UPDATE 1-TSMC posts weak Q1 net, but recovery underway

* Q1 profit falls but is above expectations

* Stock gains 7 pct before results, in line with main market (Adds quotes, share prices)

TAIPEI, April 30 (Reuters) - TSMC (2330.TW), the world's biggest contract chip maker, reported its weakest quarterly earnings in nearly eight years on Thursday as a slowing global economy hit demand for technology products.

But the chip foundry market, dominated by TSMC, UMC (2303.TW) and Chartered (CSMF.SI), is likely bottoming out, due partly to China's stimulus package that is seen supporting demand for computers, cellphones and flat-screen TVs.

Taiwan Semiconductor Manufacturing Co Ltd (TSMC) (TSM.N), which counts U.S. Texas Instruments (TXN.N) and Nvidia (NVDA.O) among its major clients, said it booked a net profit of T$1.56 billion ($47 million) in January-March.

Profit tumbled 94.5 percent from T$28.14 billion a year ago, but beat a consensus T$1.2 billion forecast of six analysts surveyed by Reuters.

"As a result of deepening economic recession worldwide and customers' inventory adjustment, first quarter saw a sharp decline in demand for semiconductors across all applications," TSMC said in a statement.

On Wednesday, cross-town rival UMC (UMC.N) posted a T$8.16 billion net loss for January-March but said it would return to profit in the current second quarter as wafer shipments more than double from those in January-March. [ID:nTP130150]

ASE (2311.TW) (ASX.N), the world's largest chip packager, and Taiwan's chip designer Mediatek (2454.TW) also predicted a brighter second quarter. [ID:nTPU001331] [ID:nTPV001331]

TSMC's results came as the Taipei stock market closed on Thursday. TSMC shares surged 7 percent to their daily limit and UMC shares also rose limit up, in line with the main TAIEX's rally on hopes of Chinese investment to the island. (US$1=T$33.2) (Reporting by Baker Li, Editing by Anshuman Daga)