LG Display - Earnings Call - Q1 2025

Transcript

Operator (participant)

Good morning and good evening. Thank you all for joining the conference call for the LG Display earnings results. This conference will start with a presentation followed by a Q&A session. If you have a question, please press star and one on your phone during the Q&A. Now we will begin the presentation on LG Display's first quarter of fiscal year 2025 earnings results.

Brian Heo (Head of Investor Relations)

[Foreign language] 안녕하십니까, LG Display IR [Foriegn language]팀 화석팀장입니다. 2025년 1분기 실적 발표 컨퍼런스 콜에 참석해 주신 분들께 감사 말씀드립니다. 오늘 컨퍼런스 콜에는 CFO 김성현 부사장, 경영관리담당 조승현 상무, 금융담당 김규동 상무, 비즈니스 인텔리전스 담당 이기영 담당, 대형기획관리담당 김종덕 상무, 중형기획관리담당 안유신 담당, 소형기획관리담당 백승용 담당, 오토마케팅 상품기획담당 송기환 상무가 함께 참석하였습니다.

Good afternoon. I'm Brian Heo, in charge of IR team at LG Display. On behalf of the company, thank you all for joining us today in our first quarter 2025 earnings call. Today I'm joined by our CFO Kim Seong-hyun, Cho Seung-hyun, who's the VP of Business Management, Kim Gyu-dong, VP in charge of Finance, Lee Gi-yong in charge of Business Intelligence, Kim Chun-deok, VP of Large Display Planning and Management, Ahn Yu-shin in charge of Medium Display Planning and Management, Baek Seung-yong in charge of Small Display Planning and Management, and last but not least, Son Ki-Hwan, VP of Auto Marketing.

[Foreign language] 금일 컨퍼런스 콜은 국영문 통합 방식으로 진행될 예정입니다. 실적과 관련된 상세 자료는 공시된 잠정 실적 또는 자사 홈페이지 내 투자 정보 부분을 참조하시길 바랍니다.

This call will be conducted in both Korean and English, and for more details, please refer to the provisional earnings that were just disclosed or the IR events section on the company's website.

[Foreign language] 실적 발표에 앞서 디스클레이머를 읽어 주시기 바랍니다.

Also, before we begin, please take a moment to read the disclaimer.

[Foreign laguage] 금일 실적 발표 내용은 국제회계기준인 IFRS에 따라 연결 기준으로 작성된 재무 수치로, 아직 외부 감사인의 감사가 완료되지 않은 상태에서 투자자 여러분의 편의를 위하여 작성된 자료임을 안내드립니다.

As a reminder, please note that today's results are based on consolidated IFRS standards prepared for your benefit and have yet to receive an audit by an outside auditor.

[Foreign language] achieved solid results with revenue of KRW 6,065.3 billion, driven by the advancement of our OLED-centered business structure and the positive impact of the won-dollar exchange rate. This represents a 15% increase compared to the same period last year.

Let me start by running through the business results for Q1 of 2025. Despite the usual seasonality seen during the first quarter across different product segments, driven by OLED-centric business structural upgrade, coupled with won-dollar effects impact adding to the positives, revenue reported a solid KRW 6 trillion 65.3 billion, which is an increase of 15% on a year-over-year basis.

[Foreign laguage] 영업 손익의 경우 사업 구조 고도화에 따른 OLED 제품군 매출 비중 확대와 함께 고강도 원가 절감 및 운영 효율화 활동을 지속하며 과거 통상적 흐름과는 달리 계절적 비수기임에도 전 분기에 이어 KRW 33.5 billion의 흑자를 기록하였습니다. 이는 전년 동기 대비로는 KRW 509.2 billion, 2023년 1분기 대비로는 KRW 1,131.8 billion 개선된 수치로 코로나 특수기를 제외할 경우 8년 만에 1분기 흑자를 기록한 것으로 의미 있는 성과라고 할 수 있겠습니다.

Coupled with increase in revenue share of our OLED products following business structural upgrades and stringent cost savings and operational efficiency activities continuing, despite it being a slow season and unlike typical trends seen in the past, operating profit reported KRW 33.5 billion, sustaining the profit-making streak since last quarter. This is an improvement of KRW 509.2 billion on a year-over-year basis and KRW 1 trillion 131.8 billion versus Q1 of 2023, which is quite noteworthy in that we were able to generate profit in the first quarter for the first time in eight years, except for the special period during the COVID pandemic.

[Foreign language] EBITDA margin is 20%, which is the highest level since the third quarter of 2021.

Q1 EBITDA was KRW 1 trillion 231.3 billion, with EBITDA margin rate at 20%, which is at its highest since Q3 of 2021.

[Foreign language] 다음은 출하 면적과 면적당 판가 추이입니다. 1분기 출하 면적은 중대형 패널의 계절성 영향이 반영되며 전 분기 대비 19% 감소하였으나 전년 동기 대비로는 OLED TV용 패널과 노트북용 패널의 출하 확대 영향으로 1% 증가하였습니다.

Next is area shipment and ASP per square meter. Area shipment in Q1 was down 19% Q on Q on the back of seasonality impact on mid to larger panels, while on a year-over-year basis, driven by panel shipment expansion for OLED TV and notebooks, there was 1% increase.

[Foreign language] 면적당 판가의 경우 전 분기 대비 8% 하락한 $804를 기록했습니다. 이는 통상적인 1분기 변동폭 대비로는 상당히 완화된 수준으로 OLED 영역에서의 성과가 두드러진 결과입니다.

ASP per square meter recorded $804, which is down by 8% Q on Q. Considering how prices tend to fluctuate during the first quarter, the decline was very much mitigated thanks to robust OLED performance.

