Japan Display Gets New Lifeline From Government-Backed Fund

Japan Display, which has struggled to deliver consistent profits since it was formed by a government-backed fund four years ago, is going back for more money, according to Bloomberg. The Japanese maker of smartphone screens agreed to a 75 billion yen ($637 million) injection of cash from Innovation Network, which is already its largest shareholder. INCJ, which has a track record of rescuing ailing Japanese corporations, created Japan Display by merging the troubled screen-making units of Toshiba, Sony, and Hitachi.

Japan Display is headed for a third-straight annual loss, as global mobile demand sputters and competitors from Korea and China undercut prices to grab market share. Japan Display said it will use the capital for the development of organic light-emitting diode displays, which offer more vibrant and energy-efficient screens for mobile devices.  Apple, its biggest customer, is considering shifting to next-generation smartphone screens as early as 2017.

Japan Display will issue 45 billion yen of convertible debt to INCJ and also get a 30 billion yen subordinated loan from the entity, Japan Display said in a statement in Tokyo on Wednesday. Japan Display climbed 2.5 percent to 366 yen at the close in Tokyo before the announcement, after broadcaster NHK reported that it was about to secure the financing.

The display maker also announced on Wednesday that it is raising its stake in JOLED Inc., a Japanese OLED-display maker, to 51 percent from 15 percent, through a transfer of shares held by INCJ to Japan Display. JOLED is working on a new method of manufacturing OLED screens that lack higher resolutions, but are cheaper to make. The convertible debt issued by Japan Display can be exercised from 2019, at a strike price that’s about 17 percent higher than the current stock price.

Japan Display is seeking to reduce its reliance on mobile devices by shifting toward autos, virtual-reality gadgets, high-end laptops and other areas such as health care and education, the company said in the statement. “The competitive environment has intensified due to a Korean manufacturer’s active marketing for OLED displays,“ Japan Display said.