Taiwan's UMC at 19-mth high on stake sale talk

TAIPEI Jan 7 (Reuters) - Shares of UMC (2303.TW) rose to a 19-month high on Thursday on a report that Abu Dhabi's Advanced Technology Investment Corp (ATIC) could buy a stake in the world's No.2 contract chipmaker.

By 0140 GMT, UMC (UMC.N) shares were up 2.45 percent at T$18.85, its strongest intraday level since May 19, 2008, and outpacing the benchmark TAIEX share index's .TWII flat performance.

The Chinese-language Economic Daily newspaper reported on Thursday that ATIC, which recently bought Singapore's Chartered Semiconductor Manufacturing CHRTF.PK, had approached UMC for talks on a possible stake buy, citing market rumours.

A continued pick-up in demand for chips and lean inventory days has also contributed to the uptick in the company's shares in recent months, as demand for electronic products returns.

"PC-related orders continue to kick in from late-Dec after the introduction of Windows 7," Deutsche Bank wrote in a research report. "Inventory restocking of handset chips for the Chinese New Year picked up from the last week of Dec."

UMC shares have risen more than 160 percent since the beginning of 2009, far outpacing the TAIEX's advance of about two-thirds.

The company competes with larger rival TSMC (2330.TW) (TSM.N) in the chip foundry sector, producing on behalf of companies who design their own chips but do not have the manufacturing capabilities. (Reporting by Kelvin Soh; Editing by Chris Lewis)