By Josh Ong

Published: 08:40 PM EST (05:40 PM PST)

Apple is rumored to be investing in part of a $1 billion LCD factory that Toshiba is building mainly to supply panels for the iPhone, as the hugely successful smartphone continues to strain manufacturing capacity with its explosive growth.

Toshiba Mobile Display will construct the plant, which will produce low-temperature polysilicon LCD panels, in the Ishikawa prefecture of Japan, Reuters reports the Nikkei business daily as saying.

Update: Reuters has updated its original report to include a response to the rumor from a Toshiba spokesman. "The report was untrue and nothing had been decided regarding a new plant to build LCD panels for Apple," Reuters reported the spokesman as saying.

Work on the new plant is expected to start by early next year, with production beginning in the second half of 2011, the report noted. Toshiba will reportedly spend about 100 billion yen ($1.19 billion) on the factory.

A preexisting Toshiba plant in the prefecture has a monthly capacity of 8.55 million LCD panels. The new plant is projected to more than double Toshiba's capacity for low-temperature polysilicon panels.

The Nikkei reported that Apple plans to contribute to a portion of the factory investment, though it didn't specify how much.

At the unveiling of the iPhone 4, Apple touted the device's 325 pixels-per-inch Retina Display as the best of any smartphone. "We think this is going to set the standard for the next several years," said Apple CEO Steve Jobs.

Nearly 6 months after the iPhone 4's launch, its global supply remains constrained. In China, wait times for the iPhone 4 are around 2 months and China Unicom has been unable to fulfill a third of its preorders.

In the U.S., availability of the iPhone 4 has improved significantly, with both the 16GB and 32GB currently listed as shipping within 24 hours on Apple's website. Early demand for Apple's latest smartphone caused shortages in the U.S. throughout the summer, but supply has increased in recent months.

Apple revealed in October that it had sold a record 14.1 million iPhones in the September quarter, up 91 percent year over year. During an earnings conference call, CFO Peter Oppenheimer admitted that Apple was struggling to keep up with demand and could have sold even more iPhones if available.

Wall street analysts expect Apple to have an "extremely strong" December quarter with the iPhone, iPad, and MacBook Air topping many holiday gift lists.