A recent announcement stating that Japan Display (JDI) has struck a deal to accept a JPY60 billion (US$535.98 million) investment from a consortium formed by Taiwan- and China-based companies signals that Japan is retreating from the global flat panel industry.
According to the deal, the consortium, Suwa Investment Holdings, which was led by Taiwan’s touch panel maker TPK Holding, would acquire a 49.82% stake in JDI through the purchases of new shares and convertible bonds issued by Japan’s ailing flat-panel maker.
The consortium plans to subscribe up to JPY42 billion in new shares and to JPY18 billion in convertible bonds issued by JDI. The consortium also agreed to pour in another JPY20 billion by subscribing to a convertible bond issue should JDI needs to raise additional funds to strengthen its operations.
TPK also said in a statement that it has signed a letter of intent to invest US$230 million to take a 41.8% stake in Suwa, while China’s Harvest Tech Investment Management will hold 34.5%, and two investment firms – Gosgrove Global and Topnotch – owned by Taiwan’s Fubon Financial Holding, will take a 23.6% in the consortium.
Japan had been a leader in the global LCD panel industry. However, the latecomers from Korea and Taiwan have gradually outraced the performance of their Japan-based rivals, in terms of operational efficiency, management response and production scale. Sharp became one of the falling preys of this dwindling competitiveness and allowed Taiwan-based Foxconn Electronics to acquire a majority stake in the company in 2016.
The display units of Hitachi, Toshiba and Sony formed JDI in 2011, aiming to rejuvenate Japan’s flat panel industry.
JDI, which has been focusing on LTPS LCD technology, did make some progress and became the world’s second largest vendor of small- and medium-size panels in 2017, with 50% of its revenues contributing by Apple.
In addition to increasing price competition from China’s flat panel makers, JDI’s recent financial woes have been caused mainly by Apple, as the US smartphone vendor has gradually reduced its purchases of LTPS LCD panels from JDI due to its shift to the use of OLED panels for its premium models.
According to market data, shipments of JDI’s LTPS panels accounted for 44.7% of Apple’s total purchases of handset panels in 2016, but the ratio dropped to 33.2% in 2017 and to 26.3% in 2018. Such a ratio is expected to further decline to 25.2% in 2019.
Additionally, JDI’s handset panel shipments slid 28% on year to 119 million units in 2018, the lowest level since 2015, according to IHS Markit.
Apple is expects to launch three new iPhones in the second half of 2019, including one 5.8-inch and another 6.5-inch OLED-based model, and a 6.1-inch LCD-based model. Therefore, Apple is likely to continue to purchase some LCD panels from JDI in 2019.
But JDI is bracing for a major blow in 2020 when Apple overhauls its smartphone strategy reportedly by adopting OLED technology for all of the three new iPhone devices. The new iPhones available in 2020 will come in 5.42-, 6.06- and 6.67-inch sizes.
In addition to the gloomier handset panel business, JDI has so far failed to ramp up significantly its automotive and notebook panels. Although it has begun trial production of OLED panels, but it eventually would be unable to land orders from Apple in time.
It remains to be seen if the consortium, led by TPK, could rejuvenate the ailing JDI.―Digitimes