In 2-quart saucepan, cook bacon and onion over medium heat, stirring occasionally, until bacon is crisp and onion is tender; drain off fat.
Drain clams, reserving liquid. Add enough water, if necessary, to clam liquid to measure 1 cup.
Stir clams, clam liquid, potato, salt and pepper into bacon and onion. Heat to boiling; reduce heat. Cover and simmer about 15 minutes or until potato is tender.
Stir in milk. Heat, stirring occasionally, just until hot (do not boil or soup may curdle).