* July orders -3% y/y vs -5.9% in Reuters poll

* Orders from China drop 6.3% y/y; U.S. down 1.6%

* Ministry sees Aug orders falling, but eyes stabilisation Recovery might not come till Q1 2020 - analyst

TAIPEI, Aug 20 (Reuters) - Taiwan’s export orders contracted for a ninth straight month in July though at a slower pace than expected, which might signal demand for new electronic products as the peak year-end season for gadgets approaches.

Tuesday’s data showed a milder contraction in orders from China and Europe compared with June. But amid escalation in the U.S. trade war with China, demand for Taiwan products from the U.S. contracted, after increasing the previous month.

Total orders in July dropped 3.0% from a year earlier to $40.53 billion, data from Taiwan’s Ministry of Economic Affairs showed. That was better than a forecast of a 5.9% decline in a Reuters poll and June’s 4.5% drop.

The ministry expects August export orders to decline 2.7-5.0% on-year, but held out hope for gains afterwards.

The ministry said orders for electronics including laptops and servers remained weak amid the trade war, but Taiwan has seen a milder contraction thanks to demand for new electronic products ahead of the year-end, when smartphone vendors are set to launch products.

“With the approach of the peak season for electronics ... export orders could gradually stabilise in the second half,” the ministry said, citing rising demand for fifth-generation telecommunications (5G) technology. Others were not so sanguine and said the trade war continues to create uncertainty about Taiwan’s growth.

“We expect continuous contraction for export orders until the end of the year, but fortunately the decline won’t deteriorate,” said Johnny Ching, economist at Masterlink Securities Investment Advisory.

In Ching’s view, orders could return growth again in the first quarter at the earliest.

Taiwan’s hi-tech factories are major suppliers for global tech heavyweights such as Apple Inc and Qualcomm , and the continued drop in orders suggests global electronics could remain soft for some time.

RETURNING PRODUCTION

Despite weak exports, Taiwan’s government last week raised its 2019 economic growth forecast as more factories move production back to the island from China as the Sino-U.S. trade war escalates.

The relocation trend could cushion the direct impact of the trade dispute and further improve exports in the second half.

Shipments in coming months could also benefit from U.S. President Donald Trump’s decision last week to delay new duties on some Chinese imports including cellphones, laptops and other consumer goods from Sept. 1 to Dec. 15, in the hopes of blunting their impact on U.S. holiday sales.

July orders from the United States dropped 1.6% on-year, compared to June’s 6.8% growth.

Orders from China dropped 6.3%, compared with a fall of 14.6% the previous month, while orders from European buyers slipped 1.8%. Japan orders grew 0.7%.

Taiwan’s manufacturers have suffered from trade war disruptions and sluggish global demand for gadgets.

Foxconn, which makes smartphones for Apple and other brands, last week reported a 2.5% fall in second-quarter profit and faces more challenging quarters ahead as Washington plans to impose additional tariffs.

Applied Materials Inc, which supplies equipment for micro-chip makers, beat Wall Street estimates for quarterly revenue last week but cautioned that a recovery in the memory chip market is unlikely before 2020. (Reporting by Yimou Lee, Emily Chan and Jeanny Kao; Editing by Richard Borsuk)