[Foreign language] 다음으로 제품군별 매출 비중을 말씀드리겠습니다. 계절적 비수기 영향으로 모바일 및 기타 부문의 매출 비중이 전 분기 대비 8% 포인트 하락한 34%를 기록한 가운데 다른 제품군의 매출 비중은 상대적으로 증가하였습니다.

Moving on to product revenue mix. On subdued seasonality, mobile and others revenue dipped 8 percentage points Q on Q, reaching 34%, while revenue share of other product segment expanded on a relative basis.

[Foreign language] the previous quarter, based on increased shipments of IT OLED panels. The TV division's revenue remained the same as the previous quarter at 22%, and the auto division's revenue recorded 9%, up 1 percentage point from the previous quarter.

IT segment revenue share was up 7 percentage points Q on Q, recording 35%, underpinned by increase in shipment of OLED panels for IT. TV segment revenue was flat Q on Q at 22%, while auto segment revenue mix increased 1 percentage point Q on Q, accounting for 9%.

[Foreign language] 전체 매출 내에서 OLED 제품군의 비중은 전년 동기 대비 8% 포인트 상승한 55%를 기록하며, 당사가 추진 중인 OLED 중심의 사업 포트폴리오 전환 성과는 지속적으로 확대되고 있습니다.

OLED mix out of total revenue increased 8 percentage points year-on-year, reaching 55%, as we continue to see expanded outcome from the company's transformation of OLED-centric business portfolio.

[Foreign language] 다음은 재무 현황과 주요 지표입니다. 1분기 재무상태표상의 현금 및 현금성 자산은 KRW 982.3 billion이나, 이는 매각이 예정되어 있던 중국 광저우 LCD 공장이 보유하고 있는 현금이 회계 기준에 따라 매각 예정 자산으로 재분류된 후 잔액이고, 이를 포함할 경우 회사가 보유한 실질 현금 및 현금성 자산은 KRW 2.3728 trillion입니다.

Next is financial position and key metrics. Cash and cash equivalent, as stated in Q1 financial statement, is KRW 982.3 billion, but if we were to include back cash held by China's Guangzhou LCD plant, which has been classified under assets held for sale, in terms of actual cash and cash equivalent that the company owns, it will amount to KRW 2 trillion 372.8 billion.

[Foreign laguage] 다음은 2분기 가이던스입니다. 2분기의 경우 일반적으로 출하 면적이 증가하는 시기이나 LCD TV 사업이 종료됨에 따라 2분기 출하 면적은 20% 중반 전후의 수준을 전후 수준의 감소를 예상하고, 반대로 면적당 판가는 20% 전후 수준 상승할 것으로 예상하고 있습니다.

Next is Q2 guidance. Generally, we see area shipment to uptrend during the second quarter, but following discontinuation of LCD TV business, we expect second quarter area shipment to decline by around mid 20%. Conversely, ASP per square meter is expected to rise by around 20% level.

[Foreign language] 이어서 당사 CFO 김성현 부사장의 하이라이트가 있겠습니다.

Next, I invite our CFO Kim Seong-hyun to run through the highlights.

Sung-Hyun Kim (CFO)

[Foreign language] 안녕하십니까, CFO 김성현입니다. 컨퍼런스 콜에 참석해 주신 여러분들 감사드립니다.

Good afternoon. I'm Kim Seong-hyun, the CFO. Thank you all for joining our earnings call today.

[Foreign language] are facing a business environment with higher volatility than ever before, our company achieved meaningful results by maintaining profitability in the first quarter, which is a seasonally slow period, even amid this highly uncertain environment. This demonstrates that our strategy of strengthening our business structure centered on OLED and reinforcing internal stability through strong cost innovation activities is gradually leading to results.

Aside from uncertainties in the downstream market, various factors continue to emerge, such as the shifts in the global trade environment. Although we face heightened level of volatilities in the business backdrop, we were able to drive meaningful results by way of sustaining the profit-making streak even during the first quarter, which is known to be a slow season. This is a result of our strategies that solidified our fundamentals, including the OLED-centric structural upgrades, rigorous cost innovations, which gradually drove better performance.

[Foreign language] 대외 환경의 불확실성이 당분간 지속될 수 있겠지만, 근본 경쟁력 강화에 집중한 성과가 본격화되고 있기에 연간 실적 또한 흑자 전환을 달성하고 그 규모를 더욱 확대해 나갈 수 있도록 노력하겠습니다.

Although external uncertainties may persist for the time being, we are beginning to see tangible results from the efforts that we've placed behind strengthening core competitiveness. We will continue to endeavor to achieve a turnaround in annual profit and further grow the size of that profit.

[Foreign language] 사업 영역별 계획과 전략을 말씀드리면, 모바일용 OLED 사업의 경우 고객의 신뢰와 당사의 생산 역량 강화를 바탕으로 하이엔드 시장 내 입지가 지속적으로 확대되고 있습니다. 앞으로도 기술 경쟁력과 안정적인 공급 역량을 기반으로 품질, 원가 등 핵심 경쟁력을 제고해 출하 확대를 이어나갈 계획입니다. 또한 변화하는 시장 환경에 유연하게 대응하며 미래 기술에 대한 준비 또한 체계적으로 해나갈 계획입니다.

Next, moving on to plans and strategies for each business domain, OLED for mobile has won greater trust from the customers, and based on stronger production capabilities, we've been able to continuously expand our presence in the high-end market. Going forward, underpinned by competitive capabilities in technology and stable supply, we plan to enhance core competitiveness, such as quality and cost, to drive and sustain shipment expansion. Also, by responding nimbly to fast-changing markets, we will prepare in a structured way to be ready for future technologies.

