Hon Hai is vying with BOE to grab JDI shares

Source: Content from Economic Daily, thank you.

China's leading LCD panel company BOE announced its intention to invest in Japan Display Inc. (JDI), which is undergoing business reconstruction, and is officially competing with Sharp, in which Foxconn has a stake, for an investment in JDI.

JDI is the leader in small and medium-sized panels in Japan. Apple accounts for more than half of JDI's revenue and is also its largest customer. JDI mainly supplies low-temperature polycrystalline silicon (LTPS) panels used in iPhone 7 and 7 Plus, but its business is not doing well and it is facing financial crisis.

According to JDI's plan, the company will decide on a strategic partner to rebuild cooperation with before the spring of 2018. Once BOE is also interested in acquiring a stake in JDI, if multiple companies express their willingness to acquire a stake, the final decision may be made through bidding. Hon Hai Group will compete head-on with BOE for the dominance of JDI, and it will also be the first time that the panel industry on both sides of the Taiwan Strait has competed in a case of an international giant acquiring a stake.

Sharp President Tai Jeng-wu has previously publicly expressed his intention to invest in JDI, and said that if Sharp takes the lead, he is confident that JDI can turn losses into profits, and promised to maintain employees' employment and technology will not be leaked. He also mentioned that under the restrictions of Japan's antitrust regulations, although Sharp cannot participate in JDI, there are still many ways to cooperate, and panel equipment and material suppliers should be included in the Japanese panel industry alliance.

Terry Gou, chairman of Hon Hai Group, regards panels as important strategic materials. The industry believes that if Sharp successfully invests in JDI or even obtains the operating rights, Hon Hai Group will be able to obtain the long-awaited iPhone panel orders. BOE's announcement of investment in JDI at this time was interpreted by the industry as the two major groups on both sides of the Taiwan Strait competing to enter the Apple panel supply chain.

Hon Hai Group has been launching international mergers and acquisitions and investment projects frequently in recent years. It previously acquired a stake in Sharp, but it was not very successful in the Toshiba semiconductor project. The US, Japan and South Korea camp represented by US private equity firm Bain Capital "blocked" it with 2 trillion yen (about NT$546 billion). This time, JDI is facing competition from BOE again, which has attracted much attention.

Wang Dongsheng, Chairman of BOE, attended the Nikkei World Business Leaders Conference in Japan and delivered a keynote speech entitled "From Display Devices to Smart Ports - The Way to Win in the Internet of Things Era". Regarding BOE's intention to invest in JDI, Wang Dongsheng said that facing the challenges of the Internet of Things era, it is difficult to succeed alone, and only by uniting can there be a chance. According to a report by Japan's Tokyo TV, Wang Dongsheng said in an exclusive interview that he is willing to provide assistance to JDI in its operational reconstruction.

The Nihon Keizai Shimbun disclosed that JOLED, a subsidiary of JDI, has developed a process technology that can save a lot of costs and is expected to become Japan's first panel manufacturer to achieve mass production of OLED (organic light-emitting diodes). As soon as the news came out, investors cleared out their previous short positions in JDI, stimulating JDI's stock price to soar.

Sources said that JOLED is seeking to raise 100 billion yen (about NT$27.18 billion) to invest in OLED mass production plans, and has inquired about investment intentions from more than 10 Japanese companies including SONY, Canon, FUJIFILM, Nikon, and SUMITOMO CHEMICAL, hoping that each company will invest 5 to 10 billion yen.

The report pointed out that JOLED has developed an inkjet process technology that can be used to manufacture OLEDs, and it is expected that mass production of OLEDs will start at JDI's factory in Nomi City, Ishikawa Prefecture as early as 2019. This new process requires less initial investment than the current production process and can reduce material consumption during the manufacturing process. Taking TV panels as an example, the new technology is said to reduce production costs by 30-40% compared to the current process.

If the news is true, it means that the Japanese panel industry is expected to reverse the trend and catch up in the new generation of panel OLED technology, ending the current situation where South Korean companies such as Samsung Electronics (SAMSUNG) almost monopolize the market.

JOLED is the result of the merger of JDI, Panasonic and Sony's OLED businesses. The Japanese government is behind it, aiming to ensure the survival and development of Japan's panel industry. The Japanese public-private fund "Industrial Innovation Corporation" (INCJ) currently holds about 75% of JOLED's shares, JDI holds 15%, and Panasonic and Sony each hold 5%.

Who do you think will get JDI shares?

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