Apple Reduces Japan Display's Payment Periods to Improve Panel Supplier's Short-Term Financing

[MacRumors]

Apple will shorten Japan Display's payment periods in an effort to improve the panel supplier's short-term financing situation, reports Reuters, citing a source familiar with the matter.

JDI CEO Minoru Kikuoka, who took on the role in September, told reporters on Wednesday that concerns about an immediate cash shortfall had been allayed but did not mention Apple by name.

Japan Display still owes Apple nearly $900 million for the $1.5 billion cost of building a smartphone screen plant four years ago and the U.S. tech giant is also allowing the supplier to slow the pace of those repayments.

The agreement to ease payment conditions, which also includes agreements from other business partners, would improve JDI's short-term financing situation by as much as 40 billion yen ($370 million), said Kikuoka.

JDI recently lost out on Chinese funds from a key investment firm leading a proposed bailout deal, but Apple reportedly agreed to double its own investment to aid in the LCD panel maker's restructuring.

JDI relies on Apple for more than half of its sales, and supplies the liquid crystal display panels for the iPhone 11, which has helped support its bottom line. However, its mainstay LCD business has been hit heavily by the growing adoption of OLED panel technology.

Article Link: Apple Reduces Japan Display's Payment Periods to Improve Panel Supplier's Short-Term Financing

 

[69Mustang]

Curiosity says that I want to see the pics that JDI must be using to blackmail Apple to force them to keep helping. The sheer amount of effort Apple expends to keep JDI afloat says that I really don't want to see those pics.

 

[bassanoclapper]

Wouldn’t slowing the pace of repayments increase payment periods instead of reduce them?

 

[69Mustang]

Wouldn’t slowing the pace of repayments increase payment periods instead of reduce them?

You're combining two separate processes.
Process 1: Shortening the payment periods to JDI. Apple will lessen the time between product delivery and payment. Example: JDI normally delivers product to Apple and expects payment within 30-45 days. Now JDI delivers product and gets payment within 14-20 days. They get their cash quicker to help in the short term.

Process 2: Extend repayment schedule from JDI. Example: JDI has a quarterly repayment schedule. Apple and other suppliers let them hold onto that money and allow them to make biannual or yearly payments. They keep more of their cash to help them in the short term.

 

[junior]

Curiosity says that I want to see the pics that JDI must be using to blackmail Apple to force them to keep helping. The sheer amount of effort Apple expends to keep JDI afloat says that I really don't want to see those pics.

They really really want competition to exist in the display business so they can stop their over reliance on a couple of brands (Samsung in particular). Well that and the 900 million they’re owed.

 

[PickUrPoison]

Wouldn’t slowing the pace of repayments increase payment periods instead of reduce them?

Though the Reuter’s article isn’t very clear, it looks like payments from Apple to JDI for panels they buy and repayments from JDI for a loan Apple made to them are being modified.

60% of JDI’s revenue comes from Apple, and it seems like Apple is shortening their payment periods, e.g. even though Apple might contractually have 60 days to pay for panels it buys from JDI, they might be paying in 7 days instead.

Separately, Apple is delaying JDI’s repayments due to Apple for a loan Apple gave them to build a manufacturing facility some years ago.

 

[69Mustang]

They really really want competition to exist in the display business so they can stop their over reliance on a couple of brands (Samsung in particular). Well that and the 900 million they’re owed.

Two things.
1.They rely on Samsung for OLED panels. So JDI doesn't help with lessening the reliance on Samsung since JDI doesn't do OLED. LG and maybe BOE can help with the Samsung issue. Apple already has several suppliers for LCD panels so they don't really have an over reliance on any one vendor for that product.

2. Continued support of JDI doesn't really get Apple that much closer to recouping that $900 million anytime soon... if ever, imo. They are paying JDI quicker and allowing JDI to repay them slower. JDI isn't really making any money (that $1.5B plant isn't suddenly going to be profitable) and most of what they do make comes from Apple.

 

[Sasparilla]

Considering Apple is supposed to go all OLED next fall (base 11 replacement is supposed to go OLED), it would seem time is running out here...Apple will still need LCD's for the Xr and 11 but sales numbers will just melt away.

In light of this I was surprised at that article talking about the iPhone 8 refresh next spring and Apple talking with LG for the display - I would have thought Apple would have sourced the panels from Japan Display so they could pay off that loan (and thought LG was OLED smartphone panels).

 

[cocky jeremy]

Option 1) Take longer to be paid
Option 2) Have your vendor that owes you a lot of money potentially go out of business while unable to pay you back.

Yeah, this looks like a good choice.

 

[now i see it]

convinces Japan Display that a larger LCD manufacturing plant is needed for future iPhones... then switches to OLED displays

 

[BluefinTuna]

I’m guessing that Apple will need JDI to crank out massive amounts of displays for the iPhone SE2 soon.