LG.Philips LCD, the world's No.2 flat-panel maker, told investors last week that it expected an increase in depreciation costs, primarily due to the new seventh-generation (7G) plant, which would erode operating profit and net income for this year.
"But the lead will be short-lived as the Korean companies will be able to make panels at lower costs in their new factories after output increases in the second half of this year," Lin said.
Taking a longer-term view, Taiwanese companies will continue to lag behind due to relatively conservative investment in next-generation plants, which will allow LCD screen makers to produce bigger glass substrates and to cut more and bigger panels, he said.
AU Optronics will lead local companies by ramping up production at its latest factory in the fourth quarter of this year, but will trail competitors such as LG.Philips LCD by almost a year. Samsung, the world's top LCD screen maker, has an even bigger lead.
The two Korean companies are planning to build even more advanced eighth-generation plants. AU Optronics has not unveiled any new investment plans.
"It takes guts to expand production when the industry slows, as the investment required is massive," Lin said.
Korean firms carried on with their expansion plans during the last downturn, while local firms suspended their investments to reduce risk, Lin added.
As a result, local flat-panel makers will have to rely heavily on saving costs on raw materials if they are to have any hope of catching their rivals, he said.
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