Good morning. This is Brian Heo, in charge of LG Display's IR. On behalf of the company, let me thank all the participants at this conference call. Today, I'm joined by the CFO, Sung-hyun Kim, the CSO, Hee Yeon Kim, Seung Min Lim, Senior Vice President of Corporate Planning, Ki-young Lee, in charge of Business Intelligence, Won Jae Lee, in charge of Large Display Marketing, Chang Won Kim, in charge of Medium Display Marketing, and Kim Hee-seon, Vice President of Auto Marketing. The conference call will be conducted in both Korean and English. Please refer to the provisional earnings released today or the IR event section of the company's website for more details on the financial results of Q4 2022. Before we begin the presentation, please take a moment to read the disclaimer.
Please note that today's results are based on consolidated IFRS standards prepared for your benefit and have not yet been audited by an outside auditor. Before we begin the earnings presentation, CFO Sung-hyun Kim will provide a briefing on the company's main tasks and activities.
Good morning. This is Sung-hyun Kim, CFO of LG Display. Looking back on 2022, we see demand slowdown accelerate in major product groups on the heels of worsening macro environment, resulting in year-long inventory correction in downstream industries. Softening demand that started in general B2C products spread to B2B, then to high-end product groups as well, which had shown relatively solid demand. The display market continued to face headwinds with panel prices still on the trend of decline, although the pace slowed down. Given the protracted challenges in the market, the company is focusing on recovering financial soundness and future-proofing.
Upgrading our business structure remains our utmost priority, where we will concentrate our internal capabilities. Allow me to first brief you on our activities and achievements in recovering our financial soundness. The company is moving ahead of the original timeline to downsize LCD TV business, which has structurally weakened competitiveness. Production in Gen 7 LCD TV fab located in Korea was terminated at the end of last year, and the remaining Gen 8 LCD TV fab in China is scheduled to downsize to 50% of its capacity starting this year. Under the assessment that LCD TV business is unlikely to recover competitiveness, we will phase it out while responding to commercial products and the volume agreed with customers.
당분간 중국 LCD TV Capa Downsizing, 국내 대형 OLED 팹의 고강도 생산 조정과 실수요 변화에 대한, 변화 및 시장 재고에 대한 면밀한 모니터링을 통해 비용 축소 및 운영 효율을 높여갈 계획입니다. [Foreign language].
To address the continued soft demand and secure operational flexibility, the company undertook intense production adjustment. The inventory re-reduction by around KRW 1.6 trillion from Q3 affected profitability in Q4, but it placed the company in a better position to flexibly respond to market environment in the first half of this year. The preemptive inventory adjustment in Q4 is expected to reduce cost in Q1 this year. The company plans to keep reducing cost and improving operational efficiency through LCD TV capacity Downsizing in China, intense production adjustment in large OLED fabs in Korea, and close monitoring of real demand changes and market inventory.
다음으로 사업 구조 고도화와 관련된 경과 및 향후 계획입니다. 수급형 사업은 고부가가치 영역에 집중하고, 시장 변동성에 대응해 합리적인 운영체계를 구축하여 안정적인 수익성을 확보하고 밸류를 창출하고자 합니다. [Foreign language].
Next is on the progress of the company's business realignment efforts and future plans. In supply and demand-based business, we will enable a more rational operational structure and secure consistent profitability and create value by focusing on high-value-add products while responding to market volatility.
그동안 지속적으로 추진해 오던 수주형 중심의 사업 구조 전환도 보다 가속해 나가겠습니다. 올해 하반기 양산 예정인 스마트폰 신규 라인과 내년 상반기 양산 예정인 IT형 OLED와 같이 고객과 협의된 프로젝트들을 체계적으로 준비하고 있습니다. 이러한 수주형 사업 비중은 지난해 30%, 올해는 40% 초반, 그리고 2024년에는 50%를 상회할 것으로 예상됩니다. [Foreign language].
Not stopping there, the company will add a stronger drive to the transition in order-based business structure. We are systematically preparing for projects agreed with customers like the new smartphone lines to be mass-produced in the second half of the year, and OLED for IT products to be mass-produced in the first half of next year. Such order-based business took up 30% of our business last year, expected to be in the low 40% this year and exceed 50% in 2024.
