A Japanese government-backed fund is considering a range of options to help turn around Sharp Corp including a direct investment, a person familiar with the matter said.
A direct investment would mark a shift in thinking at the Innovation Network Corporation of Japan (INCJ), which previously only wanted to be involved in Sharp's liquid crystal display business.
The source, who did not want to be named because the matter was private, said INCJ was also looking at a possible joint-investment in Sharp with Taiwan's Hon Hai Precision Industry Co in Sharp.
While talks about a possible tie-up between Hon Hai and Sharp fell through in 2012, the Taiwanese firm is still interested in buying all or part of the LCD unit, according to sources and Japanese media reports. Hon Hai has not commented on the reports.
Nikkei business daily earlier on Saturday reported INCJ was considering a direct investment, as well as a merger between Sharp's liquid crystal display unit and a venture that it owned with Japan Display.
Officials from the fund were not available for comment. An Osaka-based Sharp spokesman declined to comment.
The fund's interest comes as Sharp was set to report an operating loss for the six months through September due to slow sales of liquid crystal displays in China's mobile phone market, another source said.
It was becoming increasingly difficult for Sharp to achieve its operating profit target of JPY 80 billion (4,312 crores) for the year ending March, he added, requesting anonymity because he was not authorised to speak to the media.
INCJ was also considering teaming up with Japan Display IncT> to bail out Sharp, the person said. INCJ is the top shareholder of Japan Display, the world's largest maker of liquid crystal displays for smartphones and tablets.
Sharp said in July it would spin off its LCD panel business, which supplies displays to smartphone and tablet manufacturers, and seek funding for it from outside.
Once among the top display suppliers to Apple Inc, Sharp has been pushed aside by the likes of LG Display and Japan Display as the U.S. device maker diversified its supply chain amid longstanding concerns over Sharp's prospects.
Japan launched INCJ in 2009 in a bid to keepthe technology sector competitive.
© Thomson Reuters 2015