Hello, everyone. This is Hiko Sakaguchi, CFO of Japan Display. Thank you very much for joining us on this web call. Appreciate your time. I am going to speak to the quarterly earnings, and then following me, our Chairman, Scott Callon, will be speaking to the business and the strategy update. With that, I am going to dive right into the presentation. We are looking now at slide four, which shows an overview of our first quarter earnings. As you see, sales came in at JPY 53 billion. Operating profit was a JPY 13.9 billion operating loss, and net income was a JPY 12.2 billion net loss as well. Numbers are still very difficult, still deeply in the red. But what I would like to highlight is that versus our internal plan, all lines have actually outperformed.
You can see that versus plan, sales came up above plan 7%, operating profit exceeded plan by JPY 2.8 billion, and likewise, net income exceeded our plan by JPY 5.6 billion. So versus plan, we are actually outperforming. The next slide on slide five shows a breakdown of our top-line sales. What I would like to highlight here is that our core businesses, which we define as automotive and non-mobile, which are our strategic growth areas, are actually doing quite well. As you see, automotive is up 8% and non-mobile up 9% for the reasons you see on the screen. Conversely, our non-core business, which is our mobile, this is our conventional LCD smartphone business, which we have been talking about shrinking and ultimately exiting, is down quite hard. So overall sales down, but it is really down mostly because of the shrinkage of our non-core business, which is strategic.
I would just like to highlight that our core businesses are actually growing right now. On slide six, we are looking at the breakdown of operating profit from the previous first quarter to this first quarter. The biggest contributing factor there, as you see on the screen, is the accounting effect on inventory. When you actually take that out, we are on par with last year, which really means the important changes worth highlighting are the fact that the operating environment continues to be very difficult. We still see material costs, energy costs remaining at very high levels, thus impacting profitability. But we are trying to counteract that through ongoing cost reductions.
We have taken out some costs as we have ended production at the Higashiura fab, as we have announced, and also, alongside the shrinkage of our smartphone LCD business, we have actually been taking out capacity at Mobara, which have also been additive to our cost-cutting efforts. The next slide, on slide seven, shows the quarter-on-quarter change of net operating profit. I think the important point here is that it is on an upward trend. Things are starting to look better. The key highlight there is the mix item you see in the middle.
You see a JPY 5.1 billion gain. That is mostly on business mix improvements. It is really largely a result of the shrinkage of our smartphone LCD business and also the efforts we have been making in our automotive business in terms of trying to either shrink or end specific unprofitable lines. Just note here that this is on an upward trend.
With that, I am going to shift over to the current year forecast. This slide is actually no different from the slide that we presented in our May earnings results meeting. We have kept our forecast the same. The key highlight here, as I explained this past May, is that revenue is looking to shrink again this year, but it is strategic. Most of that reduction, as you see on the screen, is coming from our mobile businesses. I have said several times that this is being strategically taken down, so this is progressing as planned. All the profit lines still look difficult this year. We are forecasting some pretty deep losses this year. A little bit better than last year, but nonetheless, this year is going to be looking quite difficult, as you see on the screen.
The last slide from me, again, this is the same slide. We are reusing this slide from our May presentation. The key highlight here is that this is showing the improvement in operating profit in the second half of the current year. As we explained this past May, the key here is that it is strongly on an upward trend. We are expecting the second half to show stronger recovery of profitability. A large part of that is, just to repeat myself, the fact that we are strategically transforming our business portfolio out of less profitable businesses and product lines into more profitable business lines.
A big part of this improvement is there, in addition to contributions from some of our new technologies. The key highlight here again is that we are expecting things to start improving on an accelerated basis from the second half of this year and onwards into the future. With that is all I have in terms of the earnings, and I want to hand the Board over to Scott Callon now for a business and strategy update. Thank you very much for your time.
