Sharp buys Japan Display plant as it eyes next-generation display

28, Aug. 2020

Photo by T. Q. on Unsplash
Photo by T. Q. on Unsplash

TAIPEI, NNA - Sharp Corp. has decided to buy the LCD plant of Japan Display Inc. (JDI) for $390 million in a move which will help accelerate its development of next-generation display technology.

Announcing the sale on its part on Friday, JDI said it will transfer the land, building, ancillary facilities and other assets at its Hakusan plant in Japan's Ishikawa Prefecture to the electronics maker.

Sharp's major shareholders with collective stakes amounting to over 53 percent are three companies under Taiwan's Hon Hai (Foxconn) group, which is a key supplier for tech giant Apple.

The plant, which had been making liquid-crystal-display panels such as smartphone screens, is also a key Apple supplier. JDI also announced that it will be selling LCD production equipment at the plant to an undisclosed overseas customer - widely believed to be Apple - for $285 million.

Production at the factory was suspended in July 2019, but it reopened several months later for test operation for the purpose of sale transfers, JDI said in its statement.

Meanwhile, Sharp Chairman and CEO J.W. Tai has hailed the deal as a win-win for both parties following one year of negotiations.

“I’m confident the deal will help to grow Sharp’s display sector both through increases in production and development of next generation displays,” said Tai in a statement.

A subsidiary of the world’s largest electronics contractor Hon Hai Precision Industry Co., Sharp has been developing its display business utilizing its own advanced technology to create high-value-added products, the company said.

Beleaguered JDI started holding talks with Sharp and Apple 2019 after announcing last June that it would embark on structural reforms to improve the company’s financial standing.

One reform was the suspension of operations at the Hakusan Plant, which took effect the following July. Following more talks with Sharp and Apple this year, JDI decided to sell the entire plant instead of a partial sale of assets.

JDI explained that the move would help lower maintenance costs and taxes as well as "enable repayment of advances received from the customer when the plant was constructed and provide for improved future cash flow."

JDI had built the plant several years ago after receiving about $1.5 billion from Apple in advance to supply it with LCD panels, according to reports. But Apple's switch from LCD to OLED displays had dented JDI's financial position and ability to make repayments which led to its decision to stop plant operations.

JDI now plans to settle the balance of advances of $702.5 million received from the "customer" with the total amount of $675 million generated from the latest transactions.

"The remaining balance of $27.5 million advances received after the partial repayment will be promptly paid as a lump-sum payment using JDI’s own funds," JDI added.

The company stressed that there will be no change to its production of high value-added products based on LTPS technology, which is its core competence.

This production is based at its Mobara plant in Chiba Prefecture, which also is its OLED production site. The plant has approximately twice the production capacity of the Hakusan factory, added JDI in its statement.

JDI has determined that by actively investing in human resources, research and development and equipment necessary to strengthen its competitiveness as a technology-based company, "it is possible to improve corporate value based on self-driven growth even after all Hakusan plant assets are transferred."