Photo/IllutrationA Japan Display plant in Hakusan, Ishikawa Prefecture (Asahi Shimbun file photo)

A consortium of Taiwanese and Chinese companies seems to be getting cold feet about investing heavily in Japan Display Inc.

That is not really surprising given the abysmal financial track record of the liquid-crystal display manufacturer established in 2012 through the merger of the LCD operations of Hitachi Ltd., Sony Corp. and Toshiba Corp.

On May 15, Japan Display announced financial results for the fiscal year ended March 31 that showed a fifth straight year of losses. It recorded a net loss of 109.4 billion yen ($994 million) and with a capital-to-asset ratio of just 0.9 percent, the company was teetering on the brink of insolvency.

In April, Japan Display announced that the three Taiwanese and Chinese companies would inject up to 80 billion yen in capital.

But it now turns out the companies have asked Japan Display to find other funding sources so they can reduce the amount of their investment.

Their obvious lack of confidence in Japan Display means that unless new sources of funding are found, and soon, Japan Display's plans to restructure will fall apart.

Close monitoring of Japan Display's assets by the three companies uncovered a situation much worse than originally thought, according to several sources.

Japan Display has approached a number of foreign investment funds about getting involved, but so far there have been no takers.

Even the Innovation Network Corp. of Japan (INCJ), Japan Display's leading shareholder, is hesitant about pouring more money into the company.

INCJ in April extended a 20-billion yen loan to Japan Display to temporarily tide it over. If the Taiwanese-Chinese group does not come through, Japan Display could find itself effectively bankrupt within a month or two.

Japan Display announced April 12 that it would accept financial input from the three companies, but they have delayed formal decisions on approving the injection of funds.

On April 26, the two Taiwanese companies said they were delaying the initial plan to approve the investment by the end of May to mid-June.

On May 13, all three companies informed Japan Display that a formal decision would only be made after another assessment of the company's profitability prospects.

But Yoshiyuki Tsunezaki, the CEO of Japan Display, seemed oblivious to the hesitancy of the three foreign companies when he was asked at the May 15 news conference announcing the latest financial results about negotiations with those three companies.

"The negotiations are proceeding smoothly," he said.

(This article was written by Taiki Koide, Ryoko Takahashi and Tsuneo Sasai.)