TOKYO Japan Display Inc's state-backed main investor has agreed to provide up to 75 billion yen ($640 million) in aid to the struggling smartphone display maker, in a publicly funded bailout to help it reduce its dependence on Apple Inc.
Japan Display's finances have withered on fluctuating demand for Apple's iPhones, prompting it to request support from its biggest investor Innovation Network Corp of Japan (INCJ) this year after a funding crunch saw it take out short-term loans. Apple's products account for over half of Japan Display's sales.
Under the bailout, INCJ will buy convertible bonds worth 45 billion yen to be issued by Japan Display, the latter said on Wednesday. INCJ, which has a 36 percent stake in Japan Display, will also provide 30 billion yen in subordinated loans.
The funds will allow Japan Display to invest in advanced screens for cars and gaming headsets as growth in the smartphone market slows.
The firm will also use part of the funds to hike its stake in organic light-emitting diode panel maker Joled to 51 percent from 15 percent by September 2017, improving its position in a key technology that makes panels thinner and more flexible than LCD screens and where it lags far behind rivals.
But the bailout of the ailing display maker, with taxpayers' money, could raise questions about the role of INCJ that was established in 2009 to promote new and innovative technologies.
The funding follows INCJ's earlier attempts to rescue Taiwan's Sharp Corp, which was facing a financial crunch, with the aim to broker a merger between it and Japan Display. But Sharp was bought by Taiwan's Foxconn, formally known as Hon Hai Precision Industry.
Japan Display - formed in 2012 by combining the display units of Hitachi Ltd, Sony Corp and Toshiba Corp - last month said it was slashing 30 percent of its workforce to improve profitability.
Shares of Japan Display surged as much as 11 percent to a more than one-year high earlier in the day after a media report said INCJ was finalising aid for the display maker. The shares later shed most of the gains to end up 2.5 percent, while the broader Nikkei ended down 0.3 percent.
(Reporting by Makiko Yamazaki and Taiga Uranaka; Editing by Himani Sarkar)