Analysts said the closely watched blue chip, expected to announce its third quarter profit after the close of Monday's stock trading, would report its worst quarterly profit of 1998.

Taiwan Semicon, which has a listing of American Depository Receipts on Wall Street, is the world's leading manufacturer of made-to-order "foundry" microchips.

"The third quarter is really the bottom this year," said ING Barings' Taiwan semiconductor analyst Donald Floyd.

Floyd forecast the semiconductor giant's third quarter net profit at just T$3.0 billion (US$91 million) -- sharply lower than T$3.758 billion in the second-quarter and T$6.947 billion in the first quarter.

The firm reported a net profit of T$4.6 billion in third quarter 1997.Analysts said the expected profit decline was mainly due to low sales.Taiwan Semicon's sales dropped ayear-on-year 15.9 per cent in July and 2.6 per cent in August, but recovered in September with a 5.1 per cent annual rise.

Taiwan Semicon had said it expected the global semiconductor industry to face continuing challenges in 1998 as Asia's economic slowdown, oversupply in components products and pricing pressures would remain unchanged in the near term.

Analysts agreed that the industry would likely to remain sluggish but they said Taiwan Semicon's earnings would soon bottom out. "The third quarter is definitely going to be worse than the second quarter," said Polaris Securities' senior analyst Georgiant Ho, who put his profit forecast at around T$2.8 billion to T$3.2 billion for the third quarter. "But the food news is -- the worst is now over," Ho said.

ING Barings' Floyd shared Ho's views, forecasting Taiwan Semicon's fourth quarter net profit at around T$3.9 billion. "Sequentially it's going forward. I am looking for an increased profitability in the fourth quarter," Floyd said.

Analysts saidthey did not expect a dramatic stock selloff in Taiwan Semicon as most investors had already factored in over supply and a sagging semiconductor industry worldwide. "The market is likely to be neutral to its profit announcement," said Michael On, president of Beyond Asset Management."Investors know it's not just the problem of Taiwan Semicon. It's mostly the problem of the external environment and the entire semiconductor industry as a whole," On said.Ho of Polaris Securities said it was still worth betting on the company's long-term growth.

"We are bullish in Taiwan Semicon's long-term development. It's a company with solid fundamentals and potential. When the industry recovers, it will be the first to benefit," Ho said.

Semicon ended at T$64.5 on Saturday, up T$1.5 or 2.4 per cent. (US$ =T$32.894)