OSAKA — Sharp Corp.'s Taiwanese business partner is demanding the electronics maker spin off its small and medium-size liquid crystal display business into a new entity that the two firms would then jointly invest in, sources said Saturday.

Hon Hai Precision Industry Co. appears to view the move as a precondition for its planned injection of capital into Sharp, and is also looking to send its executives to the new unit, the sources said.

Sharp, however, is reluctant to agree to the request because it views the LCD business as a key part of its operations, they added.

Hon Hai would be able to access Sharp's cutting-edge LCD technology through the new entity, but the ailing company is determined to continue producing LCD panels independently to avoid an outflow of its technologies.

Hon Hai has already urged Sharp to allow it to participate in its production of LCD panels for tablet computers and smartphones at the Kameyama plant in Mie Prefecture.

Sharp and Hon Hai have been in talks to revise the terms of the Taiwanese company's investment, aimed at shoring up the electronic maker's capital base. In March, the two sides agreed that Hon Hai would purchase a 9.9 percent stake in Sharp at ¥550 per share.

However, Sharp's stock price plummeted on the back of dismal sales in the last quarter, prompting Hon Hai to seek to renegotiate the terms of their initial agreement.