UPDATE 1-TSMC employees on unpaid leave to cut costs

(Recasts with quotes, details)

By Baker Li

TAIPEI, Dec 3 (Reuters) - Taiwan Semiconductor Manufacturing Co Ltd (2330.TW) said staff across the company would take unpaid leave as the world's top contract chip maker looks at ways to trim costs amid a severe downturn.

TSMC (TSM.N) on Monday slashed its fourth-quarter sales and margins forecasts, blaming a slowing global economy for weaker wafer shipments.

"The company must do its utmost to lower costs. At the same time, we will also do all we can to protect jobs," CEO Rick Tsai said in a video address to staff on Wednesday.

The company said manufacturing staff would take five days unpaid leave per month, starting this month, with other departments taking one day a week unpaid leave from January.

The creative cost-cutting could reduce labour costs by around a fifth, according to Reuters calculations.

Tsai said TSMC planned to use part of employees' profit-sharing distribution to make up a shortfall in their regular monthly income.

Industry sources told Reuters last week that TSMC and its cross-town rival UMC (2303.TW) (UMC.N) were preparing to cut costs by up to 20 percent. UMC had told employees they may soon be put on a four-day week, taking the fifth day as unpaid leave. [ID:nTP131902]

TSMC shares closed down 2.1 percent, while UMC fell 5.4 percent on Wednesday, underperforming the main TAIEX index's 1.1 percent drop. (US$1=T$33.5) (Reporting by Baker Li, Editing by Anne Marie Roantree & Ian Geoghegan)