Nintendo's Sole Supplier for Switch Screens Is Facing Financial Turmoil

nin switch

The sole supplier of Nintendo Switch displays, Japan Display Inc. (JPI), is in a bit of financial trouble. According to The Wall Street Journal, JPI reported a net loss of ¥31.5 billion ($286.4 million) for the financial quarter ending in June, and things don't seem to be looking up. Today it's come to light that JPI announced that it wouldn't rule out a partnership with a Chinese or Taiwanese company to survive. This, despite JPI's goal to be the number one domestic display business in Japan.

According to the WSJ, Japan Display executives apologized today for poor management of the company, and a drastic restructuring is due to take place imminently. This initiative will result in the loss of 3,700 jobs worldwide -- that's about 30% of JPI's current total workforce. Overseas operations will understandably be slashed, but more injurious is the fact that JPI will be shutting down domestic factories as well.

“We continue to face very severe market conditions,” financial chief Takanobu Oshima said, predicting a 15% to 25% drop in revenue in the year ending March 2018 from a year earlier. Much of this loss is due to the fact that Apple, JPI's most prominent and lucrative partner, is moving away from liquid crystal displays in favor of OELD screens. Currently iPhone displays make up over 50% of JPI's revenue, and as Apple makes that shift to OLED, growth and revenue will only continue to retard for the struggling display manufacturer.

What this means for Nintendo is unclear, but it seems logical to assume that JPI needs Nintendo more than Nintendo needs JPI. I reached out to Takashi Mochizuki, the author of the WSJ article, to ask whether the recent contract with Nintendo could alleviate some of JPI's revenue woes. He stated (I'm paraphrasing) that Nintendo's business isn't that big for JPI. The Switch uses cheaper panels, and the contract only calls for roughly 10 million units (possibly up to 18 million depending on Switch production increases), so in the end that revenue is a drop in the bucket compared to Apple's once-enormous demand.

If Japan Display Inc. does in fact reach out to partner with an international company, it could yet be salvaged. If this happens, we expect that Nintendo will renew its contract with JPI in order to show continued support of a domestic company. If things at JPI continue to go south, well, there's always that Nintendo Switch revision we've been speculating over -- the Switch Light or Switch Plus -- and that model will feature a new screen from a new manufacturer.

Hopefully it doesn't come to that. We'll keep you posted.