Japan Display announced a major restructuring with the loss of 30 percent of jobs at the displaymaker, in order to address the growing industry adoption of OLEDs instead of LCDs and increased competition from Chinese manufacturers. The expected adoption of an OLED screen by Apple for the next iPhone will lead to a 15-25 percent fall in sales in the current year to March 2018, the company said.
In the three months to June, the company's net loss more than doubled, to JPY 52.3 billion from JPY 19.7 billion a year earlier. Revenues were still up 8.2 percent to JPY 188.6 billion, but JDI said its surplus production capacity is leaving it with fixed costs much too high. It aims to reduce annual costs by around JPY 50 billion, by shutting down and consolidating production sites, laying off staff and writing down assets.
One of its six production lines in Japan will be closed, while details are still being worked out on how to consolidate or close some of its five manufacturing sites abroad. In total, the company expects to shed 3,700 employees, of which 240 in Japan will be offered early retirement and the remaining job cuts will come abroad. Top executives have also agreed to pay cuts.
JDI was formed five years ago from the merger of small display activities of Sony, Toshiba and Hitachi. It's backed by the Innovation Network Corp of Japan (INCJ), a public-private partnership set up to support Japan's high-tech industries. The INCJ has agreed to back a new one-year credit line of JPY 107 billion from a syndicate of banks to help JDI pay for the restructuring.
The company estimates the cost of the restructuring at JPY 170 billion, of which JPY 30 billion cash. An impairment charge of JPY 2.65 billion was already taken in fiscal Q1. The aim is to return the company to a net profit in the fiscal year to March 2019 and positive cash flow in the fiscal year to March 2020. This will be supported by an accelerated shift to OLED production and sales.