시장 창출형 사업 또한 지속적으로 확대해 나가고자 합니다. 게이밍 및 투명 등 자사가 강점을 가진 제품을 통해 지속적으로 신규 시장을 공략하고 있으며, 미래 사업 포트폴리오를 강화하여 안정적인 수익 구조를 만들겠습니다. [Foreign language].
We also continue to broaden market creating businesses. The company keeps exploring new markets with our competitive products like gaming and transparent. We will build a stable revenue structure by strengthening the future business portfolio.
시황 변동성이 여전히 높기에 현재와 같은 패널 공급 수요 부진은 올해 상반기까지 지속될 것으로 예상됩니다. 패널 출하가 세트의 실판매를 하회하는 업황은 상반기까지 지속될 것으로 예상되지만, 업계 전반의 고강도 생산 조정으로 인해 세트의 실수요와 별개로 패널 재고 이슈는 상반기 내 어느 정도 마무리될 것으로 보고 있습니다. 이에 하반기 들어서는 산업 생태계 전반의 재고 건전성이 회복될 것으로 예상합니다. [Foreign language].
With market volatility remaining high, sluggish demand for panels is expected to last into the first half of the year. The market situation, where panel shipment falls short of actual set sales, is expected to persist in the first half. The panel inventory issue is likely to be mostly addressed in the first half, regardless of the real demand for sets, thanks to intense production adjustment across the industry. This will hopefully return the industry-wide inventory to healthy levels in the second half.
실수요의 회복 국면을 예측하기 어려운 상황에서 자사는 대규모 비용 감축을 최우선 순위의 과제로 설정하고 있습니다. 1분기는 전통적 비수기 및 산업 내 재고 조정으로 물량과 매출이 감소할 것으로 예상됩니다. [Foreign language].
With recovery in real demand remaining uncertain, the company remains focused on large-scale cost cutting. Both volume and revenue are expected to decrease in Q1, given its traditional seasonality on top of industry-wide inventory adjustments.
자사는 지난 4분기부터 실행 중인 적극적인 재고 관리 활동과 LCD TV Downsizing, OLED TV의 고강도 생산 조정 등 대형 사업 합리화를 통해 1분기에 약 KRW 1 trillion 규모의 비용 감소 효과를 기대하고 있습니다. 스마트폰 신규 Capa 가동 및 고강도 체질 개선 활동을 통해 분기별 실적이 개선되며 올 하반기 중 Turnaround를 예상하고 있습니다. [Foreign language].
The company expects about KRW 1 trillion cost reduction in Q1 from the large-scale business rationalization underway from Q4, such as active inventory control, LCD TV Downsizing, and OLED TV production adjustment. New capacity utilization for smartphones and strong improvement in fundamentals will improve performance quarter-to-quarter and help achieve a Turnaround in the second half of the year. In terms of investment, only the minimum ordinary investment will be made, along with the investment in order-based projects already agreed with customers. CapEx for the year will be around KRW 3 trillion on a cash-out basis. The last point before we present the Q4 earnings is regarding the increase in Q4 net loss. The company's mid to large size panel businesses have been accounted as one cash-generating unit.
Following the decision to phase out the marginal LCD TV business, large OLED business was separated as standalone cash-generating unit in Q4. For the separated cash-generating unit, asset valuation was reviewed and assessed by an outside organization in accordance with the standards and procedure in place. With soft demand for premium TVs last year due to economic slowdown, as well as the downward revision of demand outlook, asset impairment of approximately KRW 1.3 trillion was recognized for OLED business to ensure proper accounting. The result was reflected as non-operating expense in Q4, which increased the net loss. As you would all understand, it is a result of accounting adjustment that has nothing to do with cash flow. The company expects positive impact down the road as it reduces our business uncertainties.
As the leader in large OLED, the company possesses incomparable competitiveness in premium TV market, where we intend to keep growing our market share. We will keep creating a consistent revenue structure by enabling qualitative growth as we keep strengthening our product and cost competitiveness and accelerate our push to open up new markets like transparent and gaming. Thank you very much for your attention.
