HONG KONG - Cracks at Apple are appearing in Asia's supply chains. The iPhone-screen maker Japan Display is in "advanced talks" for a financial lifeline with investors including a Chinese state-backed fund, the Wall Street Journal reported on Tuesday. Weak sales of handsets have hurt. Any such support for the Tokyo-listed company would point to the severe ripple effects of Apple's woes, and herald pain for other suppliers like Taiwan’s Foxconn.

In exchange for a 30 percent stake in the ailing Japanese group, Beijing's Silk Road Fund has teamed up with TPK Holding , a Taiwanese touch-screen technology outfit, to jointly invest 60 billion yen, or $547 million, according to sources cited by the Journal. The duo will also get a majority say on the board, and will have an option to increase their stake in the future, the newspaper added.

The capital injection, almost equivalent to Japan Display's entire market value, will be a much-needed helping hand. The outfit, which counts a Japanese government-backed fund as its largest shareholder, was created by merging the struggling display-making units of Hitachi, Sony and Toshiba seven years ago. But cutthroat competition from Chinese rivals has helped keep the company in the red since 2015. Moreover, Japan Display has failed to keep up with the likes of South Korea's Samsung Electronics in developing next-generation screens for high-end models like Apple's $1000 iPhone X.

Bleak forecasts for smartphone sales this year are a further headache. Japan Display, which relies on mobile devices for 60 percent of total sales, in November cut its full-year revenue growth forecast from up to 20 percent to between 5 and 15 percent.

In the end, the company’s pain is as much Apple's. The Cupertino giant shocked markets earlier this year, when boss Tim Cook sounded a rare warning that the company would miss its top line guidance. Apple's troubles, blamed on a slowing Chinese economy, will certainly be felt by its other Asia suppliers. Shares of the $32 billion handset-assembler, Foxconn, for instance, have already cratered 30 percent over the past six months. Efforts to limit the negative Apple effect are in full swing.

CONTEXT NEWS

- Japan Display, which specialises in making liquid-crystal display screens, is in "advanced talks" to sell a 30 percent stake to Taiwan-based TPK Holdings and Chinese state-backed Silk Road Fund, the Wall Street Journal reported on Jan. 22, citing people familiar with the matter.

- The size of the investment could be around 60 billion yen ($548 million), according to the Journal.

- In December, Japanese broadcaster NHK reported that Japan Display was in talks with Chinese groups for a capital injection. The company responded at the time, saying that it has been negotiating with outside parties including Chinese investors about alliances, but nothing has been decided.

- Shares of Japan Display closed up 19 percent to 95 yen on Jan. 23.

(Editing by Una Galani and Katrina Hamlin)

© Reuters News 2019