Elizabeth Sun - Head IR Morris Chang - Chairman and CEO Lora Ho - SVP and CFO

Randy Abrams - Credit Suisse Mehdi Hosseini - Susquehanna International Dan Heyler - Bank of America/Merrill Lynch Pranab Sarmah - Daiwa Capital Markets Steven Pelayo - HSBC

Welcome to the TSMC's fourth quarter 2010 results webcast conference call. (Operator Instructions) I would now like to turn the conference over to Dr. Elizabeth Sun, TSMC's Head of Investor Relations.

Good morning and good evening everyone, welcome to TSMC's fourth quarter 2010 conference call. Let me wish all of you a very Happy New Year. Joining us today on the call are Dr. Morris Chang, our Chairman and Chief Executive Officer, and Ms. Lora Ho, our Senior 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 fourth quarter and give you our guidance for the next quarter. Then, TSMC's Chairman, Dr. Chang will provide his general remarks 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 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 statements 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 fourth quarter earnings conference call. This next week will be the Chinese New Year, before I start, I want to sent to you my best wishes for good year of the rabbit. During today's call, I will start with the financial highlights in fourth quarter, followed by a recap of 2010, then we will move on to the outlook for the first quarter 2011. You may also refer to the quarterly financial summary slides on our website. All dollar figures are in NT dollars unless otherwise stated. In the fourth quarter, the NT dollar appreciated more than we originally expected. The actual exchange rate reached NT$30.4 to US$1 compared with the planned NT$30.60 when we gave our guidance in the last conference. However, our fourth quarter revenue still exceeded our guidance with the profit margins reaching the high-end of our outlook. Fourth quarter revenue was NT$110 billion, representing a 1.9% sequentially decline. However, in the U.S. dollar terms, the fourth quarter marked a 3% growth compared with the third quarter. Wafer shipments were 3.2 million 8-inch equivalent wafers, flat from the prior quarter and up 31.5% from a year ago quarter. Gross margin was 49.8 %, down 0.2 percentage point from the third quarter, but up 1.3 percentage points from last year. Operating margin was 37.7%, down 0.7 percentage point sequentially, but up 1.2 percentage points compared with the year ago quarter. EPS in the fourth quarter was NT$1.57. ROE was 29.3%. Now let's move on the income statement. The NT dollar appreciated roughly 5% in the fourth quarter and thus negatively impacted our margins. However, due to our continued cost improvement, our gross margin managed to stay at 49.8% slightly down 0.2 percentage point from the third quarter. Operating expenses increased NT$205 million from the third quarter, primarily due to higher operating expenses. Opening expenses for Fab 14 and Fab 12, Phase V. Non-operating income decreased by NT$5 million from the third quarter, reflecting the absence of receipts of SMIC shares from the SMIC litigation settlement. Meanwhile, in December, we acquired a partially constructed fab from Powerchip with NT$2.9 billion, including a steel plant will be disposed and rebuilt to our fab specification. Therefore, we recorded a net loss of NT$800 million in this quarter. Net investment gain was NT$690 million compared with NT$900 million in the prior quarter with slightly lower profit from certain invested companies. Net margin was 37%, down 4.8 percentage points sequentially and up 1.5percentage points year-over-year. Now, let's look at our revenue by applications. In the fourth quarter, we continued to see growth in communications and industrial-related applications, which grew 3% and 4% respectively. Computer declined 6% sequentially, while consumer was down 26% from the last quarter. Revenue from communications-related applications represented 47% of our total wafer revenue in the fourth quarter. Meanwhile, computer, consumer and industrial applications accounted for 24%, 11% and 18% of our wafer sales. By technology, 40-nanometer and 65-nanometer continued to grow and represented 21% and 31% of our total wafer revenue respectively. These two nodes combined were 52% of our wafer sales, up from 46% in the last quarter. Meanwhile, revenue from 0.13-micron and below accounted for 73% of total wafer sales from 72% in third quarter of '10. Now, since 40-nanometer and 65-nanometer combined represent more than half of our total wafer sales, starting from this quarter we redefined the terms of advanced technologies to 65-nanometer and below compared with 0.13-micron and below in the past. Now, let