Japan Display Plans $4 Billion IPO
TOKYO — Japan Display Inc., the world’s biggest maker of displays for smartphones and a key Apple Inc. AAPL -0.33% supplier, is aiming to raise up to $4 billion in what would be Asia’s biggest initial public offering so far this year.
The move, if successful, would represent a rare turnaround for Japan’s manufacturing industry, which has been battered by the rise of Chinese and South Korean rivals.
The company has thrived by taking advantage of its manufacturing scale and focusing its resources on small and medium-size displays, despite earlier criticism that Tokyo was throwing good money after bad when it helped set up the firm in 2012.
Japan Display was formed from the loss-making liquid crystal display units of Hitachi Ltd. 6501.TO -1.77% , Toshiba Corp. 6502.TO -0.24% and Sony Corp. 6758.TO -1.50% , with a Japanese government-backed fund pouring $2 billion into the combined entity.
In addition to making displays for Apple’s iPhone 5s and iPhone 5C, Japan Display’s client list includes other top U.S. and Asian smartphone makers, according to people in the industry.
The display maker on Friday gave the first concrete numbers on its lucrative business supplying Apple, saying that the U.S. company accounts for nearly a third of its revenue.
Apple representatives in Tokyo couldn’t immediately be reached for comment.
Japan Display grabbed a top share of 17% in the global market for small and medium-size LCD panels by value of goods shipped last year, according to estimates by research firm NPD DisplaySearch.
Japan Display said Friday it would offer up to 158 million new shares in the IPO. That could raise ¥170 billion or about $1.7 billion. The company intends to use the money to boost its production capacity and to develop new technologies. In addition, the current shareholders will unload part of their stakes, bringing the total IPO value to an estimated $4 billion.
While Japanese companies have lost out to Asian rivals in producing the panels that go into big televisions, Japan Display and Osaka-based Sharp Corp. 6753.TO -1.91% have maintained their technological edge in making high-resolution smaller displays.
The Japanese companies have proved skillful in improving the energy efficiency of their screens—allowing Apple to boast of longer battery life—and in helping smartphone makers make their devices thinner. Japan Display integrated touch sensors into its liquid crystal display, eliminating the need for a separate touch-screen layer.
The technological lead for Japanese makers has increased especially after Apple’s iPhone 5 came out, said Hiroshi Hayase, a Tokyo-based analyst for NPD DisplaySearch.
Still, analysts say rivals such as Samsung Electronics Co. 005930.SE +0.23% and Taiwan’s AU Optronics Corp. 2409.TW +0.43% are quickly catching up, and display prices are coming down.
“The commoditization of smartphones is already starting. It’s uncertain whether Japanese companies can make the kind of investment needed to maintain their edge in technology as prices go down,” Mr. Hayase said.
People involved in the deal said they expected solid demand for Japan Display shares, in part because investors are reassured that the company is backed by government money. Innovation Network Corp. of Japan, a government-backed investment fund, currently holds about 70% of Japan Display, while Sony, Toshiba and Hitachi hold a little less than 10% each.
For the nine months through December, the company booked revenue of ¥483 billion, or just under $5 billion, of which 32% was from Apple orders. That was slightly higher than the revenue it brought in during the entire year ended March 2013. Japan Display said it made a small profit in the year ended March 2013, but didn’t give profit figures for the current fiscal year.
The IPO would be Japan’s largest since the $8.5 billion offering in 2012 for shares of Japan Airlines Co., which relisted in Tokyo after a bankruptcy filing. The final offering price for Japan Display is set to be announced March 10.
Japanese shares have slumped 12% this year following a stellar rise in 2013 on the back of investor hopes for Prime Minister Shinzo Abe’s policies to galvanize the economy. Still, bankers say the country’s broader environment for financing remains strong.
On Friday, Hitachi Ltd. said it would relist a battery and projector subsidiary, Hitachi Maxell Ltd., in an IPO worth about $750 million. The electronics conglomerate had made Hitachi Maxell a wholly owned subsidiary in 2010 after the unit suffered steady losses. But as Hitachi Maxell’s earnings recovered, the parent decided to relist its shares.
– WALLSTREET JOURNAL