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LG Display (NYSE:LPL)

Q2 2012 Earnings Call

July 26, 2012 08:00 AM ET

Executives

Hee Yeon Kim - Head, IR

J. S. Park – Head, TV Marketing Department

Analysts

Brian White - Topeka Capital Market

Andrew Abrams – Avian Securities

Sheng Hong - Topeka Capital Market

Dan Malcolm - Viking

Jerry Tsai - HSBC Securities

Matt Evans - CLSA

Toni Sacconaghi - Sanford C. Bernstein Securities

D.S. Kim - UBS Securities

Jonathan Hwang - KDB Daewoo Securities

Operator

Good morning and good evening. First of all thank you all for joining this conference call. And now we will begin the conference of the Fiscal Year 2012 Second 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 second quarter earnings results by LG Display.

Hee Yeon Kim

Welcome to LG Display second quarter conference call. My name is Hee Yeon Kim, Head of the IR Department. On behalf of LG Display I would like to welcome everyone to our global quarterly earnings conference call. I am joined by our IR staff as well as representatives from TV marketing and IT marketing. With us is J.S. Park is heading up the TV Marketing Department and Kevin Choi is Vice President of IT Marketing.

Next slide please, people we move on to the earnings result. Please take a minute to read the disclaimer. I would like to remind everyone that results are based on consolidated IFRS accounting standards and are unaudited.

Next slide please. This conference call will take an hour. Before we go into the Q&A session, please allow me to highlight our Q2 results, performance highlight and outlook.

Moving on to the revenue and profits on the next slide, during second quarter the demand in Europe and China turned out should be weaker than accepted due to macro-economic situation which resulted in some of the set makers down for the order adjustment. In addition, LG Display strategically cut back supplying the low profitability products. Due to these factors, the shipment increases in second quarter turned out to be lower than expectation.

However, since we managed to increase the portion of a high end premium products such as tablet and FPR 3D in sales. We recorded a high to quarterly revenue in the second quarter at KRW 6.9 trillion up to a percent quarter-on-quarter. Our profitability improved in second quarter mainly due to the increased sales of high end premium products. So operating loss was significantly reduced to KRW 26 billion.

If we excluded the provision for the anti-trust lawsuit from our operating line in second quarter. We would have been turned out to be profitable. Operating profit margin was minus 0.4% while we recorded EBITDA margin of 15%, income before tax was negative KRW 78 billion and net income was negative KRW 112 billion. Moving on to slide four, looking at our financial positions and ratios.

Cash and cash equivalent rose by KRW 262 billion to KRW 2.7 trillion. Inventory increased by KRW 371 billion to KRW 2.6 trillion. It is mainly due to our customers sound right (ph) order adjustment at the end of second quarter. Effected by the macroeconomic situation. In addition the product mix improvement with more high end premiums product portion also affected the inventory in March.

Although our inventory is within the range of manageable level, we are planning to lower the inventory continuously. That level decreased by KRW 497 billion to KRW 4.8 trillion. Net debt decreased KRW 759 billion and thus net debt to equity ratio faired by 8 percentage point quarter-on-quarter recording 21%.

Moving on to slide five, looking at our cash flow. Cash at the beginning of the quarter was KRW 2.4 trillion, cash flow from operating activities resulted in cash inflow of KRW 1.8 trillion. Cash flow from investing activities resulted in an outflow of KRW 1 trillion and cash flow from finance activities resulted in an outflow of KRW 530 billion.

As a result the net changing cash was inflow of KRW 260 billion. Moving on to slide six, I would like to go over our performance and highlights. During second quarter, our shipment increased by 6% to 8.6 million square meter but ASP per square meter increased by 5% to $701. The rise in the price reflect the increased portion of a high end premium products in sales.

Moving on to our product mix on slide seven. The TV segment represents 49% of our revenue followed by the monitors at 70%, notebook at 14%; tablet is at 10% and mobile applications at 10%.

In case of tablet segment we managed to supply the new model in full-scale in second quarter so it was increased to 10% from 5% in first quarter. Moving on to slide eight, and looking at our capacity. Our producible capacity increased by 10% to 11.2 million square meters since second quarter. This reflected recover of some capacity in second quarter which was lost in first quarter.