Thank you, everybody, for joining. There is a lot of things going on, and let me go at them with you. As Hiko pointed out, still very difficult. I mean, the industry continues to hemorrhage. There was a collapse in demand, rooted in the Ukraine invasion, a surge in input costs, a collapse in demand made for extraordinary ugliness across the entire industry. Yet, we have been working towards making substantial changes in our business over a number of years, so it really does not affect us in terms of the long-term outlook, but it punches us in the face along with all of our competitors in the short term. The reality is we forecast for losses this year. We are going to have losses this year, and that is the plan, and we work towards what next year, which is where we expect to turn profitable.
Having said that, we are outperforming plan in three key areas. It is earnings, it is our next-gen technology development, customer product roadmaps. I will speak to that on the succeeding slide. As you know, or perhaps you did not know, thank you very much for joining this call. This is new information for you. We signed a strategic alliance MOU with HKC, which is the third largest display maker in the world, working towards a final agreement in September that was originally going to be in June. It is a pretty large agreement. It is taking some more time to get this done, so we pushed it to September. We acquired JOLED's engineering talent, became a sponsor of JOLED. I will speak to that.
It is extraordinarily important to us to have world-class engineers, and we really need them too, because we have got this extraordinary customer demand for eLEAP, which is our next-gen OLED technology, and we needed this talent. On the next page, we made a very hard decision, among a series of hard decisions, to end production at our Tottori fab in southwestern Japan. It is older. It is G4 substrate, which means it is pretty small. When you are trying to run very large glass through a line in order to reduce your costs and get economies of scale, it is really not adequate to the task. We are shifting production towards much more competitive G6, particularly Mobara fab in Chiba near Tokyo. It was a hard decision, but it is one that has to happen. We continue to work on sustainability. We announced support for TCFD yesterday.
We exist to serve customers in the world, and this is very important to us. Finally, JDI, along with much of the industry, quite honestly, the global display industry, has had a broken business model that combines too much capital intensity, lots of really expensive CapEx, and poor profitability. An extraordinary dramatic business model transformation has to occur. We are taking capital out of the business, and we are growing profitability by shifting towards technologies that only we can create. The model, in one sense, you can think of it as a TSMC model in the semiconductor space, where they do things that are really hard, and they are so good at it, and no one can compete with them, so they have the ability to generate very high margins.
Another way to think of us is similar to an Arm model, where we are building out a global ecosystem in the display space. We expect to be licensing out our tech and moving towards a fab-lite and fabless model based on the ability to generate technology that no one else has, and we are going to share it. We think eLEAP, for example, which is again our next generation OLED, will likely populate every display on the planet within 15 years. We do not have the capital or the production capacity to do that, and so we are going to partner with companies which are really good, which have up to this point been our competitors and may expect to become partners and customers. We are outperforming plan in three key areas. Hiko just pointed to this on the earnings side. That is important. That is good.
Better to have higher earnings rather than worse earnings. There's nothing particularly superb about having losses. We fully expect to get to profitability, and that's ultimately about changing the product set. You should think of us as a technology company, we are. Our existing technology set is not up to task, meaning we have very good competitors who are able to deliver similar tech at slimmer pricing. None of us are profitable as a result. We're cutting over to a next generation technology set, which is unique to JDI, very powerful, and will be very profitable. Yet, we want to have the smallest possible losses as we make this cutover, which is going to happen primarily starting next year. We go into mass production of both eLEAP, which is our OLED technology, and also HMO, high-mobility oxide, which is our backplane technology. Every display has a front plane.
In this case, eLEAP is the front plane. The backplane is a compute matrix. It's TFT. HMO, what's unique and powerful about it is it decreases energy consumption by 40% for displays. Anyway, earnings were outperforming. That was driven in part by 7% outperformance relative to sales, JPY 2.8 billion improvement relative to plan on the OP line, and a JPY 5.6 billion improvement relative to net income. What's absolutely most fundamental, though, is the second area, which is our next gen tech development. These technologies are hard. We have world-class engineers. The company brings together Sony, Toshiba, and Hitachi's display technology capabilities. Yet, I do, as CEO, personally lose sleep at night on can we get everything done because it's so hard. The answer is yes. We are getting things done and getting things done at a far more accelerated way than we expected.
