Apple supplier JDI may lose the gold owner. Is this the way to go for Sharp?

In the future, JDI (Japan Display Inc.), the major supplier of iPhone screens, and Japanâ€™s largest shareholder, INCJ, will probably not be too smooth.

According to foreign media reports, Japanâ€™s Minister of Economy, Industry and Trade, Seiken Kosei, recently stated publicly that if JDI cannot reduce its dependence on Apple and prove that it still maintains competitiveness, it will lose the support of INCJ and INCJ will likely consider divestment.

Shigeo Hongcheng stated that Japan has been reluctant to let go of large Japanese companies to bankruptcy or be acquired by foreign companies. This is believed to lead to the layoffs of Japanese employees and the transfer of important technologies overseas. However, such an idea is not only outdated but also dangerous. .

He explained that in an era of high globalisation in all walks of life, Japan should not continue to cling to the technology that has long been popular, and it is wise to shift its focus to cutting-edge technology that leads other countries, waiting until the original cutting-edge technology. When it becomes more common, you can choose to let go.

Shi Genghongcheng believes that the current JDI LCD panel technology has gradually become popular, and the Japanese government does not need to continue to hold tight. Therefore, there are only two ways before JDI: one is to research and develop new technologies at all costs and stay in Japan, and Japan is in power; second is to face the fact that its technology is no longer advanced, and the sale of companies is of interest to foreign countries. Buyers.

At present, the Japanese government has not made a final decision on the fate of JDI.

In fact, Apple is already the most important customer of JDI

In 2012, with the support of the government-backed INCJ 200 billion yen, the LCD divisions of three Japanese companies, Sony, Toshiba and Hitachi, signed and merged to form the current JDI company. INCJ, as its largest shareholder, holds a 35.6% controlling share.

As the world's largest manufacturer of small and medium-sized LCD display panels, JDI did not rely on Apple at the outset . According to the information previously released by JDI, the proportion of Apple's revenue in JDI's overall revenue was only 20.9% in 2012, 31.0% in 2013, and 41.8% in 2014, which is equivalent to a steady 10% annual growth rate. increase. In fiscal year 2015 (April 2015-March 2016), Apple's contribution to JDI's revenue was as much as 533.172 billion yen, an increase of 65% from 2014. This level of revenue also accounted for 53.7% of JDI's total revenue for the year, breaking the 50% mark.

In addition, other mobile phone manufacturers such as Huawei, Xiaomi, and Hammer are also important JDI customers. Among them, Huaweiâ€™s revenue reached 118.531 billion yen in FY2015, accounting for 12% of JDIâ€™s total revenue for the year.

By contrast, Apple is the most important customer of JDI, not one, in terms of importance and revenue ratio.

iPhone does not give power, JDI performance continues to decline

However, due to the sluggish sales of the iPhone in recent years, weak demand in the LCD panel market, external factors such as the depreciation of the yen and market competition from other technologies, and JDI's own investment in future technologies such as factories, equipment, and OLEDs. The company's performance continued to decline.

Data show that the previous fiscal year (April-June 2016) JDI's total revenue decreased by 29.2% from the same period of 2015 to 174,342 million yen, and the loss after settlement reached 3.411 billion yen (the same period in 2015 was a profit of 2.244 billion yen. ), and this is already the second consecutive quarter of JDI loss. The industry analysts believe that the total amount of JDI losses this year will be as high as 11.772 billion yen, and the year-on-year loss of JDI will be 461 million yen.

JDI conducted an initial public offering (IPO) in 2014, when the IPO price was 900 yen (about 9 US dollars). However, due to poor performance, its stock price has long been hovering around one-fifth of the yen of 900 yen. As of September 21st, its stock price was only 163 yen, a far cry from the original IPO price.

It is because of continuous losses that JDI had to seek financial assistance from the gold owner behind the INCJ. According to media reports, at the beginning of August 2016, JDI requested funding assistance from INCJ, and INCJ indicated that it would provide JDI with assistance such as debt guarantee or financing. The estimated amount of aid will reach tens of billions of yen.

OLED transformation difficult, or can not escape the fate of being acquired

The industry expects that JDI will use this investment as a reserve fund for mass production of OLED panels, but this money does not seem to be enough. In an interview with the media in August, Mitsuru Homma, CEO of JDI, said that because the production cost of OLED panels is approximately 2 times that of existing LCD panels, he believes that few customers' products can be absorbed by high pricing. A cost, so in the future may require smart phone manufacturers to assume some of the OLED display panel investment.

In addition to funding issues, JDI has not kept pace with the industry in technology.

As a giant of traditional LCD panels, JDI has always lagged behind Korean competitors in OLED technology. Mitsuru Homma expects JDI to mass produce OLED panels by September 2018, but according to industry estimates, Apple will start using OLEDs as early as 2017, which means that JDI will most likely lose Appleâ€™s important customer. The prospects for the future are not optimistic.

The media reported that at the beginning of 2016, INCJ had tried to promote the merger of JDI and Sharp, which was also in a loss state, but the latter was eventually acquired by Taiwanâ€™s Hon Hai Group.

Will JDI become the next Sharp in the face of difficulties in financing, performance decline, and transition difficulties?