UPDATE 1-TSMC Q2 sales beat f'cast, more gains ahead

* Books largest monthly sales in eight months

* Q2 sales surpass TSMC own forecast

* Migration to advanced process technology seen smooth

* TSMC, UMC shares gain, outpacing big board (Recasts with quotes and details)

By Baker Li

TAIPEI, July 10 (Reuters) - Top contract chip maker TSMC (2330.TW) booked its biggest monthly sales in eight months that topped the level by cross-town rival UMC (2303.TW), thanks to growing demand for computers and other consumer gizmos.

April-June sales jumped 88 percent from the first quarter and beat TSMC's (TSM.N) own forecast made in April, boding well for the third quarter as analysts expect TSMC to boost shipments of chips made by more advanced technology to its clients.

Taiwan Semiconductor Manufacturing Co Ltd (TSMC), which grabs about a 50 percent share of the $20 billion market for custom-built chips, had unconsolidated sales of T$25.78 billion ($781 million) last month, the company said on Friday.

The result fell 9.6 percent from a year ago but was up about 5 percent from May, marking its fourth straight monthly rise.

A day ago, United Microelectronics Corp (UMC) (UMC.N), the world's No.2 chip foundry, said it had sales of T$8.24 billion in June, its largest monthly sales in nearly one year. [ID:nTP116807]

"PC demand has been okay in June and July and the cellphone (sector) is also picking up, so if downstream demand is good, I don't see any problem for foundries in the near term," said John Chiu, a fund manager at Fuh Hwa Securities Investment Trust.

Deutsche Bank expects TSMC to ship more graphics chips using new 40 nanometre technology to Nvidia (NVDA.O) and AMD (AMD.N) in the third quarter, dismissing recent market fears that TSMC might delay its migration to the advanced process technology. The bank expects TSMC to further expand its share in the global foundry market, while second-tier rivals have limited research and development spending.

After a strong second quarter, however, Citi said TSMC could give a forecast of 5-6 percent sequential growth in its third quarter sales at its quarterly investor conference later this month.

TSMC's sales results came after the Taipei stock market closed on Friday. TSMC shares rose 1.45 percent and UMC shares jumped 2.16 percent, outpacing the main TAIEX share index's 0.32 percent gain.

Still, TSMC aims to keep reducing costs by sharing R&D efforts with its clients under an Open Innovation Platform created by TSMC.

TSMC has also said it would diversify into the energy-saving solar industry and beef up its presence in the power management chip segment to ensure future growth. [ID:nTP279120]

Consolidated second-quarter sales amounted to T$74.21 billion, according to Reuters calculations, surpassing TSMC's own forecast of between T$71 billion and T$74 billion.

For the first half of the year, TSMC's consolidated sales reached T$113.71 billion, down 35 percent from a year earlier.

For a graphic on TSMC's monthly sales, click here

For a graphic on TSMC and UMC's combined sales, click here (US$1=T$33) (Editing by Jacqueline Wong)