In August of 2011 Japan’s Innovation Network Corporation, a company owned by both the government of Japan and 25 Japanese companies, announced an investment of ¥200 billion ($1.335b US – today’s dollars) in what were the combined display assets of Sony (SNE), Toshiba (6588.JP), and Hitachi (6501.JP), which, nine months later, became known as Japan Display (6740.JP).  Over the last almost 13 years the INCJ has invested ¥462 billion ($3.08 billion US) in JDI (debt & equity) to support the company and Japan’s continuing desire to maintain a position in the display industry.  Unfortunately, JDI’s former management did not recognize the transition from LCD to OLED that the mobile phone industry was making, and despite its near dominance of that segment years ago, has been unable to maintain such a position of leadership, despite the INCJ’s help.
In 2020 Ichigo (2337.JP), a REIT and asset manager, took over the reins at JDI and has been trying to reshape the company into a profitable entity.  It has not been an easy task given the intense competition in the display space and the older LCD fabs that have been part of the company culture.  Ichigo has been selling underused assets and consolidating facilities while developing new technologies, particularly a photolithography-based OLED deposition technology called eLEAP, but the INCJ has, after 13 years finally sold its last remaining shares in JDI, ending its participation in the company’s development.
The INCJ had invested ¥462 billion ($3.08 billion US) in Japan Display over the years and has announced that it has recovered ~66% of that investment (¥ 307.3 billion or $2.050 billion US) through stock sales in recent months, with a loss on the project of ¥154.7 billion ($1.03 billion US), for which the chairman of INCJ apologized in a public statement.  This leaves Japan Display in the hands of Ichigo and its public shareholders, who have not been a happy lot over the last five years.  We do give Ichigo chairman (and JDI CEO) Scott Callon credit for taking the many steps necessary to try to right a ship that was poorly managed for many years.  Hopefully the company will reach its goal of a return to profitability next year.

The January 1 earthquake that hit the coast of Japan on January 1 caused severe damage to the Northern Coast of Ishikawa Prefecture, with the epicenter about 26 miles northeast of the town of Anamizu.  This puts the Japan Display (6740.JP) Ishikawa LCD fab approximately 55 miles from the epicenter of the 7.5 magnitude quake, and while the magnitude at that distance was closer to 5.0 to 5.5 on the Richter scale, it was enough to cause a number of semiconductor fabs nearby to be shut down for inspection, particularly the Toshiba (pvt) Kaga fab, which is ~9.3 miles south west of the JDI fab, and has given no estimate for when it might reopen.  While Japan Display has not commented on the status of the Ishikawa fab, we expect automated sensors at the fab, similar to those at the Toshiba Semiconductor fab, would have triggered an automated shutdown of sensative equipment to prevent damage and closing water and gas lines.  If the impact of the quake was limited to a general shutdown, we would expect the production loss to be limited to ~2 days and the loss of some product that was on the line when the shutdown occurred, so the overall impact to JDI, at least at this juncture, is minimal.
The semiconductor fabs in Ishikawa Prefecture, in most cases, were automatically shut down and would require full inspection before restarting.  Tower Semiconductor (TSEM), which has two fabs in Ishikawa Prefecture stated, “There was no impact or damage to the buildings and only minor damage to the facilities which had no impact on operations. The dedicated staff and response teams have worked to ensure operational safety and stability. Tools requalification is underway, combined with efforts to efficiently repair any damage to fab tools and in-line materials, while utilizing all available resources to minimize any potential disruptions to manufacturing and customer service.” 
Taiyo Yuden (6976.JP), a supplier of MLCCs with a ~5% share stated, “No injuries to our group employees have been confirmed. In addition, our group's production bases, no major damage was confirmed to the building or production equipment. Production is expected to resume after equipment inspection work is through”. No word from Global Wafers (6488.TT), who has two production facilities about 100 miles from the epicenter, although local sources indicate that wafer production was halted and the lines are undergoing full inspection, with the same for Shin-Etsu (4063.JP), although silicon wafer growth using the CZ method is very sensative to vibration and can cause uneven crystal growth or stress defects.  While 4” silicon wafers can be grown in 3 to 5 days, 8” wafers can take between 7 to 14 days, and 12” wafers between 14 to 28 days, so it will take quite a while to assess the damagefacing these wafer fabs.
All in, while the damage to smaller towns in northern Ishikawa was significant, most production facilities seem to be relatively unaffected, other than the typical automated shutdown, inspection  and restart, which we expect, for those with no significant damage, will take a few days to complete.  The loss of WIP is still unknown, and in the case of wafers production, could turn out to be a bit more significant, but it would seem that production losses will be limited to a week to 10 days on average so far.  Not a disaster for the display and semiconductor industry, but not a happy new year in Ishikawa for others.

