Elizabeth Sun – Head of IR Lora Ho – VP, CFO and Spokesperson Shang-Yi Chiang – SVP, R&D Morris Chang – Chairman and CEO

CJ Muse – Barclays Capital Randy Abrams – Credit Suisse Pranab Kumar – Daiwa Securities Dan Heyler – Bank of America/Merrill Lynch JJ Park – JPMorgan Mehdi Hosseini – FBR Dan Malkoun – Moore Capital Mike McConnell – Pacific Crest Securities

Welcome to TSMC's first quarter 2010 results webcast conference call. This conference call is being webcast live via the TSMC website at www.tsmc.com, and only in audio mode. (Operator Instructions) I would now like to turn the conference over to Dr. Elizabeth Sun, TSMC's Head of Investor Relations.

Thank you, Eric. Good morning, and good evening, everyone. Welcome to TSMC's first quarter 2010 conference call. Joining us on the call are Dr. Morris Chang, our Chairman and Chief Executive Officer, Dr. Shang-Yi Chiang, TSMC's Senior Vice President and Head of R&D, Ms. Lora Ho, our Vice President and Chief Financial Officer. The format for today's conference call will be as follows. First, Lora will summarize our operations in the first quarter and give you our guidance for the second quarter. Then, Dr. Shang-Yi Chiang will give you an overview of TSMC's technology. Afterwards, TSMC's Chairman, Dr. Chang will provide his general remark on the business outlook and a couple of key messages. Then, we will open the floor to questions. For those participants who 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 quarterly review presentation. I would like to remind all listeners that following 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. Information as to those factors that could cause actual results to differ materially from TSMC's forward-looking statements may be found in TSMC's annual report on Form 20-F filed with the United States Securities and Exchange Commission on April 15, 2010, and such other documents as TSMC may file with or submit to the SEC from time to time. Except as required by law, we undertake no obligation to update any forward-looking statement whether as a result of new information, future events or otherwise. And now, I would like to turn the call over to Lora.