[Foreign language] there is clearly a differentiated user value unique to Tandem OLED, such as low power consumption, long lifespan, and high brightness, with excellent durability and performance. For 2025, we expect shipment growth compared to the previous year. Based on our technological leadership and accumulated, stable mass production experience, we will continue to solidify our position in the market and effectively respond to the changing environment.

For the medium IT segment, we will be closely monitoring how the market moves and be agile in responding to changes in the downstream market. In IT OLED, there is clear and distinctive user value that Tandem OLED offers with its outstanding performance and durability features, including low power, longer life, and high luminance. Thus, we expect there to be year-over-year growth in shipment in 2025. Supported by technological leadership and stable mass production experience that has been accumulating over the years, we will further solidify our market position and effectively respond to changes in the environment.

[Foreign language] IT LCD 부문은 IPS Black, 차세대 옥사이드 등 차별화된 하이엔드 LCD 기술을 활용해 각 제품 영역별로 고객의 니즈에 최적화된 제품을 제공하고, 하이엔드 영역에서 시장을 선도하는 글로벌 탑티어 고객들과의 협력을 통해 경쟁 상황에 대응하고 성과를 확보하고자 합니다. 동시에 강도 높은 원가 혁신과 운영 효율화 노력을 지속함으로써 수익성을 지속적으로 개선해 나갈 계획입니다.

In IT LCD segment, we will leverage differentiated high-end LCD technologies, including IPS Black and next-generation Oxide, to deliver optimized products that meet customer needs in each product segment. By collaborating with global top-tier customers who are spearheading the high-end segment of the market, we will respond to competition and drive results. Also, through rigorous cost-based innovation and operational efficiency efforts, we plan to sustain bottom-line enhancement.

[Foreign language] completed, from the second quarter of this year, LCD TV sales will be excluded, so sales in the large-size business may decrease. However, through this strategic choice, we have been able to focus more on advancing an OLED-centered business structure.

In large panel business, following the closing of sale of Guangzhou LCD TV plant, revenue from large panel may start to decline starting the second quarter of this year as LCD TV revenue will no longer be captured. Through this strategic decision, we are able to place greater focus on OLED-centric structural upgrades.

[Foreign language] differentiated premium products such as next-generation OLED TV and gaming monitors with enhanced features like low power consumption and high brightness, we expect a positive performance trend going forward. At the same time, we plan to continue efficient operational strategies and cost reduction efforts that can flexibly respond to changes in demand, aiming for qualitative growth that enhances profitability along with quantitative growth in the mid to long term.

For large OLED business, underpinned by distinctive value of OLED, we are solidifying our market presence in the high-end segment as we maintain close collaboration with global customers in order to expand differentiated and premium product portfolio, including gaming monitors and Gen 4 OLED TVs, whose values, such as low power and high luminance, are even more improved. We expect positive performance. We will also continue to run efficient operational strategy and cost-cutting efforts to respond nimbly to changing demand and consequently drive mid to longer-term volume growth coupled with quality-driven growth accompanied with profitability enhancements.

[Foreign language] is also positive for the demand for OLED and LTPS LCD, which are our main focus. Our automotive business will continue to solidify our position as the world's number one company with a differentiated product and technology portfolio, including Plastic OLED, ATO, and high-end LTPS LCD, and we plan to build a stable profit structure along with continued growth.

Next is auto business. Although volatility can be spotted across the overall auto market, in-vehicle display adoption continues to expand, and accelerated shift towards larger-sized panels works to the advantage of the demand for our core products, OLED and LTPS LCD. For the auto business, we will fortify our position as global number one in terms of differentiated products and technology portfolio, which includes Plastic OLED, ATO, high-end LTPS LCD. Coupled with sustainable growth, we plan to build up a stable earnings structure.

[Foreign language] 끝으로 투자 활동에 대해 말씀드리겠습니다. 지난해 투자 금액은 KRW 2.2 trillion이며, 올해 투자는 지난 분기에 말씀드린 내용에서 변동이 없는 KRW 2 trillion대 초중반을 예상합니다.

Lastly, on investment activities. Investment last year amounted to KRW 2.2 trillion, and investment in 2025 is expected to be around mid to low KRW 2 trillion, in line with the communication made last quarter.

[Foreign language] 당사는 수익성 중심의 사업 운영 기조를 유지하고 있으며, 투자 또한 대외 환경 변화와 이에 따른 수요 변동성 등을 고려하여 보수적인 관점에서 검토하고 운영해 나가는 원칙을 이어나가고 있습니다. 따라서 투자는 현재 보유한 인프라를 최대한 활용하며 신중히 집행하되, 향후 신규 투자에 대해서도 수익성을 최우선적으로 고려하여 집행할 예정입니다.

We maintain profit-focused business operations, and as we are mindful of changing external environment and ensuing fluctuations in demand, we adhere to the principle of keeping to a conservative stance when it comes to reviewing and running the investments. We will fully maximize the use of our infrastructure that we currently own and be prudent in making CapEx spend and profitability will be of utmost priority when we make new investment decisions in the future. Thank you.

Operator (participant)

[Foreign language] 이상으로 2025년 1분기 주요 실적 내용 발표를 마치겠습니다. 다음은 질의응답 시간을 갖도록 하겠습니다. 오퍼레이터께서는 질의응답 안내를 부탁드립니다.

This ends the key highlights for the first quarter of 2025 earnings. We will now begin the Q&A. Operator, please proceed.

