Sharp will provide technology to Foxconn for a plant in China that will produce panels for the iPhone, according to the Nikkei business daily.
Reuters notes that shares of Sharp surged 7% after the report.
An agreement to share its technology would further tie Sharp to the Taiwanese company, which in March agreed to buy a 46.48 percent stake in Sharp's liquid crystal manufacturing plant in Sakai, western Japan, the nation's most advanced panel factory.
Sharp was hit hard last year by a glut in supplies of LCD panels and weak demand for TVs, prompting it to tie up with Hon Hai in a bid to utilize idle production capacity. The alliance is also an opportunity for Hon Hai to tap the manufacturing expertise of Japan's leading panel maker.
Notably, in March Hon Hai also agreed to purchase an 11% stake in Sharp sparking rumors that it was preparing for an Apple Television.