apan Display (6740.JP) is a company in transition, actually a company that has been in transition for quite a while.  Japan overall had been a dominant supplier of LCD displays, starting with wrist watches in the early 1970’s, progressing to calculators, and to hand-held TVs (‘pocket TVs’) by Seiko (6724.JP) in Japan in the early 1980’s, and by the late 1980’s Japanese companies dominated the production of LCD displays and LCD based products.  As the millennium approached, South Korean and Taiwanese companies began to challenge Japan’s position in the LCD space, and in 2011 three Japanese LCD display producers, Sony (SNE), Toshiba (6502.JP), and Hitachi (6501.JP) merged their small/medium size LCD businesses together to form Japan Display, along with a $1.49b US ($1.642b today) from the Innovation Network Corporation of Japan, a partnership between the Japanese government and 19 corporations that has been loaning capital to Japanese companies since 2009.
JDI was successful in building a small/medium size LCD panel business with the capital and assets donated by each partner, along with production assets purchased from Panasonic (6752.JP) and was listed on the Tokyo Exchange in 2014, however by 2015, price competition and relatively high operating costs pushed JDI into the red, despite being the primary small panel supplier to Apple (AAPL).  Unfortunately for JDI, in 2017 Apple began a gradual change from LCD displays for the iPhone to OLED displays, and JDI’s small panel mobile business has never recovered.  A restructuring in 2017 led to substantial layoffs and the closure of the company’s Hakusan LCD fab, which was eventually sold to Sharp (), but as Apple continued its iPhone transition to OLED JDI was left to find a new customer base.  Apple itself made an investment of $100m in 2019 as the company restructured a second time, with more plant closings.  JDI was able to develop enough OLED capacity to supply Apple with watch displays but was so far behind in OLED development that it made little difference.
After mounting losses in 2018 and 2019, JDI ceded control of the company to Ichigo Asset Management (2337.JP) for$715m in capital, and at the time the company indicated that they would begin development of a proprietary OLED technology that would be commercialized by 2022.  We give considerable credit to Ichigo management, who has brought costs down far more consistently than previous managements and has made progress on the promised OLED technology known as eLeap (see notes from 2/10/23, 4/10/23, 4/27/23, 5/10/23) the uses photolithography for the placement of OLED materials rather than the more typical thermal deposition.
However as JDI moves closer to becoming profitable again as part of the overall display industry, they have been facing the same weak demand and pricing issues as other display producers, and that has slowed the process toward positive earnings further.  Citing “Triple punch of higher costs, lower demand, & lower capacity utilization driving large losses across global display industry – Rising material & energy costs, global inflation, rising interest rates, & global economic slowdown remain significant headwinds”, JDI reported fiscal 2022 (3/2023) of ¥270.7b ($2.02b US), down 8.5% y/y but slightly above the company’s forecast, while net income (loss) declined further, increasing from ¥8.1b last year to ¥25.8b this year.

