Welcome everyone to UMC’s 2013 Second Quarter Earnings Conference Call. All lines have been placed on mute to prevent background noise. After the presentation, there will be a question-and-answer session. Please follow the instructions given at that time if you would like to ask a question. For your information, this conference call is now being broadcasted live over the internet. Webcast replay will be available within an hour after the conference is finished. Please visit our website, www.umc.com under the Investor Relations section. And now I would like to introduce Mr. Bowen Huang, Head of Investor Relations at UMC. Mr. Huang, you may begin.

Thank you and to welcome UMC’s conference call for the second quarter of 2013. With me today is the CEO of UMC, Mr. Po-Wen Yen, and the CFO, Mr. Chi Tung Liu. Our CFO will personally forward the DPR [ph] for the second quarter financial results following by our CEO’s key message including our ‘13 forecast, current market outlook and the UMC’s third quarter guidance. After CEO, CFO’s statement. There will be a Q&A section. UMC’s quarterly financial reports are available at our website under Investor Relations Financial Release section. During this conference, we may make forward-looking statements, based on management’s current expectations and beliefs. Those forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to differ materially, including the risks that may be beyond the company’s control. For these risks please refer to UMC’s filings with the SEC in the U.S. and the ROC securities authorities. I would like to introduce UMC’s CFO, Mr. Chi Tung Liu to explain UMC’s second quarter 2013 business results.

Thank you, Bowen and good day everyone. For the second quarter of 2013, revenue was NT$31.91 billion, with gross margin at 19.2% and operating margin at 3.6%. The net income attributable to the shareholders of parent was NT$1.81 billion and the earnings per ordinary shares were NT$0.15. And operating utilization rate in the second quarter was 85%, which compared to 78% in the first quarter we see a meaningful growth in terms of operating utilization rate. And that’s the main reason contributed to this 14.8% quarter-over-quarter revenue growth. As we mentioned revenue in the second quarter was NT$31.9 billion and in terms of first six months revenue reached NT$59.6 billion of 5.4% year-over-year growth. And gross margin was relatively stable say at 17.9% to reach NT$10.6 billion and because of higher advance note development R&D cost has gone up by 15.4%, so operating income was around 2.4% of revenue for the first six months to reach NT$1.4 billion and for EPS for the first six months is NT$0.67. Cash on hand at the end of second quarter was NT$52.8 billion and stockholder equities at the end of second quarter was NT$210 billion. And for the operating segment, the amount is NT$31.9 billion revenue. Foundry contribute around NT$30.3 billion by the others or the remaining was many coming from our new business investment, which includes solar and LED. And for the ASP in the second quarter which remained relatively flat compared to the previous quarter. And for revenue breakdown, we see growth coming from North American market which contributed about 47% of our total revenue. And Asia shows a milder decline to 42% of our total revenue and IDM or Integrated Device Manufacturers still account for around 10% of our total sales report [ph]. And communication actually growth most in the second quarter of 2013 and reached 51% of total revenue breakdown. And consumer electronics remained unchanged at 28% of our total revenue report [ph]. And we continue to show technology migration to the more advance note and we are happy to disclose that 40nm and below revenue has now reached 20% of our total sales in the second quarter and total revenue below 65nm in Q2 was more than 51%. We have 5.2% capacity growth in the second quarter of 2013 which is mainly coming from the full quarter recognition for January capacity. For the next quarter of Feb quarter of 2013, we’ll see less than 1% capacity growth and that conclude my second quarter financial results summary. More details are available in the report, which has been posted on our website. I will now turn the call over to Mr. Yen, CEO of UMC.