[Foreign language] 지금부터 질의응답을 시작하겠습니다. 질문을 하실 분은 전화기 버튼에 별표와 1번을 누르시기 바랍니다. 질문을 취소하시려면 별표와 2번을 누르시면 됩니다. 원활한 회의 진행을 위하여 질문은 한 분당 두 가지 이내로 부탁드립니다.

Now Q&A session will begin. Please press star one, that is star and one, if you have any questions. Questions will be taken according to the order you have pressed the number star one. For cancellation, please press star two, that is star and two on your phone. In order to allow as many Q&A chances as possible within the restricted time, we would appreciate only two questions per each participant. [Foreign language] 처음으로 질문해 주실 분은 KB Securities의 Kim Dong-won 님입니다. The first question will be provided by Kim Dong-won from KB Securities. Please go ahead with your question.

Dong-Won Kim (Managing Director)

[Foreign language] 예, 질문 기회 감사드립니다. 첫 번째 질문은 최근 미국 관세 이슈로 전방 시장과 고객사 움직임에 변화가 있는지 궁금하고요. 이에 대한 LG Display 대응 방안에 대해 말씀 부탁드립니다. 두 번째 질문은 4월 11일 공시에 따르면 광저우 LCD TV 공장 매각 금액에 대한 변화가 있었던 것으로 기억하고 있습니다. 이와 관련해 업데이트해 주실 내용 있으시면 부탁드립니다. 이상입니다.

Thank you very much for taking my question. My first question, I would like to understand as to whether there are any changes that you are able to identify in the downstream market as well as in your customers with regards to the U.S. tariff that is quite hotly debated of recent. I would also like to know as to how LG Display could respond to such development. Second question is, as per the disclosure made on April the 11th, there was a disclosure on the sales proceeds with regards to the sale of LCD TV plant at Guangzhou. Is there any information that you could update us on?

Sung-Hyun Kim (CFO)

[Foreign language] 예, 수요 부분 말씀드리겠습니다. 지금 현재 미국 관세 부과와 관련돼서는 현재 대략적인 기조는 분명히 관세를 부과한다는 걸로 저희도 이해는 하고 있습니다.

This is the CFO. I will take your question. With regards to the imposition of the U.S. tariff, I understand that the direction going forward is towards imposing such tariffs.

[Foreign language] 여러분들도 잘 인식하시겠지만 관세 자체가 그냥 관세만을 목적으로 하지 않는 여러 가지 저희가 국가별로 파악해야 되는 그런 이슈들을 해결책을 위한 관세 정책이기도 하다는 것입니다.

As you would appreciate, a tariff policy does not singly target the tariff per se. There are multiple issues that are relevant in terms of the relationship that a country has with another, and I believe that a tariff policy is used as a means to deal with those multiple array of issues.

[Foreign language] 이렇게 말씀드린 거는 관세 정책 관련돼서는 굉장히 아직 변동성을 가지고 있는 상황이다라고 저희는 이해를 하고 있습니다.

In a nutshell, what I mean to say is that there is quite a bit of volatility that is embedded in the implementation of the tariff policy per se.

[Foreign language] 여러분들도 너무 잘 아시다시피 저희의 제품이 미국으로 직접적으로 수출되는 일은 부분은 거의 없다고 보시는 게 적절할 것 같습니다.

As you would know, basically it is rare that our product would directly be exported into the U.S. market.

[Foreign language] tariff issue we are facing is with our set makers, and we are closely monitoring how the production site strategies of our set makers are changing.

As you know, the companies that are directly facing the tariff issue are the set makers, and we are hence very closely monitoring how these set makers will determine their production base going forward and the strategies related to their production base.

[Foreign language] 현재까지 저희가 감지한 바로는 생산지 전략을 수정하고 있는 세트 메이커들은 없는 것으로 파악되고 있습니다.

As far as we know and based upon what we had researched as of today, we understand that there are no set makers at this point who have changed their production base strategy.

[Foreign language] volatility depending on how the direction of policy changes. Accordingly, we will continue to closely monitor the situation so that we do not miss business opportunities or see a decline in profitability, and we will continue to establish countermeasures and respond appropriately.

What we know is that in terms of how the policy is actually going to play out into the future, which direction that it will take, it is still open to fluctuation. It has not yet been completely determined, so hence there are certain uncertainties. That is why we are very closely observing and following what is happening with regards to these policy implementations, and we will come up with an appropriate countermeasure to deal with the developments that take place to make sure that we control the situation, that we do not lose out on any business opportunity or that we do not, so the developments do not undermine our profitability.

[Foreign language] 그리고 여러분들이 제일 궁금해하시는 거일 수도 있는데요. 저희 SCM 체인상에 대해 문제를 발생시키거나 이슈를 가지고 있는 현격한 부분들은 전혀 없다고 생각하시면 될 것 같고요. 그리고 제일 궁금하실 내용이 가격 압력을 받고 있느냐 그런 부분도 현재로서는 없습니다.

I believe one of the things that you'll be most interested in is whether there are any critical issue points across our SCM, our supply chain. I can tell you that there are no critical issues that at this point we believe will exist. Also, in terms of any pressures on our pricing, we believe that there is no price pressure that we'll be exposed to because of this issue.

