Apple supplier Japan Display teams up with China’s HKC as it seeks turnaround

News of the tie-up, coming against the backdrop of Washington’s recent push to curb China’s ability to make advanced chips, sent Japan Display’s shares up more than 13%, putting them on track for their biggest one-day gain in a year.

Formed a decade ago when the LCD businesses of Hitachi Ltd , Toshiba Corp and Sony Corp merged in a government-brokered deal, Japan Display has been selling assets in a drive to return to profit after years in the red.

There was a possibility for a capital tie-up in future, chief executive Scott Callon told a briefing in Tokyo, adding that the alliance was likely to build more than one new plant in China.

“This is not just a business alliance, but a significant strategic alliance,” Callon said, adding that the move would bring together Japan Display’s technology and HKC’s cost competitiveness and large production capacity.

The two companies will jointly plan and build fabs using Japan Display’s eLEAP OLED technology, targeting mass production in 2025, the firm said.

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HKC did not immediately respond to a request for comment. Last month, Japan said it would curb exports of 23 types of semiconductor manufacturing equipment, though without specifying China as the target, but adding that manufacturers would need to seek export permission for all regions.

Queried about the curbs, Callon said Japan Display would not be making capital investments in new plants, adding that its products were for commercial use and would probably not be affected.

“I don’t think there are any security issues,” he said.

The company makes the small displays used in smartphones, cars and other products. It is majority-owned by Cayman Islands-based Ichigo Trust. Callon is also the head of Ichigo Asset Management, an affiliated Japan-focused investment manager.