The investment would give Samsung a 3 per cent stake in the Japanese LCD pioneer, three sources familiar with matter told Reuters, making it a leading foreign shareholder alongside chipmaker Qualcomm Inc, which in December agreed to invest as much as $120m.
"Rather than the amount of investment, it is the partnership with Samsung that Sharp gains that is important. Sharp has an opportunity to use the Samsung platform," said Tetsuro Ii, the chief executive officer of Commons AM, an investment fund based in Tokyo.
A deal would come as Sharp, which received a $4.4 billion bailout from its banks in October, tries to boost LCD plant utilisation, particularly at its Kameyama factory in central Japan.
It has had to slash production of Apple iPad screens at the facility since the start of the year, other sources told Reuters in January, as consumer demand shifts to the iPad mini, for which Sharp is not a supplier.
An agreement would also be a rare cross border deal between the two rival countries and the first time the South Korean TV maker has ever taken a leading stake in a Japanese rival. Japan's big three TV set makers, Sharp, Sony and Panasonic are struggling to overcome losses as Samsung clobbers them in overseas markets.
"We see a possibility that Samsung in return for its investment, may demand more preferential pricing in parts supplies," Deutsche Securities analyst Yasuo Nakane said in a report. A deal would also provide an opportunity for Samsung to partner with or even acquire Sharp's solar panel business, Mr Nakane added.
Sharp already supplies LCD panels for Samsung's 32 inch, 40 inch and 60 inch TVs, said Mr Nakane. Samsung also buys screens from Taiwanese makers.