me move on to the balance sheet. We concluded fourth quarter with NT$182 billion in cash and short-term investments, representing an increase of NT$14 billion from prior quarter mainly due to free cash flow generated during the quarter, partially offset by a decrease in short-term loans for hedging purpose. Total current liabilities increased by NT$14 billion, primarily due to an increase in accounts payable to contractors and equipment suppliers. In sum, the current ratio in the fourth quarter was 2.1. Accounts receivable days came slightly down to 38 days. Inventory turnover days were 50 days, reflecting the increase in the mix of advanced technologies and the certain early orders from customers. Net fixed asset turnover was 1.2 times in the fourth quarter. Now let's proceed to cash flow. Cash flow generated from operating activities totaled NT$70.6 billion, representing an increase of NT$6.6 billion from prior quarter mainly due to a decrease used in non-cash net working capital. Capital expenditure was NP$46 billion in the fourth quarter. And as I mentioned, we repaid a portion of the short-term loans resulting a NT$6.7 billion outflow. In sum, the ending cash balance was NT$148 billion, up NT$16 billion sequentially. Free cash flow was NT$24.6 billion in this quarter. Now in terms of installed capacity, in the fourth quarter, total installed capacity was about 3.1 million wafer in the third quarter, representing a 4% sequential increase. For first quarter of 2011, we expect our overall capacity to remain flat, while with the 12-inch capacity will continue to expand by 3% Q-over-Q, 6 and 8-inch capacity will decrease slightly due to annual maintenance. 2010 managed capacity increased 14% year-over-year with 12-inch capacity up 37%, representing 50% of our total capacity. With regards to capital expenditures, we stand at US$1.5 billion in the fourth quarter. Total capital expenditures for 2010 were US$5.94 billion. Now, I have a few comments on cash flow and cash dividend. For the past few years, TSMC had a consistently generated and full operating cash flow to fund our capital expenditure. Now, TSMC is very well positioned to more aggressively pursue higher growth, while improving profitability. We plan to invest and expand our capacity at a much faster pace to capture that growth. In the fourth quarter 2007 earnings conference, I said that our dividend payout ratio will be no less than 80% of the distributable earnings. However, in order to achieve the company's new growth objective, from now this statement has to change. We believe that our timely CapEx investment will allow the company's growth potential and bring greater rewards to our shareholders. Meanwhile, I believe TSMC will be able to maintain at minimum NT$3 per share dividend in the future or consider to increase the cash dividend when our free cash flow increases. In addition to a divided yield that is already among the highest in the industry, TSMC aims to reward its shareholders even more with share price appreciation. Next, let me give you a recap of our performance in 2010. 2010 was a record year for TSMC in revenue, gross profit dollars and net income dollars. We also achieved near historical high profit margins. To accommodate the strong demand from customers, we have been committed to providing most advanced technologies and ramping up capacities, while we managed to be fully loaded throughout the year. 2010 revenue grew 42% year-over-year in NT dollars, or 48% if measured in U.S. dollars. Gross margin reached 49.4% in 2010 with a 5.7 percentage point increase from 2009. Operating margin hit 37.9%, was certainly a 6.8% expansion from last year. Earnings per share for 2010 was NT$6.23, up 81% from NT$3.44 in 2009. ROE of 30.2% was the highest in the past decade. Now let's turn to the outlook for the first quarter 2011. Based on current basic expectations and a forecast exchange rate of NT$29.26, we expect our consolidated revenue in the first quarter to come in between NT$105 billion and NT$107 billion. In terms of margins, we expect our first quarter gross margin to be between 47% and 49%, operating margin to be between 35% and 37%. For the first quarter of 2011, we expect total demand to be stronger than seasonal, communication to be better than seasonal, while computer and consumer applications to be weaker than seasonal. We further expect semiconductor seasonal unit growth for the full year of 2011 to be as follows; PC, 12% growth year-over-year; handsets, 9% growth year-over-year, digital consumer electronics 6% growth year-over-year. This concludes my remarks today. Now, I would like to turn the call to Dr. Morris Chang, our Chairman and CEO for his remarks.

