This is Shekuana and I will be facilitating the conferencecall today. I would like to welcome everyone to UMC's Third Quarter 2007Earnings Conference Call. All lines have been placed on mute to prevent anybackground noise. After the presentation, there will be a question-and-answerperiod. Please follow the instructions given at that time if you would like toask a question. For your information, this conference call is being broadcastlive over the Internet. A replay of the call will be available at www.umc.comunder the ‘Investor Relations’, ‘Investor Events’ section through Tuesday,January 1st, 2008. Also, a telephone replay of the call will be available from10 am New York time and will run until midnight on November 1st, 2007. Toaccess the replay, please call 888-286-8010 or 617-801-6888 if you are callingfrom outside the U.S. To access, the access code will be 403-01-749 throughoutthis period. I would like to introduce Mr. Chitung Liu, CFO of UMC. Mr.Liu, you may begin.

Thank you, operator. Hello, everyone. This is Chitung. Weare happy that you could join us for our conference call today. With me hereare Dr. Jackson Hu, Chairman and CEO of UMC and Mr. Bowen Huang, Senior IRManager. Before we begin, please bear with me for a moment. I need togo over the standard Safe Harbor policy. Certain statements made during thecourse of our discussion today may constitute forward-looking statements thatare based on management's current expectations and beliefs and are subject to anumber of risks and uncertainties that could cause actual results to differmaterially, including risks that may be beyond the Company's control. For theserisks, please refer to UMC's filings with the securities authorities in theU.S. and in the ROC. First, let's start with our performance for the thirdquarter of 2007. For this period, our revenue was NT$31.03 billion, which is anincrease of 23.6% compared to $25.1 billion last quarter. Year-over-yearrevenue decreased by 11.4% from NT$27.85 billion in third quarter 2006. Gross profit for this quarter was NT$8.22 billion or 26.5%of revenue compared to NT$4.96 billion or 19.8% of revenue from second quarterof 2007. Operating profit was NT$4.24 billion or 13.6% of revenue compared toNT$1.23 billion or 4.9% of second-quarter 2007 revenue. Net income was NT$9.23 billion in third quarter 2007compared to a net income of NT$4.91 billion in 2Q '07. EPS for the quarter wasNT$0.57 and earnings per ADS were US$0.088. The bulk out of numbers highlightof UMC's financial performance for the last quarter. You can view more detailson our quarterly report, which has been posted on our website. Now let me turn the call to Dr. Jackson Hu to provide acloser look for our business update and guidance for the next quarter. Jackson,please.

Welcome to our quarterly conference call today. It is niceto meet everyone again on the air and we always appreciate your participationand your interest in UMC. First of all, we had an excellent quarter for Q3 2007. Ouroverall performance exceeded our guidance including revenue, gross margin,operating margins, wafer shipment, loading, and other key indicators. It isworthwhile to note that overall wafer shipment exceeded a 1 million 8-inchequivalent for the quarter. This was a UMC record high. Certainly the strong seasonaldemand in Q3 was a main contributor. The facts that both 12-inch fabs had anaverage loading of 95% clearly indicated that for the product mix and thecustomer mix were ideal to take full advantage of the strong demand. In the meantime, we must also point out that althoughrevenue was impressive, it did not reach historical highs due to price pressurein both material 8-inch and advanced 12-inch properties. This is a clearindication there is now too much competition within our industry. In Q3, we completed Taiwan's largest ever-capital reductionplan by canceling 30% of UMC's outstanding shares while returning NT$57.3billion to shareholders. Our cash position after the capital reduction remainsvery healthy. On the other hand, UMC continues to reconstruct its balancesheet to improve capital utilization and ROE or return on equity. Also worthwhile to mention, in Q3, we signed a technologycross license and joint development agreement with Elpida. This is asignificant development that gives us access to their DRAM technology, which wecan offer as part of our SOC solutions for memory intensive applications. Furthermore, we will jointly develop with Elpida an emergingPRAM technology or phased change memory for future SOC design. As the process ofscaling (ph) continues, multiple systems can be integrated in the future. Theability to integrate various system memories will become very important in thefuture. Another topic, which the industry should…

(Operator Instructions) Your first question comes from theline of Randy Abrams with Credit Suisse. Please proceed.

