Japan's Seiko Epson Corp will supply China's fourth largest TV maker with the liquid crystal displays (LCD) needed to make the televisions, which use LCD panels to project small images in the back of the set onto a large, plastic screen.
Skyworth will make the announcement in Beijing on Thursday as part of its new fall product line-up, according to the source, who declined to be identified.
Skyworth declined to comment, but a Seiko Epson official said the two companies would cooperate in the rear projection TV business.
"Skyworth will announce an agreement with Seiko Epson related to rear projection televisions on September 2," said the official, declining to elaborate on the deal.
Microdisplay rear-projection TVs are much thinner and weigh less than traditional cathode ray tube (CRT) televisions. They are gaining in popularity because they are considerably less expensive than similarly sized plasma display TVs.
Seiko Epson makes its own microdisplay rear-projection televisions for sale in North America and Japan but also supplies small LCDs to other TV makers.
Skyworth generated US $1.18 billion in revenue for its fiscal year through March 31.
China is also home to TCL International, which recently became the world's biggest TV maker when it combined its television-making assets with those of France's Thomson to form a joint venture, TTE Corp China's other top TV makers include former No 1 Sichuan Changhong Electric Appliances Co Ltd, and Shenzhen Konka Group Co Ltd, which is reportedly close to its own tie-up with a foreign partner.
Skyworth's entry into the rear projection TV market will mean more competition for Hitachi Ltd, Sony Corp and other players already battling it out in the rapidly expanding market.
Independent research firm DisplaySearch predicts the global microdisplay projection television market will grow to about 3.75 million units in 2006 from less than half a million last year.