[Asia Economy Reporter Yoo Hyun-seok] LIS announced on the 18th that it recorded consolidated sales of 18.2 billion KRW and an operating loss of 14.57 billion KRW in the second quarter.
This reflects the allowance for doubtful accounts on accounts receivable from overseas trading partners such as CSOT, BOE, and Tianma. LIS stated that the Chinese companies recorded payments not yet due under the name of FAT (Final Acceptance Test) as accounts receivable.
FAT refers to the 'Final Acceptance Test' included as a contractual clause when domestic equipment manufacturers enter supply contracts with Chinese companies. According to industry sources, Chinese companies are known to pay a certain amount under the name of FAT after equipment delivery, at a point when a certain level of initial mass production response has been achieved.
A company official said, "We are in the process of collecting remaining accounts receivable for sales of 81.2 billion KRW in 2017 and 211.3 billion KRW in 2018," adding, "It is true that FAT payments related to 2018 sales are scheduled to be collected starting from 2021, but under domestic accounting standards, an allowance for doubtful accounts must be set."
He also explained, "Approximately 600 billion KRW worth of OLED post-processing equipment (film cutting, module processing) already delivered to Chinese companies require modifications whenever the size and shape of mobile phones change, leading to a flood of modification requests," and added, "The profitability of modification costs is significantly better than that of the main equipment, and the customers are in a situation where modifications are absolutely necessary."
LIS plans to recover accounts receivable by requesting FAT approval through smooth cooperation in equipment modification and expects a rapid turnaround to profitability driven by the reversal of accounts receivable and growth from full-scale entry into the secondary battery market.
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