UPDATE 1-Sharp jumps on talk of deals with Samsung, Chimei

Thu Feb 3, 2011 11:49pm EST

* Sharp needs to raise production at LCD panel plant

* Chimei deal would involve mutual panel supply

* Sharp's shares rise after the news (Recasts, adds share price move)

By Reiji Murai

TOKYO, Feb 4 (Reuters) - Shares in Japan's Sharp Corp (6753.T) jumped on Friday after an industry source told Reuters it is negotiating liquid-crystal display panel supply deals with Samsung Electronics (005930.KS) of South Korea and Taiwan's Chimei Innolux (3481.TW).

Sharp expects to reach an agreement soon to supply Samsung with large panels, said the source, who declined to be identified.

Sharp, the world's fifth-largest producer of large LCD panels, is also negotiating to provide Chimei with large panels for TV use in return for a supply of mid-sized panels from the Taiwanese firm, the source said.

Shares in Sharp touched a high of 888 yen, up nearly 5 percent, following the news. Markets in Taiwan and South Korea were closed for the Lunar New Year holiday.

The Nikkei business daily said earlier Sharp and Chimei, a unit of Taiwan's Hon Hai Precision Industry (2317.TW), had formed a supply tie-up that would help Sharp cope with the effects of the strong yen, which is squeezing Japanese exporters' profits.

Sharp, which announced on Thursday it had almost tripled profits in the nine months to December form the same period a year earlier, aims to raise production rates at its state-of-the-art panel factory in Sakai, western Japan. [ID:nTOE711057]

Media reports have said Sony Corp (6758.T), which has suffered six years of losses in its TV business, is reducing its procurement from Sharp in favour of cheaper manufacturers in other parts of Asia. [ID:nTOE6AQ00E]

Sharp said it would not comment on individual deals. Chimei and Samsung could not be immediately contacted for comment due to the holiday.

Separately, Sharp has also reached an agreement to licence Chimei technology for improving the energy efficiency of LCD panels, the source said. (Additional reporting by Isabel Reynolds; Editing by Edwina Gibbs and Michael Watson)