Yes, good evening. I wonder, if you can give us an update onyour expectation for the 65-nanometer ramp over the next few quarters.

We have many 65-nanometer products at various stage of UREintroduction and others are prototyping in other stages. So they will go intoproduction as time goes by. And the highest volume, high volume will occurafter Q2 next year.

Okay. Maybe quantify it in terms of percent of revenue, howquick and maybe metrics on getting to 5% or getting to 10% of revenue from 65…

In the fourth quarter, you will be around 4%.

Okay. Thank you. On your CapEx, your utilization reached 95%you were mentioning last quarter. Do you worry about leaving some business onthe table next year? You mentioned a strong growth year. Just want to see ifCapEx is down significantly, how much can you grow your capacity next year?

As I mentioned earlier, the main objective for next year isto convert the capacity mix so that we can satisfy customer’s needs. An exampleis converting a large chunk of 0.13-micron capacity into 65 nanometer, whichwill have higher ASP. So, we will be able to support a very high growth rate nextyear, even close to or about 35% if 2008 turns out to be a strong year.

Okay. And one last question. Could you maybe talk aboutwhat's driving -- you had a strong third quarter so it might be a higher base,but what's driving a bit more of a sequential decline in fourth quarterrelative to some of your peers? And how does that set up for first quarter if you have alower base in fourth quarter? Do you still see a seasonal decline -- say highsingle digits first quarter -- maybe a range for that?

It's too early to talk about Q1 next year, but for Q4, wesee a normal adjustment probably across the Board in the computer,communication and consumer segment.

Thanks a lot, guys.

Our next question comes from the line of William Dong withUBS. Please proceed.

Good evening. Quick question on the CapEx side. I understandthat there's a plan to significantly cut CapEx for next year. But I think interms of strategic planning for the future technology development, I just wantto get your sense of what is to plan on 45 and how do we progress from here?

Good question. 45 nanometer, we are producing the firstproduct for our customer. It is in 12A, our 12-inch fab in Tainan. And, we haveseveral other customers that are doing prototype preparation in the test chipas well.

So, will the sort of slowdown in CapEx affect your ramp oris it actually not -- it will not affect your ramp?

Probably not, it will not affect the ramp. We estimate thevolume for 45 nanometer next year will be limited.

Okay. Thank you very much.

Our next question comes from line of Shailesh Jaitly withNomura, Singapore. Please proceed.

Yeah. Hi, this is Shailesh. Firstly, if you could helpexplain the utilization difference between say your 12-inch fab versus your8-inch capacity?

In which quarter?

In the just past quarter, 3Q.

In the past quarter, 3Q?

Yes.

The 12-inch actually is slightly better. Was slightly betterthan 8-inch.

Yes, that's what I was trying to understand because when Ilook at your revenue by process geometry, I noticed that your growth in thehighland processors is a lot faster as compared to the matured processors,whereas when I look at pretty much all your competitors, it is the reverse ofthat which has occurred. So could you help reconcile this major difference asto what product segments are really driving your higher end of the products?

Okay. In Q3, actually, applications demand for advancedprocess technology is -- was strong across the board, including communicationsand computers, graphics, chips and consumers. So, a referenced speaker is thatyou can find in our published report, that 90 nanometer and below accounted for25% of our revenue and 0.13 accounted for 23%. So, totaling those three, 0.13micron below accounted for about 48% of our overall revenue.

I understand. Also, could you help provide some estimates ofthe development costs, which are going to be required for your 45 nanometer ascompared to same like-to-like costs for 65?

We don't have that number on top of our head. And actually,the more expensive equipment needed for 45 nanometer is a merchant scanner. Andbeyond that, I could not think of any special equipment that are much moreexpensive than 55 nanometer generation.