We had a record year in 2010, both in revenue and in net income. We grew our revenue by 48% in US dollars. As a result, we believe our market share in the total foundry segment has increased from 43.9% in 2009 to 45.5% in 2010. Our growth momentum is fueled by timely addition and fast ramp up of capacity wide adoption of our advanced technologies and a strong growth in specialty technology revenue. TSMC's mission is to be the thrust to the technology and capacity provider of the global logic IC industry for years to come. Because we have the technologies, we have effective capacity, and we have earned trust from customers. We believe that we will continue to gain market share. For 2011, we expect the overall semiconductor market excluding memory to grow by about 7%. We expect the foundry market to grow by about 15%, and we believe TSMC will grow more than 20% in U.S. dollars. The forecast demand from our customers for 2011 outpaces the supply under our current capacity plan. We expect to continue to fully utilize our capacity this year. To support the strong growth, we plan to spend about US$7.8 billion for capital expenditures for 2011. 81% of the total budget is for 65-nanometer, 40-nanometer, 28-nanometer technologies. Of the 81%, there is 9% for R&D; and there, capital expenditures are for 20-nanometer and 14-nanometer. With this CapEx, we are able to increase our total annual capacity by roughly 20% to about 13.6 million 8-inch equivalent wafers per month. Now I would like to say a few words about our profitability in 2011. Exchange rate changes have been unfavorable in the last few months. Compared with the 2010 average exchange rate of NT$31.49 to US$1, the exchange rate assumption we are using for 2011 is NT$29.16 to US$1. The 2011 assumed exchange rate is 7.4% down from 2010. As our CFO has pointed out in the past, each percent fluctuation in the exchange rate results in 0.4 percentage point change in operating profit margin. Therefore, between 2010 and 2011 we have a 3 point operating profit degradation due just to the exchange rate. To address this significant challenge, we have taken various countermeasures including faster ramp-up of newer capacity, fuller utilization of existing capacity and greater cost reduction measures in order to make sure that we leave no money on the table. Our strategic financial goal is to achieve compounded annual 10% profit before tax growth and minimum return on equity of 20% across cycle in the next five years. We are on track this year. Now I would like to make a few comments on our technology highlights. First, TCMC's 28-nanometer is industry-first and ready for primetime. Customer products are already taped-out and in prototyping. We have superior performance, superior reliability and density, the density being 2x over 40-nanometer with our gate-last high-k metal gate process. We have the 28 HPM technology that has gained enthusiastic adoption for tablets, smartphones and embedded SoC applications. The 28 HPM has 3-gigahertz ARM CPU for multi-core application processes. The 28 HPM has low SRAM standby leakage and VCCmin for several applications. The second highlight is that the 28-nanometer lead-free bumping, which is eco-friendly, is also ready and is compatible with superior low-resistance ELK interconnect. Third highlight: 800 volts high voltage technology is production-ready and is custom assembling. Fourth, we plan to double R&D CapEx to over NT$700 million in 2011 and we plan to increase R&D budget by close to 20% to a total of over NT$1.1 billion. Fifth, we've also applied a new R&D Fab site in Hsin-Chu Science Park for sub-40-nanometer R&D. Sixth, I want to say a few words about the 450-millimeter wafer manufacturing. Our first 450-millimeter pilot line is planned at our Fab12 Phase VI, starting with 20-nanometer technology. The timing of pilot line will be around 2013, 2014. Our first 450-millimeter production line is planned in around 2015, 2016. Lastly but not least, I want to talk about two recent developments, which TSMC stands to benefit form, in the future. The first recent development is that Microsoft has recently announced that it will put Windows 8 to ARM probably by next year. Since many of our customers use ARM cores to design their products, the support from Microsoft will give our customers more opportunities to address new markets, such as mobile, computing and PC's. Since many of our customer's primary foundry will have the opportunity to grow with our customers. The second parallel development along with the Microsoft announcement is that mobile computing devices, such as smartphones and tablets have gained wide acceptance, and have become very popular in our daily lives. We estimate smartphones will respond 20 million units in 2011 and the growth is estimated to be 45% year-over-year. We estimate tablets will be 40 million units this year. The growth is very fast, 170% this year, but the overall size is still small. There is still a lot of room for the tablets to grow. We estimate that 61% of the Logic IC from the non-iPad, non-gPad, those are of course Apple and Samsung. 51% of Logic IC from the non-iPad, non-gPad tablets will be supplied by TSMC. These tablets the non-iPad demand will likely takeoff from the second half of 2011. For smartphones, many of its major IC contributors are TSMC's customers. And we currently supply 45% of the Logic IC to smartphones and we except our contribution to go beyond 50% in the near future. As fabless companies can't participate more in the fast growing new market and design the new products, such as the mobile computing devices, that faster growth fuels TSMC's growth. The development and popularity of the mobile computing devices will speed up the technology migration of the leading nodes such as 40-nanometers, 28-nanometers, 20-nanometers in order to meet the processing speed and low power requirements as well as the need for high integration of different IPs. TSM 28 HPM is very well positioned. We are the industry leading 3-gigahertz operating frequency and the best performance power ratio for low power processes. Customers are adopting our 28 HPM enthusiastically. We stand to benefit from the popularity of these mobile devices. These are my prepared comments. We are now open for questions.

