来源：半导体风向标
骆奕扬：17603002262
陈杭：ForBetterChina
执业资格：S1220519110008
方正科技·研究框架：
显示面板周期 l 网络安全框架 l 摄像头框架 l ODM l 小米
OLED l 射频芯片 l RISC·V l 半导体设备 l 5G l 华为深度
半导体制造l 功率半导体 l 互联网框架 l 科技蓝筹 l 5G
半导体·深度系列：
闻泰科技l 韦尔股份 l 兆易创新 l卓胜微l 中微 l 三安
北方华创 l 汇顶科技 l 紫光 l 长电 l 圣邦 l 澜起 l 京东方
立讯 l 鹏鼎 l 领益 l 大族 l 传音 l 乐鑫 l 光峰 l 华兴 l 安集
计算机·深度系列：
纳思达l 南洋股份 l 安恒信息 l 神州数码 l 中国长城
中国软件 l 金山办公 l 用友网络 l 浪潮信息 l 恒生电子
WPS l 同花顺 l 卫宁健康 l 海康 l 大华 l 金山软件 l 工富
赛灵思公司19Q4财年业绩会纪要
标题：LGD 20Q1业绩交流会纪要
会议时间：2020年4月23日
免责声明：本会议纪要由方正证券科技团队翻译/整理，可能存在与该公司官方公布的纪要原文/录音有不一致或不准确之处，请投资者以上市公司发布的纪要原文/录音为准。本会议纪要内容仅供投资者参考，不包含任何方正证券研究所的投资意见和建议，投资者需自行承担投资决策的风险。
金赫妍
下午好。这是负责LG Display IR的Kim Heeyeon。我代表公司感谢所有参加此次电话会议的参与者。今天，我们有CFO DH Suh加盟； Seung Min Lim，负责公司业务管理；电视营销部的Matthew Kim； IT营销的权志强。
电话会议将以韩语和英语进行一小时。首先介绍2020年第一季度的财务业绩和公司的前景，然后进行问答。有关2020年第一季度财务业绩的更多详细信息，请参阅公司网站上的IR演示文稿文档。对于那些通过网络广播加入的人，请参考屏幕小部件上的详细信息。
在开始演示之前，请花一点时间阅读免责声明。请注意，今天的结果基于为您的利益准备的合并K-IFRS标准，尚未经过外部审计师的审计。
话虽如此，我们现在将开始介绍2020年第一季度的收益结果。
让我从第一季度的业务表现开始。第一季度收入为4.7万亿韩元，环比下降26％。作为改善LCD业务结构的活动的一部分，生产能力下降。由于COVID-19以及季节性因素，导致了一些生产中断。由于液晶面板价格的上涨，降低成本的努力和汇率的影响，营业亏损为3,620亿韩元，比上一季度有所改善。营业利润率为负8％，EBITDA利润率为13％，净亏损为1,990亿韩元。
接下来是区域出货量和ASP。一季度的出货量为700万平方米，环比下降24％。这是由于季节性因素，LCD面板厂的小型化以及与COVID相关的生产中断所致。平均价格为567美元，环比下降6％，同比增长7％，液晶电视面板价格上涨，柔性OLED智能手机出货量下降。由于LCD面板厂的小型化，该公司的产能环比下降了8％。与去年的峰值相比下降了26％。
接下来是按产品细分的第一季度收入细分。电视收入份额为31％，环比略增。尽管LCD面板厂缩小了尺寸，但LCD面板价格却上涨了，而OLED的份额也有所增加。 OLED和LCD TV分别占14％和17％。 IT产品（包括显示器，笔记本电脑和平板电脑）的份额占总收入的37％。移动及其他市场份额为32％，比上一季度下降4个百分点。这归功于战略合作伙伴减少了柔性OLED智能手机的销量。
接下来是公司的财务状况和比率。该公司在第一季度末的库存为2.3万亿韩元，环比增长13％。它正在为新模型做准备，并在COVID-19中及早获取战略材料。财务比率方面，净负债权益比率较上一季度略有上升，而负债权益比率则持平。由于债务增加等原因，本季度末的现金流量从上一季度增加至3.6万亿韩元。
接下来是该公司2020年第二季度的指引。由于关闭零售店和其他措施，预计需求将大幅下降。用于在家工作和在线教育目的的IT需求预计将增长，部分抵消了电视和移动设备的需求下降。但是，COVID-19的全部后果尚待确定，它基本上显示出需求的下行风险。尽管如此，由于IT份额的增长，混合ASP仍有望增长。
接下来是该公司首席财务官DH Suh的演讲。
DH Suh
祝各位股东，投资者和分析师们早安。我是LG Display的首席财务官DH Suh。
随着COVID-19在全球范围内的不断传播，我们继续处于未知领域。首先，我祝愿您家人，健康和安全。请允许我添加一些有关公司第一季度业绩的详细信息。
区域出货量环比下降24％，这是因为大型LCD电视的工厂规模持续缩小，而COVID影响了中国模块组装厂的生产。由于季节性因素和较高的ASP P-OLED产品所占份额的减少，面积ASP环比下降6％，同比增长7％。收入环比下降26％。尽管收入下降，但经营亏损仍略有改善。这归因于汇率以及LCD面板价格的上涨。出于对中国COVID相关生产中断和潜在供应紧缺的担忧。该公司降低材料成本和总投入成本的努力也有所帮助。