This is ultimately what's so fundamental because it serves to fulfill the third one, which is we are getting loaded into customer product roadmaps. There is extraordinary customer interest and progress in integrating eLEAP, HMO, and some other secret JDI next gen tech, which we haven't announced yet, into customer product roadmaps. So we are talking to customers about this. That's one of the unfortunate challenges of running a technology company that works really hard to develop technology that no one else has, to deliver it to customers so that no one else has it. The customers don't really want us to talk about it because they're going to use it strategically to try to win in their space.
Anyway, you should know that the progress we're making on our tech development is going directly into customer product roadmaps, which speaks to how we change our earnings profile on an ongoing forward basis. Frankly, not just change our earnings profile, how we change the world. OLED is a spectacular display technology. It's organic, and it gives you, unlike artificial color that comes from LCDs, it gives you a purity of color that's extraordinary. It doesn't require a backlight because it's organic. That means you don't have this grayness interference that occurs from the backlight and these pure blacks. You can deliver a pure black. So the contrast is enormously high. It's much faster in terms of response time than LCD. You have no backlight, means your power consumption. It means you can make the display thinner, you can make the display lighter.
You can do it on thin films. Unlike LCD, which is by definition hard and rigid, you can bend and curve, and this is what allows you to have flexible and foldables. It is an extraordinary technology, and it has two major flaws. One is lifetime, and the second one is cost. eLEAP solves for both. 50% of the smartphones in the planet right now are OLED. In part, you can get away with that because the burnout that occurs on the organic pixels under conventional OLED happens over a three or four-year period, most people turn over their smartphones, but there is less than 1% penetration in cars. There is less than 1% penetration in TVs. There is less than 1% penetration for OLED in IT devices like notebooks. All these have longer lifetimes. It is a safety issue in cars to have burnout.
We solve for that, and so we expect to take OLED everywhere. We think this is a multi-decade transition. CRTs lasted for decades. They were replaced by LCDs for decades. We think OLED is the next step. That is what we are all about. A lot of this information is previously disclosed. We kind of want to put it in one presentation so those of us who look at us anew can see what we are up to. But the key is to deliver global number one technology leadership, and we think we have gotten there. Three foundations to the strategy, global number one technology leadership, market-leading technology, and transformational growth. We are going after very large markets, and displays, we think, are a foundational technology for modern society. So the TAM is huge, and we expect to win in it, and we are fundamentally about green tech and sustainability.
The strategic initiatives have not changed. We intend to build a global display ecosystem based on a technology. We are happy to partner with people. We do not have the capability. I just told you, these are transformational technologies. Because of low power consumption, it is good for the planet. So we expect to deliver technology that protects the planet and makes daily lives of people all over the world richer and better through our technology. So having an ecosystem based on this technology, we think, is very important. We are going to share it. We are going to dramatically strengthen our competitiveness. We are going to be a fab optimization. I just told you we have shut another fab, which is older and moving towards an asset-light strategy and also higher-end fabs that we have that are depreciated and have low cost production capability.
We are continuing to develop and commercialize the technology I just told you that is going well above plan. So that is exciting. We do need, number four, to have the financial strength in order to support the transition from our existing non-viable in terms of the ability to generate the returns that our shareholders deserve to kind of a new technology set, which has much higher returns, and we have achieved that. Finally, we expect to complete our alliance with HKC by the end of September. We have a China plus India fab strategy. To be clear, we intend to be in China very quickly. It is both good news and bad news. It is overwhelmingly good news, but the reality is we have such an overwhelming demand for eLEAP. We do not have the fab capacity.
