Elizabeth Sun – Director, Corporate Communications Lora Ho – CFO Mark Liu – Co-CEO C.C. Wei – Co-CEO

Donald Lu – Goldman Sachs Randy Abrams – Crédit Suisse Dan Heyler – Bank of America Merrill Lynch Gokul Hariharan – JPMorgan Steven Pelayo – HSBC Roland Shu – Citi Mehdi Hosseini – Susquehanna Financial Group Bill Lu – Morgan Stanley Andrew Lu – Barclays William Dong – UBS

Welcome to TSMC's First Quarter 2014 Earnings Conference and Conference Call. This is Elizabeth Sun, TSMC's Director of Corporate Communications and your host for today. Today's event is webcast live via TSMC's website at www.tsmc.com. (Operator Instructions). As this conference is being viewed by investors around the world, we will conduct this event in English only. The format for today's event will be as follows, first, TSMC's Senior Vice President and CFO, Ms. Lora Ho, will summarize our operations in the first quarter 2014 followed by our guidance for the current quarter. Afterwards, TSMC's two co-CEO's Dr. Mark Liu and Dr. C.C. Wei, will jointly provide a couple of key messages, then we will open both the floor and the line for the Q&A. For those participants on the call, if you do not yet have a copy of the press release, you may download it from TSMC's website at www.tsmc.com. Please also download the summary slides in relation to today's earnings conference presentation. As usual, I would remind everybody that today's discussions may contain forward-looking statements that are subject to significant risks and uncertainties, which could cause actual results to differ materially from those contained in the forward-looking statements. Please refer to the Safe Harbor notice that appears on our press release. And now I would like to turn the podium to TSMC's CFO, Ms. Lora Ho.

Thank you Elizabeth. Good afternoon everyone. Thank you for joining us today. I will start my presentation with financial highlights for the first quarter and follow by the guidance of the second quarter. You may have noticed from the information we provided to you today starting from the year we changed our wafer unit to 12 inch equivalent. A 12 inch accounts for the majority of our production capacity. The first quarter came out better than expected. Our revenue, gross margin and operating margin were all exceeded the revised guidance. In the first quarter the demand for TSMC’s wafer was much stronger than we have initially predicted in mid-January, the strength came from customers better fourth quarter results which led to a more positive outlook for the whole year prompted to the active replenishment of inventory from very low base in the fourth quarter last year. We were able to capture the bigger market share of customers upside demand thanks to the better performance and higher yield and reliability for our advance technologies. First quarter revenue increases 1.7% on sequential basis and 11.6% [technical difficulty]. Gross margin was 47.5% up 3 percentage points from the fourth quarter last year mainly due to higher capacity utilizations, a favorable foreign exchange rate offset by unfavorable inventory variation adjustments. Operating margin was 35.4% up 2.6 percentage points from the fourth quarter down (indiscernible) was a small gain of TWD0.78 billion. Overall the first quarter EPS was $1.85 and ROE was 21.9% in the first quarter, let’s take a look at revenue by application. If you recall first quarter inventory correction was mostly serious in the communication related applications. When customer demand came back in the first quarter communication shows the strongest increase, compared to the fourth quarter last year communication increased 8%, computer increased 2% and industrial related revenue increased 2% while consumer declined 14% during the first quarter. By technology, 28 nanometer revenue continue to grow and accounts for 34% of our total wafer revenue in the first quarter, 40 nanometer has a nice rebound now represents 21% of our total wafer revenue. The two advanced technologies 28 nanometer plus 45 nanometer represented 55% of our first quarter total wafer revenue increase from 51% a quarter ago. Now let’s move on to the balance sheet. Cash and marketable securities decreased TWD10 billion sequentially to 235 billion at the end of first quarter. Current liabilities decreased by 15 billion mainly because of the decrease in accounts payable to equipment suppliers. Meanwhile we borrow 9 billion in short term loans for hedging purpose. Accounts receivable turnover days decreased three days to 45 days, days of inventory increased to 52 days reflecting the strong demand in the second quarter and the starting of 20 nanometer ramp. Now let me make few comments on cash flow and CapEx, during the first quarter we generated 95 billion cash from operations invested 115 billion in capital expenditure and borrowed 9 billion short term. At the end of the first quarter our cash balance decreased 11 billion to TWD232 billion. Free cash flow for the first quarter was an outflow of TWD20 billion due to higher capital expenditure in the first quarter. Our CapEx and capacity first quarter CapEx was $3.8 billion we expect 2014 CapEx will be about $10 billion which was front end loaded pattern. About 70% of the budget will be spent in the first half would support the quick ramping of 20 nanometer. On a full year basis we plan to increase our capacity by 10% from 2013 so the total annual capacity will reach 8 million 12 inch equivalent wafers. So I have finished my reports on the financial part. Now let me turn into the second quarter outlook. Based on our current business outlook and the forecast exchange rate of 30.10 we expect our second quarter revenue to be between TWD180 billion and TWD183 billion. This would translate into around 22% quarter-over-quarter increase. On the margin side we expect second quarter gross margin to be between 47.5% and 49.5% and operating margin to be between 36.5% and 38.5%. At the January Investor Conference I talked about a tax rate for the year will be about 13% and the second quarter will carry more burden. Let me give you an update this time. According to the accounting principle when shareholder approves the earnings distribution in June we need to accrue the 10% retainer earning tax for the own distributions [ph]. Therefore our second quarter tax rate will go up to 21% and then fall back to the normal level of around 11% in the third and fourth quarter. Full year tax rate however will still be 13%. This concludes my remarks. Let me turn the podium to our Co-CEO, Mark and C.C. for their comments.