During first quarter we temporarily allocated some capacity for the development of differentiated high end products and new models and completion of developing these products. Most of these capacity was recovered in second quarter. In addition, the start of P98 production in June also affected the increase of capacity.

Next we turn to our outlook section, we expect a seasonal demand in third quarter but due to the uncertain macroeconomic situation, the degree of seasonal demand increases remain to be seen. Due to the panel makers profitability focus the strategy, utilization adjustment is expected to be continued. Thus we expect a controlled balance situation in supply demand in third quarter.

In this market environment, we are committed to improve profitability by increasing the portion of high end premium products. We expect a mid-single digit percentage increase shipment in third quarter and anticipate the panel price to be maintained sound and stable.

Next I would like to touch upon our beliefs, strategy going forward. We will optimize our LCD business in an effort to strongly focus on profitability and have thorough preparation for future technology such as OLED by reading the largest size OLED business areas.

Regarding the optimization of LCD business, we’ll implement a four action items, first, we will ship the lead transform because it is shorter just strong in focus and high end premium product category. Second, we will solidify our (inaudible) corporation with our customers and expand the scale of fair business that are in pay in order to better prepare for the OLED business structure.

Third, we will minimize our investment in LCD business and convert our partial capacity in fixed line for LTPS production with a high growth potential areas. Fourth, we will build a panel fab in China to get closer to our customers in China and improve the cost competitiveness. The capacity of China Fab will be limited to the level of the capacity loss in Korea after the fab conversion to OLED.

Regarding the larger size OLED division we will carry out four action items, first based on White RGB technology, we will convert the LCD Fab in order to obtain investment efficiency as well as product and price competitiveness.

Second, we will end up Gen-8 pilot line using White RGB technology from second half of this year. Third, the scale and timing of the additional investment for the larger size OLED, will be decided while considering the two factors. It should satisfy needs to greater, larger size OLED earlier while reducing opportunity cost in LCD business.

Fourth, we are getting ready for utilizing OLED for further display segment as well as preparing for the flat segment and transparent OLED. In case of the small and medium OLED segment we are preparing the plastic OLED to satisfy our customer needs in timely manner. In overall, we will mainly focus on generating profit in a stable manner rather than emphasize our sized grossed.

In two to three years, we will try to make the larger size OLED segment a major profit generation contributor. These ends our presentation for second quarter and I would be glad 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 questions will be provided by Mr. Sheng Hong from Topeka Capital Market. Please go ahead sir.

Brian White - Topeka Capital Market

It's Brian White at Topeka. I got a question on utilization rate in the June quarter and what do you expect in the third quarter?

Hee Yeon Kim

Our utilization rate is around maybe 90%, this kind of utilization rate should be maintained at the similar level. But our policy for the utilization rate is maintaining very lean inventory situation to eliminate the economy on certain situations. So it means we will reflect for the utilization handling base on order trend and lean inventory policy.

Brian White - Topeka Capital Market

So will inventory dollars go down in the September quarter versus the June quarter?

Hee Yeon Kim

Yes we try to lower our inventory dollar amount to be lower than second quarter level.

Brian White - Topeka Capital Market

Okay and how big were the legal costs in the second quarter you said you were operating profit positive without the lawsuit, how big was that number?

Hee Yeon Kim

It is slight over KRW 200 billion.

Brian White - Topeka Capital Market

KRW 200 billion. Okay.

Hee Yeon Kim

It is reflect in our operating profit side.

Brian White - Topeka Capital Market

Okay and just finally as we, could you give us just a little color around the LCD TV market the trends you saw in second quarter and what’s weak in terms of geographies, what’s strong and then what you are thinking about for the third quarter in terms of strength or weakness in TVs.

J.S. Park

So, if you pass as seasonal demand in Q3, seasonal demand forecast in Q3.

Brian White - Topeka Capital Market

Okay and how about just what you are seeing in Europe, China, U.S. just trend by geography maybe.

