* Strong demand from China for high-resolution screens
* Falling orders from domestic handset makers
* Competition with Sharp heats up as both pursue Chinese
(Adds quotes from CEO, details on company strategy)
By Sophie Knight
TOKYO, Aug 7 Japan Display Inc posted a
deeper quarterly operating loss than expected amid investor
concerns that the world's biggest maker of LCD panels for
smartphones and tablets is struggling to maintain its
competitive edge against its rivals.
The Apple Inc supplier said on Thursday that an 11
percent drop in prices for its panels in the April-June quarter
compared to a year earlier and an 8.5 billion yen one-off loss
on a re-evaluation of its inventory led it to an operating loss
of 12.7 billion yen ($124.2 million) for the quarter.
That lagged analyst expectations of a 5.9 billion yen loss,
the average of five estimates according to Thomson Reuters
Starmine. But Chief Financial Officer Yasuhiro Nishi said it was
in line with company expectations of a 13 billion yen loss after
the company said in May it was expecting a loss of around 10
Japan Display has seen its shares skid 37 percent since the
firm's initial public offering in March on doubts it can
maintain its throne at the top of the LCD display panel market
against competitors like Sharp Corp and LG Display Co
Analysts say Sharp and Japan Display's strategies are
essentially the same: capture demand for premium,
high-resolution panels from rapidly rising Chinese handset
makers. And some say Sharp is posing a greater threat than
Last week, Sharp said it expected revenue from Chinese
handset makers to expand fivefold in the first half of the
business year to Sept. 30 to 100 billion yen and anticipates
double that for the full year as it expands production of full
high-definition (HD) panels.
Having started from a higher base, Japan Display said
revenue from Chinese handset makers was 2.4 times higher than
the same quarter last year, a slightly slower pace than the
2.7-fold increase to 180 billion yen it expects in the current
year to March 31.
"Demand from Chinese makers is strong, but global shipments
haven't really progressed. Domestic orders have fallen
especially," Chief Executive Shuichi Otsuka said at a briefing
after the earnings were released.
Sony Corp, which sources say orders panels from
Japan Display, cut its sales target for its Xperia smartphone by
14 percent last week. Many other Japanese firms have quit making
smartphones due to foreign competition.
Analysts are also concerned that Japan Display is becoming
increasingly reliant on Apple for sales, with UBS Securities
predicting the iPhone maker will contribute 34 percent of Japan
Display's total revenue this year, up from 31 percent in the
year ended March 31.
Sources say Japan Display is currently producing two
different-sized panels for Apple's iPhone 6, which is
anticipated to be launched in September.
The company said it expected to pull into the black in the
current quarter and held its full-year forecast of a 40 billion
yen operating profit, saying demand from China remained strong
and that falling prices were bottoming out.
Shares in Japan Display, formed from the LCD units of Sony
Corp, Hitachi Ltd and Toshiba Corp,
closed 1.4 percent higher at 567 yen before the results were
($1 = 102.2600 Japanese yen)
(Additional reporting by Reiji Murai; Editing by Matt Driskill
and Ryan Woo)