UPDATE 1-Temasek to buy $242 mln stake in S.Korea LED firms

* Temasek sees growth potential in South Korea LED makers

* Seoul Semiconductor shares fall 2.6 pct before announcement

SEOUL, Nov 3 - Singapore's state investor Temasek will pump 284.7 billion won ($242 million) to buy shares in South Korean light emitting diode (LED) company Seoul Semiconductor and its affiliate.

A brokerage that advised on the sale said on Tuesday that Temasek Holdings Private Limited would acquire a 12 percent stake in Seoul Semiconductor and a 9 percent stake in affiliate Seoul Optodevice and keep the holdings for at least one year.

Temasek also confirmed the investment, saying that investing in the South Korean companies fits well with Temasek's investment theme of supporting emerging champions.

"SSC is well-positioned to benefit from the industry's long-term growth potential as LEDs continue to gain traction as an energy efficient and eco-friendly lighting alternative," Peng-Huat Ang, a managing director of Temasek Holdings, said in an emailed statement, in reference to Seoul Semiconductor.

Temasek's move comes almost two months after Abu Dhabi's state fund ATIC offered $1.8 billion to buy Chartered Semiconductor, which was 62-percent owned by the state investor.

South Korean brokerage Daishin Securities said in a statement that Seoul Semiconductor and Seoul Optodevice would use the fresh money from Singapore's wealth fund for research and development as well as expanding production capacity.

LED consumes less power and lasts longer than traditional light sources and is increasingly used in electronics products from mobile phones to flat-screen televisions.

Shares in Seoul Semiconductor have more than quadrupled so far this year, fuelled by strong prospects for the fast-growing LED market.

Its shares closed down 2.6 percent at 40,150 won before the announcement.

Temasek, Singapore's second-biggest sovereign wealth fund, holds a 9.6 percent stake in South Korea's No. 4 banking group Hana Financial Group. ($1=1177.5 Won)