Japan's Tokyo Electron, the world's No.2 supplier of semiconductor-making equipment, said quarterly orders look to be stronger than expected thanks to a surge in demand from memory makers in Taiwan and South Korea.

Tokyo Electron, which trails Applied Materials in equipment used to process silicon wafers into microchips, had previously said it expected orders to be flat in October-December from the quarter before.

Orders in July-September for tools to make chips and LCDs totalled 94 billion yen ($1.1 billion). Maintaining that level would have beaten a dismal 38 billion yen showing logged in October-December in 2008.

Orders look to be much better than we thought they would be, Tokyo Electron President Hiroshi Takenaka told Reuters on the sidelines of the microchip equipment and materials tradeshow Semicon Japan.

Taiwanese DRAM makers are rushing to put in capex orders ahead of the expiry of a tax incentive on investment at the end of December, analysts said.

Takenaka declined to elaborate on the strength of an order recovery, but said he was now more hopeful about the January-March order trend, typically a slow quarter after year-end demand peters out.

In stronger years, orders usually fall sharply in January-March, but I don't think that will be the case this year, he said, referring to the quarter-on-quarter trend.

In October, Tokyo Electron revised up its earnings estimate to an operating loss of 35 billion yen, on a jump in orders from South Korea's Samsung Electronics Co and Taiwanese foundries TSMC and UMC last quarter.

Its forecast misses the consensus estimate for a 27 billion yen loss by 15 analysts polled by Thomson Reuters I/B/E/S.

Shares of Tokyo Electron closed up 3.9 percent at 5,050 yen, outperforming a 1.8 percent rise in Tokyo's electrical machinery subindex .IELEC.T.

The stock was helped by a Credit Suisse rating hike to outperform from neutral on possible large-scale capex projects by DRAM makers and foundries in Taiwan.

(Reporting by Mayumi Negishi; Editing by Chris Gallagher) ($1=87.26 Yen)

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