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Business

Japan Display's path to growth on thin ice

Technical, funding hurdles remain amid myriad uncertainties

Chairman Mitsuru Homma, right, and President Shuji Aruga announce plans to turn Joled into a subsidiary at a news conference Wednesday.

TOKYO -- Japan Display has resolved its fundraising deadlock -- at least for now -- by committing to develop an organic light-emitting diode panel business with help from its state-backed key shareholder. But with barriers standing in the way to mass production, the outlook is uncertain.

The company announced Wednesday it will receive 75 billion yen ($637 million) in assistance from the Innovation Network Corp. of Japan, a public-private partnership that holds a 36% stake in Japan Display.

The money raised -- 45 billion yen through convertible bonds and 30 billion yen via subordinated bonds -- will be used, in part, to turn Joled, an OLED venture born via merger of the operations of Panasonic and Sony, into a subsidiary.

"By bringing together the human assets and capital of the Japan Display and Joled, we can make a big stride forward," Mitsuru Homma, chairman and CEO of Japan Display, told reporters in Tokyo.

Japan Display will acquire 36% of Joled from the INCJ, which now holds 75% of the venture, by the end of next year. This will raise Japan Display's stake in Joled from the current 15% to 51%. Panasonic and Sony each own 5%.

Taking in the OLED venture would allow Japan Display to offer a broad range of panels to finished-product manufacturers. Japan Display will focus on high-definition liquid crystal display panels for smartphones, cars and personal computers, while Joled concentrates on medium and large OLED panels, together expanding their client base.

Displays of electronics, mainly smartphones, are increasingly shifting from LCD to OLED. Not only U.S. giant Apple, but also many Chinese smartphone makers, now employ OLED screens. Television manufacturers are also rolling out more OLED TVs.

"We can expand the business domain to medium-size panels and future-generation large panels, which Japan Display doesn't cover," Homma said.

The key concern is that this growth strategy may be built on optimistic assumptions. Joled is developing a low-cost "printing" method to apply light-emitting diodes to produce OLED panels. The venture would be the first in the world to use this in mass production.

Yet obstacles abound in moving from the prototype stage to mass production. A Japan Display executive gave assurances that steps toward mass production are advancing smoothly, but Joled's prototype line opened just in September.

South Korea's Samsung Electronics and LG Display invested large sums and long periods of development time before launching mass production of OLED panels. But raising product yield remains a challenge for them.

Separately, Japan Display is devising a vapor deposition method -- suitable for smartphone screens -- for making OLED panels. Having to cultivate two technologies in the pipeline complicates decision-making for investing finite resources.

Homma says the company will keep a sharp focus on cash flows and will seek joint investment with customer companies for building mass-production lines. However, this means when sales of a customer's products languish, its manufacturing operations will be directly hit, leading to lower operating rates.

Foreseeing which technologies will flourish is not easy in the panel industry. The INCJ support is vital for Japan Display, which faced a fundraising stalemate in the summer. Yet its growth strategy still hangs in the balance. 

(Nikkei)

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