“A top maker of displays for Apple Inc. smartphones has asked a Japanese government-backed fund for hundreds of millions of dollars in aid, the latest sign of stress among Apple suppliers,” Takashi Mochizuki reports for The Wall Street Journal. “Japan Display Inc. said Tuesday it lost about $115 million in the April-June quarter and turned to its top shareholder, the government-backed Innovation Network Corp. of Japan, for support.”
“‘Our largest shareholder, INCJ, told us that they will continue to provide full-fledged support,’ said Japan Display’s chief executive, Mitsuru Homma. ‘My hope is the support would come in a way that doesn’t affect other existing shareholders,’ Mr. Homma said, indicating he doesn’t want to issue new shares to the fund, which already owns 35.6% of Japan Display,” Mochizuki reports. “Another Japan Display official said the company expected to get tens of billions of yen, or hundreds of millions of dollars, in loans and loan guarantees from the fund.”
“What amounts to a nagging cold for Apple, which still earned $7.8 billion in the most recent quarter, can quickly turn life-threatening for its suppliers. Japan Display’s revenue in the most recent quarter was down 29% compared with the year-earlier period,” Mochizuki reports. “Analysts say there might not be room left for Japan Display in an industry with tough competitors from China and South Korea.”
Read more in the full article here.
MacDailyNews Take: The saga of Japanese display firms continues.
SEE ALSO:
Japan Display CEO hints at strong Apple orders ahead of new iPhone launch – September 3, 2015
Japan Display and Apple to build new $1.4 billion plant for iPhone Retina displays – March 6, 2015
Japan Display’s reliance on iPhone orders rises – June 24, 2014
Is it a trickle down effect from Apple? The immediate reaction appears to be to blame an Apple downturn. Has Apple begun squeezing its suppliers too tightly (ala Walmart)? Or is it simply normal business issues within various companies in the Apple supply chain? I don’t know…but I don’t trust the analysts to know, either.
Side effect of Apple’s pricing demands on suppliers?
Yeah I was wondering the same thing. Pricing your suppliers right out of business means you no longer have the supply, if that is the case. That would be a big D’Oh! If you are squeezing them it also means they have no wiggle-room and if anything unforeseen happens they (and Apple) are screwed. It happens in the visual effects industry too. There needs to be a contingency made for operating issues. Problem is vendors or suppliers often are caught in a position they can’t say no even if they know they can’t deliver and just send the problem down the road.
Don’t just jump to conclusion that this is Apple squeezing supplier. Many times suppliers make promises on delivery and price that they may or may not be able to make, just to win contracts. I see it all the time, companies low-balling contracts then come back and say they can’t produce or need more money because of some “unseen” issue. Does GTAT come to mind for anyone else?
Apple does a good job of working with suppliers and paying for services and more. The don’t play the race to the bottom game but will pay for good, quality services and products. That’s the bottom feeders game that Samdung and the rest of the Android knock-off’s play.
I understand what you mean. Suppliers try to win contracts and may overextend. My point was that when working with Apple they may overextend more than they should since it is a significantly large contract. Many suppliers are not used to the scale that is involved. I would have phrased my earlier comment differently if I felt it was primarily Apple’s fault.
Apple will introduce a new model iPhone in September. The last two quarters showed that the current iPhone 6S and 6Splus sold less due to economic downturn in Asia and poor exchange rates. The same fate has hit Japanese businesses. This is also the time of lowest volume iPhone sales of the year. Display payment rates are set much earlier than delivery of new phones, so they are locked in for these, despite current economic headwinds. It is hard for Japanese manufacturers to compete with Chinese manufacturers, where labor supply is less expensive and government may more heavily subsidize businesses. Apple is also famous for changing it’s display providers based on price, availability and skill. This may have more to do with stepping up the OLED display production for 2017 causing more financial contracts than anything else. These are most likely the cause of financial concerns, rather than crazy tea leave readings that Apple is having a bigger downturn.