(Operating Instructions) First question comes from the line of Randy Abrams, Credit Suisse. Randy Abrams - Credit Suisse: I wanted to follow up on the cost saving measures, you mentioned to offset currency. And one of this was running the Fab more full. I wanted to see is that a temporary measure, and due to currency pressure are you shifting back to a strategy of managing higher utilization through the cycle?

No, we are not shutting anything back. Of course, running the fabs full is a function of the demand. I mean if there is no demand, we can't run the fabs full. But what we are saying is that we are running the fabs fuller than what we're planning to, to support some of the non-supported demand that we had in the past. Randy Abrams - Credit Suisse: And then a couple of question on the CapEx. One is on for China capacity. What your plans are to build that out and how your China business is progressing? And then also within the budget, if you could talk about how much of the NT$7.8 billion goes to the new businesses such as solar and LED?

Randy, as you know, we are aggressively expanding our fab in Shanghai, the 8-inch fab. We plan to double the size to 110,000 by early 2012. So we're expanding very fast. Of this NT$7.8 billion capital expenditure, around NT$330 million will go to the fab in Shanghai. And you also asked about the new business. Around NT$140 million CapEx goes to new business for this year.

Randy, as you know, we are aggressively expanding our fab in Shanghai, the 8-inch fab. We plan to double the size to 110,000 by early 2012. So we're expanding very fast. Of this NT$7.8 billion capital expenditure, around NT$330 million will go to the fab in Shanghai. And you also asked about the new business. Around NT$140 million CapEx goes to new business for this year. Randy Abrams - Credit Suisse: And just one quick follow-up. The Powerchip facility, how quickly do you expect to build that facility and how much could you actually do in that facility you purchased from Powerchip?

That is actually for the R&D fab that I mentioned in my prepared comments. I said that we have acquired a new R&D fab site in Central Science Park for 40-nanometer and below 40-nanometer R&D. And that's what the Powerchip site will be for. We're going to start building I think perhaps next year. It's going to be an R&D fab site. Randy Abrams - Credit Suisse: You mentioned I think in the 8-inch you'll do normal maintenance for Chinese New Year, but the 12-inch sort of implies that you're going to run through Chinese New Year. Is there I guess tradeoffs where you skip the maintenance, or was that the plan to differ maintenance this year?

No, actually it's not. We will not keep the maintenance. Actually, our fab is 12-inch. Everyone of them is gigafab. They have many, many phases of each fab. So we'll do the maintenance phase-by-phase. We do not shut down the whole 12-inch for maintenance purpose.

And then the next question will come from the line of Mehdi Hosseini, Susquehanna International. Mehdi Hosseini - Susquehanna International: Dr. Chang, could you help us understand how should we think about the mix of 40-nanometer and 28-nanometer as we exit this year, like in Q4 timeframe? And also, how many tape-outs do you actually have for 28-nanometer that will be volume ramped in the second half?

We plan to have around 2% or 3% of out total revenue in the forth quarter that will be 28-nanometer, 2% or 3% percent in the fourth quarter. The 40-nanometer is still increasing. And in the fourth quarter, it's 21% of revenue in the last quarter. And so by fourth quarter of 2011, I think that that percentage will be higher. But I do not care to give the number now. Another part of the question, the tape-outs volume ramping. The tape-outs of the 28-nanaometer, they will start to ramp in the second half, starting in the third quarter and then more in the fourth quarter. But the real momentum we believe will be in the next year. Mehdi Hosseini - Susquehanna International: Just as a follow-up, what are your thoughts in terms of the time you would take for Microsoft operating system to actually be adopted with ARM processing ecosystem or to work out the details with the ARM-based applications? Is there going to be a time where the software would have to be applied and debugged until that new architecture and the ramp is realized at TSM?

