too conservative?

Sang Lee

Oh! Yeah. This is Sang Lee from Market Intelligence. I mentioned earlier about mid single-digit growth in area TV. I think the DisplaySearch is some what conservative, if you look at current some movement in the larger size TV products, I believe it will be more than what DisplaySearch is forecasting at this moment.

Ben Lu - Seligman Investments

Okay. Great. Thank you, guys.

Operator

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

Matt Evans - CLSA

Hi. Good evening. Thanks for taking my question. I’d like some clarification on the depreciation policy please if possible. Do you intend to change that?

Hee Yeon Kim

So you mean the depreciation policy about the year from the four year to the five year?

Matt Evans - CLSA

That’s right.

Hee Yeon Kim

Actually we are not decided to change our depreciation policy but if we apply the kind of change of the depreciation policy, it could be the start of the 2013. So the only worries of the first quarter of 2013 would be the April this year. So we think we will make a decision to change on that by -- maybe within the first quarter, maybe in February or in March.

Matt Evans - CLSA

And I understand from the local briefing that, that could be five years, six years or seven years, is that right?

Hee Yeon Kim

No, that is not correct. We are considering that our decline -- the period of the depreciation is the full year and we are considering to change the period from four years to five years. But in case of the tax accounting our Korean financial authority is considering to change the tender -- the period of the depreciation from five years to six years in next year. So that is the current trend of the financial accounting. So we are considering to meet the kind of trend on that.

Matt Evans - CLSA

Okay. Thank you. And one more question, could you give us some guidance for how much LTPS capacity will grow this year in area terms?

Hee Yeon Kim

Do you mean the overall market or in our side?

Matt Evans - CLSA

LG Display on your side?

Kevin Choi

In case of LTPS, we’re going to convert 20 cases over the Gen 6 fab.

Matt Evans - CLSA

Could you give us a sense there in terms of how many 4 million unit equivalents or in terms of square meters of the year on year percentage growth would be? It seems like you would be doubling your capacity roughly but I wanted to hear from you.

Kevin Choi

As far as the current gen of 4.5 fabs capacity equivalent what we’re going to add this year.

Operator

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

Arthur Lai - Citi Research

Hey. Hello. Good evening. Thank for taking my question, I think, I have two question, one is on the page eight, about the product mix. You’re showing that your mobile device actually gained the share of the total revenue and if I do a quick calculation it’s about 20% to 30% growth Q-on-Q.

Can you share with me is purely because of unit growth or is because your product shipment is shifting from the display only to display at least the other key component for Gen 4 cover fab. This is my first question. Thank you.

Hee Yeon Kim

The impact is coming from the important point you mentioned. First of all, there was a unit growth, it happened in the first quarter. And the second reason is our ASP of the mobile, the product went up in fourth quarter with adding some other -- the functions like you mentioned the capabilities of touch functions.

Arthur Lai - Citi Research

Yeah. So my second question would be follow -- would you are answering that, we know there is a industry growth ensuring that more and more device picking their cover glass, for example, 41 feature or large one panel. So are you increasing your magnesium capacity for the 2013 in order to increase your outlook?

Hee Yeon Kim

Actually the touch solution is the area that our customers wanted for us to equip the kind of function because they are -- want to simplify their efficient if we did the touch solution with our display panel. So -- but we haven’t decided yet to how much we’re going to add to the capacity for touch, but we think this is the way we’re going to in the future. But we haven’t decided the detailed plan of the capacity in this fashion.

Arthur Lai - Citi Research

So I am good for the page eight, and please move to page nine. I think you guided that -- you saw that fourth quarter actually the Gen 8 area capacity actually decreased slightly in Gen 8. Can you tell us what’s the challenge for this area decrease, because I think capacity should in many ways to depart on it. Display you continue to grow and there is a continued driving factor to let you go down, can you tell us that how to moderate in the future?

Hee Yeon Kim

Okay. The capacity we showed in the page nine is the producible capacity, it’s not the design capacity. So, producible capacity can be adjusted by the -- if we allocate our producible capacity to [unproductable], the purpose R&D with some other reasons. So in fourth quarter we allocated some part of the -- our capacity for the R&D purpose. So that’s why we decreased that producible capacity by 2%.

Arthur Lai - Citi Research

So that’s only for R&D purpose, so in 2013 as you mentioned more changes to help us to LTPS where it also decreased Gen 6 capacity or how you save your total producible capacity for change in 2013, if we’re taking order to pass this migration? Thank you.