Yes, taking a different aside, would it be fair to assumethat your 45 nanometer development costs, the process development costs, is alot higher because when I speak to the industry participants, the numbers thatcome across are as high as $800 million. So, just trying to understand that massive reduction inCapEx versus the need to migrate to 45 nanometer, how would you reconcile thesetwo differing needs?

For your information, the development of our 45-nanometertechnology is progressing very, very well, and we have old R&D equipmentneeded. So, I don't think it has anything to do with the -- or it has not muchto do with the CapEx, yes. Everything has been factored in including theR&D equipment.

I understand. One last question if I may. You mentionedabout the capacity conversions, which you are targeting, 0.13 micron to 65nano. If you could help provide some CapEx estimates, talk emerging say astandard have a 30,000 wafers per month, how much CapEx would be required andhow much time would be required to convert say 0.13 micron to 65 nano?

It has been progressing for a while and I think within twoquarters, most of the conversions will start to become effective. So that wecan take advantage of a strong demand in Q3.

And how much will it cost you two quarters free to migrateand how much will it cost you…

We will have to discuss that information in the next quarterlyconference when we provide more detail to CapEx information.

Understand that. I appreciate for your answers. Thanks alot.

Your next question comes from the line of Pranab Sarmah withDaiwa Securities. Please proceed.

Thank you for taking my questions. First I have questions onsome financial numbers. Can you give us your non-operating guidance for fourthquarter? And also the depreciation expenses for fourth quarter?

For the third quarter, there was NT$2 billion cash dividendincome, which we will not see that again in Q4. And also, just on the assetdisposal, the share sales in fourth quarter, they will also be lower than thatin third quarter. So, overall it will be actually much lower in Q4 versus Q3in terms of net non-operating income. And as for depreciation, we will see aminor increase in Q4 over Q3, low single digits.

Low single digits. Okay. Then, Jackson, you have mentionedabout some of the critical equipment can be a bit here high productivityannouncement under some of the critical equipment. Could you identify what arethe critical equipment you are talking about here?

The one example I can mention or one equipment I can mentionis the scanners, which is very expensive, as you know, the basis. Advancedscanners can cost $50 million per piece.

So, now you will be using your old scanners to migrate to a65 nanometer from 0.13-micron. That's what you were trying to say, right?

What we are trying to say is the existing scanners arecapable of doing 65 nanometers.

The 65 nanometer. Yes. But when you start 45 nanometerprobably, from 2009, your capital intensity will again increase probablybecause you do not have any more scanners for 45 nanometer?

That's a good guess. And we'll have to talk about that nextyear.

Okay. And one question on the 65 nanometer, how manypercentage of our revenue came in third quarter?

In third quarter is about 1%.

1%. And in 45 nanometer risk productions is going to startfrom when? How for general technology, that is why I think low volt technologysorry low power technology for general technology, when you are going to startrisk production?

Okay. For 45 nanometer and low power products, we aremanufacturing the first product in the fab right now. So, I expect them to gointo production probably second quarter next year. The latest is third quarter.And then the prototypes for the high performance products will be secondquarter to have a takeout in the second quarter next year.

Thank you.

Your next question comes from the line of Tse-yong Yao withHSBC. Please proceed.

Hi, Thanks for taking my call. First, real quick, I justwanted to confirm the gross margin guidance for Q4. I thought I heard 25%, butthe press release says 20%.

25% was correct.

No, no, 20%.

No, 20%.

Because in Q3 it was 26.5%, so it will be about 20%.

Okay thanks. Second, just trying to get a better feel forthe weakness in Q4. I know you talked about strengthen in consumer and maybe alittle bit weaker in comms (ph) and computer, but could you talk about maybehow broad-based it is? Is it one or two customers or is it across the entirespectrum? And then regionally, which areas are growing? Which ones are maybe laggingsbehind?

Sorry. Would you repeat your question again?