Thank you, Elizabeth. Good morning and good evening to everyone. Welcome to our first quarter earnings conference call. I will start today's presentation with the financial highlights of first quarter 2010 and follow it by the guidance of our second quarter. Please refer to the quarterly financial summary slide on our website. All dollar figures are in NT dollars unless otherwise stated. Contrary to our first quarter normal seasonality, the first quarter revenue and the wafer shipments slightly increased. The strength came mainly from the customer demand for communications and consumer related applications, as well as very strong demand for our 40 nanometer technology. Net sales of NT$92.2 billion increased 0.1% Q-over-Q and 133% year-over-year. Wafer shipments were 2.55 million 8-inch equivalent wafers, up 4.8%, sequentially, and up 185% compared with the same period last year. Gross margin was 47.9%, representing a 0.6 percentage point decline from the first quarter – from the last quarter, and a 29 percentage point increase from the first quarter '09 level. Operating margin of 37% was up 0.5 percentage point sequentially, and up 33.9 percentage points compared with 1Q09. Earnings per share for the first quarter of 2010 reached NT$1.30. ROE was 26.3%. On page 5, let's now take a look at income statement. First quarter gross margin was 47.9%, down by 0.6 percentage point from 48.5% in fourth quarter '09. The increase in depreciation could have been more than offset by other manufacturing costs improvement. However, the effect from the March 4 earthquake resulted in additional costs from tool recovery and mold losses which brought the gross margin by 0.9 percentage point. The unfavorable exchange rate further reduced the gross margin by 0.4 percentage point. Under a scenario without these two items, our first quarter gross margin could have reached 49.5%, marking first quarter '10 the fourth consecutive quarter of margin improvement. Operating expense decreased 990 million from the prior quarter, mainly due to lower legal fee after the settlement of big lawsuits. Non-operating income decreased by 430 million from 4Q09, primarily due to the lower litigation compensations and wafer scrap loss resulting from the March 4th earthquake. Net investment gain was 180 million, down 120 million from the prior quarter as SSMC's earnings was reduced by an inventory valuation loss and the less government subsidy. Net margin was 36.5%, up one percentage point, sequentially, and up 32.6 percentage points year-over-year. Now, let's turn to revenue analysis. Demand in the first quarter was stronger than normal seasonality in all major segments. Consumer segment was the strongest with a 9% sequential growth. Communication and industrial segments both grew 2%, while computer segment declined 3% from the prior quarter. Overall, revenue from communications, computer, consumer and industrial applications accounted for 39%, 32%, 14% and 15% of our wafer sales in first quarter '10, respectively. On page seven, by technology, total wafer sales from 0.13 micron and below accounted for 71% of our total wafer sales representing 1 percentage point increase from last quarter. Meanwhile, the combined revenue from 40 nanometer and 65 nanometer already accounted for 41% of our total wafer sales. For 40 nanometer alone, revenue grew strongly in the first quarter as a result of strong customer demand and continued year improvement. 40 nanometer contributions jumped to 14% of our total wafer sales in the first quarter from 9% in fourth quarter '09. For 65 nanometer, revenue contribution was 27%. Meanwhile, 90 nanometer and 0.13 micron represented 17% and 13% of our total wafer sales, respectively. Now, let's move on to balance sheets and cash flow statements. We ended the first quarter with NT$192 billion in cash and short-term investments, decreased by NT$4 billion from the last quarter, primarily due to the 20% equity investment in Motech of NT$6.2 billion. On the other hand, total current liabilities decreased 1 billion, primarily due to the change in timing of employee bonus payments. Accounts receivable days were 38 days. Inventory turnover days increased 3 days to 45 days. This is to support increasing demand in the second quarter. Net fixed asset turnover was 1.3 times. On page 9, cash flow generated by operating activity reached NT$46 billion, representing a decrease of 16 billion from the last quarter, primarily due to the payment of employee bonus and the increase in accounts receivable. In investment activities, capital expenditure was NT$46 billion, meanwhile short-term and long-term investment increased for 6.4 billion, mainly due to the equity investment in Motech. In sum, the ending cash balance was 160 billion, down NT$11 billion, sequentially. Free cash flow was an outflow of more than [ph] 100 million. Let's turn to capacity in capital expenditures. Totaled installed capacity was about 2.57 million 8-inch equivalent wafers in the first quarter, representing a 1.3% increase from the last quarter. In the second quarter of '10, we expect the overall capacity to increase by 7%. 12-inch capacity will expand by 13% Q-over-Q; meanwhile 8-inch capacity will increase by 2% from the first quarter. For full year 2010, overall capacity is expected to exceed 10 million 8-inch equivalent wafers, and will reach 11.25 million equivalent wafers. This translates into a 13% year-over-year growth for 2009. 12-inch capacity is expected to increase by 35% year-over-year, and accounts for half of our total capacity. In terms of capital expenditure, we spent US$1.44 billion in the first quarter, increasing US$130 million from the last quarter. At the moment, we are aggressively expanding our 12-inch capacity. We expect the majority of 2010 CapEx to be front-end loaded; more than 60% will be spent in the first half. I finish my presentation on first quarter financial highlights. Now let me give you the guidance for the second quarter of 2010. Based on current business outlook and a forecast exchange rate for 31.30, we expect our consolidated revenue in second quarter to come in between 100 and NT$102 billion. In terms of margins, we expect our second quarter gross margin to be between 48% and 50%, operating margin to be between 36.5% and 38.5%. This concludes my remarks today. Now let me turn the call over to Dr. Shang-Yi Chiang, our Senior Vice President of R&D for his remarks. Shang-Yi Chiang: Hello. Good morning, good afternoon, and a good evening. I will spend the next 10 minutes giving you TSMC's technology overview. TSMC works on three technologies divided into three areas. Advanced CMOS technology follows kind of Moore's Law, and I will report to you for 28 nanometer and beyond, including our vision for (inaudible) Moore's Law extension and where it will may or may not end. Then, I will touch on "More than Moore". Those are the areas where we added special features for particular applications. Examples are embedded memory, CMOS image sensors, mixed-signal RF, analog power management, MEMS, (inaudible). I will also report to you about TSMC's engagement in wafer level package and 3D-IC stacking backend. Finally, Moore's Law may end by physics or may end by economics, so I will share with you the wafer cost controls which if we manage well then we can keep Moore's Law continue longer. The next viewgraph is TSMC's technology roadmap. On the left hand side, those boxes are the ones already in mass production such as 65 nanometer, 40 nanometer. The orange boxes are for high performance and the blue boxes are for low power. As you can see, 40 nanometer is already in production. You probably have heard of TSMC's struggle with a year issue last year. Now, all these problems are behind us. We are doing very well. The defect in end stage is good or better than previous technology at this time – the same time after we released the technology. For example, the defect in end stage reached 0.1, in some products even below 0.1 and we engage with more than 60 customers, and half of them are in mass production. 