By Reiji Murai and Emi Emoto

TOKYO, Nov 9 (Reuters) - Japan Display, the world's largest maker of displays for smartphones and tablets, has applied for a share listing in Tokyo that it hopes will raise up to 200 billion yen ($2 billion), sources familiar with the matter said on Saturday.

The state-controlled company may face difficulty hitting its fund-raising target, however, after a sudden slowdown in its tablet screen business last month that could raise doubts over an expansion drive, industry sources have said.

Japan Display has nevertheless decided to push ahead with plans for an initial public offering (IPO) by March and proceed with its expansion, one of the sources said, confident of continued growth in smartphone and tablet demand and its ability to find additional customers.

Industry sources have said the capacity utilisation rate at its recently opened Mobara plant near Tokyo fell sharply in October, reflecting soft orders for tablets using its screens. This is likely to weigh on the company's earnings outlook and could dampen demand for the share offering, they added.

A Japan Display representative declined to comment.

The company, formed in April of last year from display units of Sony Corp, Hitachi Ltd and Toshiba Corp , is 70 percent owned by the Innovation Network Corp of Japan, a mostly government-funded body to support "next-generation" businesses.

Japan Display has committed $2 billion to investment in the Mobara plant, which it bought from Panasonic Corp and began operating in June of this year. The funds raised from the IPO would be used for additional expansion projects.

Japanese companies typically proceed with a share offering about three months after submitting an application to the Tokyo Stock Exchange.

Although the company does not name its customers, industry sources widely confirm that it supplies screens for both Google Inc's Nexus7 tablet and Amazon.com Inc's Kindle Fire HDX, as well as Apple Inc's iPhone.

Japan Display chalked up sales of 450 billion yen in the latest year to March and an operating profit of several billion yen. At the start of the current financial year in April, Japan Display President Shuichi Otsuka said it was targeting sales of 700 billion to 800 billion yen and an operating profit margin around 5 percent.

Japan Display has tapped Goldman Sachs, Nomura Securities and Morgan Stanley as global coordinators for the IPO, sources with direct knowledge of the matter have told Reuters.