Let me now continue with our business performance in Q4. With worsening macroeconomy in Q4, set demand continued to remain subdued. It was followed by inventory adjustment across downstream industries, the impact of which also spread to high-end products, which had been showing relatively solid trends. Revenue in Q4 went up 8% QOQ, thanks to shipment of new smartphone products.
There was operating loss of KRW 876 billion following shipment decrease of IT panels, decline in panel prices, and intense production adjustment to reduce inventory. Operating profit margin in Q4 was -12% with EBITDA margin at 3%. There was net loss of KRW 2.094 trillion with KRW 1.33 trillion of impairment being accounted as non-operating loss. For the year, revenue in 2022 was KRW 26.152 trillion, down 13% YOY. There was operating loss of KRW 2.085 trillion. Operating profit margin was -8%. Next is area shipment and ASP trend. Area shipment in Q4 was 7.86 million square meters, increasing 2% from the previous quarter. It was slower than ordinary seasonality due to demand decreases in mid-size products and structural innovation in large product business.
ASP per square meter was $708, going up 5% QOQ. This is owed to the increase in portion of smartphones and wearables. Next is revenue breakdown by product segment. OLED accounted for 52% in Q4, following the transition to OLED-focused business structure. For the year, its portion grew sharply from 32% in 2021 to 40% in 2022. OLED's contribution to financial performance is expected to keep growing this year, with its portion out of revenue exceeding 50%. It will be largely driven by growth in smartphone capacity and panel shipments in the second half of the year, as well as the continued phase-out of LCD TV business. TV panels accounted for 25%, unchanged QOQ. Share of IT panel was 34%, falling by 9 % points QOQ. There was decrease in panel shipments and decline in panel prices.
Portion of mobile and other products was 34%, up by 9 % points QOQ on the back of higher shipment of smartphones and wearables. Auto business, which is a new growth engine for the company, has maintained growth, with its portion moving up from 5% in 2021 to 7% in 2022. It is expected to keep growing by double digits this year, with its portion continuing to rise. Next is the company's financial position and ratios. The company's cash and cash equivalent was KRW 3.547 trillion, staying above the KRW 3 trillion line. Inventory was KRW 2.873 trillion, decreasing by KRW 1.644 trillion QOQ as a result of the decision to keep inventory at the minimum and the subsequent strong adjustment in production.
As for the main financial ratios, debt-to-equity ratio was 215% and net debt-to-equity ratio 101%, both up QOQ. Next is cash flow. The company's cash and cash equivalent at the start of Q4 was KRW 3.264 trillion. It increased by KRW 283 billion and stood at KRW 3.547 trillion at the end of Q4, with increased cash flow from financial activities. Last but not least, outlook for Q1. With growing market volatility and demand uncertainty as well as the company's execution of LCD exit strategy, area shipment is expected to fall more sharply than in ordinary seasonality. In response to the demand slowdown that will last for some time, the company will keep improving profitability quarter-to-quarter by improving financial soundness and remaining on the path of structural innovation.
In addition to KRW 1 trillion cost-cutting in Q1, we will strive to achieve a turnaround in the second half by helping recover panel demand and utilizing new smartphone capacity. That completes my briefing. Thank you very much. That brings us to the end of earnings presentation for Q4 2022. We will now take your questions. Operator, please commence with the Q&A session.
Now Q&A session will begin. Please press star on, that is star and one if you have any questions. Questions will be taken according to the order you have pressed, the number 1 and star. 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 participant. The first question will be presented by Dong Won Kim from KB Securities. Please go ahead with your question.
Uh,
Thank you very much for giving me the chance to ask my questions. I have two questions, one each for the company's financial strategy and the large OLED business. The first is about the company's financial plan, including any potential borrowings following the worsening of the financial performance. Related to that, can you also give us an overview of the CapEx implementation in 2022 and what is the company's plan for CapEx this year? Next is about the large OLED business strategy and also the exit strategy. If you could also, if the company can also brief us about the large OLED business strategy. Also of what will be the way for OLED to continue to enhance its premium image over LCD. What would be the strategy to differentiate OLED from LCD?
