Japan Display Inc, a struggling Japanese maker of smartphone screens, has agreed to a ￥75 billion (US$637 million) injection of cash from a government-backed fund.
The supplier to Apple Inc will issue ￥45 billion of convertible debt to Innovation Network Corp of Japan (INCJ), already its largest shareholder, Japan Display said in a statement in Tokyo yesterday.
Japan Display is also getting a ￥30 billion subordinated loan from INCJ.
Japan Display climbed 2.5 percent to ￥366 at the close in Tokyo before the announcement, after broadcaster NHK reported that it was about to secure the financing.
Japan Display is headed for a third straight annual loss, as global mobile demand sputters and competitors from South Korea and China undercut prices to grab market share.
Japan Display said it will use the capital for the development of organic light-emitting diode displays (OLED), which offer more vibrant and energy-efficient screens for mobile devices.
Apple, the company’s biggest customer, is considering shifting to next-generation smartphone screens as early as next year.
“They were running out of cash,” said Amir Anvarzadeh, Singapore-based head of Japanese equity sales at BGC Partners Inc.
“This will be used for a combination of things” including OLED research and development as well as restarting idled LCD plants, he said. “There’s also a political issue of not letting these companies go bust.”
Japan Display also announced yesterday that it is raising its stake in JOLED Inc, a Japanese OLED-display maker, from 15 percent to 51 percent, through a transfer of shares held by INCJ to Japan Display.
JOLED is working on a new method of manufacturing OLED screens that lack higher resolutions, but are cheaper to make.
Japan Display is seeking to reduce its reliance on mobile devices by shifting toward autos, virtual-reality gadgets, high-end laptops and other areas such as healthcare and education, the Tokyo-based company said in the statement.
“The competitive environment has intensified due to a [South] Korean manufacturer’s active marketing for OLED displays,” Japan Display said.
INCJ has a track record of rescuing ailing Japanese corporations.
Four years ago, the fund created Japan Display by merging the troubled screen-making units of Toshiba Corp, Sony Corp and Hitachi Ltd.
It also put money into Renesas Electronics Corp, formed in 2010 from the hard-pressed semiconductor operations of Mitsubishi Electric Corp, Hitachi and NEC Corp.
The convertible debt issued by Japan Display can be exercised from 2019, at a strike price that is about 17 percent higher than the current stock price.
Earlier this year, INCJ lost a bidding war with Taiwan’s Foxconn Technology Group (富士康) over control of Sharp Corp, JDI’s only domestic rival.
Japan Display and Sharp may need massive amounts of capital to invest in OLED, considered the future standard for iPhones and other mobile devices.
Apple is struggling to find enough OLED supply for its new iPhones, expected next year, Bloomberg News reported last month.
However, initial costs for screen suppliers could reach US$2 billion, stretching their finances even before they get any firm orders.
“It’s a long-term investment — Sharp and Japan Display both have said we’re not going to be anywhere near supplying these displays in volumes,” Anvarzadeh said. “Forget 2017 or 2018, if they’re lucky they’ll get some volume growth in OLED perhaps in 2019.”
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