RESEARCH ALERT-JPMorgan downgrades UMC to "neutral"

* Downgrades rating on UMC due to weaker H2 outlook

* Cuts target price on UMC by 14 percent

TAIPEI, June 10 - JPMorgan on Wednesday downgraded its rating on UMC, the world's No.2 contract chipmaker, to "neutral" from "overweight", citing weaker second-quarter sales and a dismal outlook into the second half of 2009.

"With higher price erosion and lower wafer shipments expected in the second quarter, we believe there could be around a 3 percent downside risk to our current second-quarter sales forecast," JP Morgan wrote in a research note.

The rating downgrade came after United Microelectronics Corp (UMC) on Tuesday said it recorded sales of T$7.514 billion ($230 million) for May, down 12.7 percent from a year earlier, but up 9.3 percent from April.

The research house also cut its share price target on the chipmaker by 14 percent to T$12.0 from T$14.0. Shares of UMC were up 4 percent at T$12.90 at 0403 GMT on Wednesday, outperforming a 1.24 percent rise on the benchmark TAIEX.

JPMorgan expected UMC's monthly sales to continue growing on a month-on-month basis in June and July, but expressed caution over downside risks for the Taiwan company in August.

"We expect to see warning signs emerge in August, and we believe there is more downside potential," it said.

"Our checks suggest that some customers are cutting orders and the outlook for the third quarter is deteriorating." (US$1=T$32.7)