JDI Closes Plants in Bid to Become Less Seasonal

Japan Display has announced a series of structural reforms, as it seeks to move to a business structure that is less influenced by seasonality than its current main market (smartphone displays).

Since July last year, JDI’s new leadership team has focused on lowering manufacturing costs and fixed costs, as well as the break-even point. The company has now decided that a further strengthening of its structure is necessary, which will include a redesign of its business portfolio.

As part of the move, JDI will undertake the partial closure of its small-medium LCD panel manufacturing business in Japan, of which it currently owns four. These range from G3.5 to G6. Production will end at two ‘economically unproductive’ older generation lines, while related property and equipment facilities will be retained.

A partial section of the Higashiura Plant G3.5 line (LTPS) is planned to be closed in April 2016. The G4.5 line in Mobara City (a-Si and LTPS) will be closed in December 2016.

In addition to the front-end lines, JDI will restructure its overseas back-end lines. The firm has been exploring the possibility of consolidating (or partially selling) its Chinese manufacturing subsidiaries. For now, an impairment loss will be recorded, concerning assets that have been operating at a low utilisation rate. Consolidation options will continue to be explored.

An early retirement support programme is also being introduced for employees based in Japan who are aged 45 and over, and meet certain criteria. This is being done to achieve an optimised company age structure and revitalise the organisation, says JDI.

It is estimated that the costs for the front-end line discontinuation and back-end impairment loss will total approximately ¥14 billion ($125 million), which will be recorded as an extraordinary loss in the 2016 financial year. However, it is expected that they will deliver fixed cost savings of ¥17 billion ($152,100) annually (approx ¥8 billion ($71.6 million) in 2016).

JDI’s forecast for its 2015 financial year, ending on the 31st March 2016, is for net sales of ¥1 trillion ($8.9 billion) (a 30.4% YoY rise), with operating income of ¥22 billion ($196.9 million) (up 327.4%).

Analyst Comment

JDI is the market leader for LTPS smartphone panels. However, competition has been rising in the market as more panel makers have entered the market, such as LG Display, CSOT and Innolux. Most of these makers have been investing in G5.5 and G6 lines, and so phasing out its older generation lines makes sense for JDI. (TA)