Okay, thank you, Chi Tung. Hi everyone, firstly I’d like to talk about UMC’s second quarter operating results. The foundry segment recorded NT$30.33 billion in revenues, with profit margin from foundry operations of 5.3%. Wafer shipments reached 1.307 million 8-inch equivalent wafers, bringing overall capacity utilization to 85%. Revenue contribution from 40nm and below technologies grew from 18% in the first quarter to 20% in the second quarter this year. As the industry advances to more cutting edge nodes, our customers expect to adopt new technologies for their upcoming advanced products. To satisfy their increasing reliance on leading-edge geometries, we have recently announced our participation in the IBM alliance for 10nm FinFET CMOS process technology. We are excited to team up with IBM and strongly believe the collaborative effort will help overcome a variety of research challenges to realize ground-breaking results that will better serve the industry’s needs. UMC will offer our upcoming process platforms based upon IBM fundamental technology and develop derivative processes according to customer requirements. With the arrival of the third quarter, we project sequential revenue growth to follow a better-than-seasonal second quarter in the foundry segment. In the mid-term, to perpetuate our leading position in the advanced specialty technology segment, UMC’s R&D team continues to pull-in production milestones with enhanced process implementations to facilitate customer product deployment. UMC’s comprehensive range of technologies enables customers from a wide array of industry segments to differentiate their products, thus helping UMC to expand its business scope, elevate overall competitiveness, and strengthen long-term profitability. Our third quarter 2013 guidance are as follows; the foundry segment, wafer shipments were increased 4% to 3%. Foundry segment ASP will remain flat. Foundry segment profitability will be in the high-single digit percentage operating margin. Foundry segment capacity utilization rate will be in the mid-80s range. Guidance for new business segments revenue will be approximately NT$1.5 billion and operating loss will be approximately NT$600 million. Our CapEx will remain at $1.5 billion this year that concludes my comments. We are now ready for questions. Operator, please open the lines up. Thanks.

Thank you, ladies and gentlemen. We will now begin our question-and-answer session. (Operator Instructions) the first question is from Randy Abrams, Credit Suisse. Go ahead please. Randy Abrams – Credit Suisse: Okay, thank you, good afternoon. First question is on the advanced technology. If you could give a sense for the 40nm, how you expect that to ramp up or continue to ramp through second half and if you could provide an update on the status for the 28nm poly-SiON and High-K/Metal Gate?

Our 40nm revenue in Q2 is around 20% of all total sales. Based on today’s capacity profile, our 40nm capacity can reach 20% to 25% of revenue contribution. Of all 40nm revenue will be closed to 20% in the third quarter this year and overall chip demand including 40nm, we were always highly related to the market and inventory situation. We do see some downwards revisions on forecasted number recently. More time will be needed to see the first quarter chip demand including 40nm.

[Foreign Language – Mandarin] Randy Abrams – Credit Suisse: Okay, I’ve missed it but could you elaborate that you might have mentioned in Chinese that 28nm poly-SiON and High-K/Metal Gate status?

Okay, UMC’s 28nm and herein progress is generally on track and our DD [ph] performance will be very depending on the timing of engagement. Our overall chip demand including 28nm, we always be finding difficulty to the market and inventory situation. We do observe the some downward revision on forecast number recently. More time we needed to check the Qos [ph] chip demand for the 28nm poly-SiON version, we expect to contribute low-single-digit percent of sales by the end of this year and for the High-K/Metal Gate, high performance version, we will trial poly-SiON by one to two quarters.

So Randy, I’ll do a quick translation in Mandarin. [Foreign Language – Mandarin] So that’s our the question we have for you, Randy. Randy Abrams – Credit Suisse: Okay, thank you and could you talk on the other side of the 8-inch, there is an authorization for some additional capacity. Maybe, talk about where utilization reached on 8-inch and what you’re seeing for strength from that area maybe driving beneath for more capacity and whether your (inaudible) could handle that or you need to acquire FB.

[Foreign Language – Mandarin]

Our 8-inch rates are around high 80% and for 12-inch is around lower 80%. Randy Abrams – Credit Suisse: Okay.

Our 8-inch mostly is, on the driver, the driver and power management IC and for the 12-inch is mainly owned communication products, WiFi and application process of basement [ph]. Thanks. Randy Abrams – Credit Suisse: Okay and do you have interest in acquiring additional capacity looks like you have some headroom on utilization on 8-inch still?

[Interpreted So the answer will be that, even though our 8-inch loading is around high 80% but certain segment has reached full capacity. So for this particular segment, we are mandated by our board meeting to look for immediate solutions in terms of the capacity shortage and that doesn’t really means the overall capacity utilization rate for 8-inch need to be close to 100%, before we look for additional capacity for 8-inch. [Foreign Language – Mandarin] Randy Abrams – Credit Suisse: Thank you. Okay and one quick question, one final quick question. The UMC Japan in 28nm scrap, if you could provide an update maybe the magnitude of those charges, if you’ve taken those or timing to take those one-time charges?

