The main TAIEX share index was up 11.63 points at 4,425.08 in thin trading, closing the week with a 5.7 percent slide. The electronics sub-index climbed 0.37 percent, with AU Optronics, the world's No.3 LCD maker, jumping 2.5 percent.
Smaller rivals Chi Mei and Innolux Display ended up 3 percent and 4.7 percent, respectively.
"Investors were cheered by the government support. They were also betting a small rebound in flat panel prices will happen in the first quarter," said Chang Chi-sheng, who manages T$6 billion for Uni-President Asset Management.
"Still, the prospects for LCD companies remain dismal as most of them are widely expected to post losses in Q1 and Q2 next year," said the fund manager.
The financial sub-index slid 0.38 percent on new government data that showed Taiwan banks had a non-performing loan ratio of 1.6 percent at the end of November, higher than 1.54 percent a month ago.
Turnover hit a two-month low for a second day, with T$29.9 billion ($910 million) worth of shares changing hands, almost flat from T$29.5 billion the previous session.
Chang expected the market to trade in light volume between 4,300 and 4,500 points through next Wednesday ahead of the New Year holidays.
Taiwan Premier Liu Chao-shiuan said on Thursday the government would support the LCD industry, which competes with South Korean rivals, as it grapples with fallout from the global economic slowdown. The premier did not offer details about the support.
Powerchip sank 2.65 percent. The struggling DRAM maker said on Friday it had submitted a proposal to the government detailing its plans to work with Japan's Elpida on their Rexchip joint venture.
ProMOS, another DRAM maker that has applied for government aid, was off 0.47 percent.
Memory chip makers worldwide are struggling to raise cash and cut production to survive what companies expect will be the worst downturn the sector has experienced.
Hon Hai Precision, Taiwan's top electronics gear maker, ended 0.3 percent lower.
A company official denied a local newspaper report that said some Hon Hai executives would get annual pay of T$1 while employees take a 5-10 percent pay cut next year, as the global economic downturn has proven worse than expected.