HSINCHU, Taiwan May 17 - AU Optronics Corp, Taiwan's No. 2 LCD maker, said an LCD panel shortage is likely to last into the second half of this year on robust demand for PCs and TVs, even though fears linger about a weak euro.

New laptops and thinner TV models with power-saving LED backlights are selling well worldwide, and AU's early investment in the new technology helps it add value, Chairman K.Y. Lee said on Monday in an interview as part of the Reuters Global Technology Summit.

Clients have requested a large amount (of panels), but we are not able to deliver, Lee, 58, said at the company's headquarters in the Hsinchu science park, Taiwan's high-tech center.

Monitor (panel) is tight, and notebook and especially TV (as well), said Lee, adding that he sees no impact from a weak euro now. AU returned to profit in the first quarter after strong demand boosted sales and prices of its displays.

Major LCD makers in Asia have reported brisk demand recently as economies recover, with China leading the way. However, some analysts say the sector might be saddled with oversupply later this year if display makers aggressively ramp up output.

AU has applied to the Taiwan government for approval to set up a new LCD factory in China, with an investment of about $3 billion, as it aims to strengthen its competitiveness in China, which could soon become the world's largest TV consumer.

AU, a supplier to brands such as Dell and Sony, expects the Taiwan government to give a go-ahead by the end of the year and it plans to add up to 1,000 new workers in the factory, Lee said.

Other LCD rivals, including LG Display of South Korea, also have similar plans to build new plants on the mainland, and relaxed investment laws may help usher high-generation production there.

Lee said AU is in talks with some Chinese rivals, including BOE and CEC-Panda, to supply components to them in the future, but he declined to give other details.

In March, newly merged Chimei Innolux overtook AU as Taiwan's No. 1 and the world's No. 3 LCD maker.

For Lee, however, crafting new designs is a survival issue.

Competitors are competing with volume, but we should compete on value. How much value a panel can create is a key, Lee said, who was named AU's chairman in 2001 when the company was created by a merger of Acer Display and Unipac Optoelectronics.

AU has agreed to buy certain assets and display patents from Field Emission Technologies (FET), in which Japan's Sony owns a 39.8 percent stake.

Other new applications, including 3D panels and electronics displays, or e-paper, are also on Lee's radar screen.

AU is also diversifying into the solar market and is looking for partners to boost its new business.

We have prepared for more than two years and we are on the right direction now, Lee said.

It definitely will happen that it (the solar business) will make up more than 10 percent of AU's revenue in the future, said Lee, who often rode his bike in town on weekends to promote a green lifestyle.

(Additional reporting by Argin Chang; Editing by Ken Wills)

South Korea Japan Dell China