[Foreign language] 두 번째로 저희 광저우 LCD TV 법인 매각 관련된 질문 주셨는데요. 일단 공시에서 밝혀드린 내용이 금액상으로 정확하게 맞습니다. 그 내용이 맞고요. 거기서 변동이 있는 내용들은 거의 없다고 보시면 될 것 같고요. 그리고 4월 1일자로 CSOT에서 풀 가동을 지금 진행 중인 걸로 알고 있습니다. 전혀 문제 없이 굉장히 잘 돌아가고 있는 걸로 확인이 되고 있고요. 그리고 매각 대금들이 지금 예정에 따라서 원래 지불 예정이 있었습니다. 지불 예정에 따라서 지금 순조롭게 매각 대금이 지불되고 저희가 수취를 하고 있습니다. 이 부분에 대해서는 이제는 종결됐다라고 생각하시면 될 것 같고요. 아마도 상반기 중으로 의미 있는 금액의 현금이 유입이 된다라고 생각하시면 될 것 같습니다. 그리고 여러분들이 제일 궁금해하시는 그 돈을 어디다 쓸 것인가 하는 부분들은 저희가 회사가 생각하기에는 이 돈이 한 군데로 다 집중돼서 들어가는 것보다는 회사가 좀 시급성을 요하는 부분들, 그리고 미래를 위한 부분들, 그리고 현재 오퍼레이션 관련된 것들은 별 문제 없이 진행된다는 걸 전제로 하고요. 지금 제가 말씀이 너무 길었는데 일단 통역을 마쳐드리겠습니다.

Yes, and then moving on to the second question about the sale of the entity that we have, the LCD TV plant at Guangzhou. As per our disclosure that we have previously made, the amount of the sales proceeds is the correct amount. There is almost no change to the figure that we had previously disclosed. We have been informed that as of April 1, CSOT is running that plant at full capacity, meaning that the plant is currently running without any significant issues. In terms of the sales proceeds, we are being paid, meaning we are receiving that payment as per the payment schedule. With regards to this sales transaction, I can tell you that more or less the whole transaction is now closed. In the first half of the year, we are looking forward to a meaningful amount of cash into the company.

Second part, I'm sure you're also interested as to where we will be using this sales proceeds. The company's thoughts are that we will not be concentrating the use into one specific area. We will not be using the whole amount to one certain area. We are mindful of different aspects in terms of urgency of certain business and preparations for the future and the operation. Now, based upon the assumption that all of those factors, that there are no issues, we will be making the decision as to where we will invest that amount.

[Foreign language] 말씀을 조금 정리해서 드리면 현재 오퍼레이션 관련된 캐시 플로우는 충분히 영업을 통해서 충당이 되고 있는 상황이고요. 그렇게 되면 저희가 저 매각을 통해서 나오는 캐시 플로우는 재무 구조 계산의 일부는 활용이 될 거고, 그리고 저희 사업력 강화를 위한 OLED 부분 쪽에 조금 투자가 적절히 이루어져야 되는 미래 부분에 투자가 이루어져야 되는 것으로 저희는 인식을 하고 있습니다.

Let me backtrack on this and just give you a clear message on this. Basically, in terms of the cash flow requirement for our operations, we are able to fund that through the operational activities. The sales proceeds that we will get, the cash flow that will come in, we will use part of it in improving the financial standing, and also there may need to be some investment that we make to better prepare for the future and to strengthen our business capabilities in terms of the OLED business.

[Foreign language] 네, 다음 질문 받도록 하겠습니다.

Next question, please.

Operator (participant)

[Foreign language] 다음으로 질문해 주실 분은 IBK 투자증권의 김은호 님입니다.

The following question will be presented by Kim Woon-ho from IBK Investment & Securities. Please go ahead with your question.

Kim Woon-ho (Analyst)

[Foreign language] 네, 질문 기회 주셔서 감사합니다. 세 가지 정도 질문인데요. 일단 첫 번째는 앞서 CFO님께서 충분히 설명을 많이 해주신 것 같기는 한데, 대외 불확실성 관련 질문입니다. 역시 상황이 그렇게 좋지는 않아 보이는데, 기존 사업 전망에 어떤 변화가 있을지가 좀 궁금합니다. 물론 전략 고객 사업 중심으로 설명해 주시면 감사하겠습니다. 그리고 두 번째는 역시 전략 고객향 관련 질문인데요. 공급사 간의 경쟁 심화가 계속 진행이 되는 걸로 얘기가 들립니다. 이에 따른 물량 변화나 판가 인하 압력이 혹시 나타나는 게 없을지에 대한 질문입니다. 이 부분에 대한 설명 부탁드리고요. 그리고 마지막으로는 올해 하반기에 매년 신제품이 나오니까 올해도 나올 텐데, 이게 전량 LTPO 모델로 나온다는 소문이 있는 것 같습니다. 이렇게 됐을 때 우리 회사에 어떤 좋은 일이 있을지 이 상황에 대해서 한번 마지막으로 설명 부탁드리겠습니다. 감사합니다.

Thank you. Would like to ask you three questions. Although the CFO gave us a quite good explanation on this, I just would like to follow up by asking. The external uncertainties do not seem very good, so would like to understand whether you have made some adjustment into your business plan outlook going forward, and particularly in relation to your strategic customers. Second question also regards your strategic customers. There seems to be heightened level of competition amongst the suppliers. Would like to know whether that is impacting the amount of volume shipment that you're making to each of these customers, or whether you are exposed continuously to any pressures, downward pressures on ASP. The third question is, in the second half, we always used to get new products. There's a rumor in the market that the new products will all be based on LTPO technology.

If that is the case, what good news would that be for LG Display?

Sung-Hyun Kim (CFO)

[Foreign language] 소형획 관련한 백승용입니다. 관세로 인한 불확실성은 분명히 존재합니다. 다만 고객사들은 우선적으로 생산지 다변화를 통해서 대응하고 있으며, 향후 추이를 좀 지켜보고 있는 상황입니다. 스마트폰 사업의 경우에는 자사 역량과 전략적 입지가 강화되어 당초 계획 대비 큰 변화 없이 사업을 운영해 나가고 있습니다. 전방 시장의 변동성이 나타났을 때 고객사와 긴밀히 소통하며 상황 변화에 기민하게 대응해 나가고자 합니다.

