UPDATE 2-AU to spend $13 bln on new Taiwan LCD plants

(Adds further details, analyst comments)

By Baker Li

TAIPEI Aug 27 (Reuters) - AU Optronics Corp (2409.TW), the world's No.3 LCD maker, will invest about T$400 billion ($12.7 billion) to build four new LCD plants in Taiwan over the next 10 years, looking beyond a current industry downturn.

As part of a long-term commitment to investing in Taiwan, AU will build a first LCD factory to use more advanced technology, with operations starting in 2011-12. It gave no capacity estimates.

After meeting Taiwan Premier Liu Chao-shiuan on Wednesday, AU Chairman K.Y. Lee unveiled the investment plans aimed at boosting AU's presence in a display market that is dominated by South Korea's Samsung Electronics (005930.KS) and LG Display (034220.KS).

The four new plants, to be located in central Taiwan, will use advanced 10th-generation or above technology, allowing AU to reduce manufacturing costs and make bigger panels from motherglassess.

Samsung and Sony Corp (6758.T) are already mulling construction of an 11th-generation line, local media in South Korea reported last month.

AU (AUO.N) also plans to attract upstream component makers to build an LCD complex, the cabinet said in a statement.

The company warned last month of an impending industry slowdown. Blaming high fuel costs and a global economic downturn that is hurting spending on new PCs and flat-screen TVs, AU predicted lower prices and smaller shipment growth for the third quarter.

If demand for computers and flat-screens remain week, it is widely expected that a severe industry-wide supply glut is likely to emerge later this year or early next year.

Robyn Hsu, a fund manager at Taiwan's Capital Securities, said it was difficult to project so far ahead in this industry.

"I don't even have a visibility of the market in the next two months, and AU's first new plant won't start operating until at least three years later," said Hsu, who has some AU shares in his portfolio.

"A lot of people might dream about TV's longer-term potential, but this is a highly cyclical market and companies that have plans to build new factories might feel pressure if market conditions are not as good as they had expected."

AU's Taipei-listed shares have dropped about 40 percent so far this year, more than double the fall on the main TAIEX index .TWII. AU shares rose 2.3 percent on Wednesday, outpacing a 1.7 percent gain on the TAIEX.

AU has invested T$600 billion in industrial science parks in central Taiwan, a local newspaper reported last week.

Earlier this month, Hon Hai Precision (2317.TW), Taiwan's biggest electronics parts company, also unveiled plans to expand on the island, with total investment of over T$100 billion. (US$1=T$31.5) (Editing by Ken Wills and Ian Geoghegan)