Trade accounts and notes receivable as of December 31, 2018 was
W
2,829 billion, a decrease of
W
1,496 billion from net trade accounts and notes receivable as of December 31, 2017, mostly reflecting an increase in sale of our trade
accounts and notes receivable.
The book value of our total tangible assets as of December 31, 2018 was
W
21,600 billion, an increase of
W
5,398 billion from the book value of our total tangible assets as of December 31, 2017. The increase was due to our continued
investment in increasing our production capacity, which outpaced the negative effect of depreciation of our production facilities.
Trade
accounts and notes payable as of December 31, 2018 was
W
3,088 billion, an increase of
W
212 billion from trade accounts and notes payable as of December 31, 2017,
mainly due to foreign exchange effects and an increase in our purchases.
Other accounts payable as of December 31, 2018 was
W
3,567 billion, an increase of
W
397 billion from other accounts payable as of December 31, 2017, primarily due to large-scale investments in production facilities for
OLED television and plastic OLED panels and new production facilities in China.
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(4)
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Dependence on Key Customers
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We sell our products to a select group of key customers, including our largest shareholder, and any significant decrease in their order levels will
negatively affect our financial condition and results of operations.
A substantial portion of our sales is attributable to a limited
group of
end-brand
customers and their designated system integrators. Sales attributed to our
end-brand
customers are for their
end-brand
products and do not include sales to these customers for their system integration activities for other
end-brand
products, if any. Our top ten
end-brand
customers, including LG Electronics Inc., our largest shareholder, together accounted for approximately 82% of our sales in 2016, 81% in 2017 and 77% in 2018.
We benefit from the strong collaborative relationships we maintain with our
end-brand
customers by
participating in the development of their products and gaining insights about levels of future demand for our products and other industry trends. Customers look to us for a dependable supply of quality products, even during downturns in the
industry, and we benefit from the brand recognition of our customers’ end products. The loss of these
end-brand
customers, as a result of their entering into strategic supplier arrangements with our
competitors or otherwise, would thus result not only in reduced sales, but also in the loss of these benefits. We cannot provide assurance that a select group of key
end-brand
customers, including our largest
shareholder, will continue to place orders with us in the future at the same levels as in prior periods, or at all.
We expect that we
will continue to be dependent upon LG Electronics and its affiliates for a significant portion of our revenue for the foreseeable future. Our results of operations and financial condition could therefore be affected by the overall performance of LG
Electronics and its affiliates.
Our revenue depends on continuing demand for televisions, notebook computers, desktop monitors, tablet computers and
mobile and other application products with panels of the type we produce. Our sales may not grow at the rate we expect if consumers do not purchase these products.
Currently, our total sales are derived principally from customers who use our products in televisions, notebook computers, desktop monitors,
tablet computers and mobile and other application products with display devices. In particular, a substantial percentage of our sales is derived from
end-brand
customers, or their designated system
integrators, who use our panels in their televisions, which accounted for 38.2%, 42.2% and 40.0% of our total revenue in 2016, 2017 and 2018, respectively. A substantial portion of our sales is also derived from
end-brand
customers, or their designated system integrators, who use our panels in their notebook computers, which accounted for 9.0%, 8.1% and 11.7% of our total revenue in 2016, 2017 and 2018, respectively,
those who use our panels in their desktop monitors, which accounted for 15.2%, 15.8% and 16.6% of our total revenue in 2016, 2017 and 2018, respectively, those who use our panels in their tablet computers, which accounted for 10.2%, 8.5% and 8.2% of
our total revenue in 2016, 2017 and 2018, respectively, and those who use our panels in their mobile and other applications, which accounted for 27.2%, 25.3% and 23.4% of our total revenue in 2016, 2017 and 2018, respectively. Although the degree to
which our total sales are dependent on sales of television panels has fluctuated in recent years, television panels remain our largest product category in terms of revenue and we will therefore continue to be dependent on continuing demand from the
television industry. In addition, we will continue to be dependent on continuing demand from the personal computer industry, the tablet computer industry and the mobile device industry for a substantial portion of our sales. Any downturn in any of
those industries in which our customers operate would result in reduced demand for our products, which may in turn result in reduced revenue, lower average selling prices and/or reduced margins.
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