* Sees TV panel prices starting to bottom out in Q2
* Smartphone panel shipments to surge
* Q1 net loss T$13.9 bln vs median f'cast T$5.77 billion loss
* Second consecutive quarterly loss
By Clare Jim
TAIPEI, April 27 (Reuters) - Taiwan's AU Optronics Corp , the world's No.4 LCD maker, posted a loss in the first quarter that far exceeded expectations, blaming weak TV panel prices and a strong Taiwan dollar, but the company offered a brighter outlook.
AU, which supplies major brands such as Hewlett-Packard Co , Dell Inc and Sony Corp , lost T$13.9 billion ($481 million) for January-March, its second consecutive quarterly loss after a net loss of T$11.34 billion in the previous quarter.
AU was expected to report a net loss of T$5.77 billion, according to a consensus forecast of 13 analysts polled by Thomson Reuters I/B/E/S. In the same period a year earlier AU had reported a profit of T$7.1 billion.
"AU's potential growth is limited, but it couldn't get any worse. We don't see any big changes in terms of fundamentals and stock price performance in the next one to two months," said J. J. Lee, chief investment officer at Fubon Financial's fund unit.
"We expect AU to continue to post losses in the second quarter, though the loss would not be as big as the one in the first."
The mutual funds at Lee's firm underweight AU shares.
The global liquid crystal display (LCD) market is battling tepid demand since flat screen TVs are already widespread in developed markets. Some analysts have said the $100 billion LCD TV industry had peaked last year and would shrink by 3-4 percent annually.
LCDs are also expected to give way to new displays such as energy-efficient active matrix organic light-emitting diode (AMOLED), which is increasingly used in high-end smartphones and tablets and has been touted as a future large-sized TV display.
Samsung Electronics , the world's top maker of LCD panels, also said its operating profit during the first quarter fell to its lowest level in almost two years because of tumbling flat screen and TV prices. [ID:nL3E7F602O]
LG Display , the world's No.2 flat-screen maker, posted a worse-than-expected second consecutive first-quarter loss. [ID:nL3E7FE02P] But the company said it has started to see signs of recovery in depressed TV panel prices and forecast a return to profitability in the current quarter.
Hurt by the devastating earthquake and tsunami in Japan last month, panel makers, led by Sharp Corp , are reducing production, but demand from television and computer makers is too weak to absorb even lowered supplies, sending prices of large-sized LCD panels down more than one third over the past year.
"The first quarter is always a low season, LCD prices should have bottomed in the last quarter and started improving in Q2. AU should be able to narrow its loss in the second quarter," said HFT Investment Management analyst Allen Pu.
AU said it sees better times ahead, with TV panel prices starting to bottom out in the second quarter and its capacity utilisation rate improving.
It sees second quarter TV panel shipments up about 10 percent from the first quarter, though average selling prices will be flat, while IT panel shipments will rise by single-digit percentage points.
Smartphone panel shipments are set to rise 60 percent this year, reflecting booming demand for the devices, while the company sees strong growth in LED shipments this year.
It said it saw only a limited impact from Japan's earthquake and tsunami, which has disrupted the supply of hi-tech components, though its polysilicon plant in Japan lost some T$400-500 mln in the quarter due to the disaster.
AU shares have fallen about 3 percent this month, versus a rise of more than 2 percent in the boarder market . They closed down 0.2 percent at T$24.85 on Wednesday ahead of the results in a broader market that was up 1.1 percent. (Additional reporting by Faith Hung; Editing by Vinu Pilakkott and Ken Wills)