Good afternoon ladies and gentlemen let me cover the first, let me begin by saying our 2014 market outlook has improved since our mid-January Investor Conference. The first quarter is typically a slow season for our customers and for TSMC. However since mid-January we started to see strong orders across all segments. We now have improved demand outlook from the following three perspectives. First in smartphone appears healthier than we expected last quarter. The acceleration of LTE infrastructure build up, LTE smartphone proliferation, and the increased silicon content of smartphone improved our demand outlook. The silicon content increases come with more decore 64 bit application processor, multi-mode baseband, multiband receiver, image sensors, MEMS, near field communications, and finger print, these all are included in the smartphone. Second, TSMC’s 28 nanometer technology performance and quality suffice to feel mostly below seasonal when we exit 4Q last year. We still expect phablet’s DOI will be below seasonal in 1Q, ’14. Four, for second [technical difficulty] to be strong and above seasonal in all major applications. Now I have covered the market supply chain and demand of second half and full year for 2014. Since first quarter phablet’s DOI is below seasonal, the second quarter demand on us is unseasonably strong but we expect phablet’s DOI will return to seasonal level and therefore our second half demand would be more normal. TSMC will gain 28 nanometer market share with 28 nanometer High-K Metal Gate transition in the second half of 2014. TSMC also expect to gain overall foundry market share. In second half 2014 when we can see in the second half of 2014. However, since our first quarter and second quarter we will establish a higher base. The quarter-to-quarter growth of third quarter and fourth quarter will be both be positive than our second quarter. For the full year of 2014 our outlook improves from last quarter as follows. Semiconductor revenue grows from 5% to 7%. Phablet’s revenue growth from 8% to 9%, foundry revenue growth from 10% to 14%. Our growth for full year of 2014 will be higher than the forecasted foundry growth by several percentage points. Then I will cover the updates on 16-FinFET plus and I’ve two general offers for customers, 16-FinFET and 16-FinFET plus. 16-FinFET plus offers 15% speed improvement the same total power compared to 16-FinFET. More importantly 16-FinFET plus offers 30% total power reduction at the same speed compared to 16-FinFET. Our 16-FinFET plus matches the highest performance of both 60 nanometer and 40 nanometer technologies in the market today. Compared to our own 20 SoC, 16 16-FinFET plus offers 40% speed improvement. The design rules of 16-FinFET and 16-FinFET plus are the same, IPs are compatible. First custom tape-outs about 15 products planned for 2014, another about 45 in 2015. Volume production is planned in 2015. These 95% tools [technical difficulty], we will ramp them in the same gigafab’s in TSMC. 16-FinFET yield learning curve is very steep today and has already caught up with 20 SoC. This is a unique advantage in TSMC 16 nanometer. For 10-FinFET, 10-FinFET is a third generation FinFET transistor designed to meet the power and the performance requirement of mobile computing devices. 10-FinFET will offer greater than 25% speed improvement the same total power compared to 16-FinFET plus. More importantly 10-FinFET greater than 45% compared to 16-FinFET plus. 10-FinFET will offer 2.2x of density improvement over its previous generation 16-FinFET plus. So currently 10-FinFET development progress is well on track as risk production will be in 4Q, 2015. Above are the key messages.

