Apple will shorten Japan Display's payment periods in an effort to improve the panel supplier's short-term financing situation, reports Reuters, citing a source familiar with the matter.
JDI CEO Minoru Kikuoka, who took on the role in September, told reporters on Wednesday that concerns about an immediate cash shortfall had been allayed but did not mention Apple by name.
Japan Display still owes Apple nearly $900 million for the $1.5 billion cost of building a smartphone screen plant four years ago and the U.S. tech giant is also allowing the supplier to slow the pace of those repayments.
The agreement to ease payment conditions, which also includes agreements from other business partners, would improve JDI's short-term financing situation by as much as 40 billion yen ($370 million), said Kikuoka.
JDI recently lost out on Chinese funds from a key investment firm leading a proposed bailout deal, but Apple reportedly agreed to double its own investment to aid in the LCD panel maker's restructuring.
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.
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Process 1: Shortening the payment periods to JDI. Apple will lessen the time between product delivery and payment. Example: JDI normally delivers product to Apple and expects payment within 30-45 days. Now JDI delivers product and gets payment within 14-20 days. They get their cash quicker to help in the short term.
Process 2: Extend repayment schedule from JDI. Example: JDI has a quarterly repayment schedule. Apple and other suppliers let them hold onto that money and allow them to make biannual or yearly payments. They keep more of their cash to help them in the short term.
60% of JDI’s revenue comes from Apple, and it seems like Apple is shortening their payment periods, e.g. even though Apple might contractually have 60 days to pay for panels it buys from JDI, they might be paying in 7 days instead.
Separately, Apple is delaying JDI’s repayments due to Apple for a loan Apple gave them to build a manufacturing facility some years ago.
Option 2) Have your vendor that owes you a lot of money potentially go out of business while unable to pay you back.
Yeah, this looks like a good choice.