20 nanometer, those boxes on the right hand side – the left hand side of this box means reached production state. The one on the very bottom is 28LP. We start its production by the end of Q2, which is about two months from now, and this is a version, low power with oxy-nitride state. Other three versions, HP, HPAR and HPM are all with high-K metal gate. HPAR is for low power. HP is for high performance, where HPM is a combination of high performance and low power, this is particularly designed for mobile interconnect Internet devices. We also made a decision to skip 22 nanometer, go directly to 20 nanometer, and we plan to introduce 20 nanometer at the end of Q3 2013. We put in a dash line in those boxes means the detail – because they are more than two years from now. So, the exact date will be – we will discuss with our customer before we finalize that date. The reason we skipped 22 nanometer because we have to detail study from technology point of view and from our customers' performance gain versus cost. This will give the best solution. Let's go to the next. If we judge advanced technology, usually there are three key measures. One is a transistor, one is a FinFET and the third is the interconnect. TSMC's vision for the transistor roadmap, we see the current we call it planar transistor can be expanded to (inaudible) about 18 nanometer. For up to 20 nanometer we will continue to use planar transistor. Starting from 14 nanometer we will begin to – we will shift to the so-called FinFET transistor structure; the three dimension structure. Moving forward, it is likely we will add more trend engineering and we will begin to use Germanium or Gallium Arsenide as channel material to enhance mobility. From device physics point of view, FinFET transistor structures would allow us to carry to (inaudible) about 7to 8 nanometer. So we still have about four generation to go based on the technology we know today, not including the possible innovations that may come up in the next ten years. So from physics point of view, especially from transistor, Moore's Law will be able to extend it to 7 nanometer based on everything we already know today. Then, let's look at the lithography. We had been using this 193 immersion lithography; in fact we will continue to use that for 20 nanometer. We will look at as a possible opportunity if EUV, or multiple E-beam direct-write become cost effective, we will switch because the mass production for 20 nanometer will be begin in 2013. So, we still have a few years to go. Going forward to 40 nanometer, we believe one of the EUV or multiple E-beam direct-write will be the tool for litho. And if we look at the interconnect, the measure for interconnect performance is resistance and a capacitance. So everybody try to improve their interconnect speed by reducing capacitance, using the so-called low-K material. TSMC pioneer – is the first company to ship low-K product in the industry. We are also the first one to introduce second generation low-K material. And we are the first ones to begin to improve resistance – we call low-R, in addition to low-K, as you see on the right hand side. Let's go to the next. Now, I will switch to More than Moore, give a few examples. We are engaged in embedded DRAM and at this moment we are introducing 40 nanometer embedded DRAM, both in the high speed version, T [ph] version, and low power version, LP version. Go to next. Another example is the embedded flash. This is mainly – application is microcontroller. We are working on 90 nanometer and going to 65 nanometer right now. TSMC has already shipped more than 1 million wafers embedded flash and we are qualified for various types we rapidly expect for automotive applications in this area. Go to the next. CMOS image sensor. We are working with customers on 1.19 micron pixel, and TSMC is the first one to introduce this thing called BSI technology, backside illumination. There are certain advantages if we shine light from the backside, and in this case we had to slim down the wafer to 3 microns thick. The handling, the technology, extremely difficult. We already shipped products using this BSI technology in 8-inch wafers and we are working on 12-inch wafers right now. Next. For the power device, we show example of this technology, give a breakdown voltage from 750 volts – that's not, I'm sorry, 700 volts to 850 volts. And in this area, there are many, many different applications for 12 volts, for 16 volts and just it requires a different way of optimizing these devices. And next one is the MEMS technology. TSMC takes a special approach. We make CMOS on one wafer, MEMS another wafer and package on the third wafer and then we bond them together, and this particular case allowed us to optimize all three of them independently and then finally, we put them together. Next please. On the package side I would just like to show you one example. We are – we began to work on 2D and 3D integration. This looking forward, I think before – especially after we – after the Moore's Law began to slow down, we still need a solution for system integration, and as 2D, 3D integration use silicon as a substrate, allowed us to make the entire system into a very small package with high performance and a low power. So we began to work on 3D stacking and a silicon interposer for 2D integration. Next, please. My final viewgraph, TSMC in the past has been – controlled the wafer cost from one generation to the next – the build-out costs within 15%. And right now, with increase in the complexity of transistors, for example, we began to use high-k metal gate. And looking forward, likely we will use FinFET as a 3D structure. We see the pathway wafer costs increase will be very steep because of transistors and because of lithography. For example, the – if we use EUV we are look – we are expecting a single set of EUV2 with a cost of US$100 million. So TSMC will work harder with our wafer supplier to find solutions, control the costs, allow the Moore's Law to continue longer. Thank you very much.