Thank you Mark and following Mark there will be two remarks made by C.C. Wei. C.C. Wei: Thank you Elizabeth. Good afternoon ladies and gentlemen. Following Mark’s exciting forecast and our second quarter and second half of year 2014. I would like to take this opportunity to share with you the two topics with you. Namely the 20 SoC ramp and TSMC’s advance assembly solution to our customer. First I will brief you on the status of 20 SoC ramp. Let me recap what we had said in the last meeting here, we started 20 SoC production in January this year and by fourth quarter of this year the 20 SoC will account for 20% of the quarterly revenue wafer revenue and for the whole year of 2014 we expect 20 SoC will be about 10% of our total wafer revenue of the year of 2014 of course. All these expectations remain the same today. Now, there are some major achievement I would like to share with you. First on the ramping speed, 20 SoC by far is the fastest ramping in TSMC’s history. Of course this fast ramp is to meet customers’ strong demand. I believe this production of 20 SoC and TSMC represents one of the largest mobilization in semiconductor history. Let me share with some number so you can have a snapshot on this ramp. I think about one year’s of time we have built a manufacturing team of 4600 engineer and 2000 operators in two (indiscernible). More impressively in the same time period across Taiwan, Southern engineer has been relocated among TSMC’s (indiscernible) all these are prepared for the 20 SoC’s ramp-up. This magnitude of mobilization I believe is not an easy job. More people around that show our strength in manufacturing and [technical difficulty] it's not moving or just handful of it. We’re talking about we’re moving the engineer and operator among TSMC’s. In the meanwhile we have installed more than 1500 major tours for this 20 SoC ramp. Of course the faster ramp has done with a very good device reliability and a very good wafer effect density. As we all know the first ramp make no sense, now how important off these 20 SoC ramp, well we knew that 20 nanometer provided the engine of TSMC’s a profitable growth in the years of 2012 and 2013 and similarly we expect 20 SoC will provide the engine of TSMC’s profitable growth in year 2014 and 2015. Let me switch gear to advance assembly technologies. The purpose to provide our customer as a better performance and a the lower power consumption assumption while at a lower cost as compared to the previous assembly solution. For example we have developed cohorts and cohorts has been developed to collect two (indiscernible) together. We have very high performance and the very low power consumptions and today cohort has seen a small volume production already. However the cost structure of cohorts because cohort is only suitable for some very high performance application and the product. To authorize the cost structure issue and for those are mobile very large volume mobile devices we have developed a derivative technology called INFO, that stands for integrated fan-out. INFO will significantly lower cost as compared to cohorts and at the same time INFO also can have the same capability to collect multiple ties together just as a cohorts did. Currently we’re working with major customers and if any functional ties to our customers already and process optimization are ongoing. TSMC’s advance assembly technology development as we’re building innovative solution for our customers and product which require high function and at the very reasonable cost structure. Now let me sum up of today’s [technical difficulty] and myself. First we have deducted inventory for semiconductor industry and for foundry segment as a outperformer of foundry peers and we will continue to increase our market segment share as we have done in the past four years. The demand of one 28 nanometer and the strong outperform of this year The 20 SoC surround -- our 16-FinFET plus are highly competitive and we have a very similar good density performance already with of course just like myself and it's very positive performance. Our 10 nanometer technology development and we’re working on cost effective advance assembly solution INFO for our large volume mobile devices for the next few years. This ends our prepared remarks and thank you very much.

Thank you C.C. This concludes our prepared statements before the session I would like to remind everybody to limit your questions. We will take questions from the floor and from the line. Should you wish to raise your question in Chinese I will translate it to English before our management answers your question. (Operator Instructions). Question-and-Answer Session

First question we will invite Donald Lu from Goldman Sachs. Donald Lu – Goldman Sachs: [Foreign Language]

First question with respect to smartphone semiconductor content, he likes to know what is a semiconductor content for the smartphone on average in 2013 and 2014 and what’s the semiconductor content to TSMC for a smartphone in 2013 and 2014 if we could do that he also want us to break it down into low end and high end smartphones that’s the first question. The second question is with respect to 60 nanometer 16-FinFET progress. According to ASML said they saw it got delayed and he was wondering whether the delay is caused by TSMC or another company?

