Cash-strapped Japan Display Inc is discussing an investment of more than 200 billion yen ($1.8 billion) from three Chinese panel makers including BOE Technology Group Co, Kyodo News reported.
Japan Display is aiming to agree to a deal by the end of March, Kyodo said, without citing its source. The other two firms are Tianma Microelectronics Co and Shenzhen China Star Optoelectronics Technology Co (CSOT), Kyodo said.
Japan Display and rival Sharp Corp once boasted cutting-edge screen technologies, but they have struggled in recent years to compete with more nimble Asian rivals.
Japan Display has been losing money for the past three years due to weaker liquid crystal display (LCD) prices and as customers including Apple Inc shifted to newer organic light-emitting diode (OLED) screens.
The company has said it is seeking capital to begin mass-producing OLED screens in an attempt to catch up with South Korea's Samsung Electronics Co Ltd, and that it is open to partnerships with rivals including Chinese firms.
A source familiar with the situation said Japan Display would need several hundred billion yen to launch mass production of OLED panels.
Officials at BOE and Tianma did not immediately comment, while Shenzhen China Star declined to comment.
Japan Display declined to comment on the report or disclose the identity of potential investors, which may also include Sharp, now controlled by Taiwan's Foxconn, formally known as Hon Hai Precision Industry Co Ltd.
Sharp CEO Tai Jeng-wu said earlier this month the company would ask the government to help it form an alliance with Japan Display to better compete with South Korean rivals.
Japan's state-backed fund INCJ owns 36 percent of Japan Display, which was formed by combining the ailing display units of Sony Corp, Hitachi Ltd and Toshiba Corp.
Shares of Japan Display jumped as much as 10.1 per cent and were up 6.6 per cent by the end of morning trade, while the Tokyo market was roughly flat.