Shih-Wei Sun - Chief Executive Officer Chitung Liu - Chief Financial Officer Bowen Huang - Senior Investor Relations

CJ Mills - Barclays Donald Lu - Goldman Sachs Samanth Waheed - Unidentified Company Steven Colio - Unidentified Company Steven Pelayo - HSBC Patrick Ho - Stifel

Welcome everyone to UMC’s 2009 Second Quarter Earnings Conference call. All lines have been placed on mute to prevent any background noise. After the presentation there will be a question-and-answer session. (Operator Instructions). For your information, this conference call is now being broadcasted live over the internet. Web cast replay will be available within an hour after the conference is finished. Please visit our website at www.umc.com, under the Investor Relations/Investor Events section. I would now like to introduce Mr. Chitung Liu, CFO of UMC. Mr. Liu, you may begin your conference.

Thank you, and hello everyone. Apology for this technical delays. We encountered some issues with the conferencing of our company, but let’s start with our conference call. Thank you for joining us today. I am Chitung, and joining me today is the CEO of UMC Dr. Shih-Wei Sun and Mr. Bowen Huang, Senior IR Manager. Before we start our second quarter 2009 conference call, I need to take a few seconds to go over our Safe Harbor policy. Certain statement made during the course of our discussion today, may constitute forward-looking statements, which are based on management’s current expectation and beliefs, and are subject to a number of risks and uncertainties that could cause actual results to differ materially, including risks that may be beyond the company’s control. For these risks, please refer to UMC’s filing with the SEC in the U.S. and the ROC Securities authorities. For the second of 2009, wafer shipment rose substantially to 898,000 [ANG] equivalent wafers. While the transition rate for the second quarter was up to 79%. Revenue increased substantial 108.8% quarter-over-quarter to NT$22.63 billion, from $10.84 billion in Q1 2009, and decreased 10.3% year-over-year from 25.24 billion in 2Q ‘08. Gross profit margin was 23.8, we saw operating margin at 11.9%. Net income in quarter two 2009 was NT$1.55 billion with earnings per ordinary shares of NT$0.12. Earnings per ADS was $0.018 for ADS. You can find more details within the financial data that accompany our press release today. Now let me turn the call over to our CEO and he will provide you with UMC’s business update and outlook for the second quarter of 2009.

Thank you Chitung, I would like to welcome everyone one to our second quarter conference call. We appreciate your participation and your interest in UMC. As usual, I would start with a quick overview of the past quarter, before we move into the Q-and-A session I will give you a few of my thoughts on our status and direction. I would then conclude by providing the third quarter guidelines. We experienced the strong customer demand in June second quarter of ‘09. Revenue for June have been exceeded last year’s June figure and have returned to the level before the economic prices. We expect increased revenue for Q3 and will keep a close eye on the industry situation. During the upcoming quarters and then proceed accordingly. I would like to add that UMC has executed well on its customer driven foundry solutions approach. To provide ideal solutions that meets customer’s needs. The number of new products for 65 and 55 nanometer has increased as we previously reported. This revenue from this technology segments growing significantly from Q1 to Q2 by approximately 120%. This would help contribute to our future revenue and the market share for advanced process notes. Furthermore, numerous customers have already adopted UMC’s independently developed 40 nanometer high performance logic process. This volume production process incorporates many advanced technologies, such as embedded SiGe, Laser Anneal and ultra-low K. In addition, yield optimization for ICs designed using our 45 and 40 nanometer low power process are progressing smoothly. Which regard to 20 nanometer High-K Metal Gate technology development, UMC will mainly adopt the Gate-Last technology, which meets our customer’s needs for both high performance and low power technologies as advanced in those. We have decided to increase CapEx spending as well for 2009 to $500 million. This amount will mainly be used to expend 65/55nm, 45/40nm and the 28 nanometer production capacity and to acquire the most advanced R&D equipment. The global economic crisis was tough for everyone in the past year, but UMC successfully persevered. Our management team and employees worked together through this period of economic adjustments, demonstrating commendable teamwork and execution to facilitate the company’s smooth reorganization, and the human resource consolidation. This resulted in significant improvement operation efficient and a cost structure. Looking ahead, UMC will continue to improve our utilization rate and revenue via implementing cost control measures at the same time. We were also exercised timely CapEx spending aggressively in advanced R&D and to support customer’s capacity needs to pursuit stable, long term growth, increased profitability and maximize return on stockholder’s equity. Now, let me provide you with the guidance for the third quarter of 2009. Wafer shipments to increase by approximately 8% to 10%. Wafer ASC, US dollars to rise by approximately 5%. Capacity utilization rate approximately 85%. Profitability modestly increased from previous quarter. The computer segment is expected to be the strongest followed by the consumer and their communication segment. In 2009 CapEx budget $500 million. This concludes my comments. Thank you again for attending today’s teleconference. We very much appreciate your continued interest and the support of UMC, we will now take your questions, thank you. So operator, please we are ready to take questions, please give the Q-&-A instruction please.