I probably cannot give you as detailed numbers as you wish but let me give you some numbers of ’13. TSMC’s average wafer value per unit is $7 last year, it will increase to about $8. So this increase of course include the silicon content increase as what’s the market share increase but I cannot at this point I cannot distinguish those two. For last year we are about $10.8 per unit in average. This year we expect to be $13.9 so that’s a major increase. For the mid-end and low-end we see similar, last year was about $6 and this year it will also be $6 and low end is 3.6 and this year will be 3.6 also. However we do see the low-end performance spec continuing increasing mid-end and low-end smartphone continue increasing and we see a lot of features regardless mid-end and low-end still increasing almost like the high-end of last year. So these are the perspective we can see. Secondly, but let me give you some comments on that. If you talk about the FinFET technology difficulties, our March development is well on track and our new improvement is well on track and we are working with customer closely and we expect to ramp up 2015 but I think December like 20, so we can leverage all the yield learning’s into next year’s 16-FinFET. Secondly, if you observe once we do see the 32 bit conversion to 64 bit in the processing after the Apple’s announcement of the product development to 28 nanometer and 20 nanometer product design and indeed we see increased demand on the 28 nanometer and 20 nanometer. This year as well as next year. So that’s a second message and the last message I would like to comment with that is if you combine in 20 and 16 our Chairman has mentioned to you that combined 20 and 16 total revenue in the first eight quarters or the first two years will be even bigger than the 28 nanometer revenue in total. So that I will give you this above. Thank you.

All right next question will be coming from Crédit Suisse, Randy Abrams. Randy Abrams – Crédit Suisse: I could ask a follow-up on the 16, could you talk about the timing for the 16 regular version versus the plus version if there is difference on timing and also the customer adoption then could you also talk about your expectation at this early stage on market share for the 16 node.

So Randy your question is with respect to the timing, the availability of the 16-FinFET versus the 16-FinFET plus and then the…

16-FinFET plus will be qualified in September but remember we and our customer work on 16-FinFET design on 16-FinFET, okay. So the customer for those customers when the product tape-out for example we have a first product tape-out this month, it will right on 16-FinFET processes and mostly I will say mostly will be right on the 16-FinFET plus. So I will think majority of our proud customer will run on 16-FinFET plus. And looking into the volume and for the next year I will say most of the product will be running on 16-FinFET plus. Thank you. Randy Abrams – Crédit Suisse: And the second question if we look ahead to second half you talked about normal kind of normal profile for growth. I mean if you could give a characterization with that normal would be for third quarter, fourth quarter how you think about normal seasonal and then in that context for gross margin given 20 nanometers ramping and depreciation is going up. If potential would normal growth margins can move up?

Okay you’re talking would it be normal. As I just gave you the guidance of second quarter will grow 22%. I cannot give you specific number, I’m sorry. We also talked about the margin. I think last quarter couple of analyst were asking how can we maintain even better structure profitability given 35% year-over-year depreciation increase. Let me elaborate and I will talk about a 20 nanometer impact. The reason we can improve structural growth profitability are the following, number one, you see the 35% increase in depreciations that’s on dollar to dollar but we’re also increased 10% capacity so if you divide it by unit basis asset depreciation or whole basis go up by 22% that’s number one. Number two, we have another half that’s basically the variable cost in direct material and other fixed cost. We work extremely hard to drive those cost down. With that along with the better blended ASP thanks to the technology migrations and our higher EUV and better performance we’re able to raise the overall corporate SGM level. With the ramping of 20 nanometer which started in the second quarter. We will have very, very small volume shipment but we will have much more volume in third and fourth quarter as any new know -- top level margin starting from second quarter the magnitude of that your impact for the second half but for the whole year we still expect to see a slightly higher SGM compared to last year.

Next one goes to Bank of America Merrill Lynch, Dan Heyler. Dan Heyler – Bank of America Merrill Lynch: On Donald’s questions on the mobile numbers that you put out which were helpful. That’s a very significant increase in the high end content for phone for TSMC. I wanted to talk more about your mid-end number. I’m a little bit surprised to see that you talked about the mid-end phones being basically flat but you also commented that the specs are increasing for mid-end phones. So would that suggest there is significant pricing pressure that and you’re not benefiting from that content increase? Thanks.