接下来是2020年第二季度的前景以及公司的发展方向。在第一季度，COVID对行业的影响主要集中在中国和韩国的生产方面。但是从第二季度开始，我们看到它也会影响需求方面。对电视和手机的需求预计将大大下降。幸运的是，IT需求的强劲增长将部分抵消下降的影响。但总的来说，它将仍然是一个充满挑战的环境。从电视开始，我们看到需求在萎缩，主要体育赛事如东京奥运会和欧洲杯已经被推迟，而零售商店在美国和欧洲等发达市场关闭。暂停客户生产线（接近全球主要市场）后，短期影响变得更加严重。
相比之下，随着在家工作和其他在线活动的增加，IT产品的出货量预计将在所有类别（如显示器，笔记本电脑和平板电脑）中按季度增长和按年增长。这也是由于零售商店关闭而在线销售的增长。特别是在IT领域，公司凭借独特的技术，高端产品阵容和全球客户而具有差异化的竞争优势。预计第二季度收入下降的影响会有所缓解。
对于移动设备而言，由于今年的大规模出货量集中在下半年，因此上半年的影响相对较小，但战略客户对实际销售疲软的担忧也可能会影响公司的销售。有挑战，但随着我们与战略客户的合作，我们将加强运营能力并降低风险因素，因此公司将在下半年为新车型做准备。
其次是管理方向和危机模式管理。为了为不断变化的环境做好准备，该公司现在处于最坏情况下的危机管理模式，因为我们将当前形势视为全球金融压力和实际经济挑战的结合。具体来说，该公司正在迅速彻底地分析零售趋势和客户状况，以便我们可以评估市场的波动程度。
我们还积极降低库存水平，以应对不断增长的需求收缩风险。我们还加强了现金管理计划，可以通过优化资源投入和加强对财务风险的监控来应对甚至不断恶化的情况。特别是，该公司还正在修改生产系统，以迅速应对即使需求减少也总是出现的新机会。在家上班和在线上课的工作就是推动对IT产品需求的机会。
接下来是中国广州OLED面板厂的现状和计划。由于COVID延迟了我们技术人员的部署，广州OLED面板厂遇到了一些困难。我们计划完成所需的工作，以确保在第二季度内实现最佳的批量生产条件。此后，满负荷运行将取决于市场情况。在LCD面板厂业务方面，由于不断进行业务调整，因此产能比去年的峰值下降了31％。因此，对于液晶电视的需求减弱对公司的影响将较小。需求萎缩预示着面板价格的下行压力。但是鉴于今天的情况，我们不能指望价格下跌会触发需求增长的那种价格弹性。我们在改善通用LCD业务结构方面的工作将保持原来的方向，并会灵活运用以确保短期内的盈利能力。
对于包括我们自己在内的所有公司而言，第二季度都将成为一个充满挑战和艰难时刻的时期。由于COVID加剧了需求波动，该公司将继续管理风险，同时保持潜在的需求下行空间。但是，我们再次看到，即使在最坏的情况下也有机会，例如IT需求的结构性变化和电视在线销售的增长。该公司将通过专注于捕捉短期和长期商业机会，同时为我们的投资和财务状况进行艰苦的准备，来尝试明智地克服当前的挑战。
我希望在7月份发布下一个收益报告时，对COVID的展望更加乐观。在那之前，让我们所有人保持健康。非常感谢您的关注。
QA环节
Q
现在我对OLED和LCD都有一个问题。现在首先是，由于COVID-19的情况，广州的生产开始有所延误。然后我现在不知道，因此，该公司今年大批量OLED的计划是否有任何变化？第二个问题是，您预计什么时候柔性OLED的盈利能力会提高？接下来的问题是关于PC。现在，我们看到这些天对PC的需求迅速增长。那么，鉴于当前的情况，那么公司是否还在考虑将Paju P8生产线中的部分电视产能转换为IT面板生产，以便您能够提高盈利能力？
A
关于您有关今年OLED电视出货量的第一个问题。诚然，正如您已经提到的和前面介绍的那样，由于COVID-19的情况，广州OLED面板厂的最终调整工作有所延迟，这是因为延迟了在那儿分配我们的工程师的时间。但是我们确实计划在今年第二季度内完成必要的工作。现在已经说过，无论在广州的哪个工厂，由于COVID-19，第二季度需求将下降。
首先，我们发现美国和欧洲地区的零售店已经关闭，这将对需求端，以及许多固定工厂产出，产生影响。他们位于靠近消费者所在市场的地方。而且由于那里的供应中断，因此我们确实可以预见第二季度需求将下降。
现在的问题是，第二季度的影响是否会持续到今年下半年，这也是我们正在密切关注的情况。但是现在，我们确实希望第二季度对需求的影响也将在今年下半年持续存在。因此，与我们最初的预期相比，我们预计我们的需求将减少10％。
关于您第二个关于柔性OLED业务盈利能力的问题。现在，正如我们在上一个IR中提到的那样，我们已经为战略客户争取到了一定数量的交易，并且我们相信我们已经为扭亏为基础奠定了基础。我们正在就开发和发布时间表与战略客户保持密切的协商，但尚未最终确定。
但是随后我们也意识到了COVID-19局势的影响，这也将影响我们在这里的活动。话虽如此，我们仍然相信，我们可以在今年下半年实现两倍以上的收入。这样我们就可以为下半年的转机奠定基础。
接下来是关于P8产能的下一个问题。因此，一些P8产能已出于IT目的而转移。以便在IT需求不断增长的地方抓住机遇。现在，我就是这样理解您的问题的。如您所知，自去年以来，在坡州P8的通用电视方面，我们已经取消了通用电视的生产线。