Thank you very much for the question. This is the CFO responding. Now, for a company, the fundamentally, the financial strategy would be to keep earning revenue from our operations.
투자 및 비용의 과감한 축소와 효율화를 통해서 저희가 시장 상황에 부합하는 운영체계를 확보하는 것입니다. 그리고 세 번째로는 최소 수준의 재고 관리 및 운전자본 관리를 통해서 저희가 cashflow를 지출을 최소화하는 방향을 지금 모색하고 실행하고 있습니다. [Foreign language].
Now, given the nature of the industry and also the market situation, sometimes that is not conducive. In such a case, then we will try to improve the financial soundness through better cashflow management, which is what we are doing currently. As for now, the plan is to accelerate our exit strategy in LCD TV, which has been proven to be a marginal business so as to minimize our potential losses from this business.
We will also keep reducing our investment as well as expenditure and also enhance the efficiency of such costs so that we will also be able to create the kind of operational structure that will be in line with the current market situation. Another part of the plan is to minimize our inventory and the working capital. In order to do that, and by doing so, we will be able to minimize our cashflow expenditure.
최근 벌어지고 있는 그, 뭐, 저희가 Gen 7 LCD Fab의 종료라든지, 그리고 중국 Gen 8 Fab의 그, 단계적인 생산 축소라든지 그런 것들은 그냥 단순히 생산 축소의 문제가 아니고 거기에 투입되고 있는 비용들을 줄이겠다는 걸 같이 말씀을 드리는 것입니다. 그래서 아까 말씀을 드렸다시피 1Q에만도 그, 운전자본 관리와 그런 비용의 효율화를 통해서 약 KRW 1 trillion 정도를 저희가 절감하는 계획을 실행을 하고 있습니다. [Foreign language].
Some of our recent actions, for example, the termination of the production in the Gen 7 LCD Fab, as well as the Downsizing of production in Gen 8 LCD Fab in China. These actions are not just about downsizing production. It also entails reducing expenditure or reducing the cost. By doing so, we intend to reduce costs by about KRW 1 trillion in the first quarter of this year, as has been explained earlier, by better managing our working capital and improving the efficiency of our cost structure.
CapEx에 대해서 원칙을 그, 아까 서두에 말씀을 드렸는데요. 작년부터도 그렇고 올해, 내년도 그렇고 투자는 생산 설비를 유지하기 위한 최소한의 경상 투자하고, 그리고 제가 수요와 매출이 거의 확정되어 있는 수주용 프로젝트만 진행을 합니다. 근데 작년 그, cash-out이 KRW 5.2 trillion 정도가 이루어졌는데요. [Foreign language].
사실 그거는 저희가 예상했던 것보다도 조금 많은 수준이었습니다. 이 증가 사유를 보시면은, 다시 말씀을 드리겠습니다. 일단은 여기까지 말씀해 주시죠. [Foreign language].
Now about the CapEx. I did explain about the principles earlier in the briefing, and that is that for last year and this year, we will be maintaining the minimum ordinary investment so as to that will be necessary to maintain the production facilities and also maintain the investment for the order-based businesses for which demand and revenue are pretty much fixed. Also on a cash-out basis. Last year it was KRW 5.2 trillion, which was a bit higher than expected.
저희가 사실 예상했던 것보다 KRW 5.2 trillion로 투자 cash-out이 많이 일어난 이유는 아까 투자 원칙에 말씀드렸다시피 수주형 프로젝트 중심으로 진행한다는 그 원칙에서 맞아떨어지는 건데요. 이 투자를 조금 일정을 가속화를 했습니다. [Foreign language].
가속화를 했다는 부분은 역시 매출도 가속화되어서 발생한다는 가정을 근거로 하고 있는데요. 그런 사용 내용을 보신다면 올해 발생할 것, 내후년에 발생할 것, 그런 것들을 조금 당겨온 것이기 때문에 몇 년치의 총 현금 흐름으로서는 투자비가 증가 발생하지 않는 것으로 이해해 주시면 감사하겠습니다. [Foreign language].