Hello. I'm in charge of small display. Responding to your question, yes, there is definitely uncertainties coming out of the tariff-related developments, but basically the customers are at this point diversifying their production base, and so we expect that multiple companies will continue to pay close attention to how things go going forward. In terms of the smartphone business that we engage in, we have very strong capabilities, and our strategic position is quite robust, so we are running our business as per our original business plan. Having said that, there may be downstream market volatilities, so we are in close communication with our customer base, and we are fully prepared to nimbly respond to changes in the market.

[Foreign language] 공급 우체 같은 경쟁은 늘 존재하고 있습니다. 자사는 고객이 필요한 미래 기술 준비, 적기 공급을 통해서 차별화된 역량을 증명해 나가고 있으며, 지속적인 원가 혁신과 품질, 경쟁력 강화를 통해서 물량 확대로 경쟁 상황을 효과적으로 대응해 나갈 예정입니다.

Competition amongst the suppliers and vendors has always existed, but we were able to prove our differentiating points through timely supply of the products and volume to our customers, and also through making appropriate preparations for upcoming future technologies. Through continuous cost innovations and strengthening of quality, as well as other competitive factors, we were able to expand the volume that we supply, and through such commitments, we will effectively respond to the competitive landscape.

[Foreign language] 상반기가 계절적 비수기임에도 불구하고 고객사의 신뢰, 자사의 기술, 생산 역량을 기반으로 전년 대비로는 의미 있는 물량 증가가 예상되고 있으며, 하반기는 신모델 중심으로 물량 확대를 통해 연간으로도 전년 대비 성과 확대가 예상되고 있습니다.

Despite the fact that the first half of the year is usually the slow season, thanks to the trust that we have from our customers and our strategic positioning, as well as our production capabilities, we expect there to be a year-over-year increase in volume. In the second half of the year, we will continue to see more expansion through the shipment volumes, especially coming out of the new models. We expect to achieve a YOY performance that is on par with what we've seen the previous year.

[Foreign language] we will now take the third question.

Next question, please.

Operator (participant)

[Foreign language] 다음으로 질문해 주실 분은 iM 증권의 님입니다.

The following question will be presented by Wonsok Jeong from iM Securities. Please go ahead with your question.

Wonsok Jeong (Analyst)

[Foreign languageu질문 기회 주셔서 감사합니다. 두 가지 질문 간단하게 드리고 싶은데요. 최근에 LCD TV 사업이 종료됐는데 OLED TV로 대형 비즈니스를 집중해야 되는 상황에서 지금 수요 불확실성이 있고, 그리고 하이엔드 시장 성장도 좀 정체되어 있는데 대응하기 위한 전략이 어떻게 되는지 궁금합니다. 그리고 최근에 관세 등 여러 가지 불확실성이 있는 상황에서 올해 출하 계획에 변화가 있는지도 말씀 부탁드리겠습니다. 감사합니다.

Thank you for taking my question. I just have two very simple questions. Since you've discontinued your LCD TV business for your large business, I take it that you have to focus on your OLED business. In light of the uncertainties and the demand and the fact that the high-end market segment is currently stagnant, would like to understand what strategies you have in place. Second question is that on top of the tariffs as well as uncertainties in the market, I would like to know as to whether that drove any changes to your overall shipment plan.

Kim Chun Deok (VP of Large Display Planning and Management)

[Foreign language] current profitability-focused business operation policy, I think it can be divided into two pillars. One pillar is that, to respond to customers, we are focusing our portfolio capabilities on differentiated products in terms of product specs, sizes, and so on. The other pillar is that we are further strengthening the cost reduction activities that we have continued so far, so that we can achieve the business results we planned for this year without any setbacks.

Yes, my name is Kim Chun-deok. I'm VP in charge of large display. I will take your first question on the profitability side. Basically, I can divide that into two pillars. We operate our business under a profit-centric operational stance, and it's made up of two pillars. First, in terms of responding to what the customers need, we are focusing and providing a differentiated product portfolio that has distinct product specifications as well as sizes. By strengthening the portfolio, we will be responding to the need. The second pillar has to do with an ever-stringent cost-savings effort. Through these two approaches, we are committed to stay in line with the plan towards the objective of enhancing the business performance.

[Foreign language] 그리고 질문하신 대로 저희가 LCD TV 사업을 종료함에 따라서 저희가 대형 OLED 사업을 얼마나 좀 더 고도화할 거냐에 대한 부분 계획대로 진행 중에 있습니다. 그래서 현재 대형 OLED 사업은 첫 번째는 저희가 시장의 불확실성이 있으니까 실수요에 연동한 기준의 우리 오퍼레이션 캐파를 운영을 하고, 그다음에 관련된 원가 절감 활동을 좀 더 극한의 원가 절감을 진행 중에 있고, 고객 측면의 세 번째는 글로벌 고객들하고의 협력 강화하고, 네 번째는 지금 최근에 저희가 OLED 모니터 사업에 있어서의 어떤 차별화, 확대 등을 통해서 수익 구조를 좀 지속적으로 강화해 나가고 있기 때문에 중장기적으로도 현재 저희가 추가적인 양적 성장이나 이런 양적인 성장을 통해서 좀 성과를, 안정적인 성과를 계획하고 있는 상황입니다.

