Foxconn, the company that produces many products for Apple, among other companies, has invested $1.6 billion in Sharp. The companies will equally share production capacity for flat panel displays, including 40″, 60″ and 70″ screens. Foxconn manufactures the Apple iPhone and iPad, for which Sharp is one of the display panel suppliers. The news has fuelled speculation that the companies could be gearing up to produce panels for a widely anticipated but as yet unannounced Apple television screen.

Hon Hai Precision Industry, which trades as Foxconn, has established a strategic partnership with Sharp, taking a 10% stake in the company and becoming an equal shareholder in Sharp Display Products, with Sony currently continuing to hold 7%. Foxconn will procure up to half of the liquid crystal display panels and modules produced by the company.

Sharp has been losing money and is expected to report a $3.5 billion loss, the biggest in the 99-year history of the company, partly due to reduced revenues from flat screen displays. Japanese manufacturers Sony, Panasonic and Sharp are expected to report losses of $16 billion between them for the financial year.

Hon Hai has meanwhile reported a rise is sales to $36 billion and a net profit of $1.6 billion, buoyed by manufacturing products like the Apple iPad.

Terry Gou founded the Hon Hai Precision Industry Company in 1974 with $7,500. Headquartered in Taiwan, it is now the largest exporter in China.

Some see the Foxconn partnership with Sharp as the strongest sign yet that Apple could be securing the supply chain to enter the television display market.

The presumed plans for an Apple product, which has been widely dubbed the iTV, come as sales of large screen televisions are reported to be as flat as the panels themselves.

Shipments of flat panel televisions in the United States are forecast to dip for the first year since the market began. IHS iSuppli suggests that 37.1 million units will ship in, or rather to, America in 2012, down from 39.1 million in 2011. It further forecasts that numbers will continue to fall for at least the next three years, given the maturity of the market.

While some remain sceptical about the prospects for an Apple television, many analysts were equally pessimistic about the iPhone and the iPad. If Apple does launch a television screen and gets it right, it has the potential to be a game changer, radically redefining and reinvigorating the market.