For the full year so there is, currently we can see is from five point, the silicon content versus the market share. I think we will hold on market share is always there. Dan Heyler – Bank of America Merrill Lynch: Okay, yeah I think that mid-end market is where being significant units in terms of globally it represents the biggest part of the units and I’m amazed how much that content is in dollar value and the mid-end market go up was that maybe happening in the second half of the year in 2014 or 2015. So how should we think about that?

I think it has to do with second half. Dan Heyler – Bank of America Merrill Lynch: I wanted to ask a bit about if you could elaborate about what's your feeling of the progress on EUV as if you, are we still kind of treading water and your latest best estimate on when there would be an insertion into your progress, again timing. Thanks.

Well with their comment about EUV yesterday I think we hold this for same perspective. Okay, today of course EUV is not up to the production spec actually the most recent breakthrough was a 30 watt and now they have higher 80 watt machine that we’re still working toward that goal. So and EUV will not be inserted in 10 nanometer at the start because on EUV team it's still continuously working on EUV on 10 nanometer after the 10 nanometer process started qualifying and that will meant to be second half next year.

Thank you. Next one goes to Deutsche Bank, Michael Chou. Michael Chou – Deutsche Bank: What is the difference between this one and (indiscernible). C.C. Wei: The geometry to connect, (indiscernible) 65 nanometers geometry to connect the multi-ties together. In INFO we’re using the larger geometry which are technical confidential information. But the cost is much, much lower. Michael Chou – Deutsche Bank: Do we expect that from mobile customers? C.C. Wei: I would say that we’re working towards it. Michael Chou – Deutsche Bank: Thank you. The second question is regarding outlook by segments.

Seasonal, especially strong in communication, consumer and industrial related applications. Computer will grow--

Next question goes to JPMorgan, Gokul Hariharan. Gokul Hariharan – JPMorgan: My question is about the second wave of demand both for 28 nanometer I think some of it is already coming through and how do you think about second wave of demand for the future process like 20 or 60. Is it going to be much smaller and how does that have an impact in terms of your thinking on investment as well as future returns? Thanks.

I think Gokul your question is with respect to the backfill of the 20 and 60 nanometer, once the first wave customer migrate to the next node. Whether we’re not we will have sufficient profile and change our return on investor capital.

The 20 nanometer SoC is not a transition. We have worked with our customer already come out with a very powerful products and in the ramping up. So and these customer sum on them indeed will quickly transition to 16-FinFET plus. However still some other product will stay on 20 SoC on for a long time, not every product require the highest speed for example. But the key is we manage this transition by the two commonality between 20 and 16 are 95%. So when the customer move from 20 SoC to 16-FinFET plus we own marginal amount of the capital to suffice that demand. Of course ASP and the product will be more competitive for our customer. So that’s how we, so we consider 20 SoC CapEx wise as one note but it does provide our customer their product grade or product spec be continually improve year-after-year. Gokul Hariharan – JPMorgan: Should we expect that to continue going into 2016 and 10 nanometer or is it [technical difficulty].

We have not decided CapEx for 2015 but from what we are seeing right now we expect the CapEx for next quarter to grow for this year and also for next year. So the CapEx intensity will go down this year and next year as well. Next boast of CapEx will be 10 nanometer. So I think it will be coming on maybe the timeframe of ’16 and ’17.

Next question comes from HSBC’s, Steven Pelayo. Steven Pelayo – HSBC: We focus on so much on the first quarter is your 45 nanometer actually grew about 25% quarter-on-quarter that was a bit of surprise. So what’s the driver to transition some of those products to 300 millimeter, what are we thinking for the higher nodes that are still at the business.

Our 40 nanometer and 45 nanometer share holds up and is associated with the connectivity and the connectivity integration becomes very big. So we hold very large capacity for customer. So the demand is very strong this year. Steven Pelayo – HSBC: So the second question -- built on 200 millimeter so I’m curious are you out of more mature node capacity and what are you doing about that? C.C. Wei: Actually we did modify and buying some part and tools to increase it a little bit more and more specialties capacities. We did all the time, we continue to see the strong demand and those are specialties that’s just like you mentioned in the sense of finger print especially. Steven Pelayo – HSBC: We’re still focused in intensifying competitive landscape [ph] 28 and maybe 45 as well, you guys are just extending and lengthening, your landscape has almost got less intense. Would you agree with that?

I think it will be difficult and more difficult in the future. Take 28 nanometer for example, in the third year, the fourth year we ramped 28 and the third year 20. Our performance did not standstill. We continue to improve the product grade in the 28 nanometer. There are several ways our product improvement. That’s how we try to defend our market share.

