Japan Display exploring sale of smartphone factory to Apple for $820M

AppleInsider

Japan Display has reached out to both Apple and Sharp Corp in hopes of selling off its main smartphone screen factory in hopes to settle its massive debt.

Apple's shift to OLED displays has left Japan Display with less orders to fill

Japan Display's factory, which took $1.5 billion to build four years ago, could be sold for $820 million should either company decide to make the purchase. Sharp, a child company of Taiwanese electronics giant Foxconn, is currently considering its options.

"We are carefully considering it, reviewing the impact that any purchase would have on our earnings, and whether and how much risk it would entail," Sharp said in a statement.

Japan display had recently been in talks with Ichigo Asset Management to receive financial support. However, depending on how much Japan Display agrees to accept, this could provide Ichigo with effective control of the company. Ichigo could provide Japan Display with up to 45 billion yen ($414 million) in the form of a common share purchase at up to 50 yen per share.

Japan Display had said that it was considering all available options for its plant, which is located in Japan's Ishikawa prefecture.

According to Reuters, Apple has not responded to a request for comment.

Japan Display's financial hole has largely been caused by a deal with Apple, where it borrowed approximately $1.5 billion to build an LCD display plant four years ago under the premise that they would pay the money back over time. However, Apple's shift to OLED has led to fewer orders to Japan Display, and the company still owes in excess of $800 million.

Apple has been involved in bailout consortiums for Japan Display to keep the company running, and has offered shorter payment terms. Japan Display is believed rely on Apple for roughly 60% of its revenue.

While the company is slowly moving to produce OLED panels, possibly for the Apple Watch, Apple may have to wait for up to two years before even receiving its first OLED screen from the company.

larryjw

Typo aside, this story is a good example of how not to do business. Going into massive debt to capitalize to supply one customer, you’ve only succeeded in killing your company. At minimum, your customer now owns you. 

mark fearing

larryjw said:

Typo aside, this story is a good example of how not to do business. Going into massive debt to capitalize to supply one customer, you’ve only succeeded in killing your company. At minimum, your customer now owns you. 

While I agree with you generally, there is most likely other, extenuating circumstances that lead to a series of decisions that ultimately had them take on too much debt. I'd imagine they acted in this way because they had only worse choices -  meaning they may have had no capacity to compete or grow. They may have also badly underestimated the speed with which OLEDs got into the mainstream market. They most likely thought LCD would be here for 10 or 15 more years and give them plenty of companies to sell screens to. Business is most often a bet. You lose some, you win some. And so far as I know no one has proved omniscient no matter how many billions they pay a CEO.

viclauyyc

There is an old movie by Tom Hanks called The Money Pit 1986. The movie has a happy ending. Japan Display is also a money put, just
the pit is much much bigger, but I doubt it will have a happy ending. 

OLED is the best currently technology but other companies already searching for a new better one. Yet JD still unable to mass-produce it. By the time JD master the OLED, Apple may already switch to a new technology. 

StrangeDays

mark fearing said:

larryjw said:

Typo aside, this story is a good example of how not to do business. Going into massive debt to capitalize to supply one customer, you’ve only succeeded in killing your company. At minimum, your customer now owns you. 

While I agree with you generally, there is most likely other, extenuating circumstances that lead to a series of decisions that ultimately had them take on too much debt. I'd imagine they acted in this way because they had only worse choices -  meaning they may have had no capacity to compete or grow. They may have also badly underestimated the speed with which OLEDs got into the mainstream market. They most likely thought LCD would be here for 10 or 15 more years and give them plenty of companies to sell screens to. Business is most often a bet. You lose some, you win some. And so far as I know no one has proved omniscient no matter how many billions they pay a CEO.

This a hundred times. I've run my own business (retail packaged goods, separate than my primary trade as a developer), and it's murky. In hindsight it's easy to see what you did wrong and say "Don't do that", but at the time it is never so clear. 

hentaiboy

Fun fact: Ichigo is Japanese for Strawberry.

cy_starkman

interesting.

Who was the company that supplied Apple with GPUs that went belly up due to Apple producing their own?

In this case, there might be a small reason to buy - to retool the factory for micro led displays.

fastasleep

So, “smartphone display factory”, not “smartphone factory”. 

crowley

cy_starkman said:

interesting.

Who was the company that supplied Apple with GPUs that went belly up due to Apple producing their own?

In this case, there might be a small reason to buy - to retool the factory for micro led displays.

Imagination?  They sued Apple, alleging/implying that Apple had stolen their tech to build GPUs in-house.  No idea where that got to.

And there's the sapphire company that ended up getting in over its head and unable to fulfill Apple's demands.

I think any commodity supplier should be very cautious when getting into bed with a buyer of Apple's size and power.

mdriftmeyer

cy_starkman said:

interesting.

Who was the company that supplied Apple with GPUs that went belly up due to Apple producing their own?

In this case, there might be a small reason to buy - to retool the factory for micro led displays.

They're still around.

https://www.imgtec.com/

Wgkrueger

https://youtu.be/Cjl0p0MdvQ0

dewme

Maybe Apple should buy it and convert it to sapphire production.

Or not.

SpamSandwich

Apple tends to get deeply entangled in some really lousy business deals. They should’ve bought whatever patents they needed and then moved production to the US instead.

MacPro

I'm not sure it's in Tim's plan to buy this company, however, on quite a tangent,  I keep thinking IBM would be a good purchase for Apple if Tim ever were in a buying mood.

StrangeDays

crowley said:

cy_starkman said:

interesting.

Who was the company that supplied Apple with GPUs that went belly up due to Apple producing their own?

In this case, there might be a small reason to buy - to retool the factory for micro led displays.

Imagination?  They sued Apple, alleging/implying that Apple had stolen their tech to build GPUs in-house.  No idea where that got to.

And there's the sapphire company that ended up getting in over its head and unable to fulfill Apple's demands.

I think any commodity supplier should be very cautious when getting into bed with a buyer of Apple's size and power.

A bit mote to the sapphire company. GT Advanced was completely unable to produce what it said it could produce. The CEO was charged with fraud for lying to investors and to Apple about their capabilities. The SEC said Apple didn't do anything unfair. Apple even helped out the workers after by repurposing the facility to do some other work.

https://appleinsider.com/articles/19/05/03/sec-presses-charges-against-gt-advanced-ceo-for-fraud-in-iphone-sapphire-supply
https://www.theverge.com/2019/5/3/18528920/sec-charges-apple-iphone-sapphire-supplier-gt-advanced-fraud

SpamSandwich

MacPro said:

I'm not sure it's in Tim's plan to buy this company, however, on quite a tangent,  I keep thinking IBM would be a good purchase for Apple if Tim ever were in a buying mood.

Yep. I said the same thing years ago.