AU Optronics (AUO) has entered Sony Mobile's supply chain for its SmartWatch 3 and will supply 1.6-inch panels.

AUO will reportedly supply 30% of the panels for the new smartwatch. Sony is increasing its proportion of panels purchased from Taiwan makers in general, said industry sources, adding that Innolux will also supply a number of the panels.

Sony is showing increased cooperation with AUO. Sony has also purchased a variety of Ultra HD TV panels sized 42- to 85-inch from AUO in addition to curved units. Some of AUO's technology used in Sony TVs were shown at the recent IFA exhibition, the sources noted.

AUO is optimistic about shipments of 1.6-inch panels due to wearable device demand in 2014 into 2015.