[Interpreted] So we pretty much complete all the wafer scrap related expense in both quarter one and quarter two. So there shouldn’t be any remaining for the coming quarter related to the wafer scrap. [Interpreted] As for UMC Japan liquidation cost, we’re still looking for the final buyers for remaining facility and share and for the guidance of high-single-digit operating profit margin for the third quarter, we did not include or we did not factor in potential or possible liquidation loss from the UMC J closure. [Interpreted] Thank you. Randy Abrams – Credit Suisse: Okay, thank you.

Your next question is from Dan Heyler, Merrill Lynch. Please ask your question. Dan Heyler – Merrill Lynch: Thanks, hi, Chi Tung. Just a two quick ones for me. Your R&D and depreciation was up pretty high in the second quarter, what are your thoughts on the third and fourth quarter for R&D and depreciation?

[Interpreted]

Our R&D expense over our total sales will be increased a little bit roughly 1% and for the development of 14nm and 10nm technology so we’ll maintain this number both for the coming quarters.

[Interpreted]

Thank you. Dan Heyler – Merrill Lynch: Okay and then depreciation, Chi Tung maybe just give me the full year number that you’re looking for?

Still the same, still less than 10% growth compared to the previous year. [Interpreted] Dan Heyler – Merrill Lynch: Okay, great and then now just, help me with the number on utilization, which went from 70% to 85%, your capacity increased 5.2% but shipments were up 16%. So I would say, a little bit of disconnect in those numbers again 16% unit growth, so can you explain the gap there, Chi Tung?

So 85% divided by 78 times or plus additional capacity coming from generally I say, that’s mainly the reason. Dan Heyler – Merrill Lynch: Okay because that’s a 7 percentage point different there, but you’d 16% increase in shipments plus the 5%, so I get about 11% but maybe it’s average utilization, maybe that’s the difference.

Yes, that’s average and also there is always some difference between wafer shipment, wafer out. Dan Heyler – Merrill Lynch: Exactly, okay. Thanks and then looking at your – in the past it was interesting looking at your IDM contribution Mr. Yen, you’ve been quite high as high 17% of revenue just last year, maybe update as then and whether there are some opportunities within the IDM universe because that doesn’t seems to have come down quite a bit relative to year ago.

[Interpreted]

I think this is mainly because we calculate; we define IDM versus that fabless their contribution, so for some IDM companies they do not invest on leading edge development, so in that kind of case, we catalyze them to into type of this company like fabless company that’s why the IDM companies share reduced. The other reasons, one of the key customers they expect the conventional application process surfaces, so that effect a little bit on this type share.

Sorry, Dan I need to do a little bit translation here [Interpreted] Dan Heyler – Merrill Lynch: Okay and just finally on that front on the IDM side. I’m not sure, if you have a calculation in what your say specialty technology is in contribution to sales, specialty derivative technology and what your strategy there is to build out that business.

[Interpreted]

Our specialty technologies, the derivative contribution is around 30% and we actually invest a lot on our specialty technology, especially high-end specialty technology which is UMC’s a very good acquisition and especially in the China market and so we’ll continue to enlarge UMC’s especially technologies share and (inaudible) specialty technology R&D center in Singapore, that is what our Singapore trench far for the high-end specialty technology development.

Quickly translation, sorry Dan. [Interpreted] Dan Heyler – Merrill Lynch: Okay, thank you. All from me.

Thanks.

(Operator Instructions) your next question is from Szeho Ng from BNP Paribas. Go ahead please. Szeho Ng – BNP Paribas: Hi good evening, gentlemen. Just wanted to know the gross margin for the two divisions for the foundry and also for the new business in Q2 and what’s your expectation to going into Q3?

Sorry, Szeho. Your line is breaking up. Can you repeat the question again, please? Szeho Ng – BNP Paribas: Yes, sure. Can you share your prospect gross margin for the two divisions in Q2 for foundry and also for the new business and expectation going into Q3?

Well we basically, if you go to the handout on the page of segment information on page seventh. You can see the operating line. We don’t really disclose anything beyond this and so because it is financial statement related. So that’s the most we can disclose, but actually it shouldn’t be difficult for you to figure it out. Szeho Ng – BNP Paribas: I see.

And for other revenue, let me repeat that in the second quarter was roughly about NT$1.6 billion operating loss or segment loss of NT$574 million. Szeho Ng – BNP Paribas: All right, okay.

Sorry a quick translation [Interpreted] Szeho Ng – BNP Paribas: And my second question is related to the 28nm as quietly repost, how much you booked in Q2 and in which like did you book it?

