Sharp Corp., the troubled Japanese electronics provider, is moving to spin off part of its panel-making unit and plans to ask a government-supported investment fund for help, several people familiar with the matter said. The unit to be spun off makes small- and medium-size liquid crystal display screens for smartphones. Demand for the screens is growing, but Sharp6753, +2.45% SHCAY, +6.88% has struggled to compete with South Korean providers such as LG Display and domestic rival Japan Display Inc., which has been marketing its panels aggressively to makers of low-cost handsets in China. As part of the plan, Sharp is seeking a capital injection from Innovation Network Corp. of Japan, a fund overseen by the Ministry of Economy, Trade and Industry that was created to support the country’s electronics industry. The fund previously invested in Japan Display, which was created from a merger of panel operations of several other Japanese electronics giants. A Sharp spokesman said the company is considering various restructuring options including those for the panel business, but “has not made any decisions.” Sharp hopes the spinoff plan, along with staff reductions and other cost cuts, will help secure new financial aid from lenders. The banks already hold more than Yen 600 billion ($5 billion) in Sharp debt. Sharp said in February it would post a loss of Yen 30 billion, instead of the Yen 30 billion profit it had previously expected, for the business year ended March 31. Along with the panel business, Sharp’s domestic consumer electronics business has struggled of late. It has been hurt by the weak yen, because much of what it sells in Japan it makes overseas. An expanded version of this report appears at WSJ.com