For last year on a cash-out basis, it was KRW 5.2 trillion, which was a bit higher than expected. What this means is that this actually is in line with our principle of transitioning more towards the order-based business. We have accelerated our investment timeline for some of the order-based business. This also means that the achievement of revenue or the accrual of the revenue would also be pulled up. This means that, the revenue to occur this year and the year afterwards will also be pulled up as well.
When we look at the cash flow across the next few years, we will see that the investment expenditure will not go up. About the funding. There are some concerns about potential shortage of funds due to our investment plan as well as the current performance. Regarding that, I would like to assure the investors and the shareholders that there is no cause for concern as we are making preparation and also implementing the preparation with regards to the funds aspect as well. When it comes to investment or the operations of our business, there are ways in the market that are available aside from borrowing or aside from using our own funds to do so.
When it comes to cash management, once again, I would like to reassure the shareholders and investors that you do not have to worry about them because we will be making the best use of the other means and ways that are available in the market. This is Won Jae Lee, in charge of large display marketing, responding to your question about the OLED plan for 2023. In terms of the shipment of OLED is expected to be similar in 2023 YOY. Now, in the high-end market, the demand keeps changing.
Also, given that it is not clear when there is going to be recovery in the demand, we will keep closely monitoring the market and try to continue to differentiate OLED in the high-end TV market, so that we will be able to increase our market share from the current high 20% level to over 30%. With the goal of improving the inventory level among the distributors and the set customers, we will be adjusting our production and also trying to reduce the fixed costs in line with the trends in the actual demand. About the business strategy for large OLED.
In terms of the infrastructure, we have already achieved the economy of scale in large OLED, based on which we can compete in the high-end market, meaning that is 10 million units. We have already achieved the economy of scale. We also see more opportunities still arising in terms of new markets as well as new customers. We will continue to strengthen our competitiveness and improve profitability. Strengthen our competitiveness and strengthen our structure so that we will also be able to see profitability from the existing market as well.
Another positive aspect is the fact that we are also seeing visible results come out of our market creating businesses like gaming and transparent OLED. These are the new markets that go beyond the existing TV market, as the current TV market continues to remain subdued. In short, although demand in the downstream industries remains slow, mostly due to the macroeconomic situation, this is the business segment where there are still potential and many opportunities. We will continue to strengthen our cost innovation and also strengthen the OLED specific competitiveness so that we will be able to keep growing this market as well as the business. There was also a question about the differentiation of the product, especially between OLED versus LCD.
Given the fact that my answer has become quite long-winded, I would like to wait for another opportunity to give you more details. Thank you. We will take the next question.
The next question will be presented by Kim So-won from Kiwoom Securities. Please go ahead with your question.
Thank you. I also have two questions. First is about the LCD TV exit strategy, and the company explained earlier how the company has accelerated the execution of this exit strategy. I believe that as a result of this, it will place the company in a, different position from the peers in terms of financial performance. If you could give us a guidance on the financial performance for the first quarter as well as for the year. The second question is about the, specific business plan. Since the company also discussed the market creating businesses as well as the, plan to strengthen the future business portfolio. If the company can provide more details about the business plan. Thank you.
First, about the outlook for the year, and, there's a clear response to this, and it is low in the first half and high in the second half. Now, we all know that the macro economy continues to struggle. This means that demand is likely to remain slow into the first half of the year. Also the situation that we had been seeing since last year, where the purchase of panels fell short of the actual sales of sets, we believe that this phenomenon is likely to continue into the first half of the year as inventory adjustment continues. Given this environment, one of the options given to the company is to go into a large scale cost cutting. That is what we have been doing.
In order to reduce the inventory burden, last year, we had reduced the inventory level by about KRW 1.6 trillion across one quarter. We believe that that is going to provide us with positive benefits in the first quarter of this year. In addition to that, we also have taken actions to downsize or reduce production of the large size business, and we are also cutting costs by rationalizing our business structure. All in all, I believe that in terms of the innovation or the rationalization of our business and also reducing of the inventory, this will bring about a cost cutting benefit of about KRW 1 trillion in the first quarter.
