The following is excerpted from the question-and-answer section of the transcript.
(Questions from industry analysts are provided in full, but answers are omitted - download the transcript to see the full question-and-answer session)
Question: Kangho Park - Daishin Securities Co. Ltd., Research Division - Analyst
: [Interpreted] I'd like to pose two questions. My first question is on a corporate-wide basis and second question is related to MC. My first question
on a corporate-wide basis, as of end of July, you officially closed the MC business in early July, you established a joint venture between LG and
Magna. And also because of this reason, we can look forward to strengthening of the -- your business of automotive electronics. I will appreciate
if you can share, if there is any change in your strategy for your long term?
And my second question is related to VS company. Actually, the market is keenly interested in your situation after your announcement in -- for the
closing of MC business. And since that most of the reassignment with your MC members have completed. So it will be appreciated if you can share
the overall size of internal transfer and external transfer to other affiliates, in particular, in the case of internal transfer, considering the technological
relevance, I'm wondering, if you can look forward to the synergy impact from this reassignment of MC members.
Unidentified Company Representative
[Interpreted] Let me take your first question. After closing of MC business and business restructuring and of automotive electronics, the long-term
business strategy for our company in the long term is being considered based on 2 major pillars centering around qualitative growth. If I explain
the first pillar, we are going to make more innovative business methods and models based on our existing business, and we are going to enhance
both revenue growth and profitability at the same time.
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JULY 29, 2021 / 7:00AM, 066570.KS - Q2 2021 LG Electronics Inc Earnings Call
To this end, we are going to make use of growth assets, loyal customer base and customer behavior data. And based on this, we are going to take
a new approach regarding platform service and solution to expand the business. And with respect to the electric vehicle component, we are going
to closely cooperate with Magna to strengthen synergy, and we are going to accelerate the growth of vehicle land and automotive electronics to
make the new growth engine.
Secondly, we are going to enter into the new businesses where we expect the market size, growth, profitability to be high, and we will secure both
future growth and profitability potential at the same time. To this end, we are going to pursue inorganic growth based on partnership with strategic
businesses and equity investment for the future businesses. So we will continue to see the scale up of new businesses for the future.
Unidentified Company Representative
[Interpreted]
So I'll take the second question regarding the size of the assignment of MC members and their contribution to our business. After the announcement
of our business closing, we have opened job positions for transfer. With the top priority on individual preference and job relevance, we implemented
transfer both internally and to external affiliates. Out of Korean employees around 1/4 of the members decided to transfer to affiliates.
With respect to potential synergy, there were a great need to hire more to grow their business fundamentals and prepare the future within LGE
and in LG Group. To fulfill the needs, we implemented reassignment by matching the individual functional and technological capability with the
requirements. So that's the reason why we can look forward to making a great contribution to individual growth at the same time to expanding
our business for the future within our LG Group.
I'll take the next question, please.
Question: Jong Wook Lee - Samsung Securities Co. Ltd., Research Division - Analyst
: [Interpreted] I'd like to pose 2 questions. My first question is on BS. With the expectation for economic recovery, high growth is expected for the
BS company focusing on B2B business. In line with this, can you share with us the current status and forecast of your business? And my second
question is on HE. Your OLED TVs are getting positive response from the consumers, and there is a great expectation for the growth. And if Samsung
enters into the over the market, with WOLED panel source from LGD. And can you share with us what you think about the impact this movement
will have on LGE?
Unidentified Company Representative
[Interpreted] Our BS company is running 3 different product categories, one for IT devices, including Monitor and PC; second, for information
displays such as signage and hotel TV; and lastly, solar module business.
Driven up by non-face-to-face environment embodied by working from home and online schooling, the IT business is showing a growing sales
trend. For the future market, it is forecast to show a rather slower increase for monitor and PC from 2022. But then for the high-end product segment
that we are focusing on with large-size monitor, gaming monitor and high-performance ultra lightweight laptop, the demand dynamics is forecast
to go up continuously.
With respect to information display, with the recovery of demand in 2021, the sales of IT products are showing signs of recovery. With the expectation
for economic recovery, the private and public sectors are expected to spend their investment. Against this backdrop, we also expect the sales
increase from major verticals like corporate vertical, schools and hospitality for digital signage, e-board, hotel TV and others. But again, the business
is more volatile against COVID-19. It's the reason why the current resurgence of COVID-19 is more concerning for this sector?
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JULY 29, 2021 / 7:00AM, 066570.KS - Q2 2021 LG Electronics Inc Earnings Call
Lastly, solar module business. With the clean energy policies of the U.S. and other major countries, the demand is forecast to continue to go up.
But then with the rising prices of raw materials such as polysilicon, the profitability level has declined and with more aggressive investment by
Chinese players, the competition is heating up. At the end of the day, we will focus on enhancing the product competitiveness like high output
product and improved cost level.
LGE is the world's first to launch OLED TV. So far, there has been widespread awareness among consumers that equals LGE with OLED TV.
In terms of amount, the OLED TV market share is whopping 70%, showing absolute market presence, and we expect this trend to continue to be
in the market.
Around 19 companies have already entered into OLED band. And with this entrance of our competitors, if I explain the positive impact of LGE, in
terms of market, with the size of market increasing, we're able to expand the ecosystem of OLED TV.
With the expanded market, if we continue to strengthen our market presence based on the competitiveness of our products, we'll be able to create
more sales in the market.
Furthermore, with the expansion of OLED volume, instead of having worried about the possibility of panel price increase, we rather forecast that
-- thanks to the increased yield, there will be more pressure to decrease the overall cost level. And with the improvement of cost, there will be more
positive impact on LGE's business.
Question: Dongwon Kim - KB Securities Co., Ltd., Research Division - Analyst
: [Interpreted] I have 2 questions. My first question is on VS. After the acquisition of ZKW, I'm wondering what kind of synergies you are generating
-- and could you specifically tell us about the activities that you have been doing and when and how we can see visible results?
And my second question is on MC. In relation to the net loss from discontinued operations, approximately how much is directly associated with
the withdrawal of the business? And can you share the details related to obsolete inventory or compensation for distribution channels and suppliers
and et cetera?
Unidentified Company Representative
[Interpreted] Recently, in the headlamp business, the connection between vehicle lamps and vehicle components and relevant technologies are
growing in importance. Based on these market trends, we expect ZKW's lamp light technology and our vehicle component-related competitiveness
to create synergy. And as for the visible outcome ZKW has recently won the next-generation headlamp business for a European customer.
ZKW'S revenue and profitability were temporarily affected by COVID-19 and semiconductor supply constraints. But once the uncertainties in the
external environments are resolved, we expect to see visible results.
As reported in this earnings call, the net loss from discontinued operation for the first half of this year amounts to approximately KRW 1.3 trillion.
I would like to say that we have sufficient provisions set aside for maintenance, such as OS upgrades and app service operations for customer
services that we have promised to deliver.
With respect to the costs associated with the withdrawal of the MC business, if we exclude the loss from operating activities that occurred in first
half, which is estimated at around KRW 530 billion, the net amount is around KRW 770 billion.
I understand you asked for the details of the net loss from discontinued operations but please understand that we are unable to disclose that
information.
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