因此，这意味着P8工厂已经主要用于IT生产，并且在P8上生产了一些商用电视。话虽如此，我们当然将努力为IT生产分配更多的容量。现在的问题是后端，即模块侧而不是面板。因此，我想说的是，也许会有瓶颈。因此，我们将尝试通过例如从其他产品重新分配一些人力资源或通过将其他生产线分配给IT生产来提高那里的能力。因此，我们希望增强后端的能力，并确保我们有足够的必要材料采购。
Q
现在我有两个问题。首先，现在已经多次提到对IT的需求好于预期。所以问题是多少，比预期好多少？一个相关的问题是，如果现在对IT的需求是否比预期的要好，那么，可以说，例如，在电视方面，中国竞争对手正在用商品充斥市场，您是否仍然看到公司有机会在产品方面与众不同？
第二个问题是，现在，国内竞争对手已经宣布要更快，更大规模地关闭其LCD业务。那么这会改变公司的LCD战略吗？另外，您如何预计这会在今年下半年影响LCD供需动态？
A
现在，您的第一个问题是有关IT需求，它比预期的要好多少？现在就短期而言，因此对于第二季度，我们预计这将同比增长约20％至30％。当然，随着我们进入第二季度，它可能会发生变化。但目前，预期增长约为20％至30％。但是现在的问题是，这种情况会持续到今年下半年吗？
关于这个问题，现在有不同的看法。有人说–由于第二季度需求的急剧增加，下半年需求将更加疲软，而另一些人则认为，随着更多家庭的需求，需求将继续保持强劲。每个家庭拥有超过1台PC，并且还需要不断升级以升级到更好的设备。但是现在关于第二季度的需求增长，我们正在尝试通过灵活地调整产量来应对这种数量增长，并且我们将密切关注随着需求情况的变化情况如何持续到下半年情况，以便我们将能够充分利用我们的优势。
现在，这将是第二个问题，这是第一个问题的第二个答案，那就是随着IT需求的不断增长，我们将如何在电视领域与众不同。因此，我的理解是，由于IT需求的增加，我们将把更多的容量从电视转移到IT。在此之中，我们将如何保持竞争。而现在–是的，我们的确看到了IT需求的增长。然后，现在对低端类型的需求也越来越大。但是现在，对于现在针对中国竞争对手的面板而言，他们大多是在从事PM。
实际上，增长的需求是对PM面板的需求。但是，然后我们的TM，但那时我们不经营该产品。我们重点关注的是IPS和基于氧化物的技术。为此，我们已经与战略合作伙伴建立了非常紧密的联系。这意味着这不是中国公司短期内可以进入的细分市场。因此，我们将继续专注于基于氧化物的技术和IPS技术，以便我们能够在这里完全满足需求。
您的第二个问题是与国内竞争对手比预期更早关闭LCD面板厂有关的，这是否会对公司的运营战略产生任何影响，以及今年下半年的预期前景如何。
现在，首先，我要简单地说，从战略角度来看，竞争对手退出LCD业务对公司的影响不大，因为对于公司而言，比如说对于LCD TV，一般产品，现在无论如何都在国内生产。因此，国内工厂都主要生产IT产品。因此，竞争对手的LCD产品组合与我们的产品基本上有所不同。因此，竞争对手退出基于电视的fab LCD业务对公司影响不大，这意味着它在我们的战略方面变化不大。
至于它如何影响下半年的运营，现在，当然，竞争对手退出市场的决定将对整个市场产生影响。但是现在来看市场情况，它是非常复杂的。我们已经有COVID-19的情况。最重要的是，竞争对手决定关闭其面板厂。当然，现在它们将在短期内产生一些影响。
但是，从一个角度来看事情，那么我们已经看到，有许多面板厂正在为第10代LCD生产做准备。因此，即使在正常情况下，与需求相比，我们已经看到供过于求的现象。因此，是的，短期内可能会产生影响。但是从长远来看，这会对供应需求平衡产生重大影响，对面板价格也产生重大影响吗？我对此的回答不一定是这样。
Q
现在我对大型OLED面板有疑问。现在，正如首席财务官所说，第二季度对OLED的需求将急剧下降。而且第三季度的前景也不明确。最重要的是，广州工厂正在投产，最终将增加供应。现在，这是否意味着与今年初相比，该公司关于大型OLED面板的策略将发生变化，例如，产能变化或目标出货量等发生变化？因此，如果您的策略有这种变化，请告诉我们。
第二个问题是现在假设COVID-19在第二季度消退，并且电视需求在第三季度回升，那么中国高清电视制造商很有可能会变得非常积极试图占领市场份额。现在，在这种情况下，鉴于大型OLED基于优质战略，该公司将不会具有价格优势，这意味着对该公司大型OLED的需求也有可能下降。那么您会对这种假设有何看法？
A
现在关于需求前景，我已经在前面提到过，需求将比我们最初预期的减少约10％。但这并不意味着我们将改变有关OLED电视的策略，因此我们目前尚无此类计划。目前，当我们经历COVID-19的情况时，市场上已经进行了很多分析，让我与您分享他们的一些结果。现在的一个问题是，在北美和欧洲等发展中市场，在线销售仍然保持活跃，那里有活跃的在线零售，物流以及强大的后备基础架构。
