Taiwan's AU Optronics Corp said it plans to invest $800 million in a Chinese LCD company in what is set to be the first investment by a Taiwanese LCD firm in mainland China.

The decision means AU will withdraw an earlier plan to set up its own LCD panel subsidary in China, the world's No.4 LCD maker said in a statement.

"We will submit a new application to the Taiwan regulator," said AU spokewoman Yawen Hsiao.

Taiwan said in March it would allow LCD companies to buy into or merge with Chinese rivals, in a move that could help the Taiwanese firms compete better with larger South Korean rivals. This had not been allowed previously due to concerns over intellectual property and other issues.

AU said it plans to invest $800 million in Longfei Optoelectronics in Kunshan, eastern China, which has already acquired a Chinese government licence to build a 7.5-generation production plant.

AU's original plan had been to build a 7.5-generation LCD plant of its own in China to start in 2012. The plan called for investment of $3 billion.