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TOKYO—A top maker of displays for Apple Inc. smartphones has asked a Japanese government-backed fund for hundreds of millions of dollars in aid, the latest sign of stress among Apple suppliers.

Japan Display Inc. said Tuesday it lost about $115 million in the April-June quarter and turned to its top shareholder, the government-backed Innovation Network Corp. of Japan, for support.

Sluggish demand from Apple and the strong yen have battered Japan Display and Sharp Corp., another Japanese display maker, which has agreed to be taken over by Taiwan's Foxconn Technology Group.

"Our largest shareholder, INCJ, told us that they will continue to provide full-fledged support," said Japan Display's chief executive, Mitsuru Homma. "My hope is the support would come in a way that doesn't affect other existing shareholders," Mr. Homma said, indicating he doesn't want to issue new shares to the fund, which already owns 35.6% of Japan Display.

Another Japan Display official said the company expected to get tens of billions of yen, or hundreds of millions of dollars, in loans and loan guarantees from the fund. An INCJ spokesman said that nothing specific has been decided, but that the fund has expressed its support for Japan Display.

Japanese companies in the electronic-devices area have leaned heavily on Apple for business in the past few years, prospering when the iPhone was on the upswing and taking a hit when sales slackened.

What amounts to a nagging cold for Apple, which still earned $7.8 billion in the most recent quarter, can quickly turn life-threatening for its suppliers. Japan Display's revenue in the most recent quarter was down 29% compared with the year-earlier period. Analysts say there might not be room left for Japan Display in an industry with tough competitors from China and South Korea.

"If the government believes this industry is still important for Japan, the fund or the Ministry of Economy, Trade and Industry would need to take aggressive turnaround measures," said SMBC Nikko Securities analyst Ryosuke Katsura.

Japan Display was created by the government-backed fund in 2012 by merging display operations from Sony Corp., Hitachi Ltd. and Toshiba Corp. It had an initial public offering in 2014, but the shares are now trading at less than one-fifth of the offering price.

Sales of the iPhone have been slowing because of advances by Android phones from Samsung Electronics Co. and cut-price Chinese makers. More than half of Japan Display's revenue comes from Apple, according to a company stock-exchange filing. Despite sales efforts in China, Japan Display's largest Chinese client, Huawei Technologies Co., accounted for only 12% of sales in the year ended March 2016.

Mr. Homma, the Japan Display CEO, said he expected orders from Apple to pick up starting this month, and he said the company was looking for other business in products such as virtual-reality headsets and in-car displays.

Even if orders pick up in the short term, Japan Display risks getting stuck with dated technology. The company has focused mainly on developing traditional liquid-crystal displays, but smartphone makers are eyeing organic light-emitting diode, or OLED, technology. Industry executives say they expect Apple to introduce the new technology on some iPhones as soon as next year, a projection Apple has declined to discuss.

Japan Display is trying to catch up and says it hopes to start mass-producing OLED displays next year. But Amir Anvarzadeh, head of Japan equities at brokerage BGC Partners, said the company's limited arsenal for investment would have trouble catching up with bullish development plans by South Korean and Chinese makers, both backed by strong support from their governments.

OLED panels in theory are more flexible and offer improved energy efficiency. But some executives say the technology has yet to fulfill its promise and LCD panels display colors more vividly.

Executives at both Japan Display and Sharp have sent conflicting messages, sometimes saying they plan big investments in OLED while maintaining at other times that LCD is superior and capable of further improvement.

Atsuko Fukase contributed to this article.

Write to Takashi Mochizuki at takashi.mochizuki@wsj.com

(END) Dow Jones Newswires

August 09, 2016 06:35 ET (10:35 GMT)

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