因此，鉴于此，现在当然会对需求产生一些影响。但是现在，在离线零售商店关闭且离线不足的地方，在线营销渠道可以从离线停止的地方开始。因此，就短期而言，我们正在建模如何更好地利用在线分销渠道。简而言之，这意味着与正常情况相比，我们正在尝试寻找更好地利用在线分销渠道的方法。
关于中国LCD公司在下半年可能会变得更具侵略性的第二个问题是，由于其高端战略，这将影响该公司对OLED产品的需求。现在是电视LCD面板，现在他们已经以接近现金成本的价格出售了。因此对于公司和中国公司都是一样的。因此，考虑到当时的情况，是否存在，当然，平均销售价格已经有所反弹，但总体而言，它仍然很低。那么，问题是，它们是否会在价格折扣方面走得更远，比如说要在下半年竞争面板市场？好吧，这个问题还有待观察。
但是现在，是的，LCD制造商也有可能变得更加积极进取，面板价格的折扣甚至更高。因此，是的，我们在尝试实现OLED战略时也遵循了这一假设。但是，话虽这么说，但是现在由于COVID-19的情况，有些事情被遗忘了，或者被搁置了，这就是我们能够为OLED增加新客户的事实。 这样，直到去年，我们才能够增加客户数量。
同样在今年，我们能够确保中国的华为，美国的Visio和日本的夏普等客户的安全，因此这些公司具有很高的品牌价值以及强大的营销和销售实力。因此，我们也获得了这些新客户，并且我们相信，我们将能够利用这些新客户更好地利用广州OLED面板厂。因此，即使LCD制造商要以更低的面板价格进行竞争，我们也相信我们将能够维持我们的OLED战略。
Q
现在让我首先提出第一个问题。现在，从中长期来看，我认为重点放在OLED电视上。去年，该公司的面板销量超过300万。预计今年市场将有600万块面板。但是，当然，由于中国生产中断以及全球宏观形势的影响，可能会有一些调整，但是您仍然相信可以保持500万到600万块面板的出货量吗？
而且，您何时相信可以达到800万或1000万？然后，就营业利润而言，您将能够在此之后获得有意义的营业利润吗？回答之后，我将跟进有关CapEx的问题。
A
现在我确实提到了需求比我们最初的预期低约10％。另外，请理解，就数字而言，我们目前很难指定一个数字，这显然是因为COVID情况及其可能对需求波动产生巨大影响的事实。另外，您问我们什么时候可以达到800万或1000万的OLED销售额。当然，这也必须得到生产的支持。
但是再说一次，现在我们经历了上半年，也将进入下半年，那么就无法确定COVID的发展方式，它是否会在今年消退，然后在明年不再产生影响，或者只是在今年上半年消失，然后在今年下半年恢复。根本没有办法知道。因此，对于我们来说，尤其是从长远来看，我们可以共享我们的计划，而我们只能按情景来共享。因此，我希望以后我们能够再有机会与您分享这种长期计划，并根据方案进行生产和销售。
很抱歉，我似乎要重申一下，关于您的OLED转换问题的同样答复。当我们只有Paju面板厂时，当然，折旧和摊销完全来自Paju面板厂。但是现在，随着CO面板厂也开始运营，也将产生启动成本的负担。
因此，在这种情况下，我们还必须考虑成本方面的两个面板厂。而且，这也与市场如何看待或者说我们何时看到，我们有能力进入市场有关。但是，当然，这仍然是一个很大的问号，它是高度不确定的。我相信，只有在对未来的预测有一定了解的情况下，我们才能做出回应。
Q
我的最后一个问题是，现在我们终于可以看到，在第一季度中，设施投资已经开始。因此，第一季度的资本支出低于折旧和摊销成本。那么，您是否将此视为未来的可持续趋势？因此，换句话说，资本支出每季度保持在1万亿韩元以下，而折旧和摊销保持在每季度1万亿韩元以上，这还会改善现金流吗？
当前的汇率也有利于公司。因此，还有一些好处。此外，就公司税而言，似乎–您将获得退还税款的权利，因此，我相信这种情况或许意味着您将能够改善自己的财务状况以及财务结构。因此，我想知道是否是如此。
A
谢谢您的提问和解释。现在是的，我想说的是，我们谈论的是包含COVID影响，或不包含COVID影响的方案，两者立场都会大不相同。但是，现在我们已经说过，在第一季度，我们确实提到第一季度存在资产减值。而且，也有一些-结果，财务比率有所改善。
是的，资本支出低于折旧和摊销成本不仅是过去一个季度，而且也不是短期的，这是因为目前大部分主要投资已经完成。因此，现在要做的是尝试提高已经投资的投资回报率。
而且，已经提到了对电视和移动设备的需求将在第二季度下降，尽管这将被对IT需求的增长部分抵消。但总的来说，它为我们提供了非常具有挑战性的情况。而且，存在高度不确定性。因此我们不知道它会在第二季度结束还是会持续到第三季度及以后。
因此，我们需要做的是设法明智地克服当前局势。只有到那时，我们才能通过将资本支出保持在折旧和摊销水平以下来改善我们的财务状况。因此，我要说，作为首席财务官，我发现这是克服当前困难的主要挑战。
纪要英文原稿：
Kim Heeyeon
Good afternoon. This is Kim Heeyeon, in charge of LG Display’s IR. On behalf of the company, let me thank all the participants at this conference call.
