UPDATE 2-China's SMIC CEO change could augur consolidation

* Long-serving SMIC CEO Richard Chang resigns

* Industry veteran David Wang to take over

* Move may pave way for industry consolidation, analysts say

* SMIC to settle lawsuit with TSMC in cash, shares - source (Adds settlement with TSMC in para 6-9)

By Doug Young

HONG KONG, Nov 10 (Reuters) - SMIC (0981.HK), China's largest contract chipmaker, said its long-serving CEO has been replaced by another industry veteran, in a move that could pave the way for consolidation in China's struggling chip sector.

SMIC's founder Richard Chang had been replaced as CEO by David Wang effective immediately, the company said in a statement to the Hong Kong Stock Exchange on Tuesday.

Wang's strong industry background, as a former executive at Applied Materials (AMAT.O), the world's top supplier of chipmaking equipment, and more recently as head of another major Chinese chipmaker, Huahong NEC, could be setting the stage for much needed industry consolidation, analysts said.

"This will likely be a precursor for a merger of the two companies, and David Wang will take charge after the merger," Nomura analyst Rick Hsu said, referring to SMIC and Huahong NEC. "A new person will hopefully bring in a new culture, a new mission and new results."

SMIC's shares have been suspended since Nov. 4 pending the release of price-sensitive information. Last week, sources told Reuters the company was in talks to settle a U.S. court case that found SMIC guilty of stealing trade secrets from Taiwan's TSMC (2330.TW), the world's top contract chipmaker. [ID:nHKG215742]

SMIC will pay $140 million in cash to TSMC and may offer $100 million worth of SMIC shares to TSMC to settle the case, another source with knowledge of the matter told Reuters on Tuesday.

The source said SMIC could announce the settlement as early as Tuesday.

SMIC and TSMC settled a similar case a couple years ago after SMIC agreed to pay $175 million to TSMC, and the source said SMIC has paid the bulk of that amount and would pay the remaining $60 million to TSMC.

SMIC officials were not immediately available for comment.

QUARTERLY LOSSES

Chang founded SMIC in 2000 with major support from the Chinese government as China tried to build up its higher value-added technology industries to move away from lower-margin manufacturing that has become a staple of its economy.