J.S. Park

Okay in China due to government subsidy program we think around 10% y-o-y growth rate will be possible in China because of October 1st, is one of the biggest hard decisions so we have positivity in China and North America, continues to be 4%- 3% y-o-y growth rate and last and we think and so is. So, North America is okay, Europe, we forecasted it as negative growth rate in Europe because due to the economic situation.

And rest of it was quite positive; we expected growth to 20% y-o-y growth rate.

Brian White - Topeka Capital Market

Okay and I didn’t the hear that the North America, well you said it was okay but what was the growth?

J.S. Park

Yes around 3% y-o-y.

Operator

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

Andrew Abrams - Avian Securities

Just a couple of details, the inventory adjustments that were made at the end of second quarter which you mentioned, were these changes in delivery schedules for customers where they cancellations, and where they sort of rebuilt by you and then not taken and would you see them rolling into third quarter or some of them gone?

Hee Yeon Kim

Usually at the end of second quarter, we had some order adjustment from our customers because it is end of first half. So we don’t expect it is kind of order cancellation, strictly on ruling issue in third quarter. So, that why we believe some seasonal demand increase in second half of this year. Although the degree of the seasonality should remain to be seen, however we still expect some seasonal impact in second half. So in this we don’t expect any orders assessment and that kind of order adjustment to be lowered in second half.

Andrew Abrams - Avian Securities

Got it, okay and I missed what you said about your Gen-6 conversion to LTPS, will reduce the LCD exposure and OLED will be increased to fill that difference, is that correct, so would that imply that you will outfit a Gen-6 type facility for OLED.

Hee Yeon Kim

If my understanding would be correct, actually I will mention about our plan first, we will convert LCD fab, personally convert LCD to LTPS. This LTPS can be used to suppose for LTPS LCD mobile phone together with plastic OLED. We are planning to use these LTPS facility for LCD and OLED together.

Andrew Abrams - Avian Securities

Okay I understand and then you mentioned something about the Gen-8 pilot and I missed that part.

Hee Yeon Kim

Gen-8 pilot will be used for OLED television and LTPS will be used for small size display for LCD and OLED.

Andrew Abrams - Avian Securities

And what’s the max capacity for your Gen-8 fab the pilot fab?

Hee Yeon Kim

8K per month.

Andrew Abrams - Avian Securities

Got it and lastly you increased your tablet percentage and you mentioned something about new models being the reason behind that, can you give a little detail there, was that something that you were specifically working on for a customer or was that part of your new premium products.

Hee Yeon Kim

Actually in first quarter we have some issues to deliver our smart device to customers. It is already recovered in second quarter that’s why our tablet portion increased to in second quarter. This kind of increased should be maintained in third quarter as well. Thanks to our cooperation and with our strategic partner.

Operator

Currently there are no participants with questions. (Operator Instructions). The following questions will be presented by Mr. (inaudible).

Unidentified Analyst

My first question is about unit sale, could you talk of more about the progress of your unit sale like the current capacity, the yield rate and the mass production timing. Thanks.

Hee Yeon Kim

For that average, in conclusion we are ready for the production but the details related to capacity and production timing; we cannot mention about that because it is related to our strategic partner, we have done this in this kind of situation.

However, we will deliver our product in the middle of this quarter.

Unidentified Analyst

So you mentioned that you deliver your unit sale panel neither of this quarter, is that correct?

J. S. Park

In this quarter.

Hee Yeon Kim

In this quarter, we plan to our touch embedded solution to our customer in this quarter.

Unidentified Analyst

Okay and second question is that about tablet PC, because from your previous remark, you mentioned some like conversion of that, either into LTPS or into OLED. The question is how about the progress of your oxide technology as far as I know for the current and mainstream tablet display; you guys are still working on conversion of that either into LTPS or into OLED.

The question how about the progress of your oxide technology as far as I know for the current (inaudible) tablet display. You guys are still working on (inaudible).

How about in the future your strategic partner will like to transfer to oxide, I think you are ready for that situation or anything you would like to share with us?

Hee Yeon Kim

To clarify our LTPS investment, LTPS where used for small size display such as the smartphone instead of tablet yes and then we are now using, I am (inaudible) for tablet. So we are also developing oxide for tablet but the timing for the mass production oxide tablet is not decided yet.