Well, this probably is a question that Microsoft needs to answer better than TSMC can. But as far as what we have obtained from publicly available information, I think the porting probably will start next year, given that I think for other third-party software developers still take some time to develop more software for the ARM core, using the Windows platform. But this is really not a question that TSMC can answer.

The next question will come from the line of Dan Heyler, Bank of America/Merrill Lynch. Dan Heyler - Bank of America/Merrill Lynch: I wanted to ask back on the 40-nanometer question, if I may. The comment on very strong and broad demand for your advanced technology and the need for low power plus the global bullishness in smartphones and tablets, does this suggest that 40-nanometer should surge in demand mainly from here? Is that predominantly where the mobile demand is coming from?

I don't think the demand in 40-nanometer comes just from mobile. The total 40-nanometer demand is increasing faster than we expected even three months ago, Dan. Dan Heyler - Bank of America/Merrill Lynch: I guess if you look at your other major product cycles in terms of nodes, I'm wondering whether 40 potentially would be maybe a higher contributor to overall sales? In many of your cycles, you've picked up about 30% I guess of contribution to total sales. Given you strength in demand that you're offering to, whether potentially 40 would be a higher contributor potentially on some of the other node net contributions to sales?

I actually think that's possible, Dan. Of course, both of us will be just speculating. But really I think that we are pretty much seeing new trends that we didn't see even as late as six months or a year ago. Back then we thought that 65 was going to be a very, very important node and 40 might be actually less important in terms of the ultimate volume than the 65. But I think that we are revising estimates now, because there is a migration from 65 to 40 and then there are new applications for the 40. And actually we now feel that 28 is going to be a very, very important node also. So all of these are pretty exciting. Dan Heyler - Bank of America/Merrill Lynch: My second question is on the margin side, because with the implied utilization, your shipment number over your capacity number goes from 106.8 in the third quarter down to 102.9, so about a 4 percentage point decline in utilization. But your gross profit margin is almost flat, only 28 basis points.

I don't think we are following you. Would you please start over again? Dan Heyler - Bank of America/Merrill Lynch: So you're seeing about a 4% decline in utilization from the third quarter to fourth quarter, but your gross profit margin is almost flat, only a 28 basis point decline. In fact, depreciation is up. So could you talk about profitability, what's going on in your business? I guess when I look at your mix, your ASPs are up, driven by 40-nanometer. So is this profitability effectively driven by your contribution from 40-nanometer, because again your margins are almost flat, while your utilization declined?

I think the utilization you are seeing is probably higher than what we're seeing, because if you take the shipments, the (inaudible) our installed capacity. What we are seeing here is we use wafer move, because the bidding versus installed capacity has to do with industry fluctuation on the back-end among quarters. What we are measuring based on the equivalent utilization is how many move we can do in every wafer fab that we can use every piece of equipment. So from that end, we are not doubtful as you expected. So if we can do a very good job, we can very well run above 100% utilizations, though we still have some room, also depending on the demand as well. Dan Heyler - Bank of America/Merrill Lynch: But there was a decline in utilization, right, because your capacity grew faster than shipments?

Do you mean from third quarter to fourth quarter? Dan Heyler - Bank of America/Merrill Lynch: Yes, your utilization decline?

From third quarter to fourth quarter, yes, there is a slight decline. Dan Heyler - Bank of America/Merrill Lynch: And your margins are flat. So I guess I'm wondering what's driving this profitability. Is it the mix, and is there something happening on 40-nanometer in particular?