The second part of the question, yes, we've decided to discontinue the LCD business, which means that in our large panel OLED business, we will focus our efforts to further enhance and notch up that business, and things are going as planned. Looking overall at our large panel OLED business, because of the existing uncertainties in the market, we have linked actual demand of the market onto the operating capacity of our business, and also we've taken cost-cutting activities to the extreme. That's the second part. Third, we've strengthened our cooperation with the global customer base. Fourth, we have expanded and differentiated LG Display's very distinctive products such as OLED monitors. Through these different efforts, we are really strengthening our earnings structure. From a mid to longer-term perspective, we're seeking to drive growth in terms of volume, which will bring us a steady performance.

[Foreign language] 그리고 이제 마지막 OLED 제품은 글로벌 저희 탑티어 고객들하고 지금 라인업이 되어 있는 상황이고, 시장 내에서도 아시는 바와 같이 최상위에 지금 포지션이 되어 있는 상황입니다. 그래서 이제 LCD하고 좀 향후 경쟁심하는 지금도 그렇고 향후도 좀 경쟁심하는 예상되고 있지만, 저희가 OLED가 가지고 있는 강점인 차별화된 밸류, 이런 바탕으로 해서 하이엔드 시장 내에서 포지션을 좀 더 강화할 수 있도록 하겠습니다.

OLED is actually at the top of the product lineup at the top-tier customers, and OLED itself has a top-tier positioning in the market. We do expect that there will continue to be competition against LCD, but underpinned by the very distinctive value that only OLED can offer. We are committed to strengthening its positioning in the high-end segment of the market.

[Foreign language] 그리고 두 번째 질문 주셨던 관세 관련된 부분은 앞서 CFO께서 좀 설명을 전반적인 설명을 다 드린 상황이고, TV 세트 입장에서 관세 정책의 단기간의 변화 때문에 혼선이 좀 있었지만, 현재 대형 사업에 있어서의 TV 사업에 있어서의 관세 영향에 대한 부분들은 현재는 좀 제한적이라고 판단을 하고 있습니다. 하지만 향후의 변화 상황에 따라서 저희가 결국 관세는 세트 업체의 이슈이기 때문에 현재 상황에서는 저희가 그런 공급에 대한 부분의 유연성을 좀 더 고객하고 확보할 수 있도록 최선을 다하도록 하겠습니다.

Regarding your question on tariff, our CFO has provided you with the overview of the high-level explanation regarding tariff, but with respect to the changes in the tariff policy that hinges on the TV set, there's been some mixed impact. I can tell you that for now, in terms of the large panel business, the TV set business, the impact at this point we believe is quite limited. Going forward, subject to how the tariff policy is actually going to play out into the future, the entities that will directly be impacted are the set makers. We are committed to doing our best to make sure that we secure flexibility in terms of supply against our customers.

[Foreign language] will take the next question.

We'll take the next question.

Operator (participant)

[Foreign language] 다음으로 질문해 주실 분은 키움증권의 김소원 님입니다.

The following question will be presented by Kim So-won from Kiwoom Securities. Please go ahead with your question.

Kim So-won (Analyst)

[Foreign language] 네, 안녕하세요. 질문 기회 주셔서 감사합니다. 저는 IT 패널에 대한 질문 두 가지 드리겠습니다. 최근에도 IT 제품의 수요 불확실성이 지속되고 있는 상황인데요. 저희는 2025년 IT 각 제품군 수요를 어떻게 전망하고 계신지 설명 부탁드리겠습니다. 두 번째는 저희뿐만 아니라 최근에 다른 패널 업체들도 IT OLED 출하를 늘리는 등 제품이나 기술의 상향 평준화가 나타나고 있습니다. 저희가 하이엔드 시장에서 경쟁력을 유지할 수 있는 전략이나 수익성 개선 방안을 공유 부탁드리고요. 더불어서 LCD TV뿐 아니라 IT LCD의 사업 축소나 효율화 계획도 공유가 가능하시다면 말씀 부탁드리겠습니다. 감사합니다.

I will ask two questions on your IT panel business. The demand for IT panels and the uncertainties is continuing and persisting. What is your outlook for the IT product demand by each different product segment for year 2025? Second question is not just LG Display, but your peers have all been able to up their technology standards. The standard itself has become very elevated. How do you differentiate yourself in the market? How can you continue to sustain your competitiveness in the high-end segment of the IT market? Also, with regards to the IT LCD efficiency planning, what are some of the ways for you to improve on your profitability as you go forward?

Ahn Yu‑shin (Head of the Medium Display Planning and Management)

[Foreign language] such as replacement demand and the end of maintenance. However, due to the prolonged macro uncertainties and the U.S. imposing reciprocal tariffs, continuous monitoring of demand changes is necessary. Depending on whether reciprocal tariffs are imposed by each country and the level of tariffs, different trends are expected by product and region. As volatility may occur in the front-end market, we plan to respond to changes by communicating closely with customers about market conditions.

Yes, I am Ahn Yu-shin. I am in charge of Medium Display. Responding to your question, originally we were looking forward to some positive impact coming from the replacement demand and the discontinuation of Windows 10, having and triggering market demand in the high-end as well as the B2B market. At this point, with the talk of the reciprocal tariff that will be imposed by the U.S. and with the prolongation of the macroeconomic uncertainties, we do need to closely and continuously monitor how the demand dynamic changes as we go into the future. Depending on the decision on the imposition of the tariff by different countries and the extent of that tariff, the actual impact could surface quite differently depending on which product segment you're talking about and depending on different geographies. There are potential for continuous volatility to emerge in the downstream market.

We are committed to very closely communicating with our customers in regards to the market situation and respond accordingly.