Next question goes to Citi’s, Roland Shu. Roland Shu – Citi: My first question is to C.C, C.C. talking about the engineer mobilization is the key for the fast on the 20 nanometer. I think definitely the reason be highlighted, TSMC has enough tail end pool. Last couple of weeks TSMC would like to hire about 5000 tail ends and those are the same time (indiscernible) and the other Tier 1 company in Taiwan also would like to hire 1000s, so are you… C.C. Wei: I think TSMC employer in Taiwan [technical difficulty]. Roland Shu – Citi: Very nice to hear you you’re so confident about that but another question is about new employees and to motivate and to work more hard, more smart, more innovative to and the two more contribution to TSMC. C.C. Wei: The existing employees, actually TSMC has continued to expand and our young engineer or the employees have a bright future because they solve lot of new openings in the higher position and company’s performance is getting very good, that’s enough to motivate our existing employees. We have never had the problem. Roland Shu – Citi: My second question is to Lora, I actually look at your, on your margin improvement for the customer. So my question is how much will you need for you to continue to cut cost or/and to increase your gross margin.

There is much room. I was, every time I was surprised how much the engineer can actually do. So I’m confident. We will continue to drive that, old technology, current technology and leading age technology. Roland Shu – Citi: And a follow-up, TSMC is loading at 100% utilization what is the margin there for ’14?

Understand whether we can achieve 50% again if the capacity utilization is 100%, right. I can say I think we have the capability to achieve 50% if the utilization exceed or reach 100%.

To open the Q&A to those people who are on the line. Operator could you proceed with the first caller on the line.

Mehdi Hosseini from SFG. Please ask your question. Mehdi Hosseini – Susquehanna Financial Group: Going back to the commentary on 16 and 16 plus it seems to me that 16 nanometer revenue contribution could you please clarify on that, and then what should we think about the actual contribution? Is it going more of a Q4, ’16 or would it be more meaningful in early 2016.

I think the question is with respect to 16-FinFET versus 16-FinFET plus, whether or not we will have a bigger business volume from 16-FinFET plus and if so whether we’re not volume will be coming from Q4 of 2015 or we have to wait until 2016.

From 2015 first of all the volume of 16-FinFET plus will drive that even for some of the customer initially their products sits on 16-FinFET plus they also would like to migrate their second if market opened up. I really mean massive majority will be 16-FinFET plus. Mehdi Hosseini – Susquehanna Financial Group: Okay and then one follow-up question for Lora, you talked about the SG&A trend into the second half. Why should we think R&D? Should we also assume R&D because the revenue will go higher in the second half and into 2015?

I think current R&Ds to revenue is 7% to 8% range.

Now we have the next question from the line of (indiscernible).

Within the 28 nanometer how [technical difficulty] and how do you think this might trend through this year?

So Bret’s question is what is really the mix between poly that is our 28LP versus our high-k metal gate and what is going to be the trend with respect to that kind of mix throughout this year.

Allow me to answer that, 28 nanometer the high-k metal gate has three options, 28HP, 28HPM and 28HPC. And this year these 28 high-k metal gate technology will be about 85% of the overall 20 nanometer in terms of the wafer.

And follow-up question on INFO, can you maybe talk a little bit about attach rates for INFO over the next couple of years and something that you think is more targeted at the high end and maybe what is the benefit that INFO is bringing to your chipmakers. I don’t if there is a performance or power saving maybe if you can share with us and also how should we think about the margin structure for this within TSMC’s business. Thank you.

Okay, we’re working with major customers that all I can say and outlook is good. The cost is look, I believe we will see the product out but that will be our customer’s schedule. Technology is close to be in production, probably next year.

Okay and will be a very higher attach rate, when you sell SoCs in the leading edge, do you think that percentage of chips you sell at leading edge will be a catch with INFO. I’m just trying to get a sense for the penetration for that bigger smartphone chipmakers.

We certainly believe that our attach rate you’re using that word attach rate, we certainly think are very popular and because we provided a very low cost route assumption whether it's going to be what is the percentage of test rate I can’t answer that question right now.

Morgan Stanley, Bill Lu. Bill Lu – Morgan Stanley: (Indiscernible) but building some of the demand in 2Q and 1Q and that impacted margins, if you look at your 2Q, if that didn’t happen can you tell me what the margins would have been. So I think that would have been 1Q margin little bit lower, 2Q margin little bit higher right?

