TOKYO -- Japan Display's newest factory finally will begin mass producing smartphone display panels this month, with recovering demand providing an opportunity to launch the high-efficiency plant.
The planned June start of the Hakusan city factory in Ishikawa Prefecture was delayed by disappointing sales of Apple's iPhone 6.
Japan Display now has decided to begin operations at the site after existing factories could not keep pace with order growth for high-resolution liquid crystal display panels since the summer from Chinese smartphone makers such as Huawei Technologies and Oppo Electronics.
The Hakusan factory will begin at 30-40% capacity, with production rising gradually after the new year based on order trends.
Japan Display, also known as JDI, received most of the plant's roughly 190 billion yen ($1.67 billion) construction cost from Apple as an advance payment. Construction began in spring 2015 and was accelerated to ready for panel production for the iPhone 7, which debuted this fall.
But disappointing sales of the previous year's iPhone 6 led Apple to downgrade production plans for the newer model. Since orders fell short of Japan Display's expectations, the company postponed starting operations at the Hakusan factory, which would entail booking depreciation on the plant.
Once iPhone panel production starts at the Hakusan factory, Japan Display can shift manufacturing for Chinese smartphone makers to its Mobara plant in Chiba Prefecture and elsewhere.
The drop in orders earlier this year created a cash crunch at Japan Display. The company's top shareholder, the government-backed Innovation Network Corp. of Japan, considered offering support but stopped short of anything that would smack of a rescue, arguing that its role is not to provide operating capital. But as Japan Display works to enhance earnings capacity, INCJ may become inclined to provide funding for growth-oriented investments.