JOLED, an organic light-emitting diode display company created through a merger of Panasonic and Sony operations, said Monday it has filed for court protection with debt totaling ¥33.7 billion ($260 million).
The company said it will pull out of the display manufacturing business and close its factories in Ishikawa and Chiba prefectures. Regarding its roughly 380 employees, the struggling venture said it will lay off about 280 who are not involved in development.
The company had suffered from weakened demand for OLEDs and increased competition with its rivals, it said, while adding that it took more time and cost than expected to achieve stable production.
Japan Display, a former shareholder of the company and a maker of liquid crystal displays, will take over its technological development business, it said.
The move comes despite a vast amount of funding from state-backed fund INCJ. The fund has long supported JOLED, betting on its potential. The total amount of its financial support amounts to about ¥140 billion.
"It breaks my heart that JOLED had to decide to file for court protection," said Mikihide Katsumata, president of Innovation Network Corporation of Japan (INCJ), in a statement.
JOLED was set up in 2015 by Panasonic, Sony, INCJ and Japan Display, merging the two Japanese tech giants' OLED operations to compete against Asian rivals.
The idea was to cut into a display market dominated by South Korean and Chinese makers with thinner, energy-saving OLEDs. But it struggled with mass production and could not beat cheaper rival products, leaving the company with no choice but to seek court protection.
INCJ is the top shareholder of JOLED, with a 56.8% stake, according to Japan Display. Among other major shareholders, car parts manufacturer Denso owns 16.1% of the company.