Regarding Q4 revenue guidance, you had talked about consumerseeing some strengthen in consumer and followed by communications and computermaybe being a little bit weaker. Just trying to get an idea, first of all regionally, isthere specific regions that are growing faster than others? And then, thesecond part is kind of how broad based it is. Is it caused by a handful ofcustomers or is it caused by a more broad based industry?

I understand. As a matter of fact, I think that we needed tocollaborate on this area. Actually, the percentage of applications in Q4 willbe not too much different than Q3 maybe a variation of 1%, 2% for each segment. So, consumer segment is expected to be the strongest, is arelative statement, as you know in Asia, that's what is stronger. Andcommunications segment, probably is weaker in the United States. And computersegment is lower mainly probably due to LCD drivers. Hopefully that is helpful.

Okay, thanks. I guess, then next question is, so talkingabout the capital, the greater capital discipline, lower capital spending for2008, have you begun to see any signs of perhaps spillover in the sense thatcustomers not being able to get capacity at say TSMC or some of the othercompetitors and then coming to UMC as an alternative?

You mean, when? When?

I guess…

Or in general?

In Q4, just generally speaking do you start to see any typeof customers coming to you looking for capacity because perhaps they can't findit somewhere else?

Good question. Maybe there are a couple of them.

Okay. And the next question for me is; you are talking aboutconverting a lot of your existing capacity for example the 130 nanometer to 65nanometer. I assume that this is limited to your 300 mm or your 12 inchinstalled base.

That's correct.

So do you have any plans to improve -- what are your -- Iguess a better way to ask is what are your plans to improve productivity if yousqueeze additional capacity out of your mature technology lines, your 8 inches?

Okay, that is a good question. The answer is yes. As amatter of fact that we see higher demand on certain mature 8-inch technology,for example like a 0.18 micron generation. We do see a strong demand and nextyear, we will spend more in dollars, in absolute dollar amount for increasingthe 8-inch capacity.

Okay. Thanks a lot. That's all for me.

Your next question comes from the line of Mehdi Hosseini,with FBR. Please proceed.

Thanks for taking my question. I apologize if I'm repeatinga prior question. I joined in late. Could you -- I'm not asking you forguidance, but based on what you are seeing out there in terms of forecasts orvolatility in the forecasts, how would you describe Q1? Would you say isseasonal, below seasonal, above seasonal? And then going back to the prior question you said strengthfrom certain areas for mature technologies; can you be more specific? I'm notasking for a specific customer name, but in terms of end market or application,what are those applications that you are actually seeing on expected strengthfor these mature technologies?

Okay. First of all, for Q1, and we do not make forecaststhat far out, and we don't see any signs one-way or the other. It's still alittle early. And secondly, on 8-inch technology, for example,high-voltage process, which is UMC -- one of UMC's strengths for LCD driversfor both large panel and small panel, that segment has the strong demand.

Okay, I thought you said LCD driver was weak or did Imisunderstood you earlier on?

I'm talking about over a broader timeframe.

Okay. I understand. And then in terms of the rather high-endapplications, especially with some of the graphics using flip chip packagingtechnology, are you seeing any shortages of bumping at the back end houses?

Not really. We see strong demand and tight supply, but notshortage yet.

Okay. Thank you.

(Operator Instructions) At this time there are no furtherquestions. I would now like to turn the call back over to Mr. Liu.

Thank you, operator. That concludes our call today. Thanksagain for your participation. If you still have any additional questions,please do not hesitate to contact us directly. Operator, back to you.

Thank you. Our link to the replay of this call will beavailable until the end of Tuesday, January 1st, 2008 in the "InvestorRelations" section of UMC's website. A dial-in version of the replay canbe accessed by calling 888-286-8010. If you are in the U.S., or 617-801-6888 for internationalcalls. The dial-in replay will be available until midnight or on November 1st,2007 New York time. The access code is 403-01-749. If you have any additionalquestions, please feel free to contact us directly. Thank you all again andhave a good day.