The largest mobile phone LCD panel factory: JDI seeks Chinese capital to help solve its dilemma

by:Kimeery     2021-05-28

According to foreign media reports on December 19, the reconstruction of the large LCD panel manufacturer Japan Display (JDI) is at a critical juncture. The company categorically implemented a large-scale reorganization in the 2017 fiscal year (ending March 2018), but it is still unknown whether the damaged financial system can revive the competitiveness of the liquid crystal business that requires huge investment. The company is currently advancing investment negotiations with Chinese funds and other funds, but the current trade war initiated by the United States has intensified and the situation has become more serious.

Maintaining the LCD business and advancing the mass production of organic EL panels (LCD for Samsung) in the future are inseparable from huge investment funds. In order to strengthen the financial system, JDI is aiming for March 2019 and is advancing negotiations with a number of parties such as a corporate alliance centered on China's sovereign fund 'Silk Road Fund'.

However, a JDI related person said, 'If it accepts Chinese capital, Apple may refuse to use our LCD panels.' If Apple, the largest customer, no longer uses JDI panels, the premise of the reconstruction plan will fundamentally collapse.

JDI was formed in 2012 by the integration of the LCD businesses of Hitachi, Toshiba and Sony. In the field of small and medium-sized LCD panels for smart phones, it is the largest manufacturer with a market share of 20% in the world. However, China's panel makers have risen in recent years. China's Huawei Technologies and Xiaomi, which have expanded sales, adopt locally made panels with relatively strong price competitiveness, and JDI's market share has shrunk. There are also voices that 'the technological gap (between China and Japan) is also narrowing' (analysts in Japan).

Apple's first use of organic EL panels in 2017 also exacerbated JDI's sluggish performance. In the field of organic EL panels, South Korea's Samsung Electronics holds more than 90% of the market share. And JDI is still in the trial production stage, so it has suffered a decline in sales.

JDI has suffered losses for 4 consecutive years as of fiscal year 2017 (as of March 2018), and invested more than 140 billion yen to implement structural reforms such as plant closures and layoffs. This makes the balance sheet obviously 'damaged.' In the 2013 fiscal year when JDI was listed (as of March 2014), its own capital ratio showing financial soundness was 53.3%, but in the 2017 fiscal year (as of March 2018) it fell to 13.1%. In April 2018, about 35 billion yen was raised through a third-party allotment of capital for overseas institutional investors and Nichia Chemical Industry. However, the ratio of self-owned capital at the end of September 2018 was still only 16.2%. It is 20-30% below the standard of financial soundness of the manufacturing industry.

The use of LCD panels in Apple’s new smartphone 'iPhone XR' should have been the driving force behind JDI's turnaround, but expectations of sluggish sales of 'XR' have surfaced. On November 19, Japan's Mizuho Securities lowered its XR production forecast for October 2018 to March 2019 by nearly 30% to 45 million units from October 17.

Although JDI stated that it 'does not plan to reduce production during the year' on smartphone panels, the US research firm predicts that the operating rate of JDI smartphone panel factories will drop from 81% in July-September from October to December. To 75%.

JDI's share price fell to 50 yen per share on December 13, the lowest level since its listing. Although on the 14th after the news of the advancement of investment negotiations with Chinese companies and others was revealed, the stock price rose by 24 yen (46%) to 76 yen from the previous trading day, and the closing price on the 17th was 86 yen, but once It did not exceed the issue price of 900 yen at the time of listing, and the current share price is less than one-tenth of the issue price. The prospect of JDI is not optimistic.

(Editor's Note: Some Mi 6 uses JDI panel)

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