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Japan Display's reliance on iPhone orders rises in 2013-14

By Sophie Knight - TOKYO (Reuters) Japan Display Inc, the world’s biggest smartphone LCD maker, got a third of its revenue from Apple Inc in the year to March, growing more reliant on the iPhone even as it seeks to bump up orders from fast-growing Chinese smartphone makers.

The display maker, which supplies screens for the iPhone along with Sharp Corp and LG Display Co Ltd, is expected to further increase sales to Apple this year with the release of the iPhone 6, which supply chain sources say will sport larger panels than previous generations.

But while the popularity of the iPhone makes Apple hard to turn down – 153 million handsets were sold in 2013, up 13 percent on the year – doing business with the California company can be a mixed blessing, sources close to suppliers say.

Apple squeezes its parts suppliers hard on price, resulting in narrow margins, the sources say, while a high reliance on its product cycle can cause large swings in quarterly profits.

Japan Display said in May that it expected to log an operating loss for the April-June quarter, but foresees a rebound in shipments to Europe and the United States in the following three months to September. That is when Apple is widely expected to launch its next-generation iPhone 6, although Japan Display did not name which customers would boost shipments.

Japan Display said in a securities filing on Tuesday that sales to Apple accounted for 31 percent of its revenue, or 190.5 billion yen ($1.87 billion), for the year ended March 31, up from 20.9 percent in the previous year.

Investors are concerned about how long Apple can sustain its share of the smartphone market as its foothold in the fast-growing Chinese market is limited by the rise of relatively high-specification, low-cost smartphones offered by local rivals such as Xiaomi.

Japan Display is courting those Chinese newcomers for business, aiming to triple revenue to China to 180 billion yen ($1.76 billion) in the business year to March 2014, or about a quarter of total forecast sales.

Chief Executive Shuichi Otsuka told Reuters in an interview in April that he expected the Chinese smartphone market to reach about 450 million handsets in 2014, with more than half employing the kind of high-definition panels that Japan Display makes.

But business may be less lucrative than the company had hoped with Chinese manufacturers, which have been pushing for lower prices. Japan Display cut its profit forecast for the year that ended on March 31 after price negotiations for Chinese handset orders fell through.

Sources with knowledge of the matter have said Japan Display will not supply the displays for Apple’s planned smartwatch, dubbed by market watchers as the iWatch. The curved organic light-emitting diode panel will be produced by LG Display, the only Apple panel supplier capable of volume production of such screens.

(Additional reporting by Reiji Murai; Editing by Matt Driskill)

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