The unit, Renesas SP Drivers, designs chips for Apple iPhone, according to industry sources. Renesas, which has been restructuring to focus on automotive chips, owns 55 percent, Sharp Corp owns 25 percent and Taiwan's Powerchip owns the remainder.
The reports sparked a surge of as much as 19 percent in Renesas shares to their highest in more than three years.
Japanese companies are key suppliers of screens and related components for Apple's iPhone and iPad, and will be among the producers of larger screens for the new iPhone 6 that is widely expected to be released this autumn, supply chain sources said.
Renesas, formed from struggling chip divisions of three Japanese electronics conglomerates, has launched a drastic restructuring to focus on its core business supplying chips for the automotive sector after racking up nearly 650 billion yen in net losses during eight years in the red.
The company received a 150 billion yen bailout from a government-led fund and its major customers in September to counter an earlier bid by U.S. private equity firm KKR & Co LP.
The Nikkei said a transaction for the unit was expected to be completed by summer and that Sharp was also likely to sell its stake if Apple requested it.
The U.S. company "apparently wants to meld" the design of core display components into its overall product development as image quality becomes a crucial selling point for smartphones, the Nikkei said.
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