February 15, 2018 2:46 am JST

Japan Display suffers as Apple opts for OLEDs

Net loss widens to $942m in April-December period

KOTARO HOSOKAWA, Nikkei staff writer

TOKYO -- Japan Display's financial troubles deepened amid a shift to organic light-emitting diodes at Apple, its largest customer.

The Tokyo-based panel maker on Wednesday reported a group net loss of 100.6 billion yen ($942 million) for the nine months through December. This marks a sharp deterioration from the 9.4 billion yen loss a year earlier.

While sales are typically highest in the the October-December quarter, when demand peaks with the rollout of new iPhones, 2017 saw sales fall 30% on the year during the period. The factory utilization rate dropped to about 60%.

Apple has long held sway over Japan Display. Construction of a plant in Ishikawa Prefecture, for one, was meant to meet a request from Apple but ended up sowing the seeds for Japan Display's financial troubles. In March 2015, the U.S. company, seeking to procure more LCD panels, called on Japan Display to boost output capacity. But it urged a halt to the construction on slumping sales of its iPhone 6s, released in the fall of that year. Japan Display pushed through the construction nevertheless because the building was already completed. 

Apple is now grappling with slow sales of its iPhone X, which uses OLED screens, and has been increasing orders for LCD panels for upcoming iPhone models. This shift back to LCD panels could be a boon for Japan Display, which is not able to mass-produce OLED panels, but is certain to complicate its business strategy. The company has been scrambling to establish OLED mass production technology and has explored capital partnerships with overseas companies to secure funds.

Japan Display seeks to reach a partnership deal by the end of March. But doing so will not be easy, Chief Financial Officer Takanobu Oshima said. Tie-up talks, if prolonged, could rekindle concerns over a cash crunch at the company.

Japan Display's road to financial health will be long if its fate remains tied to Apple's vacillation over panels.

Japan Display, Inc.

Japan

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