Apple supplier Japan Display has lost out on Chinese funds from a key investment firm leading a proposed bailout deal, but Apple could be about to double its own investment to aid in the LCD panel maker's restructuring, according to reports.
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Chinese firm Harvest Group has been leading the consortium for an 80 billion yen ($740 million) bailout deal, which includes investments from Apple and Hong Kong-based activist investor Oasis Management.
However, Nikkei Asian Review today reports that Harvest Group has decided it will not provide any financial aid to Japan Display Inc, also known as JDI. Harvest was expected to contribute 63 billion yen ($557 million), said Nikkei, citing sources familiar with the negotiation.
This is just the latest disappointment for the ailing Japanese firm, which has seen its bailout plan falter repeatedly. The display maker had been expecting $230 million from Taiwan's TPK Holding to cover its losses, but the proposal was withdrawn in June.
Then, just days later, financial firm CGL Group also dropped its investment plans, leaving JDI unsure whether other members in the Chinese-Taiwanese consortium would follow through with their own bailout proposals.
However, this morning, The Wall Street Journal reports that Apple is considering a revised plan that would see the tech giant double its investment in Japan Display to 20 billion yen, up from the 10 billion yen ($100 million) it originally proposed in June.
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.
JDI relies on Apple for more than half of its sales, and supplies the liquid crystal display panels for the iPhone 11, which has helped support its bottom line. However, its mainstay LCD business has been hit heavily by the growing adoption of OLED panel technology.
That has left the supplier scrambling to invest in OLED production to turn around its business, which saw a $2.3 billion loss in 2018.
On a positive note, JDI received a 20 billion yen infusion earlier this month from Innovation Network Corporation of Japan. Japan Display also supplies the OLED displays for then new Apple Watch Series 5 models, according to well-known analyst Ming-Chi Kuo.
Last month, Kuo forecasted that Japan Display will gradually increase its proportion of OLED display orders for the Apple Watch, starting with 15-20 percent of orders in 2019 and reaching 70-80 percent in 2021.
If the Japanese firm can rethink its restructuring plans with the help of Apple, it could potentially supply OLED panels for future iPhones, which would in turn allow Apple to diversify its supply chain and reduce its heavy reliance on Samsung for the newer OLED display tech.
Top Rated Comments
On topic: JDI seems like a financial anchor that fewer and fewer firms want to carry. If Apple wants them to remain viable they may need to look into a majority stake.
Manufacturing is a cost intensive, low margin, low profit business that subsists on volume. If Apple owned JDI they would essentially be owner and primary customer. Not a good look imo.
Apple seems to be the only company that's really concerned about the continued existence of JDI so I have to assume they have a plan there. No one else seems to care since I'm guessing they no longer see a path for a decent ROI, even with Apple's involvement. ← That was probably the primary reason for the others to get involved in the first place.