Operator

Your following questions will be presented by Mr. Nitin Saigal from Bridger. Please go ahead, sir.

Nitin Saigal - Bridger

I was wondering if you can give me pricing and volume trends specifically in the TV segment.

J.S. Park

Your question is our volume and price in Q3?

Nitin Saigal - Bridger

Yes just year-over-year and quarter-over-quarter, just a growth trend.

J.S. Park

We expect high single digit through an area base Q3, comfortable in Q2 and the price will be stable.

Nitin Saigal - Bridger

Okay. Thank you and what was it in Q2?

Hee Yeon Kim

Second quarter it was 9%, and it might close to mid-single growth in third quarter.

Nitin Saigal - Bridger

Okay so 9% quarter-on-quarter volume growth in Q2.

Hee Yeon Kim

Area growth, we don’t any volume growth we only have area growth 9% second quarter and mid-to-high single digits in third quarter.

Nitin Saigal - Bridger

Okay and second quarter ASPs? Let’s say ASPs were stable also?

J.S. Park

It will be stable in Q3.

Nitin Saigal - Bridger

Was it stable in Q2 as well?

J.S. Park

Yes. 42 inch of prices is going up due to the tight supply, other side including big screen size like 54 and 47 flat almost flat.

Operator

The next questions will be presented by Mr. Sheng Hong from Topeka Capital Market. Please go ahead, sir.

Sheng Hong - Topeka Capital Market

Just another question profitability in the third quarter, it should be easy, am I crazy to think you can’t generate a profit in the third quarter?

Hee Yeon Kim

Actually if you will second quarter, operating profit, if we take our provision for anti-trust, we already cannot tend to brag at around over slight over KRW 200 billion so we expect our third quarter operating profit should be higher at the second quarter in terms of operating profit.

Sheng Hong - Topeka Capital Market

Okay great and then when we think about the unit sale ramp here how bigger are we talking in terms of size, are these big panels, are these small panels?

Hee Yeon Kim

For that area we understand all the investors very interested in that product but we cannot comment on that issue but we can just mention, we can deliver that product in this quarter.

Sheng Hong - Topeka Capital Market

This quarter and this is a first time you have been able to deliver it?

Hee Yeon Kim

Yes.

Sheng Hong - Topeka Capital Market

Okay and finally cost down, how should we think about cost down in the September quarter and what was the cost down in the June quarter?

Hee Yeon Kim

In June quarter, our cost reduction was low single digit, so we are also expecting a similar level of cost reduction in third quarter.

Operator

The following questions will be presented by Dan Malcolm from Viking. Please go ahead, sir.

Dan Malcolm - Viking

Could you just clarify your comments on tablet, how much did you grow tablet in the second quarter and I think you said to grow the same amount in the quarter, I was confused.

Hee Yeon Kim

Actually, our sales increased by two times, quarter-on-quarter.

Dan Malcolm - Viking

Like 2X?

Hee Yeon Kim

Yes two times.

Dan Malcolm - Viking

Okay. And what is your expectation for third quarter? And your expectation for tablet in 3Q?

J.S. Park

Around 40% to 50% level.

Dan Malcolm - Viking

Okay that’s very strong, is that do you think you are taking market share in third quarter?

J.S. Park

We hope so.

Dan Malcolm - Viking

So part of that’s market share and then part of that just overall strength in the category.

J.S. Park

Right.

Hee Yeon Kim

Perfect.

Dan Malcolm - Viking

And then on the notebook side/tablets, how did that do in the second quarter and how are you looking at the third quarter, how do you think inventory is positioned for just in that segment?

J.S. Park

You mean the notebook area right?

Dan Malcolm - Viking

Yes, notebook, PC.

J.S. Park

As tablet PC growth is quite strong, generally the notebook is not that strong, and we believe the second quarter it was like negative growth slightly but first quarter because of (inaudible) launch we believe we are expecting single-digit growth compared to Q2.

Dan Malcolm - Viking

So and your point was that the tablet is growing very fast, it's kind of cannibalizing the notebook.

J.S. Park

Yes.

