Taiwan UMC ends unpaid leave in possible sign of recovery

* UMC ends all unpaid leave for staff, CFO says

* Stock limit-up ahead of the announcement

* Analysts say it is latest sign of a chip sector turnaround

TAIPEI, March 23 (Reuters) - UMC (2303.TW), the world's second-largest contract chip maker, has ended all unpaid staff leave, its chief financial officer said on Monday, in a sign that the chip sector could be recovering.

UMC's announcement came days after a similar announcement by its larger rival, TSMC (2330.TW), which also sharply raised its first-quarter sales and margin forecasts earlier in the month due to rush orders from China. [ID:nTP219809]

"We haven't asked any employees to go on unpaid leave since the middle of March," UMC Chief Financial Officer Liu Chitung told Reuters. "There are also no plans to re-implement this unpaid leave policy in the future."

Liu made his comments after the Taiwan stock market closed on Monday. UMC surged by its daily maximum 7 percent up limit, outpacing a 3.28 advance on the benchmark TAIEX .TWII share index.

Not all companies changed their unpaid leave policy. Taiwan's largest LCD maker, AU Optronics (2409.TW) (AUO.N), said it was monitoring the market and would be sticking to its unpaid leave policy for now.

UMC's turnaround comes after it posted a record quarterly net loss in the fourth quarter of last year, its second consecutive quarterly loss, on the back of big losses in equity investments and sluggish tech demand. [ID:nTP97157]

Policies implemented by UMC to deal with the downturn had included encouraging early retirement, a 15 percent reduction in salaries of its chairman and other top executives, and several hundred lay-offs. [ID:nTP210083]

Since late last year, most customers of TSMC, UMC and Singapore's Chartered Semiconductor CSMF.SI, 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 appears 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." (Reporting by Argin Chang; Writing by Kelvin Soh; Editing by Nick Macfie)