Today, I am joined by the CFO, DH Suh; Seung Min Lim, in charge of Corporate Business Management; Matthew Kim of TV Marketing; JY Kwon of IT marketing.
The conference call will be conducted for one hour in both Korean and English. Starting with the presentation on the financial results of Q1 2020 and the company’s outlook, followed by Q&A. Please refer to the IR presentation document in the company’s website for more details on the financial results of Q1 2020. For those joining through the webcast, please refer to the details on the widget on your screen.
Before we begin the presentation, please take a moment to read the disclaimer. Please note that today’s results are based on consolidated K-IFRS standards prepared for your benefit and have not yet been audited by an outside auditor.
With that said, we will now start with the presentation on Q1 2020 earnings results.
Let me start off with our business performance in Q1. Revenue in Q1 was KRW 4.7 trillion, down 26% quarter-on-quarter. Production capacity was reduced as part of the activities to improve the LCD business structure. There were some production disruptions due to COVID-19 as well as seasonal factors. Operating loss was KRW 362 billion, an improvement quarter-on-quarter, thanks to the rise in LCD panel price, cost reduction efforts and exchange rate effects.
Operating margin was minus 8%, EBITDA margin, 13%, and net loss was KRW 199 billion.
Next is area shipment and ASP. Area shipment in Q1 was 7 million square meters, down 24% Q-o-Q. It is owed to seasonal factors, LCD fab downsizing and COVID-related production disruptions. ASP was $567, down 6% Q-o-Q and up 7% Y-o-Y, while LCD TV panel price rose, plastic OLED smartphone shipment fell. The company’s production capacity was reduced by 8% Q-o-Q due to LCD fab downsizing. It is a decrease by 26% from previous year’s peak.
Next is Q1 revenue breakdown by product segment. Share of TV revenue was 31%, up slightly Q-o-Q. Although there was LCD fab downsizing, LCD panel price rose, while share of OLED also increased. The respective share was OLED 14% and LCD TV, 17%. Share of IT products, including monitors and laptops and tablets was 37% of total revenue. Share of mobile and others was 32%, down 4 percentage points from the previous quarter. It is owed to volume reduction of P-OLED smartphones for strategic partners.
Next is the company’s financial position and ratios. The company’s inventory at the end of Q1 was KRW 2.3 trillion, up 13% Q-o-Q. It was in preparation for new models and early acquisition of strategic materials amidst COVID-19. As for financial ratios, net debt-to-equity ratio rose slightly Q-o-Q, while liabilities to equity ratio stayed flat. Cash flow at the end of the quarter increased to KRW 3.6 trillion, up from the previous quarter due to increase in debt, among other factors.
Next is the company’s guidance for Q2 2020. Considerable decline in demand is expected due to retail closings and other measures. Demand for IT, for purposes of work-from-home and online schooling is expected to grow, partially offsetting the demand decline in TV and mobile. But the full consequence of COVID-19 is yet to be determined, and it is basically showing downside risk to demand. Still, blended ASP is expected to rise, thanks to growth in IT share.
Next is presentation by the company’s CFO, DH Suh.
DH Suh
Good morning to our shareholders, investors and analysts. I am DH Suh, CFO of LG Display.
With the ongoing global spread of COVID-19, we continue to be in an uncharted territory. First and foremost, I wish everyone in your family, health and safety. Allow me to add some more details on the company’s Q1 performance.
Area shipment fell 24% Q-o-Q as fab downsizing for large LCD TV continued and COVID affected production at China’s module assembly plants. Area ASP was down 6% Q-o-Q and up 7% Y-o-Y due to seasonal factors and the reduced share of the higher ASP P-OLED products. Revenue was down 26% Q-o-Q. Despite the drop in revenue, operating loss improved slightly. This is owed to the exchange rate as well as the rise in LCD panel price. Stemming from concerns over COVID-related production disruptions in China and potential supply crunch. The company’s push to reduce material cost and overall input cost also helped.
Next is Q2 2020 outlook and the company’s direction. In Q1, COVID’s impact on the industry stayed on the production side that mostly takes place in China and Korea. But starting in Q2, we are seeing it affect the demand side as well. Demand for TV and mobile is expected to significantly decline. Fortunately, the strong demand increase in IT will partially offset the decline. But overall, it will remain a challenging environment. We are seeing demand shrink starting with TV, with major sporting events like the Tokyo Olympics and EuroCup having been postponed and retail stores shutting down in developed markets like the U.S. and Europe. The short-term impact is made more severe by work suspension in customers' production lines that are approximate to major global markets.
In comparison, shipment growth is expected in IT products, Q-o-Q and Y-o-Y across all categories like monitors, notebooks and tablets, following increase in working from home and other online activities. It is also due to the growth in online sales as retail stores remain shut. In particular, IT segment is where the company has a differentiated competitive edge with unique technology, high-end product lineup and a global clientele. It is expected to somewhat smooth the impact of the fall in revenue in the second quarter.
