UPDATE 1-Sanyo to close South Korea chip plant -Nikkei

(Adds background, share price)

TOKYO, Sept 30 (Reuters) - Japan's Sanyo Electric Co (6764.T) will close its semiconductor plant in Masan, South Korea, as early as October to help turn around its loss-making chip business, Japanese business daily Nikkei reported on Tuesday.

The paper said the planned closure was already factored into the company's earnings outlook.

Sanyo's microchip operations have been floundering since a major earthquake hit one of its factories in northern Japan in 2004. The electronics maker spun off the chip-making business in 2006 in a move widely seen as a prelude to selling it.

But it gave up on the sale after private equity firm Advantage Partners LLP last year failed to gather enough funds to support its bid.

Shares in Sanyo fell 6.3 percent to close at 179 yen, underperforming the Tokyo stock market's electrical machinery index .IELEC.T, which fell 4.4 percent. (Reporting by Sachi Izumi, Kiyoshi Takenaka; Editing by Michael Watson)