Now, our call will be turned to our Chairman and CEO, Dr. Morris Chang, for his general comments.

Hello, ladies and gentlemen. I will make a few comments on various topics that are of interest to you, and then we will be open for questions. First, on business outlook, as the CFO has indicated in her report of the first quarter and in her guidance for the second quarter business at TSMC is very good – very brisk in the past quarter and now. As far as the overall electronic equipment market is concerned, we see that the PC market will probably be up 17% this year. That is an upward revision of our forecast from last quarter of 14%. Handsets will be up 13% this year. That is also an upward revision. Digital consumer electronics will be up 7% from last year, and that forecast is unchanged from our last forecast. Semiconductor market – world semiconductor market will be up 22% from last year. That is an upward revision from the 18% growth that we had forecast last time. Foundry market, we forecast, will be up 36% this year. Now, the next topic I am going to discuss is the supply chain inventory. We have complete data only for the end of fourth quarter, and our data indicated that as of the end of fourth quarter, inventory was below normal seasonal levels. Also, DOI, days of inventory, was below seasonal level by about ten days at the end of the fourth quarter. First quarter data are very sketchy. We only have about 15% to 20% of first quarter inventory data and it is premature to draw any conclusions from those sketchy data. My next topic is our capacity expansion. Our capacity expansion is very much in progress. As the CFO has pointed out, our capital spending in the first quarter is as planned. In terms of the physical progress I would say that we are expanding, we are adding Phase Five to fab 12 which is in Hsinchu. And we are adding Phase Four to fab 14, which is in Tainan. Both fab 12 and fab 14 are 12-inch GigaFabs. Each of those is expected to produce 100,000 12-inch wafers per month, and each of those is very close to that mark already. In addition to those fabs, we are also going to break ground on a new GigaFab, fab 15. It will be in Taichung. Taichung is about half an hour of bullet train away from Hsinchu and you can drive there in about one hour or so. In Taichung, we will be adding – we will be breaking ground for another GigaFab, and in that new GigaFab we will first start with 40 nanometer production and then we will expand our 28 nanometer production in that new fab too and then, of course, later on we will be doing 20-nanometer production, and so on. My next topic is our structural profitability. By structural profitability, I mean profitability independent of utilization. In the P&Ls that you have been looking at every quarter, the level of utilization has always masked the structural profitability because when utilization is very high, as it is now, the gross margin percentage would be quite high. And when the utilization was low, as it was a year ago, the gross margin percentage will be very low. Now, of course, the management team looks at a profitability independent of utilization. Now, I am happy to report that our structural profitability has improved in the last couple of years, year '09 and this year. It has improved by a couple of percentage points. Now, this is a major direction of ours to improve structural profitability and we are devoting a lot of energy and investment to do it. The next topic I will comment on is, IBM outsourcing. That is, outsourcing from customers that have their own fabs or used to have their own fabs. Now, 2009 was very bad for IBM outsourcing because our revenue from IBM in 2009 declined 42% from 2008. That was because in a bad year like 2009, the IBMs took in the sourcing, they did not outsource as much. This year, IBMs outsourcing has bounced back and we are, of course, a very major beneficiary of that. As far as the long-term trend is concerned, there is no question that IBMs has been increasing their outsourcing. From 2003 to 2008, the five-period, TSMC’s revenue from IBMs grew 15.7% per year compounded annually. This was faster growth than our revenue growth from the fabless customers. So the long-term trend is very healthy, the IBMs increasing their outsourcing and we are a major beneficiary. Last year, it dropped for us 42% and this year it is bouncing back. Last topic I am going to comment on is our business in China. We began our business in China earnestly in '04. Since then, our business from Mainland China has grown at a compounded average growth rate of 63% a year. Last year, our business from China, that is, orders placed by customers that are based in China, has exceeded our revenue from customers in Japan. That was something we hardly expected a few years ago. Actually, even bigger things were happening in Europe. Our business from Europe used to be about the same as our business in Japan, but the business from Europe overtook the business from Japan several years ago. And now, the business from China has overtaken the business from Japan. Also, I want to say just a few words about our manufacturing operation in China. We have had an 8-inch fab in Shanghai since '04 and we have been increasing the capacity of that fab also. It will be 50,000 8-inch wafers per month by the end of this year. Those are all the comments I have at this point. We are open for questions.

This concludes our prepared statements. Operator, please open the floor to questions.

(Operator Instructions) Your first question comes from the line of CJ Muse with Barclays Capital. Please, proceed. CJ Muse – Barclays Capital: Good evening. Thank you for taking my questions. I guess, first question, with fab 15 breaking ground in 2010, is there any change to your CapEx budget for full year 2010? And I guess as part of this question, when will you start equipping fab 15?

The fab 15 where we will start groundbreaking in the middle of this year, but we do not expect there will be a huge investment coming – capital expenditure coming from that fab yet. It is going to take more than one year for the fab constructions going forward. For the time being, we do not have a plan to change our CapEx guidance for 2010. CJ Muse – Barclays Capital: Okay. And as a quick follow-up, considering the increased competitive landscape for the foundry industry and as you talked about on the call earlier, increasing complexity at the next nodes and the strong demand you are seeing for 40 nanometer and your work on 28 nanometer including fab 15, and I know it's early, but what does this suggest for your CapEx spending in 2011? Does this mean capital intensity hovers above 40% well into 2011?

Well, capital intensity, of course, is capital spending divided by that year's revenue. And that number, that percentage may indeed go up for a couple of years because we have shifted that to a higher growth path, I believe. And in – while the capital intensity increases I think that we will have growth – higher growth to also show our investors. CJ Muse – Barclays Capital: That's helpful. If I could just follow-up real quickly, in terms of that higher capital intensity, how much of that would you describe to – your views of taking share in the foundry space versus the increased capital intensity at the next nodes, given some of the new technologies?

Well, I really have not stopped to look at that. Just as a first answer to your question, I would say that the increase because of the higher node is expected to be compensated for by price. And so, the first answer to your question is that I believe that most of it – most of the increase in capital intensity will – is attributed to the growth that we are expecting. CJ Muse – Barclays Capital: Very helpful. Thank you.

Next question comes from the line of Randy Abrams with Credit Suisse. Please, proceed. Randy Abrams – Credit Suisse: Yes. Hi, good evening. On 28 nanometer with the higher technical complexity, could you talk about early stage how it will start looking, and also process maturity? And, how are you seeing customer uptick relative to similar timeframe early in the 40 nanometer transition? Shang-Yi Chiang: Yes. This is Shang-Yi Chiang. I – indeed high-k metal gate is considered pretty challenge for technology development, and at this moment, we are proceeding according to schedule. And we have – let me think, we have engaged more than 20 customers at this moment and we expect about half dozen customer product tape-out before the end of this year.