On the positive side, JDI signed an MOU with HKC (pvt) (see 4/10/23 note) for the development of JDI’s eLeap OLED technology, which they believe will generate royalties in fiscal 2023, along with an additional ¥18b in reduced fixed costs, but on a net basis, operating profit this year will only improve by 9%, against a sales decline of 11.3% as the company continues to face lower volumes and rising material costs as it develops new products, with eLeap mass production beginning in 2024.  In the near-term JDI will continue to reduce its exposure to the commodity smartphone business (down 36% in f. 2022), increase its exposure to automotive displays (up 26% in f. 22) and bring back growth to their VR and wearable display business (down 15% in f. 22), which faced lower volumes as customers were forced to raise prices, all of which are the ‘standard’ year-end ‘fixes’ for most small panel LCD manufacturers.
 While it is hard to put perspective on JDI’s short-term growth strategy given the current economic state, we do give them credit for posting intended actions the company will take to return to ‘mega-growth’ by 2026, some of which are financial, most of which involve Ichigo financing.

1. Ichigo lends JDI ¥20b to repay ST loan from INCJ, which puts Ichigo loans to JDI at ¥48b.
2. Ichigo buys ¥53.7b of JDI debt from INCJ which eliminates all JDI debt to INCJ.
3. Ichigo forgives ¥15b of JDI debt.
4. INCJ returns Class A preferred shares to JDI at no cost. Shares cancelled.
5. Ichigo does ¥86.7b debt swap with JDI (@¥45) on Ichigo loans to JDI, which eliminates all JDI debt.
6. JDI issues ¥173.6b warrants to Ichigo (@¥45) which will provide capital for JDI growth.

All of which will happen by the end of fiscal 2023.  With the finances as above, the company management (Ichigo) is predicting its long-term growth as follows, and while there are so many variables out 5 years that we have little faith that the path will remain intact, we have to give them credit for putting the numbers on paper and Ichigo for making a large bet.

Only a few days ago we noted that Japan Display’s (6740.JP) largest shareholder Ichigo (2337.JP), a $5.8b asset manager based in Tokyo that is a small (13%) part of a large Real Estate & Clean Energy management company, had decided to convert 658m Class B preferred shares to common stock that it received in 2020 when it bailed out JDI.  This increased Ichigo’s share of the common from 49.28% to 56.7%, giving it full control of JDI.  Last night JDI disclosed its 3Q results, reduced full-year guidance, and announced new funding which we detail below.
JDI gave 3Q (December quarter) guidance in November of last year, projecting sales of 75.6b¥ ($577.2m US) and an operating loss of 9b¥ ($68.7m US), although 3Q sales came in 7.8% lower than guidance and operating loss 1.6b¥ lower than guidance.  Management lowered full year guidance to reflect lower 3Q results and expected lower consumer electronics and automotive display weakness, lowering 2023 sales (March year) by 5% to 266b¥ ($2.03b US) and lowering the expected operating loss by 12.4b¥ to a loss of 47.3b ($361.1m US).  On a general basis lower smartphone and VR demand and higher material costs more than offset price increases, however, the company also announced a major refinancing and a change in the company’s focus.

• Ichigo will lend JDI 20b¥ to repay a short-term loan JDI had with INCJ (Innovation Network Corporation of Japan), a quasi-government corporate partnership that invests in a variety of industrial and technology related Japanese companies, bringing Ichigo’s loans to JDI to 48b ($366.5m US)
• Ichigo will buy 53.7b¥ of JDI debt from INCJ, and will do a debt/equity swap at 45¥, eliminating all debt owed to INCJ by JDI, while INCJ will return all Class A preferred (convertible) shares to JDI at cost, which will be cancelled by the company
• Ichigo will forgive 15b¥ of JDI debt.
• JDI will issue 173.6B in warrants to Ichigo (45¥) to finance growth through 2026.

