July 27 (Bloomberg) -- Toshiba Corp., Japan's biggest chipmaker, raised its first-half profit and sales forecasts, anticipating increased orders for semiconductors and personal computers ahead of the year-end shopping season.

Net income in the six months ending Sept. 30 will probably rise 3 percent to 40 billion yen ($336 million), compared with an April outlook of 10 billion yen, Tokyo-based Toshiba said. Sales may climb 14 percent to 3.6 trillion yen, surpassing an earlier forecast of 3.5 trillion yen.

Toshiba may struggle to meet chip demand from makers of mobile phones and music players this quarter, said Fumio Muraoka, a vice president. The company today reported a fivefold increase in first-quarter profit to 20.6 billion yen, buoyed by increased demand for chips that can handle multiple functions and a gain from the sale of a music venture.

The company should ``have a better market outlook for the rest of the year,'' Takeo Miyamoto, a Tokyo-based analyst at CLSA Asia-Pacific Markets, wrote in a report before the earnings announcement. ``The NAND flash average selling price for the first quarter seems to have increased about 5 percent'' when Toshiba had expected a decline of as much as 10 percent.

Stronger-than-expected demand for NAND flash may prompt the company to raise its full-year profit forecast for the chip unit later in the year, according to Miyamoto.

Shares of Toshiba fell 3.1 percent to 1,115 yen on the Tokyo Stock Exchange. The stock gained 44 percent this year, compared with a 0.3 percent advance in the Nikkei 225 Stock Average.

Flash Memory Demand

Toshiba expects to meet 75 percent of its orders for NAND flash chips in the current quarter, compared with 80 percent in the previous three months, Muraoka said.

The company in April projected operating profit at the chip unit would fall 14 percent to 110 billion yen this fiscal year as a change in accounting rules from April 1 led to higher equipment amortization costs.

Toshiba kept its annual earnings goals unchanged.

First-half operating profit will rise 7.4 percent to 70 billion yen, exceeding an earlier estimate for 40 billion yen, Toshiba said. The company, which had expected to break even in the first quarter on an operating level, reported an operating profit of 21.2 billion yen.

Toshiba-EMI Gain

Fiscal first-quarter sales rose 15 percent to 1.66 trillion yen, the company said today. Toshiba's earnings included a 12.7 billion yen gain from selling its 45 percent stake in Toshiba-EMI Ltd. to EMI Group Plc.

Operating profit in the chip unit in the quarter rose 18 percent to 23.5 billion yen, helped by demand for flash memory and system LSI, semiconductors that handle many functions on a single piece of silicon, the company said. Toshiba makes LSI chips for Sony Corp.'s PlayStation 3 machine and liquid-crystal display televisions by Sharp Corp. and Hitachi Ltd.

The company's personal-computer business reported a 24-fold gain in operating profit to 9.6 billion yen in the quarter, helped by lower component and production costs, Toshiba said. Sales in the unit rose 16 percent to 239 billion yen, led by demand in the U.S.

To contact the reporter on this story: Pavel Alpeyev in Tokyo at palpeyev@bloomberg.net.

Last Updated: July 27, 2007 06:49 EDT