And let me add. This is Morris Chang now. What Shang-Yi says is that we have engaged some 20 customers. By engaging, we are working with them in the pre tape-out phase. They haven't given us the tapes yet, but we have started to work with them already. And that is the way things should be done in this business. That is a pretty long collaborative period before tape-outs are given, and we are in that phase right now. Tape-outs will not be available until about – well, for the first technology which is the low power technology. Right? Tape-outs, even for that first technology of 28 nanometer, tape-outs will not be available until the end of this year. Right? So it is a bit – we are still very much in the development stage, so – and we do have – in the development stage, we do have our defect goals. And – but it is premature to discuss yields. Well, actually, our goals are to be very economical to the customer such that he will buy them, and also very profitable to us. Randy Abrams – Credit Suisse: Okay. Thank you for that. And a follow-up question with two approaches, the gate first versus gate last, will that make it more difficult for, say, an IBM alliance member if it is like an STMicro or Freescale, the designs on an IBM process, to move into TSMC, and maybe at the same time some of the customers you work with on 28, does it make it tougher for a TSMC-like process or for them to go to a second source for the design? So, maybe talk about the challenge on 28, if it is changing any versus history? Shang-Yi Chiang: The quick answer is yes. So, this is the first time in many years that we see the industry diversified to such a large degree. Previously, like 90 nanometer, 65 nanometer approve [ph] the design from one foundry to the other. It is not as difficult as it for 28 nanometer, and that we do experience that. Randy Abrams – Credit Suisse: Okay, thanks a lot. Shang-Yi Chiang: You're welcome.

Your next question comes from the line of Pranab Kumar with Daiwa Securities. Please, proceed. Pranab Kumar – Daiwa Securities: Hi. Good afternoon. This is Pranab from Daiwa. I have – first question is basically on your wafer costing chart, I think. Thanks for giving those charts. You have indicated 28 nanometer versus 40 nanometer cost will increase quite significantly compared to, say, 45 nanometer versus 65 or 65 versus 90, which is quite stable. How much ASP can you command on 28 nanometer so can – so that you can at least maintain decent margins out there? Basically, that would be the – my first question because the cost is increasing quite rapidly there – 28 nanometer. Shang-Yi Chiang: This is Shang-Yi Chiang again. To answer your question, we – that curve I draw is didn't – is more trying to make the point. Those – please don't take the number, quantitative number seriously. We tried to deliver the message – we began to go to 28 nanometer because of the high-k metal gate. The transistor – the cost for making the transistor did go up quite a bit. And we look forward, we see going to 20 nanometer and below the transistor continue to be very complex. In addition to high-k metal gate, we also built in a lot of the cost trend engineering. Every one of them costs additional, an additional wafer cost. And we will also there – very much alert that the lithography cost will be very high. We go to 28 nanometer, we will start with still the same 193 immersion-lithography, but we added a lot of special features into this lithography technology. The – from the high school physics we know when we try to make an image with an image dimension smaller than the wafer length we begin to see interference patterns and this image will not be clear. Now we are looking that we use 193 nanometer light, its wavelength is 193 nanometer. We try to print 20 nanometer. It is only one tenth of the wavelength with the pattern, so that take a lot of work to make it happen. And all those are add-on costs, even before we use EUV or multiple E-beam. That is why we draw that curve just to highlight the change in transistor and the trend for the very high cost lithography. That is – we still are able to handle 28 nanometer to maintain the cost to be cost effective for customer to migrate to 28 nanometer. And to go beyond that, we will try very harder and we believe we can do that. It really hasn't happened yet.

Pranab, if I can make some comment on this. You are asking about the cost and price on 28 nanometer. Pranab Kumar – Daiwa Securities: Exactly.

We do have an internal goal for 28 nanometer cost. It is a parity to our 40 nanometer. We are working hard to achieve that goal. In the same time, we believe the value we bring to the customer in 28 nanometer. On the pricing side, we should be able to get a reasonable price so that the SGM for 28 nanometer will not be lower than the prior node. Pranab Kumar – Daiwa Securities: Okay. Thank you, Lora, for clarification. And my second question is on SMIC, assuming like you get approval to get that 8% SMIC stake, would you consider SMIC to be your competitor, an alliance after that?

Right now they are a competitor, even though we own 8% – we will own 8% of SMIC. But that was a result of the settlement of the suit that we had with SMIC. And we declared when we received it that we will not participate in any aspect of the management of SMIC, we will not be represented on the Board. We will not participate in the management, and we will not cooperate with SMIC. So, they are a competitor. Pranab Kumar – Daiwa Securities: :

Well, yes. Yes, we will consider that, but I believe there is a lock-up period. But, certainly, yes we will consider that. Pranab Kumar – Daiwa Securities: Okay. Can I ask one more – ?

Yes, actually – yes, yes, well, okay. Pranab Kumar – Daiwa Securities: Can I ask one more question because my two questions is over?

Pranab, can you go back to the queue? Thank you. Pranab Kumar – Daiwa Securities: Okay. Thank you.