Hee Yeon Kim

The conversion of the Gen 6 capacity to LTPS is not started yet. So we are not fixing the detailed plans of the timeframe to change that but presumably it could be happened in the second quarter or the third quarter. So if we convert to the original plan of the 80K of our existing at the -- on [special cum basic] capacity, we can get 20K of the LTPS capacity. So we will not lose the 60K of the Gen 6 capacity that is approximately 2% to 3% of our total capacity.

Arthur Lai - Citi Research

If also through the other this is -- like contemporary, so where you do the other process migration to offsite in 2013.

Hee Yeon Kim

We are planning to convert our Gen 8 for silicon the LCD line to old television line. But when we decided that until now is we are going to convert our existing line but what we are not deciding yet, is how much is going to be. So we are considering the [business trends] over the converting our -- this Gen 8 fab. So it could be shift in this quarter but we cannot say, how much is going to be but for sure one sure thing is we are going to convert the -- our gen fab but I cannot say how much percentage of our capacity could be go into the conversion.

Arthur Lai - Citi Research

Can you please give us (inaudible).

Operator

The following questions would be presented by Ms. Kim Kyung Min from Hyundai Securities, please go ahead ma'am.

Kyung Min Kim - Hyundai Securities

Good evening thank you for taking my question. Actually I have two questions about the local briefing in the afternoon. And first question is about the our changes of useful life, as far as I understand there was a question during the Q&A session that the impact of those changes and the CFO, Mr. Jeong said that impact for the initial stages does that further useful life change from four year to five year, the cost will be larger for the initial years and is that true or if my understanding is not correct?

Hee Yeon Kim

Yeah. If we change our depreciation technology from 4 years to 5 years, we can get some lower depreciation cost for the time being the impact could be very big in the first year of the change. So we cannot say how much is going to be, so it should be calculated very deliberately. So, yeah, it's right the first year impact is very large.

Kyung Min Kim-Hyundai Securities

Why is that large because according to my understanding the useful life is getting longer which means that less cost for each year, right? And why it's still large cost impact for just for the first year just after the change?

Hee Yeon Kim

Maybe you mean, you understand the cost going to be larger but it's pretty opposite way because the costs…

Kyung Min Kim-Hyundai Securities

I thought the cost maybe lower for the initial--

Hee Yeon Kim

Lower, and the impact of the lowering for was quite big impact, it's costing us.

Kyung Min Kim-Hyundai Securities

I see, in a positive way right, for your cost right?

Hee Yeon Kim

Right.

Kyung Min Kim-Hyundai Securities

Awfully sorry for my misunderstanding. And my next question in about different amount of your reported operating profit and on your, let's say true operating profit and could you give us more details on those numbers in terms of the gain from foreign exchange and loss from provision, which is larger and how much of the amount for each accounting, let's say those items.

Hee Yeon Kim

So I don't know that I can understand what's the meaning of the true operating profit but the adjusted amendments over the financial (Inaudible) change the rules of the -- the definition of the operating profit in financial statement. So that is the sales, (Inaudible) cost of the goods sold, and the SG&A. So our adjusted -- the operating margins which is KRW 575 billion it is calculated by the kind of the methods.

Kyung Min Kim-Hyundai Securities

And the increased amount of let's say KRW 60 billion came from the gain from foreign exchange and loss of provision right?

Hee Yeon Kim

Right the two big thing is provisioning and the second thing is the foreign exchange gain and loss from the operating side.

Kyung Min Kim-Hyundai Securities

And if I understand you correctly the gain from foreign exchange is larger than the loss from provision, right.

Hee Yeon Kim

Actually it's positive data but we can say that the overall that amount is around the KRW 60 billion?

Kyung Min Kim-Hyundai Securities

KRW 60 billion positive right .

Hee Yeon Kim

Right.

Kyung Min Kim-Hyundai Securities

Okay. Thank you.

Operator

The following questions will be presented by Mr. Brian White with Topeka Capital. Please go ahead sir.

Brian White - Topeka Capital

I just wanted to be clear are there any one time negative impacts in the quarter losses or anything?

Hee Yeon Kim

Well, it's very hard to the project the fourth quarter's one time the loss but under the new the rules of the financial accounting, there kind of one time impact could be lower - could not impact on the operating profit side.

Brian White - Topeka Capital

Okay. But was there any, fines, litigation anything in the December quarter that was one time in nature, is it a pure operating performance that we saw in the December quarter?

Hee Yeon Kim

So, our operating margin before amendment of the financial accounting was around 525 and our operating margin from after the amendment is 575, the difference is can be understood by the one-off issues.

Brian White - Topeka Capital

Okay. Got it. Great. Thank you.

