For the sauce: Bring all ingredients to simmer in small saucepan over medium heat and cook, stirring occasionally, until reduced to about 1 cup, 5 to 7 minutes. Transfer ¼ cup sauce to small bowl and set remaining sauce aside for serving.

For the chicken: Combine paprika, sugar, salt, and smoked paprika in large bowl. Process bacon in food processor until smooth paste forms, 30 to 45 seconds, scraping down sides of bowl as needed. Add bacon paste and chicken to spice mixture and mix with your hands or rubber spatula until ingredients are thoroughly blended and chicken is completely coated. Cover with plastic wrap and refrigerate for 1 hour. Thread chicken tightly onto four 12-inch metal skewers.

For a charcoal grill: Open bottom vent completely. Light large chimney starter filled with charcoal briquettes (6 quarts). When top coals are partially covered with ash, pour evenly over half of grill. Set cooking grate in place, cover, and open lid vent completely. Heat grill until hot, about 5 minutes.

For a gas grill: Turn all burners to high, cover, and heat grill until hot, about 15 minutes. Leave primary burner on high and turn other burner(s) to medium-high.

Clean and oil cooking grate. Place skewers on hotter part of grill (if using charcoal), and cook, turning skewers every 2 minutes, until well browned and slightly charred, 8 to 10 minutes. Brush top surface of skewers with sauce, flip, and cook until sauce is sizzling and beginning to char in spots, about 1 minute. Brush second side with remaining ¼ cup sauce, flip, and continue to cook until sizzling and browning in spots, about 1 minute longer.

Transfer skewers to serving platter, tent with aluminum foil, and let rest for 5 to 10 minutes. Serve, passing reserved sauce separately.