For mobile, impact in the first half is relatively small as large-scale shipments this year are concentrated in the second half, but concerns of weakening actual sales by strategic customers are likely to affect the company’s sales as well. There are challenges, but the company will make forward preparation for new models in the second half as we strengthen our operational capability and reduce risk factors in collaboration with strategic customers.
Next is management direction and crisis mode management. To prepare for an environment with growing volatility, the company is now in crisis mode management under the worst-case scenario as we see the current situation as a combination of global financial stress and real economic challenges. Specifically, the company is swiftly and thoroughly analyzing retail sales trends and customer status so that we can assess the level of volatility in the market.
We are also preemptively reducing the inventory level to respond to the growing risk of demand contraction. We are also strengthening our cash management plan where we can respond to even worsening scenarios by optimizing resource input and tightening monitoring of financial risks. In particular, the company is also modifying the production system to rapidly address new opportunities that always arise even as demand decreases. Work from home and online classes are such opportunities that are driving demand for IT products.
Next is the status and planning for OLED fab in Guangzhou, China. There were some difficulties in the Guangzhou OLED fab as COVID delayed the deployment of our technical personnel. We plan to complete the work needed to ensure optimum volume production conditions within Q2. Thereafter, full capacity operation will be subject to the market situation. As for the LCD fab operations, the capacity was reduced by 31% from the peak last year as the result of continuous business reshaping efforts. Thus, the impact from weakening demand for LCD TV will be less for the company. The shrinking demand signals a downward pressure on panel price. But given the situation today, we cannot expect the kind of price elasticity where falling price will trigger demand growth. Our work in improving the general purpose LCD business structure will stay the original course with some flexibility to be exercised to ensure profitability in the short term.
Q2 is shaping up to be a time of challenge and hardship for all companies, including ourselves. The company will keep managing risks while remaining open to potential demand downside as COVID has worsened the demand volatility. But once again, we have seen that there are opportunities even in the worst of times, such as structural changes in IT demand and growth in online sales of TV. The company will try to wisely overcome the current challenges by focusing on capturing short-term and longer-term business opportunities while making painstaking preparations in our investment and financial position.
I hope to come back to you at the next earnings release in July with more positive post COVID outlook. Until then, let’s all stay safe and healthy. Thank you very much for your attention.
Kim Heeyeon
That brings us to the end of earnings presentation for Q1 2020. We will now take questions. Operator, please commence with the Q&A session.
Question-and-Answer Session
Dongwon Kim
Now I have one question each for OLED and LCD. Now first is, now there had been some delay in the Guangzhou ramp up because of the COVID-19 situation. And then now I wonder then, because of this, have there been any changes to the company’s plan for the large OLED shipment for this year? And the second question is, when do you expect the profitability to improve for plastic OLED? And then the next question is about the PC. Now we see that there is a rapidly rising demand for PCs these days. Then given the current situation, then is the company also considering perhaps converting some of the TV capacity in the Paju P8 line to IT panel production so that you will be able to improve profitability?
DH Suh
Regarding your first question about the OLED TV shipment of this year. Now it is true, as you have mentioned and also as was presented earlier, that because of the COVID-19 situation, there have been some delay in the final tuning work at the Guangzhou OLED fab because of the delay in allocating our engineers there. But we do plan to complete the necessary work within the second quarter of this year. Now having said that, regardless of the Guangzhou fab, there is going to be decline in demand in the second quarter due to the COVID-19.
First of all, we see that the retail stores have shut down in the U.S. and European regions, that is going to have an impact on demand and also many of the set plants, the set build plants. They are located close to the markets for the – where the consumers are. And because of the supply disruptions there, so once again, we do foresee demand decline in the second quarter.
And now the question is whether the impact from Q2 will last into the second half of this year, and that is the situation where we are closely monitoring as well. But then now, we do expect the impact on demand that we are seeing in the second quarter to have a lingering effect into the second half of this year as well. So we are expecting about a 10% reduction or the 10% decrease to the demand that we – compared to our original expectations.
And regarding your second question about the profitability of the P-OLED business. Now as we did mention in the last IR, we have secured some volume for the strategic customers and we do believe that we have laid the basis for a turnaround. And we are maintaining close consultations with the strategic customers regarding development and the launching schedules, but it has not been finalized yet.
But then we also are mindful of the impact from the COVID-19 situation, and that is also going to affect our activities here. Having said that, we still believe that we will be able to more than double the revenue in the second half of this year. So we will be able to lay the basis for a turnaround in the second half.
And then to your next question about the P8 capacity. So some of the P8 capacity being shifted for IT purpose. So as to seize the opportunity where there is rising demand for IT. Now that is how I understood your question. And as you would know, since last year, in terms of the general purpose TV at P8 in Paju, we have already removed the lines for the general purpose TV.
So that means that the P8 plant is already mostly being used for production of IT, with some production of commercial TV at P8. Now having said that, of course, we will be making efforts to allocate some more capacity to IT production. And now the issue would be the back end, the module side rather than the panel. So I would say that maybe there would be where we could have a bottleneck. So we will be trying to improve the capacity there by, for example, reallocating some of the human resources from other products or by allocating other lines to IT production. So by doing so, we hope to beef up the capacity for back-end and also to make sure that we have sufficient procurement of the necessary materials.
Operator
[Foreign Language] The next question will be presented by Chuljoong Kim from Mirae Asset Daewoo. Please go ahead, with your question.
