“Master, times have changed.”
If you pay attention to the mobile phone industry, you will clearly feel that OLED screens are becoming mainstream, and the living space of LCD screens is gradually being squeezed. In this trend, upstream suppliers are also undergoing shuffling.
Nikkei Asian Review Report , screen panel maker Japan Display Inc. (Japan Display Corporation, JDI) is considering selling its main mobile phone display factory. Most likely it is Apple or Sharp, a factory located in Hakusan, Japan, which may cost 70 billion to 80 billion yen (about 5 billion yuan).
It was previously reported that Apple invested 200 million to acquire some of JDI’s production lines and production equipment. Today, the transaction is upgraded and the entire mobile phone screen panel production line may be packaged for sale. This is the main mobile phone panel factory of JDI. , Which means that the company has withdrawn from the mainstream competition of mobile phone display panels.
JDI’s Dilemma
As you can see from the name, JDI plays an important role in the Japanese display industry. Founded in 2011, JDI integrates the small and medium-sized display divisions of Sony, Toshiba, Hitachi, and Panasonic, and was once the world ’s largest manufacturer of small and medium-sized displays.
But now, JDI is really having some trouble.
In September this year, JDI announced its financial report for the mid-term of fiscal year 2019 (April to September). The financial report showed that JDI continued to lose money, with a total loss of 108.6 billion yen (about 7 billion yuan). This is the 11th consecutive quarter in which JDI has recorded losses.
In April this year, JDI announced that it had reached agreements with three companies from mainland China and Taiwan on financial support of up to 80 billion yen. However, three companies subsequently withdrew.
By June of this year, JDI’s financial problems did not seem to be effectively alleviated. It was necessary to announce the layoffs of 1,200 people, which accounted for about a quarter of JDI’s total domestic employees. Many production lines were closed, including this The main body of the acquisition is the Hakusan Plant; Yoshiyuki Tsuzaki, who took office in June last year, also announced that he will resign on September 30 this year, during which a former executive fired for corruption committed suicide in Tokyo.
In December of this year, JDI again won Financial assistance . Japanese asset management company Ichigo Asset Management contributed 90 billion yen (approximately RMB 5.8 billion) to JDI. This round of funding also includes Apple. Apple has agreed to shorten the payment period and invest $ 200 million in JDI.
JDI’s Baishan factory was established in 2015 and cost $ 1.5 billion. Apple made most of the money. The way JDI repays is to provide preferential prices for Apple purchases.
But you also know what happened later. OLED has gradually become the mainstream. The purchasing demand of Apple, the main customer, has declined. As of the shutdown, the production capacity of the Baishan factory was only about 50% of its peak period. The arrears of JDI exceeded 800 million. US dollars.
Apple is quite interesting about JDI. Not only has it invested in building factories, it has also repeatedly delayed the repayment period.
Supply chain management is a good thing for Apple. Just like supporting Intel’s baseband business, and finally acquiring it, it is also reasonable for JDI to be eaten by Apple. The current price of the Baishan factory is US $ 820 million, which is basically equal to 1.5 billion of the construction funds minus arrears. Another potential acquirer is Sharp, which is also an important supplier of Apple LCD screens.
At present, JDI issued a statement saying that all options are currently being considered, but it is not sure how the factory will be handled, and relevant news will be synchronized. In fact, JDI with unfavorable operations has repeatedly reported that it will be acquired, including Hon Hai Group and Huaxing Optoelectronics. However, the future of JDI is still unclear.
After the news came out, Japan Display’s shares in Tokyo rose 8.2%, and the industry seems to be more optimistic about such operations.
What’s the problem?
The core reason for JDI business’s difficulties is that its main business, that is, the market environment for small-sized panels (accounting for more than 80% of revenue) has changed:
Today, OLED is becoming mainstream.
IHS Market predicts that in the third quarter of this year, the market size of OLED displays will reach $ 4.7 billion, a 30% increase over the same period last year. This year, 36% of smartphones will be equipped with flexible OLED screens. By 2020, this proportion Will rise to 53%.
The most important thing is that Apple, JDI’s largest customer (accounting for more than 60% of JDI business), is starting to embrace OLED:
Before iPhone 8, Apple was synonymous with high-quality LCDs, and that was also the honeymoon period between Apple and JDI. But as you can see, although the iPhone XR and iPhone 11 are still LCD screens, the higher-end flagships are equipped with OLED screens.
The news shows that several new iPhones in the fall of 2020 will be equipped with OLED screens. Only the entry-level iPhone SE2, which was rumored to be released in the spring, will choose LCD screens.
The advantages of OLED are obvious. Due to its self-luminous properties, it has inherently higher contrast, blacker black, and more power-efficient. Popular fingerprints can only be achieved with OLED (LCD also has related technologies, but not yet mass-produced).
More importantly, OLED panels are thinner and lighter. In the 5G era, due to the increase in signal source devices, the internal space layout of mobile phones has become more targeted, so the importance of OLEDs has become more prominent. Even JDI itself acknowledged that smartphones with OLED screens will become mainstream in 2021.
However, JDI’s transformation is obviously slower. In 2017, JDI raised 900 million funds to set up an OLED production line, but until now, the OLED screens used by smartphones have not yet been mass-produced.
However, JDIIt has begun to produce small-sized OLED screens, such as those used by Apple’s Apple Watch Series 5, which are screens from JDI. However, according to Ming-Chi Kuo’s Report , JDI The initial supply ratio was only 20%.
This is obviously not enough to fill the big hole in JDI finances.
Of course, LCD will not be eliminated at once, it still has market space (such as entry products, specific consumer preferences, etc.), but JDI is also facing a severe competition on LCD, such as BOE Representative domestic manufacturers often have price advantages.
The logic here is that LCD will hardly be used on flagship machines anyway (except for Apple), so it is better to choose a domestic supplier with a price advantage.
For example, Huawei Mate 30 chooses Huaxing Optoelectronics, and Redmi Note series chooses Shentianma and Shenchao. Nowadays, you can rarely see the screen of domestic mobile phone manufacturers choosing JDI.
The loneliness of the Japanese screen industry
This is not just the plight of JDI, but a problem that the entire Japanese display industry must face together.
Sharp has been acquired by Foxconn, and Panasonic also announced in December this year that it will completely suspend the production of liquid crystal display (LCD) panels by 2021. The remaining SDP Kyocera and other companies are no longer in sight. In 2017, the merger of JDI and JOLED failed to help Japanese panel suppliers make up this course.
In fact, Japan was the earliest country to deploy OLED, but due to various reasons such as technology and market, it failed to fully invest in it and was eventually overtaken by South Korea.
Large-size LCD panels, the top three are BOE, LGD, and Samsung; mobile phone panels are also the main battlefield of Samsung and domestic suppliers.
In addition to LCD, it also represents future technologies such as OLED and Micro LED.Board. For example, Sony TV ’s high-end products have panels from LG, and mid-range LCD panels from Taiwan ’s AUO and mainland China ’s BOE.
JDI’s lost Apple orders were also eaten by China and South Korea. Next year, BOE will become an iPhone supplier, and together with Samsung will supply OLED screens to the iPhone.
In the OLED industry, South Korea has a clear advantage, while Chinese manufacturers are actively developing and putting into production; while in LCD, the first names of large and small sizes are South Korea and China. It seems that there is no absolute advantage in the Japanese display industry in any of the segments.
The plight of JDI also reflects the loneliness of the entire Japanese display industry.