Japanese manufacturers Sharp and Japan Display have started scaling back production of LCD panels for Apple smartphones amid disappointing global sales of Apple's iPhone 5, the Nikkei business daily reported Monday.

The two companies, along with South Korea's LG Display, supply LCD panels to the U.S. tech giant, which had planned to purchase panels for 65 million units in the first quarter of 2013, the newspaper said.

Apple, however, indicated to the three suppliers that they should cut output by nearly half, the business daily said, adding that Japan Display, which operates six plants in Japan, would take the biggest hit.

Other Japanese companies that manufacture iPhone 5 components, such as TDK, Seiko Epson and Murata Manufacturing, have seen orders fall from the U.S. tech giant, Nikkei said, citing industry sources.

Apple is dealing with ferocious competition in the smartphone market from South Korea's Samsung, which has grabbed market share with its Galaxy S3 and Galaxy Note models. EFE