[Concall] LG Display "Financial Soundness Top Priority"... Reducing Investment and Adjusting OLED Production

Focus on Strengthening Financial Soundness Due to Market Response Limits
CAPEX to be Reduced by Over 1 Trillion Won This Year
LCD Fab Production Cut 6 Months to 1 Year Earlier Than Planned
"Adjusting Large OLED Fab Utilization Unavoidable Due to Market Slump"

[Asia Economy Reporter Kim Pyeonghwa] LG Display is prioritizing strengthening financial soundness and will undertake high-intensity investments and inventory adjustments in the second half of the year. The LCD TV exit strategy will be advanced by about one year domestically, and the business structure will be reorganized to focus on high value-added OLED. Production volume adjustments for large OLED will also be made, anticipating gradual recovery according to future demand. Next year, shipments through the OLED TV channel are expected to exceed 7 million units.

On the 26th, Kim Seonghyun, LG Display Chief Financial Officer (CFO), said during a conference call following the Q3 earnings announcement, "We have pursued business structure advancement over the past three years, but severe demand downturn and highly volatile market conditions posed limits to our response," adding, "Since poor management performance could be prolonged, we will respond meticulously with strengthened operational standards."

LG Display will focus on strengthening financial soundness considering its financial health. Until financial soundness improves, it plans to drastically reduce investments and operating costs except for essential investments and adjust inventory to the highest level.

CFO Kim said, "This year's CAPEX (capital expenditure) will be reduced by more than 1 trillion KRW, and next year's CAPEX will be executed at about half the level of depreciation expenses after reviewing the existing plan. Current inventory stands at about 4.5 trillion KRW, but it will be aggressively adjusted to decrease by more than 1 trillion KRW by the end of the year, and additional production volume will also be adjusted."

Business structure advancement and reorganization will be pursued simultaneously. In this process, the LCD TV exit strategy will be targeted earlier than the existing plan, accelerating the structural transition to the OLED business. The plan includes gradually reducing not only domestic 7th-generation LCD production but also China's 8.5-generation LCD production.

Kim Heeyeon, Head of LG Display's Business Strategy Group, explained, "We plan to reduce 130,000 sheets at the domestic 7th-generation fab and 80,000 sheets at the Chinese 8th-generation fab. Some reductions are already underway, and some are planned. The 7th-generation fab reduction plan will be advanced by about 6 months to 1 year, and a similar scale of production reduction is planned for the 8th-generation fab around the same time."

LG Display expects that, given the unfavorable market conditions, short-term adjustments to the operating rate of large OLED fabs will be inevitable. Since the proportion of European demand for its OLED exceeds 45%, local consumption contraction is impacting the OLED business. As distributors and set makers continue inventory adjustments, shipments of large OLED panels are expected to decline this year.

LG Display plans to enhance cost competitiveness by adjusting production capacity based on actual demand and increase fab utilization rates according to future real demand. Regarding OLED TVs, consumer value recognition is solid, and actual sales are growing cumulatively, so the market is expected to continue growing in the long term. It is also predicted that once inventory stabilizes from the end of this year, shipments through the OLED TV channel could exceed 7 million units next year.

LG Display will shift to an operating system based on actual demand for large product lines, strengthen product and cost competitiveness to establish a profitability foundation, and focus on performance growth. For medium-sized product lines, it will strengthen customer relationships while expanding market share in high-end monitors and laptops. Starting with tablet OLEDs scheduled for mass production in 2024, it plans to strengthen the medium-sized business portfolio in the mid to long term.

In the small product segment, LG Display will stabilize business by strengthening order-based business capabilities. It plans to secure future business leadership by timely preparing next-generation technologies. Additionally, it will expand the IT display business area by increasing differentiated products such as gaming.

CFO Kim stated, "We will secure stability through financial soundness recovery strategies and business structure reorganization and advance future business portfolio sophistication. We expect the difficult business environment to continue next year, and with a clear-eyed recognition of reality, we will reorganize strategies and enhance execution capabilities to make our best efforts for a new leap forward."

LG Display recorded sales of 6.7714 trillion KRW in Q3 this year, down 6% year-on-year. Operating profit posted negative growth as in the previous quarter, resulting in a loss of 759.3 billion KRW. The Q3 net loss was 774 billion KRW, and EBITDA (earnings before interest, taxes, depreciation, and amortization) was 391.2 billion KRW (6% profit margin).

This content was produced with the assistance of AI translation services.