Dan Malcolm - Viking

And on the monitor side, what are you seeing there for kind of IT monitor for third quarter? How did that do in the second quarter and what’s the thought for third quarter?

J.S. Park

In case of monitor and notebook, pretty same the trend but slightly better than notebook. So still the monitor side negative in Q2 but flat from around the 10% growth in Q3 compared to Q2.

Operator

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

Jerry Tsai - HSBC Securities

Like to know that you have any forecast on the panel area demand globally for this year and perhaps like maybe you can break it down by seasonality like maybe just one second versus first half that kind of stuff.

Hee Yeon Kim

Panel growth for the year we are expecting high single digit y-o-y overall. In case of the seasonality we are expecting first and second seasonality 47 versus 53 percentage.

Jerry Tsai - HSBC Securities

Okay, do you have some forecast on the industry capacity growth in terms of area, large size area for this area?

Hee Yeon Kim

A positive growth should be mid-single digit this year.

Jerry Tsai - HSBC Securities

So that was that capacity growth matches was panel area growth?

Hee Yeon Kim

Yes.

Jerry Tsai - HSBC Securities

Okay also another question is that I wonder if you have seen any signs of size migration happened in the (inaudible) TV Panel. Either you have seen that or believe that your customer is going to start to coin those bigger size TV panels in the second half this year.

J.S. Park

Your question is big screen size demand?

Jerry Tsai - HSBC Securities

Exactly.

J.S. Park

Your question is big screen size (inaudible) ratio or?

Jerry Tsai - HSBC Securities

In terms of the average size of LCD panel you shifted for TV of course, do you see increase in size.

J.S. Park

Yes in terms of average size, the year will be continuously increased.

Jerry Tsai - HSBC Securities

Can you give us some idea like how much it has grown so far this year just approximately in terms of diagonal inch?

J.S. Park

First of all I don’t have any data now.

Jerry Tsai - HSBC Securities

Okay that’s fine. Well I will come to target (ph) later and one last question since you are ramping up the this advance technology to see technology in this quarter and do you see any chances that the margin could be impacted in some way reported initially potentially lower EO (ph) initially.

J.S. Park

Actually we are not sure, we are just the stage of finishing the month and we did not start, we are about to start mass production, so we need to see the initially build rate for the time being.

Operator

The next questions will be presented by Ms. Clara Kim (inaudible). Please go ahead, ma'am.

Unidentified Analyst

I just want to clarify my understanding on the production line conversion, if there is any conversion from mostly combined than how much would be the capacity reduction for LTPS and on oxide line, is there any number difference between oxide and LTPS or are they just the same 70% or 40% capacity reduction from the previous a more of silicon line.

Hee Yeon Kim

There is this huge gap between LTPS and Oxide conversion, in case of oxide conversion the capacity is expected to be 22% - 40% and in case of LTPS the capacity loss should be 70% to 80%.

Unidentified Analyst

Then is there any difference between generations let’s say Gen-6 and Gen-8.

Hee Yeon Kim

That’s not because of the generation, that’s because of the complication of the production. In case of LTPS we need more promise process and need more complicated increment so we can lose our production arrears and we will have a more long lead time because of that the capacity for the LTPS should have been must bigger than oxide.

Operator

Currently there are no participants with questions. (Operator Instructions). The next questions will be presented by Mr. Matt Evans from CLSA. Please go ahead, sir.

Matt Evans - CLSA

When will the LTPS conversion begin and how will that take?

Hee Yeon Kim

Our major CapEx will be spending in next year, the next year we will start the conversion for the LTPS.

Matt Evans - CLSA

And do you need to ramp down the whole fab or is it done in stage by stage over a number of quarters or?

Hee Yeon Kim

Stage by stage.

Matt Evans - CLSA

Okay and is that line currently used mostly for monitors?

Hee Yeon Kim

Monitor and (inaudible).

Matt Evans - CLSA

And that will shift on to the AG (ph) capacity well on the monitor side or whoever you accommodate the loss production.

Hee Yeon Kim

That we have shifted it to the other path.

J.S. Park

But naturally it is reduced monitor production mainly.

