UPDATE 2-Chartered Semi swings to Q2 profit, sees Q3 loss

(Recasts with CEO comments, new dateline, share price)

By Jennifer Tan

SINGAPORE, July 25 (Reuters) - Contract chip maker Chartered Semiconductor Manufacturing Ltd (CSMF.SI) swung to a quarterly profit after a tax credit, but forecast a third-quarter net loss on higher costs, sending its stock down as much as 6.5 percent. Singapore-based Chartered forecast a net loss of $24-$34 million for July-September, citing increased electricity charges and rising prices for supplies like chemicals and process gases.

"Though we have not seen any broad-based reduction in our customer demand, we continue to be cautious about the worsening economic situation as we manage our business," Chief Executive Chia Song Hwee told analysts on a conference call on Friday. "We expect gross margins to decline significantly in the third quarter. We have initiated discussions with our customers to share the cost increases," he added.

Chartered's shares sank as much as 6.5 percent to a morning low of S$0.645, its lowest since mid-March, following its results and after the firm said it was not considering any specific takeover bids at the moment.

The stock had risen recently on market speculation that Chartered might have received bids from interested parties.

The firm ranks alongside China's Semiconductor Manufacturing International Corp (SMIC) (0981.HK) in the market for custom-built microchips, which is dominated by larger rivals Taiwan Semiconductor Manufacturing Co Ltd (2330.TW) and United Microelectronics Corp (2303.TW).

In contrast, TSMC, which reports April-June results on Thursday, is seen posting stronger profits on rising sales of chips for PCs and consumer gadgets. TSMC has forecast its July-September sales will rise from the second quarter.

MODERATING GROWTH