There have been lapses in demand for Apple iPhones in Japan. Photo: Reuters/Issei Kato

Japan Display Inc’s state-backed main investor is preparing US$500 million in aid for the struggling Apple Inc supplier, whose capital has withered as smartphone sales slow.

The Innovation Network Corp of Japan is focusing on a plan to issue subordinated bonds, which are lower in repayment priority than other debt, to raise about 50 billion yen, the Asahi newspaper said on Saturday.

Japan Display said in August the fund had pledged full financial support as the company seeks help weathering future market swings, in particular lapses in demand for iPhones from Apple, whose products account for more than half of Japan Display’s sales.

Japan Display, facing difficulties raising its own funding after two years of losses, wants long-term financing for such growth areas as organic light-emitting diode displays and displays for automotive use, the Asahi said.

The fund could decide on the aid as soon as this month, the newspaper said.

Officials from Japan Display and INCJ could not be reached immediately for comment.

INCJ tried earlier this year to broker a merger with rival Sharp Corp, which was instead bought by Taiwan’s Hon Hai Precision Industry Co. Japan Display was formed in 2012 by combining the display units of Hitachi Ltd, Sony Corp and Toshiba Corp.