Sharp Corp will spend about 100 billion yen ($1.2 billion) to build production lines for small and midsize LCDs, with Apple Inc slated to purchase bulk of the output for its iPhone, the Nikkei business daily said.

Apple will shoulder a large portion of the 100 billion yen investment and buy most of the panels produced by Sharp, which has supplied LCD panels for Apple's iPod touch music player, the paper reported.

Sharp will start installing equipment next year at a Mie Prefecture plant and mass production is slated to begin in the latter half of 2012, it said.

Smartphone demand is expanding worldwide, encouraging major investments by Japanese electronics makers such as Toshiba Corp, which also plans to build an Ishikawa Prefecture factory to boost LCD supplies to Apple, the paper said.

Apple will expand procurement from the two Japanese firms to further expand its market share in smartphones, the Nikkei reported.

(Reporting by Soham Chatterjee in Bangalore)

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