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UPDATE 2-Japan Display says cutting 4,700 jobs, funding crunch easing

* Cutting 30 pct of workforce via consolidation of production

* Says Chinese smartphone makers switching back to LCD from OLED

* Still in talks with INCJ on long-term financing

* Forecasts Q3 op profit of 10 bln yen (Recasts with CEO comments, background)

By Makiko Yamazaki

TOKYO, Nov 9 (Reuters) - Japan Display Inc said it is slashing 30 percent of its workforce, or 4,700 jobs, to improve profitability but added that concerns about its cash position have eased as it is seeing strong demand for its screens from Chinese smartphone makers.

The firm faced a funding crunch earlier this year and took out short-term loans from lenders due to slower iPhones-related demand from Apple Inc, whose products account for more than half of Japan Display’s sales.

But Japan Display played down liquidity concerns on Wednesday, saying sales are quickly improving as some Chinese smartphone makers are switching back to its liquid crystal displays (LCD) from organic light-emitting diode (OLED) displays made by South Korea’s Samsung.

Manufacturers of consumer and other electronics have been gradually shifting towards technologically advanced OLED screens, which are generally thinner and are more flexible than LCD screens.

“Our LCD panels have caught up with OLED rivals in thinness and power efficiency, the very reasons that drove those Chinese players to OLED,” Chief Executive Mitsuru Homma said at an earnings briefing. “They have now begun to have doubts about the future of OLED.”

Homma did not name the Chinese smartphone makers who have switched back to LCD screens. Samsung’s Tokyo office was not immediately contactable for comment.

Japan Display said the planned job cuts will be completed by end-March next year and come through global consolidation of its production lines and plants in Japan, China and Taiwan.

Q2 RESULTS

The company reported on Wednesday an 85 percent plunge in operating profit to 1.24 billion yen ($12.18 million) for the July-September quarter due to slower smartphone demand and a strong yen, but forecast an operating profit of 10 billion yen for the current quarter.

Homma said that the company is continuing discussions with its state-backed main investor, the Innovation Network Corp of Japan (INCJ), to seek long-term financing for future growth.

“The financial support from the INCJ will be integrated in our business strategy that we are compiling right now,” he said.

Additional funding would be crucial for Japan Display to weather erratic iPhones-related demand, and to invest in OLED displays, in which it trails South Korean rivals.

Even though the company’s business strategy will centre on LCD technology, it will continue to work on developing the OLED technology, Homma said. “We will make sure that our customers have choices.”

The company plans to start OLED panel production by September 2018, though Apple is widely expected to begin adopting OLED for its iPhones as early as next year.

But analysts have said that chances may be slim for cash-strapped Japan Display to win the OLED race at a time when Korean and Chinese manufacturers are already making massive investments.

Sharp Corp, Japan Display’s domestic rival that is also trying to catch up in OLED, has called on the Japanese government to initiate a technology alliance between the two display makers.

Earlier this year, INCJ tried to broker a merger of Japan Display and Sharp, which was instead bought by Taiwan’s Hon Hai Precision Industry Co.

Japan Display was formed in 2012 by combining the display units of Hitachi Ltd, Sony Corp and Toshiba Corp. ($1 = 101.8300 yen) (Reporting by Makiko Yamazaki; Editing by Muralikumar Anantharaman)

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