UPDATE 1-Quanta to up China workers' pay to meet labour shortage

* Pay hike to have little effect on margins - Quanta

* Currently employs over 40,000 workers around Shanghai

* Labour shortage should ease by May - analyst

* Shares give up most gains, end session up 0.3 pct (Adds details, quotes, background)

By Roger Tung

TAIPEI, Feb 24 (Reuters) - Quanta Computer (2382.TW), the world's largest contract laptop maker, will raise salaries of its production workers in mainland China by about 10 percent to fend off a labour shortage as demand picks up for its products.

"We estimate salaries will climb by about 100 yuan ($15) this time, or about 10 percent," Elton Yang, Quanta's Taipei-based vice-president for finance, told Reuters.

Other tech firms have also expressed concern at labour shortages in China, a major manufacturing base, with Acer (2353.TW), the world's No. 2 PC brand, saying recently that it has been giving orders to its contract manufacturers up to six months ahead to allow them to plan their staffing needs.

Quanta currently employs about 40,000 production line workers around the Shanghai region in China, he added, and is said to manufacture goods for some of the world's top PC brands such as Apple (AAPL.O), Hewlett-Packard (HPQ.N) and Dell (DELL.O).

"For Quanta, the impact may not be that big because we're fairly well-known," Yang said. "But our suppliers may have some issues with manpower, and if things worsen, we may even step in to send some of our workers over to help them tide through this time."

Quanta's suppliers include component manufacturers such as battery maker Simplo (6121.TWO), laptop hinge maker Shin Zu Shing (3376.TW) and adaptor manufacturer Delta Electronics (2308.TW), all of which manufacture laptop parts.

UBS analyst Edward Yen estimates that about 5 percent of the company's total cost goes to labour, and the current labour shortage should ease by May.

"We're probably going through the worst right now," said Yen. "Things should ease when China's school year ends in May, and that's when we may see a new batch of people entering the workforce, which will help things."

The salary hike is unlikely to have an effect on Quanta's margins since salaries make up only a small percentage of the company's cost, Yang said, and the firm is further pushing towards automation for its production line.

Quanta shares slipped on the news after having traded up more than 1 percent over most of the session. It closed up 0.3 percent, compared with the benchmark TAIEX share index .TWII, which closed down 0.89 percent.

Most major tech brands do some or all of their own design work in-house, but outsource the manufacturing process to firms such as Quanta, Hon Hai (2317.TW) and Flextronics (FLEX.O), which run large facilities in lower-cost countries.

(Editing by Ken Wills)