In Q2 is roughly NT$400 million to NT$500 million. Szeho Ng – BNP Paribas: I see all right and in the operating liabilities, R&D like.

Now it’s in this Feb or April was in the operating expense, but mainly in the LCM item. Szeho Ng – BNP Paribas: Sorry, which area?

In the inventory and LCM item. Szeho Ng – BNP Paribas: Okay, all right. I see and last question. When I look at the depreciation at cost of goods sold it has gone up quite a bit in Q2, how should we comprehend?

Again, I don’t have to break down number, which means right now but first of all for the whole depreciation expense this year as I mentioned earlier shouldn’t be more than 10% growth previous year and for the quarterly item, actually it should be pretty lenient. So sometime it has to do with our WIP, work-in-process, so it’s our little bit out of endpoint on a quarter-to-quarter movement. Szeho Ng – BNP Paribas: I see, okay, all right. Got you, thank you very much Chi Tung.

Thank you.

Your next question is from Andrew Lu, Barclays Capital Research. Go ahead, please. Andrew Lu – Barclays Capital Research: [Foreign Language – Mandarin] I’ve couple of questions to follow-up. First one, do you expect in your Q4 will have a similar decline like TSMC 8% to 10% 2Q, [Foreign Language – Mandarin]

[Interpreted] So the question is really asking how, UMC Q4, we cannot give Q4 guidance until the next quarter. However as our CEO mentioned earlier, he has been doing some downward revision on the following quarter in terms of the main forecast. So it is happening. Andrew Lu – Barclays Capital Research: Thank you, the second question I have is, related to tax rate. I see the second quarter tax rate is only about 2%, is that Q3 is going to change back to earlier guidance 14%, and [Interpreted].

[Foreign Language – Mandarin] Andrew Lu – Barclays Capital Research: [Foreign Language – Mandarin] Thank you. [Foreign Language – Mandarin]

[Foreign Language – Mandarin] Andrew Lu – Barclays Capital Research: Thank you.

Sorry, Andrew I need to do a quick translation. So your question was, have UMC seeing 40nm revenue to shrink because certain customer may integrate WiFi into AP chips and our CEO has answered that, we still see relatively good demand from 40nm or WiFi demand and we understand that some of the customers, some of the fabulous design house may integrate WiFi into APs for UMC’s client profile, at least for the near-term, we haven’t really seeing that scenario yet. Andrew Lu – Barclays Capital Research: Thank you.

The next question is from Harry Chen [ph] (inaudible), go on please.

And first I’d like to know your China strategy, the particular update and the internal revenue percentage and from the China base the ICP by half and how about (inaudible) internal (inaudible) the geometry. Thank you. [Foreign Language – Mandarin]

Okay. Yes, well in the China the sales are in terms around less than 10% of our total foundry sales and [Foreign Language – Mandarin]

[Foreign Language – Mandarin]

[Foreign Language – Mandarin]

Sorry, Harry I need to do a quick translation. So China WiFi is currently less than 10% of our foundry business. Since UMC control of Jan [ph] Q1, 2013 we have leverage geographic advantage in first channels to enlarge our Chinese foundry business and we also benefit from the strength of Chinese mobile computing market including APDB [ph] display driver, touch controller, etc. and although there is still seasonal demand or seasonal correction for Chinese market, but we are happy to see that they are actually 40nm, 55nm demand coming from Chinese market. This is really advance note.

Okay, thank you. [Foreign Language – Mandarin]

[Interpreted] So we don’t have any plan for royalty issue per se and if there’s any, we will of course announce it following year regulation. [Interpreted] So even though we don’t have any immediate plan for royalty issue, we do have product replacement proposals approved by our shareholders meeting for the last two years and the quota is roughly 10% of the issuing shares and purpose is really looking for strategy investor always who can bring value to UMC in terms of technology development. sales channel and manufacturing etc. So we are now really looking for financial investor of just purely capital, but we do looking synergy and that’s the reason why, even though it has been approved by shareholder meeting for two years, we haven’t really being able to close this deal, so but for the time being we’re still open for any potential opportunity out there, thank you.

Okay, thank you. [Foreign Language – Mandarin]

Well the question is related to our specialty technology as the percentage of revenue [Interpreted]

[Foreign Language – Mandarin]

Okay, thank you. [Foreign Language – Mandarin]

(Operator Instructions) your next question is from (inaudible) Citi, go ahead please.