2Q will be a very strong quarter and all capacity are essentially full. Bill Lu – Morgan Stanley: So I wasn’t clear, I don’t mean that you would do that again in 2Q but what you did in 1Q impacted 1Q margins and 2Q margins correct?

Yeah Bill’s point is that since we did it in the first quarter which probably would send -- so had we not done that? Our second quarter utilization probably will be even higher and then second quarter’s margins would be higher.

Had we continue doing that? Well you’ve to look at which node you’re building. For example for certain capacity it's already full. So you can only run that much, right. So, I don’t know how to assume, we will be exceeding 110% utilization? That’s essentially not possible. So am I answering your questions? Bill Lu – Morgan Stanley: Not exactly, I guess I could take it offline that’s okay.

Impact on second quarter, impact first quarter because the way we utilized the first quarter-- Bill Lu – Morgan Stanley: From that second quarter margins would have been little bit higher.

Second quarter order already coming in, it's a regular order. Bill Lu – Morgan Stanley: Second question is on this inventory cycle that we have seen, 1Q, 2Q were also very good and things dropped off in 3Q and 4Q, can you talk about what you’re seeing now a broader base recovery maybe more end markets, more customers or what are seeing that gives you confident that that won't happen again this year and I guess if you look TSMC you just have a very diversified customer base but in the not too distant future I could see your top two customers being 25% – 30% of total revenues both in the model [ph] segment, right? How do you manage that concentration going forward?

In the past few years we see the end of the year people try to control inventories and towards the end of the year it's about back to the seasonal level, however last year we look at our phabelt’s DOI inventory, reduced inventory, even at the end of Q3, we see them get to seasonal and going to Q4, everybody find that their inventory is below seasonal, what our data shows below seasonal by six days which is has been when they were in the third quarter last year. Now for this quarter we see the inventory it is minus five days below seasonal so they don’t have time to replenish inventory. The inventory will happen in the second quarter. Now whether this year, we will be as per last year more optimistic because even down to the second quarter it is only to the seasonal level. So it might even we assume doesn’t overshoot, it shouldn’t be very much below seasonal. We just work very closely with our customers. Remember if you’re IBM you’ve to face you’ve big market share you’ve to face the same customer demand decontrol. So this problem is more an industry problem than our problem but we deal with this problem by working very closely with our two biggest customer and today we’re already together planning our 2015 supply demand, very closely so we recognize this challenges. Our customer also recognize the same challenges, so these are very closely together.

All right. Next question goes to Barclays, Andrew Lucentis. Andrew Lu – Barclays: The first one is the CapEx number for next year about 10 billion, [technical difficulty] to 16-FinFET plus or something and earlier you say this capacity is 95% convertible. I believe the spending is very low. Assuming we have a 40k-50k capacity by the end of this year and next year 30k convert to 16-FinFET plus instead of adding a new capacity. Supposing compared to this year so I don’t know what’s the mix on this one. Thank you.

You said next year the capacity suddenly declined? Andrew Lu – Barclays: Yes because your 20 versus 16 is 95% convertible.

What do we see is this year at the end of year we see next year that combined 20 and 16 capacity will continue to increase year-over-year. We will also add a new 16-FinFET capacity next year, that’s what the most CapEx -- 20 and 16 capacity will continue to increase next year. Andrew Lu – Barclays: So total combined 20 plus 16 the amount, the capacity you’re going to add quite similarly boast each year can we say that? For example just using example is a 40k capacity by the end of this year and next year and next year about 80k?

Allow to say me that increased total capacity increase next year I think will be more than the conversion of 20 to 16. Andrew Lu – Barclays: The reason I asked this question because I assume one customer take all your 50% of your capacity on 20 to another and you will have a totally -- on 16 unless additional 20 nanometer capacity. The second question I have is will you offer smartphone, do you calculate based on the shares you have or you use the total value divide by the global smartphone shipment?

Yes we use the total TSMC… Andrew Lu – Barclays: Field gain shares than your ASG change a lot.

Yes that includes this second counter increase question is how much at this point. Andrew Lu – Barclays: Well based on all calculation it should be much higher than $8.

Okay I will check with my staff. Andrew Lu – Barclays: Thank you.