We're bringing it up next year in our Mobara fab in Chiba next to us here in Tokyo. There's way too much demand for it. We need to build much more capacity. That's going to happen in China. China has the speed, the ecosystem, the production capabilities to enable us to take eLEAP into the world at huge scale. India comes later. There is very real ongoing discussions right now with Indian partners about us going to India, but it will follow after China. It's just going to take more time. eLEAP is, we believe, the single best and highest cost performance, price performance display technology in the world. You need to walk before you run. India needs to build out a stronger ecosystem, and we think India will get there, and we fully expect to be in India with our partners and building eLEAP in India over time.
As I indicated, we acquired JOLED, kind of a good co, bad co. We took their talent and their IP. We really needed these world-class OLED engineers. We've got too much demand. We're going into too much customer product roadmaps. This requires design and engineering resources. It's hugely additive to us and supportive of our METAGROWTH 2026 strategy to have these talented engineers. So that takes us forward a lot. We have continued to optimize our fabs. In Japan is our front-end fab, so that's the super high tech element of what we do, and yet some of the fabs are old and need to be scaled down. We have exited, we have sold, we have downsized, so we're getting to the right kind of line capacity in order to serve what our needs are. eLEAP requires a whole bunch of CapEx, literally billions of JPY of CapEx.
We don't expect to be doing that on our own. That's why we have alliances and partners on that. We have done the CapEx in order to get up and running in Mobara, the fab in Chiba. We've downsized our smartphone line there. By the way, to be clear, we've exited and we are exiting smartphones, LCD smartphones. We will re-enter with eLEAP. The technology is super powerful in the smartphone space also. Then the global area, these are back-end fabs. They're kind of more mid-tech. The exits there are primarily, we don't necessarily see ourselves advantaged in running mid-tech back-end fabs. Switch over Taiwan fab and the China fab to EMSs, we think are very capable of delivering the kind of cost performance we want. Across the board, all this meant we took out JPY 43 billion of costs. That's showing up in earnings right now.
It shows up in earnings in a sense that while we're still not profitable, when we switch to the new product set, it's going to create very powerful operating leverage for us and our shareholders. We announced yesterday support for TCFD. We continue to progress working on how we conserve the world. To be very clear, the central activity that we do is delivering leading tech to our customers. Again, JDI has environment positive, very particularly in the energy consumption area. We have very low power, very low energy-consuming displays. That's the primary way that we can help address some of the issues of power shortages and environmental and climate change in the world. What we're doing on sustainability side is increasingly recognized broadly. FTSE put us into their Japan Sector Relative Index last year.
Effectively, they kind of promoted us this year by having us not only there, we are also in the FTSE Blossom Japan Index. We are recognized for being best in class in sustainability. The final slide, it shows the path forward. These numbers look dramatically different, they are. This is what happens when you cut over from, and I am being hard on ourselves, but this is the reality we have. We have a product set which is excellent, but matches very excellent competitors in China, in Korea, in Taiwan, and in Japan. We need to cut away to JDI proprietary tech that no one else has. We are doing that. When you do that, it changes your ability to add value to the customer. If a customer can get your technology from five competitors, then you are really not helping move the world forward
You are certainly not helping move that customer forward. I do not know if the analogy works for you, but Moderna, which of course generated COVID vaccine, was dramatically a loss-making forever until they broke through with COVID. That is in effect what is happening. We are transitioning away from a non-viable product set to one that is super powerful. The forward view incorporates eLEAP and our understanding of where eLEAP is and customer product roadmaps. So we think this has genuine viability, and we will announce updated KPIs on this in our November earnings call. We thought we were going to do it today, but we pushed HKC out to September, so we will do it at that point in time. That is what I have. Thank you so much, everybody. Appreciate your time. If there are any questions, we are very happy to take them.
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That is fine. We will bring it to a close. We have more people watching this on video. So look, thank you, everybody. I really appreciate your time, especially in the summer, especially in the heat. So we will run forward. Thank you so much. I appreciate you watching what we are doing. Again, nothing short of the full transformation of the business model and the technology set used by millions, literally billions of people across the world in this space. Thank you so much for your time. Have a good day.