[Foreign Language – Mandarin]

[Interpreted] So revenue guidance for the third quarter, the growth rate in terms of wafer shipment is 3% to 4% and ASP will remain flat.

[Foreign Language – Mandarin]

[Foreign Language – Mandarin]

According to our capacity, firstly trying narrow mean at the most and contribute 30% to 75% of our revenue.

[Foreign Language – Mandarin]

[Interpreted]

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[Foreign Language – Mandarin] [Interpreted] Could be as longest two to three quarters. [Foreign Language – Mandarin]

[Foreign Language – Mandarin]

[Foreign Language – Mandarin]

Okay, [Foreign Language – Mandarin]

Your next question is from (inaudible) Morgan Stanley. Please ask your question.

[Foreign Language – Mandarin]

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[Interpreted] So the question related to our view regarding the overall inventory situation for semiconductor industry for Q3 and Q4.

[Foreign Language – Mandarin]

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Your next question is from Julie Zheng [ph], UBS. Go ahead please.

[Foreign Language – Mandarin]

So the question was related to the capacity shortage for certain segment of 8-inch capacity and there’s been speculation that the 8-inch wafer price may have gone up or has potential to go up.

[Foreign Language – Mandarin]

[Interpreted] So the answer is, we have seen some price enhancement mainly coming from technology migration. For example to the 55nm high-voltage and not so much for like-to-like technology.

[Foreign Language – Mandarin] Should compare to other so called non-specialty product which is other 70% of product [Foreign Language – Mandarin]

[Interpreted] The question regarding margin for specialty or process non-specialty. [Foreign Language – Mandarin] [Interpreted] So there’s no answers really for so called specialty or non-specialty in terms of profit margins difference. Still largely depends on the utilization rate that is one fact as far as the depreciation expenses, so the depreciation schedule for that particular Fab.

So that leaves to my third question, then why call these IC specialty, IC why not just categorized into end-user product or something like that?

[Interpreted]

[Foreign Language – Mandarin]

[Foreign Language – Mandarin]

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Thank you.

Your last question is from Donald Lu, Goldman Sachs. Go ahead please. Donald Lu – Goldman Sachs: [Foreign Language – Mandarin]

[Interpreted] So the question is related to our 28nm and beyond customer penetration strategy. Are we going to focus more on second source or are we going to focus more on second wave business?

[Foreign Language – Mandarin]

[Interpreted] So this is a little bit complicated. I’ll try my best. So for 28nm, we continue to see both design as well as our second source business and even for the second source business we can still deploy certain variation. Later on, we could consider us designing because its highly customized, so 28nm, so far we still believe there’s picking up adjustable market for UMC to execute our current strategy. Donald Lu – Goldman Sachs: [Foreign Language – Mandarin]

[Interpreted] Two questions are related to UMC, how going to expedite our R&D development to joining the IBM ‘14 and ‘10 development alliance and plus our view on the IBM alliance versus our experience in the past. Are we going to better if you will execute this time around.

[Foreign Language – Mandarin]

[Interpreted] Basically, we are becoming more open in terms of R&D strategy. So compared to the past, we were more so called in-house and now we actually collaborate more with the third-party or external resources. Along with joining IBM alliance, we also deployed more third party technology or the quality assurance etc. and in terms of resources concentration, we also decide shelf 20nm development and concentrate lot more resources onto 14nm, FinFET technology. So hopefully, this one along with our execution can expedite the schedule compared to the past pattern. Donald Lu – Goldman Sachs: [Foreign Language – Mandarin]

[Foreign Language – Mandarin] Donald Lu – Goldman Sachs: [Foreign Language – Mandarin]

[Foreign Language – Mandarin] Donald Lu – Goldman Sachs: [Foreign Language – Mandarin]

Thank you.

Thank you for all your questions. I’ll turn it back over to CFO, Mr. Chi Tung Liu, go ahead please.

Again thank you very much for attending our conference today. All the material has been posted on our website under the Investor Relations section and we will have our upcoming quarterly conference in November and see you then. Thank you back to you operator.

Thank you, ladies and gentlemen. This concludes our conference for today. Thank you for participation in UMC’s conference. There will be a webcast replay within an hour. Please visit www. umc.com under the Investor Relations section. You may disconnect now. Good bye.