By Lucas van Grinsven

HANOVER, Germany, Mar 8 (Reuters) LG Electronics, one of the world's biggest optical drive makers, will support HD DVD as well as Blu-ray in the emerging war over the next DVD standard, it said on Wednesday.

Until now LG Electronics was firmly in the Blu-ray camp, together with most of the other big consumer electronics firms such as Sony Corp, Philips, Dell and Matsushita's Panasonic.

LG is the second high-profile Blu-ray supporter to change position after Hewlett-Packard, the world's second biggest PC maker, decided last month to also support HD DVD alongside Blu-ray.

LG expects to announce the first product later this year, its European president James Kim told Reuters on the fringes of the world's top electronics trade fair CeBIT.

''We will do both,'' Kim said.

HD DVD is a format supported by Toshiba and NEC.

Both formats offer more storage capacity than the current DVD format. This is needed to store high definition movies whose increased picture detail means they contain four to five times more digital bits of information.

Blu-ray says it offers higher capacity, up to 50 Gigabytes for a dual layer disk which is not yet on offer, while HD DVD says it offers a cheaper system which is compatible with the current DVD standard which was set in 1995.

At stake is the -billion-a-year home video market.

HD DVD players and disks are scheduled for introduction this month with players starting at 9, while the first Blu-ray player from Samsung is not expected before May and is expected to be at least twice as expensive.

LG'S BLU-RAY PRODUCTS, BUT WHEN? LG unveiled at CeBIT Blu-ray optical drives for use in combination with a personal computer, expected to hit the market some time this year, but Kim said the price had not yet been decided.

''It will be only in a few products (PCs). The product has not yet hit the sweet spot,'' Kim said, referring to low prices which are needed to convince cost-conscious computer makers to include a Blu-ray optical drive in their products.

Support from the PC industry is important. In the first years after the DVD was introduced in 1995, around 70 per cent of demand for DVD drives came from the personal computer industry.

Toshiba said earlier on Wednesday it would include an HD DVD drive in its most expensive laptop which doubles as a high definition television receiver.

Adoption by games consoles also plays a big role.

Blu-ray will be a standard feature in the upcoming PlayStation 3 (PS3) games console from Sony, but the launch date has just been delayed to later in 2006 from an initial spring introduction. PS3 is expected to boost the installed base of Blu-ray drives by millions of units in the first year.

HD DVD may get a boost after Microsoft said it would offer HD DVD drives to go with its Xbox 360 games console.

Hollywood studios also play a crucial role in the outcome of the format war which is starting to resemble the VHS-Betamax video cassette wars of the 1980s.

''Both camps are still waiting what the software industry will do,'' Kim said, referring to the ''software'' Hollywood studios record on disks that contain films.

REUTERS SD HT2002