(Operator Instructions). Your first question comes from [Steven Colio – Unidentified Company]. Steven Colio – Unidentified Company: My first question is really relative to your gross margins, I understand in the earlier meeting you discussed the third quarter outlook for them to be greater than 24%, I guess with the components of the gross margins the cost of goods sold being so volatile with this SFAS 10. Could you help with understand how you get to that greater than 24%, what your COGGS depreciation would likely be, and then we could back in to the other number.

First of all, for depreciation in the third quarter will show roughly about 2%, quarter-over-quarter declines from second quarters. Secondly, we do have some impact from the Article 10, Accounting Principle 10 in second quarter, that’s a reversal again from Q1. That’s roughly, I would say in between one third to half of our overall gross margin in second quarter. In the third quarter there won’t be any impact from this Article 10, so it will be moderately increased from the second quarter level in terms of gross margin third quarter. Steven Colio – Unidentified Company: Okay, I want to ask that with a very slight increase in the depreciation components in cost of goods sold for the third quarter, I just want to make sure I understand that correctly.

Yes, for third quarter you will also see some volume increase. So overall the raw material cost etc.. were still growing in-line with the wafer shipment numbers.

Your next question comes from CJ Mills – Barclays. CJ Mills - Barclays: I had a quick follow up question for you on CapEx, you talked about raising the budget, and a partial focus on 28 nanometer R&D work, I guess can you talk about your early outlook for 2010, what you think your CapEx needs will be there and how we should think about the trend in CapEx?

So our long term CapEx guideline is about 20% of our revenue, as I mentioned in the afternoon conference, in the past few years UMC has been below this guideline. So we are trying to catch up at this moment. CJ Mills – Barclays: And you would expect that catch up would continue into 2010?

To some extend at this moment.

: Donald Lu – Goldman Sachs: Few questions here, first is just follow up on the growth margin question. So the Article 10 represent one third of, I didn’t get that clearly can you repeat again, Chitung?

Roughly one third to almost of even half of the gross profit in the second quarter comes from the reversal of inventory loss in Q1. Donald Lu - Goldman Sachs: After total gross profits, in the second quarter. About one third to half is coming from Article 1, so that’s one time if I’m correct?

Yes, this is actually more better than just how it appears. We also have some of the higher cost wafers in quarter two, which was manufactured in quarter one. So you shouldn’t offset some of the gains from the reversal. I can also give you an exact number, I want to mention is part of the gross margin in second quarter was due to the reversal of the inventory loss booked in Q1, and there wont be such reversal in third quarter anymore. For the magnitude I would say roughly one third to half. Donald Lu – Goldman Sachs: So the gross margin basically will remain flattish in the third quarter?

It will be moderately better. Donald Lu – Goldman Sachs: Moderately better, and the moderately means?

Means, moderately. Donald Lu – Goldman Sachs: Okay. You would give a more range for moderate, definition of moderate?

That’s slightly better. Donald Lu – Goldman Sachs: Slightly better, okay it’s fair enough. And also Mr. Sun just commented that your CapEx target is about 20% of revenue, and clearly you have the under spending, so you said you are catching up. Does that mean you are going to spend a little bit over a more than 20% to catch up or you are going to just like stay at the 20%?

Yes, at this moment we plan to spend more than 20% in the near future. Donald Lu – Goldman Sachs: To catch up?

Yes. Donald Lu – Goldman Sachs: I see, that’s fair. Also, I mean UMC have shown very significant reduction on OpEx since Q3 of last year. I just want to see whether that’s sustainable, especially in the R&D line as the presumably R&D burdens increases with migration. So is there a target we should use?

We do put pretty stringent cap in terms of operating expenses including R&D’s, and in second quarter there also have some impacts on the bad debt reversal from Q1, is around NT$200 million. So if you put that NT$200 million, that should be the level you are expecting for the third quarter and I do believe our COO will continue to monitor our operating expenses with a lot of attention so it will be our goal to get the operating expenses flat. Donald Lu – Goldman Sachs: Yes, my last question is, if you look at your wafer shipment based on the guidance, your wafer shipment would reach a record high level in Q3 about 9,88,000 wafers, and I mean clearly the end demand is not any better than last year, so I means UMC is getting back market share, congratulations on that, but would you be a concerned about over building at your customers at this point and also what is your outlook for Q4?

Now, this question was also asked in the afternoon, so our thinking has been for direct customers that ship companies or semiconductor companies in the past year the inventory level has been sliding down, I think we believe the inventory reached the bottom at Q2. Then moving forward, to the second half of this year is getting to the off season and we believe the inventory will inch up slightly, however, is stay under control and our customers they would like to I think in general view slightly higher inventory to avoid an issue, possible shortage of components during the off season. However, the channel situation, either the sales or the end of demand situation, it is hard for us to have a very precise control, but almost speaking, it should be quite reasonable and all customer, they are all very careful about building excessive inventory. As far as going even further to Q4 next year, Q1. We understand there to be a lots of uncertainties, for example we talk about panel situation of pricing, the inching up, and also the end demand is certain. So it’s a time but very difficult to make precise forecast, but we are quite optimistic at this moment. Donald Lu – Goldman Sachs: So that means you are currently looking into 4Q, the trends would then be pretty, shouldn’t be too bad or should be relatively flattish.