Chuljoong Kim
Now I have two questions. First is, now it’s been mentioned several times that the demand for IT is better than expected. So the question is by how much, so how much is it better than expected? And a related question is, now if the demand for IT is faring better than expected, then, let’s say, instead of the – so let’s say, for example, in the TV side, where the Chinese competitors are flooding the market with commodities, do you still see any opportunities for the company to differentiate yourself with the product?
And the second question is, now, there has been an announcement by the domestic competitor of a faster and larger scale shutdown of their LCD business. So does this change the company’s strategy for LCD? And also how do you expect this to affect the LCD supply and demand dynamics in the second half of this year?
DH Suh
Now to your first question about the IT demand and how much better than expected is it? Now for the short term, so for the second quarter, we expect this be about 20% to 30% growth Y-o-Y. Of course, it is subject to change as we move further into the second quarter. But at this time, the expectation is about 20% to 30% growth. But then now the question is, will this be sustained into the second half of this year?
Now regarding this question, there are differing views. Some say that the – because of the sharp increase in demand in the second quarter, there is going to be much softer demand in the second half, while some others contend that the demand will continue to be strong with more households are claiming that there should be more than 1 PC per household and also some growing need to upgrade to better devices. But now as for the second quarter demand increase, we are trying to respond to this growth in volume by flexibly adjusting our production, and we will be closely watching how the situation unfolds into the second half with any changes in the demand situation so that we will be able to fully leverage our advantages.
Now this would be the second question – second answer to your first question, and that was about how we are going to differentiate ourselves in TV as the demand for IT continues to rise. So my understanding is that because of the increase in the IT demand, we will be shifting more of the capacity from TV to IT. Then amidst this, how are we going to keep competing. And now as the – yes, we do see that there is growing demand in IT. And then also now there is especially a growing demand for low-end types. But then now for the panels now for the Chinese competitors, they are mostly dealing in PM.
And actually, the demand of increasing is for PM panels. But then we – TM, sorry, so TM, but then we are not dealing in that product. And where we are focusing on is IPS and oxide-based technology. And for this, we already have a very close tie-up with the strategic partners. Meaning that this is not the segment where the Chinese companies can enter in the short term. So we will continue to focus on the oxide-based and IPS technology so that we will be able to fully capture the demand here.
And your second question was pertaining to the domestic competitor closing down the LCD fabs earlier than expected and whether that would have any impact on the company’s operation strategy and also what the expected landscape is going to be in the second half of this year.
Now first of all, let me simply say that the competitors withdrawal from the LCD business will have little impact on the company from a strategic point of view because for the company already, let’s say, for the LCD TV, the general products, we are now producing them domestically anyways. So the domestic fabs are all mostly producing IT products. So then the competitor LCD product portfolio has been basically different from ours. So the competitor withdrawing from the TV based fab LCD business has little impact on the company, meaning that it changes little in terms of our strategy.
And regarding how it will affect the operations in the second half, now of course, the competitor’s decision to withdraw from the market would have an impact on the market in general. But then now looking at the market situation now, it is highly complex. We already have the COVID-19 situation. And then on top of that, the competitor’s decision to close its fabs. Now of course, they will have some impact for the short term.
But then seeing things from a perspective, then we already see that there are a lot of fabs, a number of fabs that are preparing for a gen-10 LCD production. So even in a normal situation, we are already seeing high oversupply compared to demand. So yes, for the short term, there might be an impact. But then over the longer term, will this have a major impact on the supply demand balance, and will this also have a major impact on the panel price? My answer to that is not necessarily so.
Operator
[Foreign Language] The next question will be presented by Gang Ho Park from Daishin Securities. Please go ahead, with your question.
Gang Ho Park
Now I have a question about the large OLED panel. Now as the CFO has mentioned, there is going to be sharp decrease in demand for OLED in the second quarter. And the outlook for the third quarter is not clear either. And then on top of that, the Guangzhou fab is going into operation, which will end up increasing the supply. Now does this mean that compared to the beginning of this year, there will be changes to the company’s strategy regarding the large OLED panel, for example, changes to the lineup or to the target volume and so forth? So if there are such changes to your strategy, then please let us know.
And the second question is assuming – now assuming that the COVID-19 were to subside in the second quarter, and the demand for TV were to pick up in the third quarter, then it’s highly likely that the Chinese HD TV makers will become very aggressive in trying to capture the market share. And now in such a case, given that the large OLED is based on premium strategy, the company will not be having a price advantage, meaning that it is also possible that demand for the company’s large OLED could fall. So what would you say to this kind of a presumption?
DH Suh
Now regarding the demand outlook, I have already mentioned earlier that there is going to be about 10% reduction to the demand than we had initially expected. But now this does not mean that we will be changing our strategy regarding OLED TV, so we do not have such plans at this point. Now currently, we expect – now as we experience the COVID-19 situation, there have been a lot of analysis from the market, and let me share with you some of their results. Now one is that online sales are still remaining brisk in the developing markets like North America and Europe, where they have a vibrant online retail and also the logistics as well as strong backup infrastructure.
So given this, now of course, there will be some impact on the demand. But now where the off-line retail stores are shutting down and where the off-line are falling short, the online marketing channels can pick up where the off-line left off. So for the short term, we are modeling over how we are going to better utilize the online distribution channels. So in short, this means that compared to the normal situation, we are trying to think of ways to better utilize the online distribution channels.