Management also revealed plans for the company’s growth after the above financing, and while some of the goals are vague, JDI does have some products that are rather unique and could help the company to bring itself to profitability.as the global economy and the display space begin to recover.  One such product is eLEAP, an OLED display production process that does not use FMMs (Fine Metal Masks) in order to create OLED sub-pixels.  This reduces OLED material waste and the cost of both the cleaning and replacement of FMMs that are typically used to produce OLED displays, while allowing for more precise material placement which increases the amount of light generated and improves OLED display lifetime.  The eLEAP process is not limited to Gen 6, as is conventional FMM deposition, with the company receiving it first order this month and full production scheduled for fiscal 2024, with Samsung Display (pvt) the rumored (unconfirmed) interested customer.
JDI’s plans also tout its expertise in IGZO backplanes, ultra-high resolution displays, transparent displays, and automotive displays, however the competition in those areas is fierce, particularly automotive, a segment where many display producers have focused as the consumer market slowed last year.  JDI will also reduce its smartphone production footprint and is expected to allocate 10b¥ of the newly raised capital to synergistic M&A.  Here’s the full breakdown of how the new capital will be allocated:

• 50b¥     R&D to Fund Continued Creation of Global No.1 Technologies
• 37b¥     Bolster Working Capital
• 30b¥     Bring eLEAP, HMO, HUD, Metaverse, and Other JDI Proprietary Technologies to Mass Production in Scale & Fund Sustainability Initiatives
• 20b¥     Further Build Out JDI Proprietary IP
• 15b¥     Launch Rælclear, LumiFree, & Other New Businesses
• 10b¥     Targeted M&A in Synergistic Businesses
• 10b¥     DX (Digital Transformation) Investments

All in Ichigo now controls 78.2% of JDI’s voting rights and has allowed the company to eliminate all debt but has also increased its own risk level in that JDI might not be able to reach its fiscal 2026 goals.  JDI’s CEO, Scott Callon, is also the Chairman of Ichigo, and a specialist in real estate financing and restructurings, but the display space is a quirky one and there are only so many refinancings that can be done before competition and industry cyclicality take their toll.  Hopefully this new financing round takes a bit of pressure off of JDI for a while and lets the company exploit its technology, particularly on a licensing basis, but JDI has a lot to prove over the next few years.

​Japan Display’s (6740.JP) largest shareholder Ichigo (2337.JP), a $5.8b asset manager based in Tokyo, has decided to convert 658m Class B preferred shares to common stock that it received in 2020 when it bailed out JDI.  This will increase Ichigo’s share of the common from 49.28% to 56.7%, and while Ichigo still has 1.02b Class A shares and 5,540 Class E shares, the Class B shares were the only preferred that had voting rights.  JDI has also borrowed 28b¥ from Ichigo.  While Ichigo has been JDI’s largest shareholder before the conversion, the increase in common shares held by Ichigo, whose CEO is also the CEOI of JDI, will reduce the company’s free float ratio below 35%, which would force JDI to lose its listing on the Tokyo Exchange, however there is an exception that allows the violation to be sustained for 5 years if the 3rd party owns the shares to support a company’s business in a turnaround situation, which this would certainly be the case.  JDI will file for the exception after its fiscal year ends in June, which we expect will be approved.

