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By Mayumi Negishi

TOKYO, Sept 19 (Reuters) – Japan’s Toshiba Corp (6502.T) said it now expects to post an operating loss in the first half and slashed its full-year forecast to below market expectations due to a weak semiconductor market.

The microchip industry is beset by falling prices and excess capacity. Sliding prices in NAND chips, used in portable music players, digital cameras and cellphones, are also hurting chip makers such as Samsung Electronics Co (005930.KS) and Hynix Semiconductor Inc (000660.KS).

Toshiba, which plans to build two new semiconductor factories in 2010, said it would post a group operating loss of 30 billion yen for the April-September first half, a 100 billion yen swing from its previous forecast of a 70 billion yen profit.

A faster-than-expected slide in NAND prices and losses on its system chips, used in Sony Corp’s (6758.T) PlayStation 3 consoles, add up to Toshiba’s first operating loss for the first half in five years. In April-September last year it posted an operating profit of 82.5 billion yen

In addition, the world’s No.2 maker of NAND flash memory, cut its outlook for the year to March by 48 percent to an operating profit of 150 billion yen ($1.41 billion), missing the consensus of 188 billion yen in a poll of 16 analysts by Reuters Estimates.

The electronics firm, which also makes PCs, nuclear reactors and refrigerators, has bet big on NAND chips, but is now smarting as consumers tighten their purses in a weakening global economy.

"The impact from NAND is huge because the company has poured most of its energy and capital investment into the business," said Fujio Ando, senior managing director at Chibagin Asset Management.

"Aside from solar panels, flat screen TVs and Blu-ray disks, there’s no area of growth among digital products."

However, Toshiba said it hoped to break even in the second half, helped by increased consumer demand at Christmas.

"We still have considerable inventory," Fumio Muraoka, Toshiba’s corporate executive vice president, told a group of analysts and reporters. "We hope the year-end shopping spree will help to lower inventory levels."

But the company may slow capacity ramp up at its newest NAND plant in western Japan by one to two months, and book part of the 367 billion yen it had earmarked for chips in the following business year starting April, instead of this year, he said.

Toshiba, which expects NAND prices to fall 60 percent in the year to March, said prices slipped 45 percent in April-September from the previous six months.

Coupled with weakness in its system chips, losses in Toshiba’s bread-and-butter semiconductors outweighed solid sales of its laptops and its thermal and nuclear power equipment.

Before the outlook revision, Toshiba shares closed up 4.7 percent at 487 yen, bouncing back from a 3.5 percent fall on the previous day when a newspaper reported the half-year loss. ($1=106.76 Yen) (Additional reporting by Nathan Layne, Aiko Hayashi, and Sachi Izumi; Editing by Michael Watson and Simon Jessop)

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