Sharp takes over JDI, and the future is unknown?

TPK Technology, a touch panel manufacturer, announced its withdrawal from the investment in Japan Display Inc. (JDI). There are market rumors that Sharp, a Japanese panel manufacturer under Foxconn, may invest in JDI's private placement. However, as of now, judging from the synergy of the technical merger of both parties, the source of funds, and the attitude of the Japanese side, the probability is actually not high.

From the perspective of technological synergy, OLED panels are indeed the field that Sharp is actively trying to advance into. It is also one of the products that Hon Hai Chairman Terry Gou was willing to let Sharp continue to invest in research and development when Hon Hai acquired a stake in Sharp. He even wrote down the relevant investment plan in black and white in the plan for acquiring a stake in Sharp.

However, from April 2016 Hon Hai's shares in Sharp to the present, the current results of Sharp on OLED panels are that their own brand mobile phones have finally adopted their own OLED panels. As for the OLED panel entering the Apple iPhone supply chain, it is still an unacceptable goal.

As for JDI's capabilities in OLED panels, at present, it is worse than Sharp, and its mass production capacity is almost non-existent. Therefore, from the perspective of overall efficiency, it has already been rated a "cross".

In terms of funds, JDI suffered a full-year after-tax loss of 109.4 billion yen in the 2018 fiscal year, while Sharp made a full-year profit of approximately 74.2 billion yen last year. However, JDI has been losing money for five consecutive years. For Sharp, investing in JDI means recognizing JDI's losses. It is questionable whether Sharp is willing to sacrifice itself.

Finally, there is Japanese public opinion. When Foxconn first invested in Sharp, there was a wave of opposition in Japanese society. People did not want to see a century-old Japanese company fall into the hands of Foxconn. The Japanese government even established INCJ (Japan Public-Private Fund) to bid with Foxconn for Sharp. However, in the end, because the conditions proposed by INCJ were not as good as those of Foxconn, Sharp finally chose Foxconn.

However, this kind of public pressure has not disappeared. When Foxconn intended to acquire Toshiba's semiconductor department, it suffered a setback. Now if Foxconn wants to acquire JDI, it is worth observing whether it will trigger another public backlash.