Matt Evans - CLSA

Okay and there is probably some low margin products where you can just lower your shipments in total I guess that was all right.

J.S. Park

Yes.

Operator

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

Andrew Abrams - Avian Securities

Question on open cell, how much have you or do you expect to ship in open cell relative to last year. Is this going to be a big increase for you guys this year and can you kind of help us a little bit understanding the cost structure given the fact that you don’t put a backlight on it.

How does your margin work in terms of open cell production?

J.S. Park

Our open cells strategy is clear, we are going to follow a market trend and we are going to open cell business to our customer based on profitability’s. So some model’s low end models and small sized screen, in that case cell business is sometimes better than LPM and our portion of cell business this year around 10%.

Andrew Abrams - Avian Securities

I am sorry what was it percent 10%?

J.S. Park

Around 10% this year.

Andrew Abrams - Avian Securities

Okay and how much different is that from last year, wasn’t it roughly the same last year?

Hee Yeon Kim

Last year was 10% (ph).

Andrew Abrams - Avian Securities

And lastly just one more question on the OLED production. On large panels you mentioned that was going to, they were going to be producing these Gen-8 pilot line, would small panels be produced somewhere else I know the back plane will come out of the LTPS conversion but where would the small panels actually be produced the OLED panels themselves.

Hee Yeon Kim

Actually we already have 4.5 generation LTPS panels with OLED, was mostly mobile display. So small size will be provided from 4.5 generation fab.

Andrew Abrams - Avian Securities

And what’s the capacity of that facility for OLED?

Hee Yeon Kim

4.5 generation?

Andrew Abrams - Avian Securities

Yes.

Hee Yeon Kim

It's around 12K.

Operator

The following questions will be presented by (inaudible). Please, go ahead, sir.

Unidentified Analyst

You mentioned that for your notebook panel in third quarter, the growth rate will be muted because kind of sound equalization is that of a tablet over notebook. And my question is how about high risk solution panel for notebook I mean the q-o-q growth rate in third quarter or second quarter.

J.S. Park

Actually I do not have detail to give at this moment but if you need it later we are going to provide information through our IRTM but the trend is there, the higher resolution we are getting more the demand for the high resolution now a days.

Unidentified Analyst

You mean that’s for notebook application right?

J.S. Park

Right.

Unidentified Analyst

Okay the other question is more of by technology based because I don’t know if you have just kind of internal number that talking about embedded at display port. So, if you do have would you like to share with us that what’s your view of the penetration rate of embedded display port in your notebook panel for this year and 2013.

J.S. Park

Unfortunately I don’t have a detailed number right now. Sorry.

Hee Yeon Kim

Let me clarify previous questions, cell portion in television last year that was 5%.

J.S. Park

Around 5% yes.

Operator

Currently there are no participants with questions. (Operator Instructions). The following questions will be presented by Mr. Toni Sacconaghi from Sanford C. Bernstein Securities. Please go ahead, sir.

Toni Sacconaghi - Sanford C. Bernstein Securities

I have a question about CapEx, I was wondering if you can give us, again the guidance of for this year and also for next year if you have any in mind?

Hee Yeon Kim

CapEx this year should remain were KRW 1 trillion as related to last quarter and next year CapEx should also be similar at this year although we will include China fab investment and LTPS conversion together with OLED conversion.

Our CapEx should not be over this year in year 2013.

Toni Sacconaghi - Sanford C. Bernstein Securities

And the second question I have is that at Q2 this quarter, your producible capacity by area is about 11.2 million square meters. So I was wondering can you give us an idea what would the total capacity be by area in Q2, 2013, one year from now from 11.2, where will it go to?

Hee Yeon Kim

One year from now, I only have the numbers at the end of this year, they should have been 12.7. The (inaudible) one year from now, they should very similar and after the conversion of our LTPS it is highly potentially though capacity for our shipment will be 12.7.

Toni Sacconaghi - Sanford C. Bernstein Securities

Got it, so in terms of shipment and we are at 8.55 this quarter, what do we expect it by Q4?

Hee Yeon Kim

Sorry.