Japan Display (6740.JP) reported weak fiscal 2Q (September) results that were below the company’s May 13 guidance of 92,250m¥, although sales for the quarter were 81,192m¥ ($554.39m US), up 42.2% q/q and up 12.9% y/y, one of the few LCD display producers that saw positive y/y comparisons in the quarter.  Operating profit was 4,900m¥ ($33.46m US), which was above company guidance of 4,200n¥.  This puts 1H sales ~10.6% below guidance, with JDI lowering expectations for the fiscal year from 329,100m¥ ($2.247b US) to 280,000m¥ ($1.912b US), down by ~14.9% from earlier guidance, with a similar reduction in fiscal year operating profit from -19,400m¥ ($-132.46m US) to -34,900m¥ (-238.29m US).
Not surprisingly both mobile and non-mobile segments saw reduced demand as inflation slowed CE demand, and while end-user demand for automotive displays continued, manufacturers were still facing limitations on the availability of analog silicon components, which forced them to slow production and ordering in 1H.  The company is concerned that potential energy availability issues in Europe, due to the Ukraine war, could also pressure automotive manufacturing during the winter, and with the automotive display segment growing from 28% of sales in 1Q ’18 to 48.8% in 2Q ’23, now JDI’s largest segment, the potential for continued limitations on the automotive display segment have been included in the reduced guidance.  On the positive side, the depreciation of the yen has helped to offset some of the rising cost of material and transportation, but the net is lower overall.
Since JDI received a bailout from Ichigo (2337.JP) in 2020, the new management has been making considerable efforts to return the company to profitability, having sold one of its display module plants and contracted for the sale of a second, closing an older, inefficient fab, and commercializing a new technology and a lithography based OLED material deposition process that is being evaluated by Samsung Display (pvt).  The company has developed a high resolution VR display (included in the ‘non-mobile’ category) that we believe is being used in headsets released by Skyworth (000810.CH), YVR (pvt), and Lynx (pvt), but that said, the best intentions can do little to overcome a global demand crisis, and JDI continues to face the same issues as most other small panel LCD display producers, including a recent reduction in VR display orders from a major customer.  JDI is slowly making its way back toward becoming a force in the display space and returning to profitability, but the macro environment is going to extend that timeline, despite the company’s efforts.  

LEDs have radically changed the world of lighting, moving us from low efficiency incandescent filament illumination to high efficiency solid state illumination, and a quick look at a few statistics shows how important LED lighting is toward reducing the global energy footprint.  However, aside from the very compelling metrics, there are some issues with LEDs that make them rather difficult to work with in certain situations.  While incandescent lighting tends to be ‘warm’ that is having a color temperature of between 2,000K and 3,000K, while CFLs tend to be ‘cooler’, meaning less yellow and more blue, while LEDs can vary considerably between warm and cold depending on their structure.  This can be confusing for consumers who are not used to choosing a color for their home lighting.
While color temperature can be an issue, more difficult is the fact that LEDs are point source emitters, and while they are very efficient at converting energy to light, that light is concentrated in a very small space.  Most LED bulbs are coated with materials that help to disperse that light, but it is difficult to diffuse LED light when compared to incandescent lighting.  When LED lighting is used in some specific applications, such as a museum or in store product lighting, the LED bulb must focus the light to the specific area being highlighted, which in many cases means an optical lens must be added or am LED bulb specifically designed for that application is necessary.
Japan Display (6740.JP), a company known for its small panel LED displays, has developed a new product through a subsidiary that uses the capabilities of LCDs to make LED lighting adjustable to a user’s needs.  Typically LED lighting with an optical lens creates a circular ‘spot’ that can be adjusted by moving the source closer or further from the object, which is not always a viable solution.  The brightness and color are adjustable, but shaping the ‘spot’ is not an option without changing the optics, which means small run LED production tends to produce expensive product.  Japan Display promises to end that issue by replacing the optics with a lens composed of liquid crystal, the same material used in all LCD displays.
While we do not know the details quite yet, the liquid crystal is used to change the refractive index of the LED light, which allows it to be shaped on both the horizontal and vertical axes.  This means that a user can adjust the shape of the LED light on the fly.  This can be done using a touch screen control or similar device, giving the user complete control over the shape of the light, meaning one could expand the light to its maximum coverage or create a spot of almost any shape to highlight an object or read.
Of course, JDI has projections as to how the creation of a new industry in 2023/24 will generate ~$67m in incremental sales by 3Q 2026, after sampling to potential customers this month and scheduling mass production for April of 2023, but until we see a cost analysis of the product, we reserve judgement on the financial aspects of the product.  That said, there are few new applications being generated for the LCD space, and any new application adds to the potential lifetime of LCD technology which is under siege from a variety of alternative display technologies.  While this application is specific to Japan Display (there are many companies that produce static optical lenses for LED lighting) and has yet to be commercialized by JDI or its customers, it is a novel approach to one of the drawbacks of LED lighting and credit should be given for working with the company’s strong suit in small LCD technology.
Here are 46s second and 27 second videos that show how the product functions:
https://youtu.be/1nq1GF_Bq94
https://youtu.be/dQFtiShMtQE
 
