* SMIC shares surge 68 pct to highest in more than a year

* Incoming CEO expected to improve prospects for SMIC

By Doug Young

HONG KONG, Nov 11 (Reuters) - Shares of SMIC (0981.HK: Quote, Profile, Research)(SMI.N: Quote, Profile, Research), China's largest contract chipmaker, posted record gains on Wednesday after the company settled a lawsuit and replaced its CEO -- moves that could pave the way for future growth.

Shares of Semiconductor Manufacturing International Corp soared as much as 68 percent in Hong Kong in Tuesday morning trade, their largest single-day gain since their 2004 initial public offering.

The stock was up about 60 percent at 0350 GMT at HK$0.60, its highest level in more than a year. But that level was a fraction of the HK$2.69 price its shares commanded for its initial public offering in March 2004.

Turnover of 1.7 billion shares was already 50 times its average volume over the past 30 days and represented almost 8 percent of its shares on issue.

The share surge came after SMIC, whose shares were suspended last week, said on Tuesday that it had settled a lawsuit against it by Taiwan-listed TSMC (2330.TW: Quote, Profile, Research), the world's largest contract chipmaker, which could include TSMC taking a stake of up to 10 percent in SMIC. [ID:nHKG280185]

In addition, SMIC said its long-serving CEO, Richard Chang, had stepped down and was being replaced by another industry veteran, David Wang -- a move analysts said could pave the way for much needed consolidation in China's fragmented chip sector.