Japan Display saga: consortium lead pulls out; iPhone 11 helps

The never-ending Japan Display saga continues today, with a report that the rescue plan is once again in doubt – though there is some good news for the company in the form of iPhone 11 orders.

Japan Display has long been a LCD supplier for Apple, but was very late to diversify into OLED …





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Background

The story begins back in 2016. Japan Display found its LCD orders falling dramatically as smartphone manufacturers began the shift to OLED. The company didn’t have the capital needed to build OLED production lines – which are expensive to create – so needed a $636M government bailout to keep the company afloat and let it finally invest in OLED.

Apple took a leisurely journey toward OLED screens, starting with the Apple Watch in 2015, followed by the Touch Bar on the MacBook Pro the following year and then its first OLED iPhone, the iPhone X in 2017.

The iPhone maker was keen to diversify its OLED supply chain away from Samsung as its sole supplier, but the market was growing increasingly competitive, with Sharp, LG and BOE all hoping to win Apple business. Japan Display, meantime, was still struggling to raise the capital needed for large-scale OLED screen production.

A second bailout was announced, initially for $723M, though with a wide variety of numbers subsequently bandied about. Things looked good for a while as that plan was ‘confirmed‘ and the company won orders for Apple Watch screens. Apple agreed to assist the company by waiting for repayment of a $1.5B loan made to the company years earlier to fund LCD production.

However, things started unravelling when a major backer exited the rescue plan. Apple agreed to chip in $100M to help balance the books, but OLED iPhone displays still looked to be at least two years away.

Today’s episode of the Japan Display saga

Nikkei Asian Review reports that the rescue plan is once again in doubt as the company leading the bailout has reportedly pulled out.

Troubled LCD maker Japan Display will not receive a financial bailout as planned from China’s Harvest Tech Investment Management. The Chinese group has informed the display maker that it would shelve its plan to contribute 63 billion yen ($557 million) to an 80 billion yen rescue package, multiple people familiar with the negotiations said on Thursday.

A spokesperson for the company, also known as JDI, declined to comment.

The development could send JDI’s restructuring plans back to square one. The company has repeatedly struggled to come up with a restructuring plan, and the Harvest Tech Investment Management’s decision will likely worsen the sense of confusion at the Japanese company.

That potentially also put Apple’s investment in doubt, as that was coming via Harvest – though a separate WSJ report suggests that the Cupertino company may actually increase its stake.

Apple was slated to invest ¥10 billion in the earlier version of the bailout plan and now is looking at doubling that amount to ¥20 billion in light of Harvest’s withdrawal, said people with direct knowledge of the plan. The people said Japan Display hopes to keep together some parts of the earlier investment consortium including Hong Kong hedge-fund manager Oasis Management Co.

iPhone 11 orders are also said to be helping.

The display maker is not likely to have any immediate problems. It received a 20 billion yen infusion on Sept. 3 from Innovation Network Corporation of Japan, a public-private partnership and JDI’s largest shareholder. JDI has also begun supplying liquid crystal display panels for Apple’s iPhone 11 which has helped support its bottom line.

Watch this space …

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Photo: Shutterstock


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