UPDATE 1-Taiwan's TSMC ends unpaid leave as orders rise

TAIPEI, March 20 (Reuters) - TSMC, the world's biggest contract chip maker, said on Friday it would end all unpaid leave for staff across the company from April, the latest sign of a recovery from the sector's downturn. The decision came after TSMC sharply raised its first-quarter sales and margin forecasts last week, due to rush orders from China, indicating a trend of falling sales that began six months ago had hit bottom. "Recently, the furlough days of business organisations have been gradually reduced due to rush orders. After considering the business need, the company has made the decision to terminate furlough," TSMC CEO Rick Tsai said in a letter to staff. "However, as the fundamentals of the economy are not significantly improved, we should remain cautious and watchful to our cost," he added. The company's manufacturing staff have taken five days unpaid leave per month since December, with other departments taking one day a week unpaid leave from January. TSMC would end the unpaid leave from April 1. TSMC released the news after the Taipei stock market closed on Friday.

TSMC shares fell 3.1 percent, sharper than a 1.5 percent fall in the main TAIEX share index. Since late last year, most customers of TSMC, UMC and Singapore's Chartered Semiconductor, the world's three biggest chip foundries, had been reluctant to place new orders for chips used in PCs, cellphones, flat screen TVs and other high-tech goods. But analysts say the chip foundry market appeared to have hit bottom in the first quarter. Makers of chips, LCDs and PCs in Taiwan are expected to be major beneficiaries of China's recent plan to encourage spending in rural areas by subsidising purchases of electronics products. Chip foundries make chips for chip designers without their own fabrication plants or chip makers that are increasingly outsourcing manufacturing to focus on design and sales. ($1=T$33.8) (Reporting by Baker Li, Editing by Lincoln Feast) Keywords: TSMC/ ([e-mail]; [phone]; Reuters messaging: [e-mail]) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved.

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