JDI intends to sell Hakusan LCD factory and equipment for US$675 million
On August 28, it was reported that Japan Display Inc. (hereinafter referred to as 'JDI'), the supplier of Apple’s iPhone screens, announced that it has agreed to sell its mobile phone located in Hakusan, Ishikawa Prefecture, Japan at a price of 390 million U.S. dollars. The screen factory was sold to Sharp to raise funds to repay the factory construction costs that Apple had previously owed. JDI said in a statement that it will sell the equipment of this LCD factory to an 'overseas customer' for US$285 million. There are rumors that this so-called 'overseas customer' is Apple.
As early as last year, there was news that JDI planned to spend 70 billion yen to 80 billion yen (about 730 million US dollars) for its smartphone display factory. To 820 million US dollars), sold to Sharp and Apple.
JDI reached an agreement with Apple in 2015 to build a new factory in Japan to produce LCD panels for Apple’s products. This project cost JDI about 1.5 billion US dollars, although Apple will bear most of the 1.5 billion US dollars of costs, and JDI will repay this cost with a certain percentage of screen sales. Moreover, according to Apple's repayment terms, JDI needs to guarantee a certain cash balance and repay it on time every quarter. In the event of a breach, Apple can require JDI to immediately repay the remaining balance in full.
However, since Apple launched the iPhone X in 2017, Apple has accelerated its shift to the use of OLED screens. Under this background, JDI’s business has also experienced an accelerated decline. According to JDI's financial report, it lost 101.4 billion yen (about 6.64 billion yuan) in fiscal year 2019, which is also its sixth consecutive year of loss.
Last year JDI also planned to raise up to 80 billion yen in equity financing, but in the end the plan fell through because of the withdrawal of Chinese investment. This also makes JDI's situation more difficult. However, as a major customer and creditor of JDI, Apple naturally does not want JDI to fall. According to reports, in June last year Apple provided 100 million U.S. dollars in aid to JDI. However, even with this $100 million aid, it is a drop in the bucket for JDI. What's more, the relief fund does not seem to be free. According to rumors, Apple provides this $100 million in assistance in the hope that JDI will restart the Baishan 6-generation LTPS production line and hope that it will switch to LCD for Samsung.
In February of this year, JDI has announced that they will accept the Ichigo bailout funds agreement, from the latter to receive 100.8 billion yen, equivalent to 930 million US dollars. However, the company's major shareholders will also change hands as a result, and the company's chairman will also be replaced. Subsequently, JDI's strategy has also changed, and its attitude towards the LCD factory in Baishan has also shifted to direct sales.
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