AU Optronics will make the generation 7.5 panels -- one generation behind the technology currently employed in Taiwan -- in the Kunshan industrial park in eastern China to take advantage of the mainland's lower wages and production costs, the Investment Commission said.

The sanctioning of the project Friday came after South Korea's Samsung Electronics Co. and LG Display -- the world's two largest LCD panel makers -- announced similar plans to invest in China.

China is a major market for the panels that are used in flat screen televisions and computer monitors.

Besides investing in China, AU Optronics also plans to build two new factories in Taiwan to make generation 11 panels and promises to employ at least 5,000 new workers on the island in the coming 10 years, the Investment Commission said.

Taiwan has set stringent rules on high-tech investment in China, hoping to keep a potential rival from making off with its technologies.

Friday's investment approval came only a week after Taiwanese tycoon Terry Gou said that further stalling on panel projects in China could stymie the local industry in its battle for competitive advantage over South Korea.

Taiwan's Chimei Innolux Corp., which counts Gou's Foxconn Technology Group among its investors, has said it will follow AU Optronics's step and invest in China itself.

Taiwan's display panel makers have had a difficult year, with both the U.S. and European Union fining them heavily for participating with two South Korean companies in a price fixing cartel.

Last week the EU fined LG Display and four Taiwanese panel makers euro 649 million ($863 million) for fixing LCD panel prices.

Samsung also participated in the cartel but avoided a fine for cooperating with EU authorities.

AU Optronics says it will appeal its EU punishment. Chimei says it has yet to decide on a course of action.