UPDATE 1-AU Optronics mulls next-generation LCD plant

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By Baker Li

HSINCHU, Taiwan Feb 20 (Reuters) - Taiwan's AU Optronics Corp (2409.TW), the world's third-largest LCD maker, is considering building a next-generation LCD plant in Taiwan to meet booming global demand for flat-screen TV panels, its president said on Wednesday. "We do not rule out the possibility (of building) a new next-generation plant," AU (AUO.N) President L.J. Chen told Reuters at the company's headquarters in northern Taiwan's Hsinchu science park. "We will need a new next-generation plant to power our future growth," said Chen.

He added that the company also plans to invest this year in an LCD module plant somewhere in Europe, such as the Czech Republic or Poland, adding that plans would be clearer after the second quarter.

In late January, AU predicted a weaker first quarter, the traditionally slow manufacturing season after the year-end buying boom. But the company remained optimistic for the whole year.

AU, which supplies liquid crystal displays (LCDs) to top PC sellers such as Dell Inc (DELL.O) and Hewlett-Packard Co (HPQ.N) and to some TV brands, booked a record profit in the October-December quarter.

The company and its rivals, including South Korea's Samsung Electronics (005930.KS) and LG.Philips LCD (034220.KS) have all been riding high recently as a long-anticipated boom in demand for slimmer, flat-screen TVs has finally begun to take off due to more affordable prices.

AU's stock dipped 4.32 percent on Wednesday amid a broader market sell-off, but its shares are still up 13 percent over the last 52 weeks.

Showing its confidence in the display market, AU last month said it was also more than doubling its capital spending this year from last year, with part of the funds going toward a new-generation LCD production line.

Surging demand for flat-screen TVs is widely expected to cause a shortage of TV panels later this year, although the spectre of oversupply is looming after new capacity comes online in 2009.

AU will start churning out its most advanced panels from a new production line in late 2009, and the company is planning to build an advanced 8.5-generation plant this year.

But analysts say future up and down cycles will not be as severe as past ones as LCD makers have learned to handle inventories in slow and peak seasons. ($1=T$31.6) (Reporting by Baker Li; writing by Lee Chyen Yee and Doug Young; Editing by Ken Wills)