Operator

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

Matt Evans - CLSA

Hi, thanks. Have you been net beneficiary of the operating level, I am not referring to each transition gains or losses, but just on the operating margin if you've been a beneficiary of the currency moves in the fourth quarter particularly, the [weekend]?

Hee Yeon Kim

Yeah. The weekend impacted on our benefit in positive side though the cost of structures.

Matt Evans - CLSA

Are you able to quantify that?

Hee Yeon Kim

It's very hard to quantify that but we pay the glasses by that this is the biggest parts of the payment by the Japanese yen, so the portion of the glasses around the 20% of our material for us. So you can calculate the impact that would be the change with the end impacted our cost of structures.

Matt Evans - CLSA

Okay. So you can calculate the impact that would be?

Hee Yeon Kim

The change of Yen, impacted our the cost structures.

Matt Evans - CLSA

Okay. And coming back to the small panel side, it will be, can you give us some indication of for the existing LTPS fab, how much of that will be used for plastic OLED and how much do you intend to continue using for LCD?

Hee Yeon Kim

So you asked us about our new LTPS capacity, than how much it's going to be the allocated in the plastic one?

Matt Evans - CLSA

Or perhaps, or perhaps you could say by the end of the year I mean how much of the capacity will be, of the LTPS capacity will be allocated to OLED either for R&D or for commercial production?

Hee Yeon Kim

We did not decide the plan yet but our [wages] consumption is that we are going to produce the surplus OLED and current LTPS set, not in the new Gen 6 fab. And the portion of plastic OLED we are expecting at that high number, high portion in this year. We are just starting the fact that OLED second quarter this year and the portion could be decided by the customers (Inaudible) for the product, so it's very we need to say how much we could we can make plus OLED at that fab than right now.

Matt Evans - CLSA

Okay. And is it possible you might change the conversion schedule for 60 conversion? Is that something that might be reviewed, some investors might be concerned that you are building a lot of capacity or do you feel very comfortable with the plan at the moment?

Hee Yeon Kim

At this so much we do not have any concerns or plan to delay the conversion, we are on track right now.

Matt Evans - CLSA

Okay. And separate issue regard to [Intel], there's discussion in the market and different schools of thought on how difficult is to do in-sale larger panel sizes particularly if resolutions continue to increase, can you comment on that, or clarify that issue?

Hee Yeon Kim

Yeah. I'm not an engineer but according to our R&D people, the [in-sale] I think somewhat around 7 or 8 inch area and it this -- limit I think somewhat but who knows, later on it could be larger but I think somewhat around 7 or 8 inches size is the limit for the (Inaudible).

Matt Evans - CLSA

Okay and one final question from me, you seem to have managed the inventory down to very low level in terms of inventory days in the December quarter, will that increase in the first quarter? And related to that there seems to be some comment in the local analyst briefing suggesting that you might build inventory early in the year in order to accommodate a potential shortage of TV capacity later in the year which sounds quite risky. So could you perhaps comment on that and correct me if I misunderstood that?

Hee Yeon Kim

Well, in the level of inventory and end of the fourth quarter it's quite down, is less than the third quarter -- end of the third quarter. And we don't have any plans to build the inventory to prepare the shortage of second half. Our basic thinking is the in overall this year that demand is not that high or not that strong. So we are maybe of course the second half is the stronger than the first half but we don't have any plan to build up the inventory to prepare the second half.

Matt Evans - CLSA

Okay. All right. Thank you very much.

Operator

Currently there are no participants with questions. (Operator Instructions) The following question will be presented by Mr. Ben Lu from Seligman Investments. Please go ahead sir.

Ben Lu - Seligman Investments

Hi, thank you guys for taking a follow-up questions from me really quickly, I know you guys have got it previously for Q4 OP to be over KRW 400 billion. What is your guidance for Q1 in terms of OP you think it will be profitable, significantly profitable?

Hee Yeon Kim

Well, we rarely give the guidance of the operating profit but we think that we are going to -- we expect we are going to maintain the profitable in fourth quarter.

Ben Lu - Seligman Investments

Okay. Great. And then my last question is how should we think about margins for mobile and tablets in Q1 understanding is that there on some fully depreciated fabs, and with the decline in production will mobile be profitable in Q1?

Sang Lee

Well at least we're happy to say that the product line -- the specific product category but we try to maintain our profitability in every segment in first quarter.

Ben Lu - Seligman Investments

Okay. Great. Thank you.

Operator

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

Hee Yeon Kim

Since there's no question, I would like to end the conference call at this movement. So on behalf of LG Display we thank you for participating in our earnings conference call. Should you have a further question, please contact our IR team. Thank you. [Foreign Language]

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Source: LG Display's Management Discusses Q4 2012 Results - Earnings Call Transcript
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