We’ll report to you the Q4 situation in three months.

Your next question comes from Unidentified Participant

I actually have a follow up to the previous question. As you look at your rolling forecast, would it be fair to say that right now Q4 is going to decline compared to Q3?

We don’t have that visibility at this moment.

So, let me ask you in a different way. Let’s say theoretically, wafer shipment was a decline and therefore utilization rates were to decline and Q1 is seasonally down meaning that we would imply utilization rate would continue to decline two quarters in a row. Are you concerned that these increased CapEx would exasperate that decline in utilization rate?

Our investments with capacities on the leading edge, I mentioned earlier 65 and the 45. So, in these segments our market share is they are having lots of room for improvement. So, and also I mentioned earlier we’re kind of trying to catch up on investment. The longer term economic cycle or quarter-to-quarter is kind of hard to forecast, but with long term goal for 20% revenue we would like keep this pace. We are just trying to catch up from the past few years.

To that extend with this market share and declining utilization rate, do we assume that their prices the AFCs could go flat to down as you gain more market share?

I am not sure, could you repeat that again?

Going back to my first question, as utilization rates decline in Q4, Q1 would it be realistic to assume that ASVs could decline as you increase your market share?

So, I think it plenty to ASV, they are manufacturers, so it depends on the technology mix, and we are doing many things interventions. So, it's really dependent on many economic factors, supply demand and also UMC specific mix. So at this moment I cannot predict next year’s situation at this moment. Again our report quarter-by-quarter as the best we can.

Your next quarter comes from the line of [Samanth Waheed – Unidentified Company]. Samanth Waheed – Unidentified Company: My question is really regarding your CapEx spending, sorry if I have already missed this, but could you please clarify if your increase in CapEx spend is for incremental capacity introduction or for upgrading current capacity?

I am not sure exactly the capacity expense, for this year we are increasing from previous guidance that was below $400 million to $500 that consists of 82% on twelve inch, that includes both capacity expansion and additional R&D procurement and 18% on the 8-inch upgrade of equipment. Samanth Waheed – Unidentified Company: So if its 80% on the upgrade of equipment would that include mostly technology upgrading to immersion then?

Let me try to do it again 8 inch includes 18%, 12 inch 82%. So, that includes certainly some diesel to it’s across the board. Samanth Waheed – Unidentified Company: You couldn’t possibly quantify that, could you?

Quantify. Samanth Waheed – Unidentified Company: The amount you will have to spend on upgrading tools and how much is in R&D?

No, I don’t have that number.

(Operator instructions) Your next question comes from Steven Pelayo of HSBC. Steven Pelayo - HSBC: I would just like you o go back to depreciation again. I think you said that you expect total depreciation and amortization from the client, about 13% exactly next year, if I remember that correctly. I guess, in order for that to happen would mean that the decline is fairly significantly in your cost of goods sold. So, once again, I am really trying to understand how the manufacturing depreciation departing us to good sold doing that trend over the next few quarters or so?

Again the whole year, ’09, will be about 9% down from previous year and next quarter we are expecting about 2% decline over this quarter. Steven Pelayo - HSBC: Okay. I am struggling to get to that lower number; I will contact you afterwards and thank you.

(Operator instructions) Your next question comes from Donald Lu - Goldman Sachs. Donald Lu – Goldman Sachs: Can you tell us the tax rate we should use for Q3 and Q4 because it has been a little choppy?

At this kind of profitability its difficult to give you ratio, basically we still use roughly 10%, and it could be slightly higher given the expiry, expiration of some previous tax credits, so it could be a little bit higher than 10%. Donald Lu – Goldman Sachs: So we should use little bit higher than 10% percent in the second half this year. How about next year?

Well, eventually we will get down to 10%. In the interim it depends how much profit we can gain to offset the previously recognized tax credit, if the tax credit was not used and expire, we need to recognize that expense in that current year. Donald Lu – Goldman Sachs: Okay. I see, so basically 10% is the minimum tax, and could potentially be a little higher than that.

Yes.

(Operator Instructions) Your last question comes from Patrick Ho - Stifel. Patrick Ho - Stifel: Can you just discuss your yields right now at the 4X technology node and how that’s progressing?

You mean 40/45 nanometer EL status? Patrick Ho - Stifel: Yes.

We’ve mentioned earlier again in the conference our few product defect density improvement occur, and overlap that with the previous generations, this 45/40 nanometer node is actually no difference from the previous node, so at 40 nanometer high performance node, we have a multiple customer product in production, high 9/12-inch that so I can say it’s progressing quite smoothly at this moment. Patrick Ho - Stifel: How much do you expect it to be percentage of your revenues by year end?

Year end about 2%.

Operator, we will take one last question please.

(Operator Instruction) And there are no further questions at this time.

Okay. So, with no further question, we will conclude our call today. Thank you for joining us, if you have any additional questions please do not hesitate to contact us directly and operator back to you.

Thank you for your participation in UMC’s conference. There will be a webcast replay within an hour. Please visit www.umc.com under the Investor Relations/Investor Events section. You may now disconnect. Good bye!