 

Japan Display (6740.JP), in keeping with its goal of reducing costs to bring the company back to profitability, has sold its display module facility in Suzhou to a Chinese OEM, converting fixed costs to variable.  The module plant, which was incorporated in 1996, takes raw (‘open cell’) panels produced by JDI and adds backlighting, a frame, and a number of other components to create a display that can be used in a device.  The subsidiary had annual sales between $394m and $487m over the last three years, but had net margins of 0.6% to 2.8% over the same period.  The sale price, which is subject to a final audit, is ~$139m, which represents ~32.2% of the average of sales over the last three years.  The sale is expected to be completed sometime between January and March of next year as it must be approved by a number of government organizations, and JDI will continue to use the module plant as a customer of the buyer, DSBJ (002384.CH), an OEM and assembler based in Suzhou.
While the last few years have been quite difficult for Japan Display as its primary customer, Apple (AAPL) has converted from LCD displays to OLED displays for its iPhone line, with JDI having little or no OLED capacity[1].  The company brought in Scott Callon, the Chairman of Ichigo (2337.JP), and the investment firm that bailed out JDI in 2020, as Chairman and CEO in to guide the company toward a new business model.  Since then the new JDI management has closed one of four JDI LCD fabs in Japan and sold another module facility to Wistron (3231.TT) and while the company is still losing money on a quarterly basis the losses are considerably smaller than in the past and the company’s product portfolio is more oriented toward newer technology where JDI has an edge.  All in, while it is both a difficult display environment and a hard road toward profitability, JDI seems to be making considerable progress toward regaining some of the statue the company had as a major supplier of small panel displays years ago.


[1] JDI shares a board member with JOLED 

Photolithography is the platform on which the semiconductor industry is built.  The concept of photolithography etch is fundamental to almost all semiconductor production and is the most common way in which structures at the micron level are formed.  In the display space however, photolithography is used in the formation of the TFT (thin-film) electronics that control display pixels, but the pixels themselves, at least in OLED displays, are formed using the deposition of OLED materials through CVD (Chemical Vapor Deposition) tools that vaporize the OLED materials and deposit them through fine metal masks, essentially screens that form red, green, and blue sub-pixels that generate the millions of color combinations needed for full color displays. 
There are problems with OLED material deposition, one of which is the masks themselves.  They are made of INVAR, a nickel-iron alloy that is able to maintain shape and uniformity under the temperature conditions used in CVD (up to 500⁰C) but at the same time must be unusually thin and placed extremely close to the substrate to create precise sub-pixel placement.  The requisite thinness limits the size of these masks, as they begin to sag above Gen 6 substrate size, and the buildup of material on the mask surface requires they be cleaned and replaced regularly, pushing OLED display producers to look for alternative deposition methods.
One promising technique is ink-jet printing where multiple nozzles place OLED material droplets on the substrate as they move across its length.  This allows for precise control over the materials, resulting in a substantial reduction in the amount of OLED emitter material waste but in order for the material to pass through the nozzles, it must be put into solution which means mixing the emitter materials with a solvent which can change the characteristics of the OLED materials or require ‘soluble’ materials that are different from those used in CVD deposition.