And your second question about the Chinese LCD companies potentially becoming more aggressive in the second half, which would affect the company’s demand for OLED products because of its premium strategy. Now for the TV LCD panel, now the LCD panel for a TV is now they had already been selling at near the cash cost. So that was same for the company as well as the Chinese companies. So given the situation already then, whether there – and of course, there have been some rebound in the ASP, but overall, it has remained quite low. So then the question is whether they will go further in the – let’s say, the price discount in order to compete in the panel market in the second half? Well, that question remains to be seen.
But then now, yes, it is also possible that the LCD makers will become much more aggressive in their approach, with even steeper discount in the panel price. So yes, we are also keeping that assumption as we are trying to have our – unfold our strategy for OLED. But now having said that, now there is one thing that was, let’s say, a bit forgotten or was put on the sideline because of the COVID-19 situation, and that is the fact that we were able to increase a new clientele for OLED. So that was – so up until last year, we were able to increase our client – customers.
And also this year, we were able to secure customers like Huawei in China, Visio in the U.S. and Sharp of Japan, so the companies with much name value as well as marketing and sales prowess. So we have also secured these new customers, and we do believe that we will be able to better utilize our Guangzhou OLED fab utilizing these new customers. So even if the LCD makers were to have a competition with even lower panel price, we believe that we will be able to maintain our strategy for OLED.
Operator
[Foreign Language] The last question will be presented by Dong-je Woo from Bank of America. Please go ahead, with your questions.
Dong-je Woo
Now let me first give my first question. Now for the mid-to longer term, I believe that the focus is on the OLED TV. And last year, there were sales of over 3 million panels. And the expectation this year from the market is around 6 million panels. But of course, because of the disruptions in production in China as well as the macro situation globally, there could be some adjustments, but still, do you believe that the shipment of 5 million to 6 million panels can be maintained?
And also, when do you believe that you can reach 8 million or 10 million? And thereafter, let’s say, in terms of the operating profit, you will be able to achieve meaningful operating profit following that? And after the response, I will follow-up with a question on CapEx.
DH Suh
Now I did mention earlier about the demand being lower by about 10% than our initial expectation. And also, please understand that in terms of the number, it is very difficult for us specify a number at this point, obviously, because of the COVID situation and the fact that it could have a huge impact on the demand fluctuations. And also, you asked about when we could reach 8 million or 10 million sales of OLED. And of course, this has to be backed by production as well.
But again, now as we go through the first half and also into the second half, then there is no telling how COVID is going to develop, whether it is going to be subsiding this year and then will no longer have an impact next year, or will it just simply go away within first half of this year, and then things will recover in the second half of this year. There is simply no way of knowing that. So for us to share our planning, especially for the longer term, and we can only do so by scenario. So I do hope that we could have another opportunity later on to share such long-term planning with you by scenario for both our production and sales.
And I’m sorry that I seem to be repeating myself, but the same question regarding – same response regarding your question about OLED turnaround as well. So now the – when we only had the Paju fab, then of course, the depreciation and amortization was solely from the Paju fab. But then now as the CO fab also goes into operations and also, there is going to be the burden of the start-up cost.
So in such a case, then we would also have to look at both fabs in terms of the cost. And also the – it’s also related to the question of how the market sees or when our – the market sees our capacity to go into of – our full capacity to go into operation. But of course, that is still a big question mark, that it is highly uncertain. And I believe that we will be able to respond to that only when there is some visibility into the future projection.
Dong-je Woo
And my last question is now we see that finally, in the first quarter, the investment in facilities. So the CapEx in the first quarter was below the depreciation and amortization cost. So do you see this as a sustainable trend into the future? So in other words, the CapEx on a quarterly basis to remain below KRW 1 trillion, while depreciation and amortization to stay above KRW 1 trillion per quarter, which will also improve the cash flow?
And also the current exchange rate is working in favor of the company. So there would also be some benefits that as well. And also in terms of the corporate tax, there appears to be a – that you’re set to receive a refund for the tax, so I believe that the situation perhaps means that you will be able to improve your financial position as well as the financial structure. So I would just like to know whether that is so.
DH Suh
Thank you for the good question and the good interpretation. Now yes, I would say that the stance would become much different, whether we are talking of a scenario that is inclusive of the COVID impact and exclusive of the COVID impact. But now having said that, in the first quarter, we did mention that there has been asset impairment in the first quarter. And also, there have been some – as a result of that, there have been some improvement in the financial ratios.
And yes, the CapEx falling below the depreciation and amortization cost is not just for the past quarter, and it won’t be for the short term, either because most of the major investment for the time being has been completed. So now what remains to be done is to try to improve the ROI on the already – on the investment already made.
And also, it was already mentioned that the demand for TV and mobile will fall in the second quarter, although it would be partially offset by the increase in the demand for IT. But still, overall, it provides a very challenging situation for us. And also, there is a high level of uncertainty. So we don’t know whether it will be ending in the second quarter or whether it will persist into the third quarter and on.
So what we need to do is try to wisely overcome the current situation. It is only then that we will be able to improve our financial position by maintaining the CapEx below the depreciation and amortization level. So let me say that, as the CFO, I find it the – my major challenge to overcome the current difficulty.
Operator
[Foreign Language] This concludes the 2020 first quarter earnings results by LG Display. Thank you very much for your participation, and please refer to the IR team for any further questions. Thank you.