[Foreign language] 그리고 자사는 IPS Black, 차세대 Oxide 등의 하이엔드 LCD 기술과 고휘도, 저전력, 장수명의 장점을 지닌 Tandem OLED에서 차별화된 기술력을 보유하고 있습니다. 이를 바탕으로 각 제품 영역별로 고객의 니즈에 최적화된 포트폴리오를 제공하면서 경쟁에 대응하고자 합니다.

We have technological edge in terms of high-end LCD technology that includes the IPS Black and next-generation oxide technology, as well as in Tandem OLED that is known for high luminance, low power, and long life. Underpinned by these technological strengths, we are able to offer the most optimized portfolio that best befits the needs of the customer for each of the product segments. That is the way in which we respond to competition.

[Foreign language] OLED monitors is also expected. We anticipate that our high-resolution, low-power solutions and medium to large-size OLED technology will become even more competitive. By applying these differentiated technologies, we believe that a solid, top-tier customer base that can lead the high-end market is also a strength of our IT business.

Now, going forward, our forecast is that there will be growth from the OLED monitor market on top of the AI PC growth from a mid to longer-term perspective. Hence, we believe that our capabilities in the mid to large OLED, especially on high picture quality and low power solutions, our competitiveness will be further solidified as we move into the future. By bringing such differentiated technologies to bear on the products that we offered, we will be able to continuously lead the market as we have a very solid base of tier one customer base, and that really works to our advantage.

[Foreign language] IT 영역 전반적으로 경쟁 강도가 심화되고 있지만, 저희 강도 높은 원가 혁신, 운영 효율화, 탑티어 고객 중심의 운영 및 파트너십 강화를 통해 단계적으로 수익성을 개선해 나가고자 합니다.

Across the entire IT segment, the level of competition between and amongst the panel providers is becoming more fierce. However, through very stringent cost innovation, as well as achievement of operational efficiencies, and really focusing on our top-tier customer base, and through strengthening the partnership that we have, we will continuously and gradually notch up our profitability.

[Foreign language] 네, 마지막으로 한 번의 질문을 더 받고 마치도록 하겠습니다.

We will take the final question before we close.

Operator (participant)

[Foreign language] 마지막으로 질문해 주실 분은 UBS의 윤종현 님입니다.

The last question will be presented by Young Hyon from UBS. Please go ahead with your question.

Young Hyon (Executive Director)

[Foreign language] 네, 마지막 질문 기회 주셔서 감사합니다. 저는 오토 사업 관련 질문을 드리고 싶은데요. 오토 디스플레이 시장의 단기 및 중장기 전망을 좀 어떻게 보고 계시는지, 그리고 이어서 LG Display 오토 사업의 중장기 성장 및 수익성 트렌드도 좀 어떻게 예상하시는지 공유 부탁드리겠습니다.

Thank you for taking my question. My question relates to your auto business. Can you provide us some color on what your take is for your short-term and mid to longer-term outlook for your auto business? Also, what's the forecast for LG Display's auto business growth and profitability going forward?

Son Ki -hwan (VP of Auto Marketing and Product Planning)

[Foreign language] European and U.S. OEMs, we currently believe it will be difficult for the overall auto market to exceed 90 million units this year. Fortunately, automotive displays are being adopted regardless of whether the vehicle is electric or internal combustion, and the adoption rate per vehicle and the trend toward larger displays are still accelerating. As a result, we expect the LTPS LCD and OLED market size to continue to grow.

As I am Song Ki-hwan, I'm VP in charge of auto marketing. If you look at the greater auto market, we are in the gradual recovery phase, but there are certain issues that have newly emerged, such as the tariff issue, as well as the slowing of the EV growth. The OEMs in Europe and U.S. have been experiencing quite a bit of stagnation. Because of all these factors, this year we expect that it will be quite difficult for the overall auto market to report more than 90 million units of vehicles. Having said that, fortunately, if you look at in-vehicle display, regardless of whether a car is an EV or IC, we see on per vehicle basis the % of adoption of such displays is increasing, and we see accelerated speed of shift to a larger panel.

We are looking forward to growth, continuous growth this year of LTPS LCD and OLED market.

[Foreign language] since 2020, and we expect a similar level of stable growth over the next three years in the mid to long term. We succeeded in transitioning to LTPS LCD faster than competitors, and based on large-scale OLED orders, stable growth is expected.

The auto business since 2020, for the past four years, it posted a growth on a CAGR basis of around 10% over the past four years. From a mid to longer-term perspective going forward, at least for three years to come, we're expecting a steady growth trend. Compared to our peers and competitors, we were successful in transitioning to LTPS LCD and supported by large-scale OLED orders. We hence expect and project there to be steady growth.

[Foreign language] 특히 저희 OLED는 유럽과 미국 고객을 시작으로 이제는 한국과 일본 고객까지 확대가 되면서 향후 3년 내에 현재 OLED 매출 대비 3배 이상 증가할 것으로 예상하고 있습니다. 앞으로도 필러 투 필러 디스플레이, 스위처블 프라이버시, 텐덤과 같은 OLED LCD 차별화 기술 기반으로 매출 및 수익성 강화를 개선하고 시장 내 리더십을 공고히 하도록 하겠습니다.

In particular for our OLED display product, we started with customers in Europe and U.S., and now we were able to expand to customer base in Korea and Japan as well. Going forward, in three years' time, we are expecting to triple the revenue compared to where we are today. Going forward, we will actively leverage new technologies such as pillar to pillar display, switchable privacy, and tandem, which are OLED and LCD differentiated technologies that we have. Supported by these new techs, we will further strengthen our top-line revenue as well as our bottom line and solidify our leadership in the market.