AR/VR displays require very high resolution displays in order to keep the optic system from becoming confused about what it is seeing (similar to motion sickness) and such displays require pixel densities far above the 400 to 500 pixels/inch we see in current smartphones, but both CVD deposition and ink-jet printing fall short of these densities, pushing OLED display producers to look for other alternatives to boost their ability to  create high density pixel displays and that is where the aforementioned photolithography comes in.  Japan Display (6740.JP) has announced that it will be starting to sample displays to customers this year that are based on ‘maskless’ lithography based material patterning.
JDI’s eLEAP (environmental positive Lithography with maskless deposition Extreme long life, low power, and high luminance Any shape Patterning) is claimed to increase emission efficiency by 60%, which is more than 2 times that of the FMM method and is not limited to Gen 6 substrates.  The process is green in that it is more ‘environmentally positive’ without masks that need to be regularly cleaned and therefore uses less toxic material and produces less CO2 emissions.  JDI is combining this technology with its expertise in IGZO TFT backplanes to create what it calls a breakthrough in display technology.
While we cannot verify many of JDI’s claims, there are some points that are do make sense.  We expect that the JDI system involves the use of supercritical Carbon Dioxide, which is a form of ‘dry ice’ that is low-cost, non-flammable, and can be used as a developing solvent that does not degrade OLED materials, which are critically sensitive to water, air, and many of the solvents used in lithography, and possibly fluorinated solvents that have less onerous characteristics toward organic (OLED) materials.  Since lithographic patterning is only limited by the size and shape of the substrate, almost any shape display could be patterned in theory, and given that no metal masks are used, three of the claims are possible.

The one area that cannot be verified is, ‘Extreme long life, low power, and high luminance’.  JDI claims a lifetime improvement of greater than 3X over conventional deposition based OLED displays (see Figure 3) and a 2X improvement in Peak brightness.  We can understand the low power portion as JDI is pairing eLEAP technology with its expertise in IGZO backplanes, which have lower power demands than other backplane technologies, and the claim of higher luminance (subjectively ‘brightness’) seems to be based on the technology’s ability to increase the size of RGB sub-pixels by placing them closer together in each pixel, but neither have been verified, so these claims need to be verified.

​There have been a a number of smaller companies that have been researching using photolithography for OLED deposition, in particular IMEC (pvt) and Orthogonal (pvt), a Cornell spin-off, but JDI would be the first to commercialize the process if it is successful in creating customer demand, particularly from AR/VR display buyers who are always looking to increase resolution without excessive cost.  We expect it will take some time for JDI to develop its eLEAP technology to the point where a full scale production line could be built, but given the mature nature of photolithographic tools, and the use of same for the TFT side of the display business, it is certainly a possibility from an infrastructure POV and one that has less limitations than current processes.  Given JDI’s on and off relationship with Apple (AAPL), there has been speculation that the ‘significant customer interest’ JDI mentions in its press release is coming from Apple, but we hesitate to make such conclusions.  All in it would be a very important step for JDI if they were able to commercialize this technology, giving them an advantage in the high resolution display market, but we expect the timeline for a viable commercial product is still some time away.

Japan Display (6740.JP) has decided to close a small (27,000 sheets/month) Gen 3.5 LCD fab in Higashiura, Japan by the end of the company’s 2023 fiscal year, which ends in March.  The fab currently produces displays for cameras, wearables, automotive, and VR, with the production of those products to be transferred to JDI’s remaining fabs in Japan.  The 259 employees at the fab will be offered employment at other sites at JDI and the company is evaluating whether the land and buildings can be sold or used for other purposes.  The company will record expenses related to the closing in the 3/2023 fiscal year, although the amount is currently under review.
The Higashiura fab was commissioned in September 1999 and has therefore been in service for over 20 years, making it less efficient than current modern fabs.  JDI has three fabs remaining in Japan, older Gen 4.5 lines in Mobara and Ishikawa, and newer Gen 6 lines in Hakusan and Mobara.  We expect the impact of the closing will be a financial positive for JDI after closing costs, as production will move to newer fabs that will likely see higher utilization rates.  JDI has been working toward reducing its breakeven for a number of years and while the company is getting closer to its goal, breakeven will not be achieved this fiscal year (3/22) as the decline in JDI’s traditional mobile display business has been severe this year while increases in the non-mobile display business have been relatively modest.  We expect the closing of the Higashiura fab will help to lower the 3/2023 breakeven further, however JDI needs to continue to expand their non-mobile business further before they can return to profitability, which we expect could occur in the 2024 fiscal year.