(Reuters) - Taiwan's AU Optronics, the world's fourth-largest LCD maker, said on Thursday it would form a strategic alliance with Japan's Idemitsu Kosan to develop next-generation flat screen technology, as the industry struggles with falling prices.

The strategic alliance includes technological collaboration to develop high-performance OLED displays and OLED-related patents, according to an AU Optronics statement to the Taiwan stock exchange.

This will accelerate business growth in AUO's small-sized OLED displays for smartphones and tablets, which have emerged as a new growth area in the display industry, and that of large-sized OLED displays for TVs, AU Optronics said.

OLEDs, or organic light-emitting diodes, are expected to be used for next-generation flat panel displays.

Under the alliance, Idemitsu will supply OLED materials to the Taiwanese company, while AU Optronics will reinforce the development of OLED products at Idemitsu.