Okay, next question will come from UBS, William Dong. William Dong – UBS: My quick question is I think in terms of competitive landscape there is [technical difficulty] on design portability and is it a realistic threat as sort of with the move from 20 to 16, we’re using the same design rule, does that really mean that your competitors can actually try to get some of these customers?

All right. So William’s question is with respect to design portability in the sense that if 20 nanometer and 16 will we open the window for our competition to learn something about our 20 nanometer design rule.

Let me answer the question, first, 20 SoC and 16-FinFET are totally different device structure. Even the backend design rules. William Dong – UBS: So I guess when 20 and 16 is difficult but in terms of perhaps you having 16, your competitor is having 60 nanometer as well, obviously I think there has been some talk in the market about them having some ability to put designs. Do you think that’s a realistic threat or is that really just lot of wishful thinking? C.C. Wei: Well Mark already answered this kind of question saying that one porting from foundry to the other foundry who are getting harder and harder. The real reason is all the device characteristic you cannot (indiscernible) you can do the reverse engineering to do get what -- so it's very actually very hard.

The porting happens and porting is cost more and more now a days for this generation. I think it takes a lot of R&D resources to do that. Secondly we just have to do better 16 technology. There are reason to do that because first of all we ramp 20 SoC massively this year and lot of learning’s a lot of process window control, a lot of design and collaboration that we will build ahead of our competitor. So we believe our 16-FinFET right on top of our 20 SoC given they are same design rule. We will be more mature at the time compared with our competitor.

All right there will be follow-up questions from the floor and that will be Bank of America Merrill Lynch’s, Dan Heyler. Dan Heyler – Bank of America Merrill Lynch: I just wanted to know 28 was fraught with problems that TSMC didn’t anticipate and your customers did not anticipate when 28 was first rolled out. How should we think about 16 and this is really unchartered territory, it is a totally new device structure. Should we be a little more conservative on the possible and unknowns coming on and that this could easily be pushed out say a few quarters. How much are you really setting expectations here very high that you can now have 16 in the market? Should we be thinking of this as a pretty uncertain node given how early it is? Thank you.

I think at this point we develop our technology, we can only make sure our technology do not stand in the way when customer has need for product needs we will be there and mature and support there enough capacity. As I mentioned earlier industry market does change for example from 32 bit to 16-FinFET plus but today I really talk about our readiness as to as the how much real business and we will let you know when we do that next year forecast. Dan Heyler – Bank of America Merrill Lynch: Just to be clear a follow-up, just to be clear that sort of kind of we should start to see volumes in first half 2015 where we would start to see a few percentage of revenue based on your current expectations? Few percentage contribution by second quarter next year is that fair? Lora is checking.

You mean the 16? Dan Heyler – Bank of America Merrill Lynch: Yes.

Okay. Dan Heyler – Bank of America Merrill Lynch: Setting the expectations low, that’s good. I want to follow-up on this info, this is quite interesting, could you just maybe elaborate a bit are we talking about in terms of with cohorts [ph] it was pretty much the PLD [ph] companies were there and others some baseband but what devices are you attaching on the initial generation chips and the second part of that question would be what kind of, how many customers do you expect it gets really complicated you start to look more like an OSAT [ph]. So I’m wondering if this is going to be a pretty small group of high volume products and finally on as you attach, are you actually doing the chip attach or will you be doing only the wafer level activity and will you be having, working with the OSATs to do the actual chip attach? Thank you. C.C. Wei: To answer your question, the INFO actually we’re right now working on appreciation, (indiscernible) good enough for you. I cannot say anything more than that. We’re working with them and we did not, we expect very high volume but we did announce with many, many customers as current status. We working on the wafer level across it's taking time. We’re able to do the complete line.

All right we have a hand raised on the back of the room. I think this is from a media. Would you please say your name and the company you work for?

Obviously more is not here and I’m just wondering if that is fine, that is very confident that for both CEO right now here and you (indiscernible) right now Mark and C.C. just out of curiosity.

I’m delighted to work with C.C. and of course Chairman and it's new initiative for the companies all the time and the rest I think is for you to judge.

But how open is Morris to both of your, does he still make the final decision?

Of course we -- everybody contribute ideas, the decision is usually made together and but more than often we find with them talking things we want to grow and up to his expectation I guess.

In the interest of time we will conclude our conference here today. Please be advised [technical difficulty] will become available in 24 hours from now both of which will be available through TSMC’s website at www.tsmc.com. Thank you for joining us today, we hope you will join us again next quarter. Goodbye and have a good day.