Patently Apple reported last year that Japan Display was the leading iPhone 6 display supplier for several quarters. Months later Apple reportedly sent a notice to their suppliers that they were switching to OLED displays for future iPhones. Because of Apple's secrecy, they only let their partners know of any shift until the last possible moment. That policy has hurt Japan Display because they got caught totally flatfooted investing in equipment to keep their lead for Apple's LCD display business. Then came the news/rumor that Samsung had won the first contracts for Apple's first OLED displays. That news hurt LG as well as Japan Display because they had to take a hard shift in a new direction much faster than anticipated and completely retool in order to get up to speed. With other OEMs chipping away at gaining more of Apple's display business and not being prepared for Apple's shift to OLED, the Japanese Government is seriously considering a move of divesting itself of its stake in the unprofitable Japan Display, according to a new Wall Street Journal (WSJ) report that was published late last night.

The comment by Hiroshige Seko, a confidant of Prime Minister Shinzo Abe, comes as Japan Display Inc. is in talks about getting further support from its top shareholder, government-backed fund Innovation Network Corp. of Japan. Japan Display, a top supplier of displays for Apple's iPhones, recorded losses in the past two business years because of tougher competition, a stronger yen and slowing iPhone sales.

The government-backed INCJ created Japan Display in 2012 by combining display operations from Sony Corp. , Hitachi Ltd. and Toshiba Corp. The company had an initial public offering in 2014 but quickly ran into trouble, and its stock has been trading at around a fifth of its IPO price of ¥900 (about $9). INCJ remains Japan Display's top shareholder with a 35.6% stake.

The WSJ report noted that "Mr. Seko listed two possible approaches to Japan Display—keeping it under Japanese ownership at all costs, or concluding that the business is commoditizing and doesn't have to be kept in domestic hands.

'Right now, where it's effectively an Apple contractor and their performance automatically gets worse when Apple's performance gets worse—that kind of situation just doesn't work,' he said.

However, no decision has been reached on Japan Display's future, he said, and he is open to any arguments about the company's importance in advancing the nation's technology edge."

It's a catch 22 situation for Japan Display because they need new funding to invest in OLED technology so as to not lose all of Apple's business completely, but by doing so, they prove the government's argument that they're behind the curve with Korean competitors and must rely on Apple's business.

In early 2015 it was rumored that Apple was considering to invest in a new plant for Japan Display. With the Japanese government warning of a possible pull-out of their stake in the company if they're unable to shift to more profitable markets, Apple may be the only lifeline left to keep them in business.

Japan's Sharp was another one-time star in the display market that suffered by stiff competition from Samsung and LG. Foxconn acquired them in March and is quickly ramping up their OLED game plan to win a portion of Apple's iPhone business. So at the moment, it's not looking good for Japan Display.

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