Toni Sacconaghi - Sanford C. Bernstein Securities

So I think for shipment we are at 8.55 million square meters for this year right, in terms of aerial in Q2. So I was wondering for Q4, 2012 what is aerial shipment in million square meters?

Hee Yeon Kim

Your question is for third quarter and fourth quarter, for the fourth quarter if your question the next fourth quarter we don’t have the numbers.

Operator

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

Matt Evans - CLSA

I was interested to know how you see the smartphone display market playing out and what do you think the market size is for high resolution LTPS panels with resolution over 300 or 350 pixels per inch and the reason I asked it seems that there is potential for oversupply in that segment, in the next two years because the high end market is no longer growing so you are going to have to push those units into the $300 to $400 smartphone segment, it's not clear to me whether that segment can accommodate that high price panel.

J.S. Park

I do not understand your question correctly but we think the smartphone area is continuously improve because the feature phone is going to be relatively reduced and smartphone area is going to take those segment. So we do not see much concern on smartphone growth right now.

Hee Yeon Kim

And if I may add some comments on that, actually the penetration of the smartphone and the mobile phone is around 35%, still it is below 40%, so we still expect next year smartphone and your growth should be slight over 30%. So we will have a chance to increase our market position in the smartphone market.

Matt Evans - CLSA

But most of the growth you are referring to is at the low end of the market, it's not at the high end of the market where smartphones are priced above $400, so my concern is that market will be fulfilled with a more silicon displays because you put a $30 or $40 display into a $200 handset it doesn’t make any sense.

Hee Yeon Kim

Fortunately our big customers always relate to specialty product even in the commodity areas, so we believe that our product category should remain in the high end premium product areas in accordance with our continued cost reduction.

Operator

Currently there are no participants with questions. (Operator Instructions). The next questions will be presented by Mr. D.S. Kim from UBS Securities. Please go ahead, sir.

D.S. Kim - UBS Securities

Just wanted to clarify one thing, how much was your current LTPS capacity, I mean the monthly input for the 82 fab if I understand correctly.

Hee Yeon Kim

The current capacity is 60K.

D.S. Kim - UBS Securities

60 or 50? Sorry.

Hee Yeon Kim

60.

D.S. Kim - UBS Securities

Okay. Thank you and do you have any utilization rate for this one currently?

J.S. Park

Mostly more than 90%.

Operator

The next questions will be presented by Mr. Jonathan Hwang from KDB Daewoo Securities. Please go ahead, sir.

Jonathan Hwang - KDB Daewoo Securities

I have got two quick questions, the first question is what is your total capacity for Gen-6 line and how much are you converting that LTPS, and second question is how many 3D FPR TV panels did you ship in the second quarter and what was that in the percentage and what will that be in the third quarter? Thank you.

Hee Yeon Kim

First question our total capacity to Gen-6 is around 410K, among them maybe around 40% more or less it should be converted to LTPS but then other much (ph) we should be 20K if we finalize the conversion of LTPS.

J.S. Park

And your second question is the portion of FPR? The 3D, right?

Jonathan Hwang - KDB Daewoo Securities

Yes that’s right.

J.S. Park

Q3 is around 40% of our total shipment through the FPR.

Jonathan Hwang - KDB Daewoo Securities

Well that in the second quarter?

J.S. Park

Second quarter slightly less than 30%.

Operator

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

Andrew Abrams - Avian Securities

Just two clarifications, the quarterly producible capacity by area, you mentioned for fourth quarter and I missed that number could you give that number again?

Hee Yeon Kim

12.7.

Andrew Abrams - Avian Securities

12.7. Right, so you will move from 11 to in second quarter to 12.7 by fourth quarter?

Hee Yeon Kim

Yes.

Andrew Abrams - Avian Securities

Okay and what you said on the Gen-6 line total capacity, what was that number?

Hee Yeon Kim

210K.

Andrew Abrams - Avian Securities

210K, okay, sorry. Thank you very much I appreciate it.

Operator

Currently there are no participants with question. (Operator Instructions).

Hee Yeon Kim

If there is no questions from now on we will end our conference call. On behalf of LG Display we thank you for participating in our second quarter earnings conference call. Should you have any further questions please contact either myself or my colleagues. Thank you.

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