Japan Display Inc. can blame industry and geopolitical headwinds if it likes. They’re certainly the excuses du jour for the tech industry’s woes.
From expecting a 10 percent rise in revenue as well as operating profit of around 12 billion yen ($110 million), the Tokyo-based supplier of screens used in smartphones, tablets and cars now expects full-year sales to drop 10 percent and an operating loss of more than 20 billion yen. It all came down to the three months ended Dec. 31, JDI said Thursday afternoon.
The news follows a Jan. 22 Wall Street Journal report saying Taiwan’s TPK Holding Co. and Chinese state-owned Silk Road Fund were in talks to invest up to 60 billion yen in JDI for a stake of about 30 percent. Kyodo reported earlier this week that the investment could be as high as 80 billion yen for as much as a 50 percent stake.
These two developments are related. A bad year doesn’t always necessitate outside investment, but a net loss for the fiscal year ending March 31 would be JDI’s fifth unprofitable year in a row. Now the company has confirmed it’s seeking funding and partners:
“JDI is continuing negotiations with several parties to strengthen its market competitiveness and financial base, with the aim of reaching an alliance agreement in the near future.”
More money won’t change the fact that JDI’s management has been unable to steady the ship. In fact, it may simply enable the same executive team to keep making the same mistakes. While bringing in partners may help, it’s unlikely even that will alter the current trajectory.
Instead of funding and alliances, what JDI needs is new management.
A foreign buyout may be the best move. Foxconn Technology Group’s 2016 purchase of Sharp Corp. is Exhibit A.
Within a year of Foxconn’s Tai Jeng-wu taking over management, Sharp’s display business returned to profitability, and crucially, it stayed there. I wrote at the time that what Foxconn saw in Sharp “parallels what the rest of the world sees in Japan as a whole: brilliant engineers and leading-edge technology hobbled by costly manufacturing and inefficient management.”
JDI still has great technology and engineers, as evidenced by the fact that Apple Inc. keeps coming back to buy its displays, and foreign companies are keen to take a stake. Sharp’s turnaround is proof that there is indeed money to be made in Japan’s display sector. The inability to consistently sell products for a profit suggests that JDI’s management is the real problem.
The global hardware sector is facing a sustained slowdown, especially among devices that use screens as an interface (compared with smart devices such as speakers). There’s probably no better time for Japan Inc. to let someone else return a great company to glory.
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Tim Culpan is a Bloomberg Opinion columnist covering technology. He previously covered technology for Bloomberg News.
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