Japan Display plantSource: Ken Kobayashi

What you need to know

  • Japan Display is selling a smartphone screen factory to Sharp for $377 million.
  • The company is using the sale to pay back Apple for covering the cost of building the plant.
  • Sharp plans to consolidate display manufacturing into the factory.

Japan Display, who supplies screens for the iPhone and has been struggling of late, is planning to sell a smartphone screen factory to Sharp for around $377 million.

Reported by the Nikkei Asian Review, the company has been missing its revenue targets ever since it inability to switch manufacturing over to OLED displays that Apple needed for its new iPhone Pro models.

A deal for the Hakusan liquid crystal display plant in Ishikawa Prefecture, along with the planned sale of equipment there to a customer believed to be Apple, are expected to earn Japan Display a total of 70 billion yen while cutting excess capacity that has weighed on its earnings.

The company had been planning to sell the idle factory by the end of March, but the pandemic slowed down its negotiations with Sharp as well as another buyer of the equipment inside the plant (most likely Apple).

Japan Display, also known as JDI, had intended to sell the factory by the end of March as part of its turnaround plan, but the coronavirus pandemic slowed down negotiations. The company announced a deal late that month with an unnamed customer for some equipment at the factory, while continuing to hold talks with Sharp to unload the remaining assets.

According to the report, Japan Display will use the money from the sale to pay Apple back for covering most of the costs associated with the building of the factory.

When the facility was built, Apple covered most of the 170 billion yen cost with a "prepayment." The plant, which began operating in late 2016, can produce the equivalent of up to 7 million smartphone panels per month. But production later slumped. JDI will use funds from the sale to repay Apple for the prepayment, lightening the burden on its finances.

Sharp, who currently manufactures iPhone panels in Kameyama, is expected to consolidate its production into the factory in Hakusan.

Osaka-based Sharp, part of top iPhone assembler Hon Hai Precision Industry, is expected to consolidate production of LCD panels for Apple's iPhone at the Hakusan plant, renting the equipment from Apple. Sharp's Kameyama factory, currently used for that purpose, will likely switch to making panels for new customers in such areas as automotive and medical equipment.