Your next question comes from the line of Dan Heyler with Bank of America/Merrill Lynch. Please, proceed. Dan Heyler – Bank of America/Merrill Lynch: Hi there. Good evening. I had a couple of follow-ups from this afternoon. So the 28 nanometer comments – and my understanding is the tape-outs were expected to be later this year. Based on the comments that were made last quarter, the comments were that 28 nanometer would be taping-out in the middle of this year, so I am wondering what has changed since then, is it is more the challenges in cost? Is it customer reception? Is it that you quite busy right now, or if you could just elaborate a little bit on the change there? Shang-Yi Chiang: Dan, this is Shang-Yi. Yes. Dan Heyler – Bank of America/Merrill Lynch: Yes, hi there. Shang-Yi Chiang: Indeed, we had major customers – they had their tape-out delayed for one quarter from third quarter to fourth quarter. And it happened to more than one customer. And it is not part of the – TMSC was not involved in this decision and cost, so we cannot comment on what caused that. Dan Heyler – Bank of America/Merrill Lynch: Thank you. That's great. And then, my second question was on the More than Moore strategy that you have had in place for a number of years. There, you are quite busy in a number of fronts, and I am wondering what the capacity situation is on 8-inch. The industry seems very tight right now on 8-inch; there is, in fact, report – increasingly reports of shortages on 8-inch. So if you could elaborate whether you think that is just merely cyclical or whether or not we do need to see (inaudible) become more aggressive in adding more 8-inch, and if it is so, how would you go about doing that, whether it would acquisitions or internal? Thank you.

Dan, our every – More than Moore, actually, gradually to see some results. So, right now, our 8-inch is quite full as it is very close to 100% utilization. So we are doing the debottlenecking to incremental add up of equipment and we also want to expand our fab 10 in Shanghai for some of the More than Moore technologies. So to – the simple answer to your question on 8-inch is, yes, we are adding some capacity for 8-inch.

Well, I should add – this is Morris Chang. I should add that one of the reasons that the 8-inch fabs are so full now is that – is because of More than Moore. We have been pursing More than Moore for three years and the results have continued to come out. The results are the applications, the specialized technologies that are adapted to the More than Moore applications. And they have started to bring benefits. And that is one of the reasons that the 8-inch fabs are more than full right now. Dan Heyler – Bank of America/Merrill Lynch:

I think it is very difficult to quantify on the longer term what is the growth rate on the 8-inch. But I – we have seen one phenomenon that our 8-inch CMOS logic gradually migrate to 12-inch. And the logic part actually where we will see some decline. But on the other hand, the More than Moore part will increase quite significantly. So I can say almost the – if you add up all the 8-inch we believe we are going to see the long-term growth for 8-inch business.

Well, I should add that – this Morris Chang. I should add that, actually, one of the original, or maybe the original objective of the More than Moore effort was to keep the 8-inches fab full for a long time. So, well, at least up to now that has happened. Dan Heyler – Bank of America/Merrill Lynch: Great. Thank you.

Your next question comes from the line of JJ Park with JPMorgan. Please, proceed. JJ Park – JPMorgan: Thanks for taking my question. My first question is about the gross margin guidance. You mentioned that the more large gross margin in the Q1 was 49.5%, but given almost 10%, say, to gross, second quarter gross margin seems to be a little bit conservative. Is it due to the potential – the FX rate or is there any other one-time cost in the second quarter?

There is two reasons on – I would like to add, two comments on the – on our Q2 margin guidance. We are adding capacity aggressively on Q2. We have said 12-inch capacity will go up by 13% in second quarter and combined capacity will go up by 7% Q-over-Q. That is one thing. So, we expect the depreciation will go up. On the other hand, the NT continue to appreciate. We guided 31.3 as the exchange rate we use for second quarter guidance. This is a 2% appreciate versus the first quarter, and that has some impact on margins as well. JJ Park – JPMorgan: Okay, thank you. My second question, regarding the new business, I know it is premature, but as (inaudible) just as going for the additive for the general lighting, I am just wondering what TSMC's trend (inaudible), compared to the existing players.

Yes –. The LED strategy, is that what you asked? JJ Park – JPMorgan: Yes.

The LED strategy, basically, we plan to make a good return. We plan to make our LED business a very profitable one and the main differentiation that we are seeking will be through technology. And that is why the very first thing that we are doing is to start LED development ourselves – technology development. And we plan to get into that business with innovations – innovations in technology. JJ Park – JPMorgan: Okay. So it is more focusing on the technology development rather than the chip production?

You said technology versus chip production? No. JJ Park – JPMorgan: Yes.

The chip production is not what we are seeking. That is not our strategy, you know, no. JJ Park – JPMorgan: Okay, got it. Thank you very much.

Your next question comes from the line of Mehdi Hosseini with FBR. Please, proceed. Mehdi Hosseini – FBR: Yes. Thanks for taking my question. A couple of follow-ups. If I just take a look at your capacity addition in the Q3 and Q4, it suggests to me that the revenues are going to follow the capacity addition, given the fact that you are already at 100% utilization rate. Is that how we should think about the year-end guidance? Mr. Chang, earlier on, was talking about 36% foundry revenue growth and TSMC exceeding that, so I am just – I am looking at utilization rate and it seems to me that second half revenues are going to just follow the capacity increases. Is that the right way of thinking?

