Sharp Corp is considering licensing its power-saving IGZO liquid crystal display technology to China Electronics Corp as part of a plan to jointly produce panels in China, two sources familiar with the plan said.
Sharp, which was rescued from failure by its banks in October, is pursuing the partnership to expand low-cost LCD production, the sources said on condition they not be identified.
Sharp will receive several hundreds of millions of dollars in fees for its advanced IGZO technology while investing in a new CEC plant in Nanjing, they added. Sharp will have the right to buy a portion of the plant's output.
The factory, which has yet to win approval from the Chinese authorities, may start production as early as 2015.
The potential deal with CEC was first reported by Japan's Nikkei business daily. The paper said CEC planned to invest 300 billion yen ($3 billion) in the plant, while Sharp would take a less than 10 percent stake in a joint venture that will operate it.
IGZO, or indium gallium zinc oxide, screen technology developed by Sharp allows for lower power consumption as well as higher resolutions and faster reaction speeds, and is key to the company's recovery plan after it suffered heavy losses due to excess capacity and weak demand for its TV screens.
Sharp forged ties to CEC in 2009, when it agreed separately to help it build a sixth-generation LCD plant and established a joint venture in eighth-generation technology.
In November, CEC blamed worsening ties between Japan and China over a territorial spat in the East China Sea for the shelving of cooperation with Sharp to build an advanced 10th-generation display factory in China. Sharp, which operates the world's only 10th-generation plant in Japan, said it had never agreed to share its most advanced manufacturing technology.
In March, Sharp agreed to sell a 3 percent stake to Samsung Electronics Co Ltd for $103 million and a pledge to supply small display screens to the Korean company. Sharp in December also sought help from mobile chipmaker Qualcomm Inc, agreeing to sell it an equity stake for $120 million and a pact to develop new screens based on Sharp's IGZO panel technology.