UPDATE 2-LCD shares up as Japan quake deepens supply worries

* LG Display, AU and Chi Mei gain after strong Japan quake

* LG Display, AU rise on strong volume; buck weak market

* Nomura upgrades LCD sector view to neutral from bearish

* Sharp to be hit by output halt at Corning glass factory (Adds Taiwan LCD shares, analyst comments, updates shares)

By Marie-France Han and Rhee So-eui

SEOUL, Aug 12 (Reuters) - Shares of South Korean and Taiwanese LCD makers jumped while Japanese rival Sharp (6753.T) fell on Wednesday after an earthquake disrupted glass production in Japan, stoking concerns shortages may intensify.

A shortage in glass substrates has constrained output in the liquid crystal display (LCD) sector and pushed up panel prices as glass suppliers have been slow to boost production after a slump in flat panels last year.

The display industry is recovering from one of its worst downturns as billions of dollars from China's stimulus package and resilient North American markets help boost demand for televisions and computers.

"Glass supply was already tight and this quake will contribute even more to that. This is good news for LG Display as a lead maker of LCDs," said Moon Hyun-sik, an analyst at Meritz Securities.

U.S. speciality glass maker Corning Inc (GLW.N) said on Tuesday it has halted production of LCD glass at a factory in Japan, warning the shutdown would result in a 5 to 10 percent decline in the volume of glass shipments in the third quarter from the second quarter. [ID:nN11525861]

Shares in LG Display Co Ltd (034220.KS), the world's second-biggest LCD panel maker, rose 2.1 percent by 0330 GMT in a broader market down 1.5 percent. LG Display is up 67 percent so far this year.

Top Taiwanese makers AU Optronics Corp (2409.TW) and Chi Mei Optoelectronics Corp (3009.TW) jumped 5.3 percent and 3.1 percent, respectively and bucked a weak broader market .

More than 78,000 shares were traded in AU, 1.3 times the average daily volume over the past 30 days, while over 3.5 million shares changed hands in LG Display, nearly matching the stock's average daily volume.

Shares in Sharp, Japan's only major LCD supplier, however fell 3.5 percent as it was expected to be directly affected by the stoppage at Corning's plant in Japan.

BULLISH SECTOR VIEW

Analysts and fund managers asid LCD shares were set to gain further, thanks to sustained demand and deep shortages of glass production.