At the end of this process, what we are expecting is to see revenue growth start in the second quarter and the loss shrinking. As a result, we hope to see the beginning of a Turnaround in the second half of the year. This is the CSO Hee Yeon Kim speaking about our business plan. I would like to explain our business plan based on the 3 businesses, gaming monitors and transparent OLED and sound solutions. Based on our competitive large OLED, we are trying to target the new business segment, which is the high-end gaming monitor where the customers are willing to pay more. We are currently in discussions with around 8 to 9 customers, and our plan is to go into mass production within the year.
Second, for the transparent OLED, we are currently targeting the key vertical customers who can see the importance of these products for retail and construction purposes. For the transparent product, unlike others, this is not something that we can address as standalone products. It's more appropriate as a solution product. That is why it is important for us to build the right ecosystem, and that is why we are currently discussing with and also cooperating with the important key vertical partners. We hope to keep building up the ecosystem and see and achieve visible progress and outcome within the year. Is about the sound solution. Usually speakers would require space to be installed.
Unlike the traditional products, we have come up with the film type sound solution that will take up less space. This is the solution that also won the Innovation Award at the CES. We believe that there is a particular value to be gained, applications where the space is limited, in other words, automotive. The automotive sector is where we are going to concentrate with our film type sound solution. It can be provided together with OLED, or as I mentioned earlier, in automotive or vehicles where the space is limited. Thank you. We will take one last question.
The last question will be presented by Simon Wu from Bank of America. Please go ahead with your question.
I also have two questions. First of all, thank you very much for the presentation. It appears as if the company's trajectory is headed towards Gen 6 OLED, even in this business, demand is not probably easy to come by. First of all, there are competitors, and also there's BOE, and also, the tablet prices remain lower than smartphones. Given the current environment, what is the rationale for the company to believe that the company will be able to have, will be able to drive sales in discussions with the clients for the high-priced OLED products? The second question is about the recent press reports about the Micro OLED, and that there have been reports about how the Micro OLED is likely to replace a small OLED in the near future.
That is probably in 2 to 3 years' time. What does the company see in terms of the possibility of the Gen 6 OLED panel being replaced by Micro OLED? Thank you. This is CSO Hee Yeon Kim, and I will be responding to both questions. Second question first, about the press reports on Micro OLED. I do not believe that the company is in the position to respond to this particular question. Having said that, in any market, there are always alternative technologies, and for the TV market as well, there are both OLED and Micro LED. I believe that there is a market size to accommodate both, and the company has been responding to these new developments quite effectively. Likewise, there are different technological options available in the mobile sector as well.
The company has been making preparation for different types of technology and when there is business case to be made and business visibility and if there are any visible potential in negotiations with the customers, then of course we will move ahead with this. Allow me to complete my response to this question by providing you with this, let's say, a fundamental response. Last point, we will keep closely monitoring the changes in the market and respond accordingly. Next is about the question on IT OLED. This is the segment where we need to maintain not only the short-term perspective, but also the mid to long-term perspective because it involves not only tablet but also monitors and notebooks as well.
In terms of the monitor segment, we will also start targeting the gaming monitors, which is a premium market where the customers are willing to pay more. This is the segment that we will start targeting, and tablet is a part of that. Looking at the mobile case, we see that the BOE's market share is now about 30% in the high-end segment. Of course, there had been concerns of the premium price and also concerns about the potential scalability. I believe that there has been value up from the set maker side, and we believe that that is how it was able to increase the penetration. We believe that the same development could occur in the tablet segment as well.
At the same time, as the questioner has rightly pointed out, the high-end payment value in tablet monitors or in notebooks would be lower than for the smartphones. Also, the use cases might be limited still. We would be looking into the different factors and the circumstances and try to come up with a rational prospect for penetration rate and also set our business plan and strategy accordingly. If there are no further questions, we will now close Q4 2022 earnings conference call. Thank you once again for joining us today. Please do contact us at the IR team for any additional questions. Thank you.