Oh, I didn't say that TSMC would exceed, I did not say it. But, of course, we are not unambitious people and we certainly want to perform better than the industry as a whole. Now I think that basically, I think that you are correct, yes. We are currently limited by capacity and, therefore, revenue growth will have to follow capacity growth. So, basically, I think, that is a right – a correct statement. Mehdi Hosseini – FBR: Sure. And just one follow-up regarding your prepared remarks, I understand that not all the data is available to assess the inventory situation following the Q1 report. But based on your own experience over the past several decades and what you have seen so far out of the reports for Q1, where do you think we are in the cycle?

Well, past experience really tells me very little. Past experience just tells you that the future is always unpredictable. I think that – I really can't comment further than that, yes. Mehdi Hosseini – FBR: But did – have you seen anything so far in the Q1 report by your customers that would concern you as it relates to too much inventory?

Well, the limited – the very limited sample that we have seen, as I said, it is about 15% to 20% of what we will get one or two months from now. One or two months from now, we will get the complete data about the end of first quarter, as we have already gotten the complete data on the end of fourth quarter. So the limited assemble we have – it is really premature to draw any conclusions. Mehdi Hosseini – FBR: Okay, thank you.

Your next question comes from the line of Dan Malkoun with Moore Capital. Please proceed. Dan Malkoun – Moore Capital: Yes. I was just wondering in the guidance for second quarter, can you just talk about what some of the puts and takes are there in terms of strengths driving the sequential growth, and any weakness maybe, if there is any?

Second quarter we expect that communication, consumer, industrial will all go up. On the communication front, within cellular we believe, all major segments will increase. Within networking, growth will be driven by wireless LANs and network processor. On the consumer part, growth will be drive by DTV and video game players, other – not other segments. On the industrial part, all segments will increase, except PLD. Dan Malkoun – Moore Capital: So, PLD will be not up in industrial in the second quarter?

That is what we are seeing now. Dan Malkoun – Moore Capital: Okay. And then, in the first quarter, the 9% growth in consumer, what was driving that? Was that primarily Driver IC? Is that – and is that not typical to see that kind of consumer strength in the first quarter for your guys?

Okay, let's see. You are asking about first quarter in consumer? Dan Malkoun – Moore Capital: Yeah.

Actually, in the first quarter all major segments increased within consumer with – one exception was set-top box. Dan Malkoun – Moore Capital: Okay, so everything drove that 9% growth. And is that typical, that growth? Do you think that was – I wouldn't expect consumer to be up, but maybe I am thinking about that wrong, seasonally, in the first quarter.

Actually, the first quarter is better than seasonality. Usually consumer will go down first quarter. Dan Malkoun – Moore Capital: Okay, so it was better than normal seasonal. Okay, thanks so much.

Your next question comes from the line of Mike McConnell with Pacific Crest Securities. Please, proceed. Mike McConnell – Pacific Crest Securities: Thank you. Dr. Chang, I was just curious with the comments that second half of the year will be softer than the first half of the year. What are the reasons for that? Is it just purely math? I was just curious about that comment.

Are you referring to the comments that I made this afternoon? Mike McConnell – Pacific Crest Securities: Yes.

Well, they were misunderstood. I did not say that the second half would be softer than the – second half would be softer than the first half. I merely said that the second half variations in the semiconductor market – remember, I am talking about the semi – the total, world semiconductor market, now, the second half – in the second half they will be – they will not follow the usual, the average seasonal variations. In other words, seasonally, the third quarter is usually the strongest quarter. Well, actually, no, I will take that back too. It is not the strongest quarter. It is very strong. Seasonally, the third quarter for the semiconductor market is a lot stronger than the second quarter by about 7 to 10 percentage points, 7% to 10% growth from the second quarter. But this year the third quarter of the semiconductor market may not grow as strongly as 7% to 10%. And by the same token, seasonally, the fourth quarter is about 3% stronger than the third quarter. Again, I am talking about the semiconductor market. And this year, the fourth quarter may not grow 3%. So, that is all I said. But since the first quarter is already so strong and even if, – again, I am talking about the semiconductor market. The first quarter is already so strong. Now, if the second quarter is a bit weaker than seasonal, and the third quarter and fourth quarter are all a bit weaker than seasonal, they will still be – the second half, will still be bigger than the first half. So, that is all I said. I think – I really think that, I mean, all this I didn't have to say – I shouldn't have said, really, because it was misunderstood, not just by you, but by some other people also. So, when I realized that it was already too late. I should have unsaid it. Mike McConnell – Pacific Crest Securities: Well, thank you for the clarification. And kind of what are your thoughts then for next year too with relationship to the strength we are seeing this year?

We think that next year will be a good year and I forecasted a quarter ago that next year semiconductor market will see a growth of 7% over this year. And this year is a tremendous year, 32% we are forecasting now. And next year, we are forecasting 7% over this year. Mike McConnell – Pacific Crest Securities: Great, thank you.

Operator, in the interest of time, I think, we will just allow two more callers. Thank you.

Your next question comes from the line of Dan Heyler with Bank of America/Merrill Lynch. Please, proceed. Dan Heyler – Bank of America/Merrill Lynch: Well, thanks. I was just going to ask you guys for an update on the 40 nanometer margins. Your previous expectation was that that would be back to the corporate average, I think, by the fourth quarter, and whether or not we are still on track for that or doing better than that? Thanks.

