UPDATE 3-Taiwan eases LCD, chip foundry China investments

* LCD makers can build 3 plants with 6th-gen or above tech

* Chipmakers can buy Chinese peers; no tech transfer

* Openings seen too conservative - Innolux CEO

* Taiwan amends financial services law

* Shares little moved, lagging big board

(Recasts with government announcement, company views; adds quotes, details throughout)

By Argin Chang and Lin Miao-jung

TAIPEI, Feb 10 (Reuters) - Some Taiwan LCD industry executives criticised government measures announced on Wednesday to ease restrictions on investments in China, saying the measures were not enough for them to tap opportunities on the mainland.

Under the liberalisation measures, LCD makers such as AU Optronics (2409.TW) will be allowed to build up to three facilities that are based on the more advanced sixth-generation and above technology, economics minister Shih Yen-shiang told reporters.

Chip foundries such as TSMC (2330.TW) will also be allowed to buy stakes in their Chinese counterparts and to build more advanced production facilities as long as they do not use the more advanced 12-inch technology, he said.

But the policy to allow the LCD panel investments remained too conservative, Innolux (3481.TW) Chairman and Chief Executive H.C. Tuan told reporters on the sidelines of a business event. [ID:nTPU002154]

The liberalisation had been expected after Japan and South Korea allowed their companies to invest on the mainland, but it has triggered some concerns of oversupply there, said an official at BOE Technology Group (000725.SZ), the biggest LCD maker in China.

WAY TO GO

Investors were also unmoved by the latest overture, with shares of foundries such as TSMC and UMC (2303.TW) down or flat, while LCD panel makers such as AU Optronics and Chi Mei 3009.TW also trailed a roughly 1 percent advance on the benchmark TAIEX share index .TWII.

The government also amended the financial services law to let its financial firms invest on the mainland, Shih said. "Opening is the way to go ... China has turned into the global market from the global factory."

The announcements came as two government sources said earlier today the island's Premier Wu Den-yih had approved laws for the investments. [ID:nTOE6190B5]

"This is obviously good news for the two sectors," said Robyn Hsu, a fund manager at Capital Investment Trust with over T$1 billion ($30 million) in assets. "However, there are still restrictions and these will have to be lifted for a real fundamental change in the industry."

The Taiwan government has been reluctant to let what it sees as strategic industries, including semiconductors, become economically dependent on a political opponent.

Under the island's current China-friendly administration, Taiwanese firms, including LCD maker AU Optronics, have urged the government to allow them to invest more in China or use more advanced technologies to cut costs and compete with bigger rivals in South Korea. [ID:nTOE5BU026]

Under previous rules, LCD makers which make large-size panels can only do final assembly work in China using panels produced elsewhere. Panel production is high-tech work that typically requires about $3 billion or more for the construction of a single factory. (Additional reporting by Lin Qi in Shanghai; Writing by Kelvin Soh and Faith Hung in Taipei; Editing by David Holmes)