Actually, Dan, there were people asking this afternoon and my answer to that, yes, we believe the fourth quarter 40 nanometer margin will be close to the (inaudible) quarter level.

Well, the corporate average actually has gone up a little, yes, so it is a kind of a moving target and so, yes. But the answer to your question that – just as Dr. Chiang said a while ago that the yields of the 40 nanometer are as good as, or even better than the yields of 65 or 90 at the same stage of maturity. And so, as far as I see, really, the 40 problems which were pretty high on our priority list last July, I believe it was last July, when I talked to you, they have – they have started to diminish as I thought they would. I remember that in July of last year I even got Mark Liu to speak to you. And at that time, he was forecasting a gradual improvement of the 40 nanometer yield situation. And, sure enough, he was – his results were as good as his words. And they started to improve perhaps even more rapidly than he promised. And so, at this point, I would say that they are not there anymore. And, now, but your question was on gross margin, and I did say that by the end of this year it would be at the corporate average. Now, keep in mind that we expect the 40 nanometer to be fully loaded all the way. Now, when I said that the 40 nanometer gross margin would be like the corporate average, I was sure that 40 nanometer would be fully loaded at the end of this year, but I wasn't sure that the whole corporation would be fully loaded. Now, I am more sure the full – the whole corporation will be fully loaded at the end of fourth quarter, and therefore, the target has moved up a little bit. Is this Dan that is asking the question? Dan Heyler – Bank of America/Merrill Lynch: Yeah, hi.

Do you follow what I said? Dan Heyler – Bank of America/Merrill Lynch: Absolutely, that is clear, and thank you. And then, a quick follow-up with – was we haven't heard much on the embedded CPU initiative which has been multifaceted, has been some working with Intel in the past in this area and some work on your own and AMD and others. But I was just, specifically, was wondering when we would start to see perhaps, presence in the PC-related space with either embedded or MIB market because it has been a growth opportunity for you a number of years that you have been targeting. I am wondering if we are getting to a point where we may start to see greater penetration into the PC space for you i.e. the embedded processor space. Shang-Yi Chiang: Dan, this is Shang-Yi. Dan Heyler – Bank of America/Merrill Lynch: Hey. Shang-Yi Chiang: We – I assume you talk about, for example, like embedded ARM core into some smartphone or smartbook type application, am I right? Dan Heyler – Bank of America/Merrill Lynch: Well, we have seen already. I am wondering in the PC space, i.e. ARM-based PCs, what extent you are seeing success there in the processor space? Snapdragon is one the devices, for instance, out of Qualcomm. Shang-Yi Chiang: We do expect that it will be a growing market and, indeed, our 28 HPM was designed to target that market, and that was customer-driven. So we define that 28 HPM by specific customers target for that market, and, at this stage, what we actually saw was that there were quite a few of our customers, probably around at least four, five of them who were very interested in this technology. And we haven't been able to see their forecast volume at this moment. And I personally think that this emerging market, how fast it will pick up, it is hard to us to predict. Dan Heyler – Bank of America/Merrill Lynch: That's great. Thank you everyone.

Your next question comes from the line of Pranab Kumar with Daiwa Securities. Please, proceed. Pranab Kumar – Daiwa Securities: Yes. Thank you for taking my question. Lora, my sense on the first quarter, non-wafer revenue there was a drop to about 10% of total revenue under Q1?

No, really, non-wafer revenue account for like 10% to 12% of our total revenue. That first quarter is in that level. Pranab Kumar – Daiwa Securities: In that level. That means the ASP drop was quite significant on the first quarter – blended ASP?

Well, in the first quarter usually we have annual pricing negotiations with the customers. It is not something new for us. Every first quarter we will see a little bit more price decline versus other quarters. Pranab Kumar – Daiwa Securities: Okay. My next question is on the dividend payout ratio. If your capital intensity decline a bit in 2011, would you consider paying more than 100% dividend payout for next year?

Pranab, I would like to repeat our dividend policy. We are very serious about our stable dividend payout and we have been paying NT$3 for the four years. And if the long-term growth and profitability goes up, we will increase the dividend, but I cannot give you a promise, that any single year we will pay out more than 100%. Pranab Kumar – Daiwa Securities: Just now, Mr. Chang you have said like your capacity will be fully loaded until 4Q, that implies like your revenue growth over the next few quarters will be quite similar to what is your capacity growth.

Say it again. Our revenue growth will be what? Pranab Kumar – Daiwa Securities: Would be quite similar to your capacity growth because you said that your factory will be almost fully loaded for the whole this year.

Well, as a first principle – as I said earlier, as a first principle that is correct, but now you have to look at the details of capacity growth and the way we are serving – or we are growing the advanced capacity, it is faster than the mature capacities. And the wafers carry a higher price and all that sort of things, yeah. But as a principle – as a first principle, what you said is correct, and what I said earlier was correct also, as a first principle, yes. Pranab Kumar – Daiwa Securities: Okay. Thank you for clarification.

I think this concludes our Q&A session. Thank you for joining us this morning. We hope you will join us again next quarter. Goodbye.

Before we conclude TSMC's first quarter 2010 results webcast conference call today, please be advised that the replay of the conference call will only be accessible through TSMC's website at www.tsmc.com. Thank you all.