Actually, 40-nanometer has been improving all through the year. It did play a very important role in keeping our margin up. But you are looking at the whole company here now. You commented on the gross margin, the relatively level of gross margin percentage, you are looking at the whole company. And this had a lot of factors in play. Yes, depreciation increased other factor, but there's a lot of cost. So there's a lot of variable cost that we have been able to reduce also. And then there's also this mix question. So I mean there are a lot of factors. I think it'll be oversimplifying it to just signal out one or two factors. But as I said this afternoon, we do manage our margin through standard gross margin that literally hundreds of people work full time to try to maximize the standard gross margin. Well, I don't mean hundreds of pencil pushers and we don't have any pencil pushers I guess. But we have dozens of cost analysts and then their conclusions, their recommendations get passed along to actually thousands of engineers in operation, in purchasing, et cetera. And all of those work to bring the standard gross margin up. Look, we haven't been the most profitable foundry for years for nothing, alright. So if you start looking at us as a complex machinery that's working well, I think that would be a good start, rather than a company that just looks on very simple issues. We spent years in building up organization. There is cost organization and the market forecast organization that I mentioned to you. Dan Heyler - Bank of America/Merrill Lynch: I am assuming that these dynamics are going to continue to play out as the year progresses. That was where I was driving at. So thanks very much.

The next question will come from line of Pranab Sarmah, Daiwa Capital Markets. Pranab Sarmah - Daiwa Capital Markets: Thank you for giving those numbers on your contribution to smartphone and tablet PC's number. Could you give some little classification and point of view whether tablet PC will be included on computer side or on the mobile handset communication side.

Pranab, the tablet at this point is not being put into either communication or computer. We actually have internally addressed in emerging applications. If it is tablet first, I think there is a portion of the tablet that's still in the computer side. But generally speaking, if you are looking at the media tablets, we basically currently put them under emerging applications. Pranab Sarmah - Daiwa Capital Markets: Emerging application; so that will be a new classification going from next year?

Emerging; she said emerging markets.

Emerging applications. So we have not yet break it out into computer or communication.

It's still pretty small.

Right, still very small.

For us, it's still very small.

Right. It is in a category where we currently said industrial and others. Pranab Sarmah - Daiwa Capital Markets: Okay, it's under industrial now, got it. Then secondly, could you give a little bit of update on the automotive semiconductor side, how the progress has been so far and what you are expecting in 2011?

For now, we will continue growing our automotive business. In the year of 2010, the automotive semiconductor business accounted for about 1.4% of our total wafer revenue and we expect it to remain at about same level this year. Pranab Sarmah - Daiwa Capital Markets: And then last question is on that CapEx cycle. Looks like your CapEx cycle has gone up quite a bit. If I see the last 5 year's CapEx cycle excluding 2010, average CapEx was US$2.5 billion roughly. Now you are moving average CapEx more than US$5 billion on an annual basis. And if you bring the 450-millimeter fab tools by 2014, 2015, your CapEx cycle will be even high when you move to there. So does it mean like your cash flow will have a little bit of constraint for next 5 to 10 years, because whatever cash you are going to get in, you have to keep on putting on the CapEx and that may lead to no upside for cash dividend?

No, that's not true. Our 5-year strategic plan calls for increase of free cash flow before the 5-year period ends, actually well before the 5-year period ends. We do expect a higher free cash flow in 2013, 2014 and 2015. Pranab Sarmah - Daiwa Capital Markets: Okay. That's very clear enough. I roughly got the idea. And your depreciation expense long-term looks like will be pretty high going forward. Like, you're guiding for 30% up on this year, and given the high CapEx probably it will remain high for the next couple of years, I guess.

We don't know about what will be the depreciation for next year. We have not estimated a number so far.

And the next question will come from the line of Steven Pelayo, HSBC. Steven Pelayo - HSBC: I'm curious about the overall foundry market. Have you sized the total capacity out there? You've grown your capacity by about 20%. Now, GlobalFoundries wants to 50,000 and Dresden 60,000 in New York in the next couple of years. Samsung is building it. I'm curious about the overall foundry capacity growth. Have you sized that at all?

Our estimate is that the overall foundry capacity growth will increase about 15%. And our capacity will grow bigger than that number; we estimate will be 20% this year.

In addition to what Lora said, I do want to call your attention to the concept of effective capacity which I introduced two or three quarters ago. Effective capacity is what the customers will place orders on. You've got to have the right technology, production mature technology; you've got to also have sufficient customer trust. That's effective capacity, and that's different from nominal capacity. The nominal capacity of the foundry industry, as Lora has estimated will increase, did you say 15%?

15%.

Yes. Steven Pelayo - HSBC: It sounds to me that you wouldn't expect these competitors building fairly aggressively as well to really disrupt the market given that their effective capacity, their customer relationships, maybe their technologies is not as mature, as you can see. So am I correct in assuming you do not expect any dislocations because of the CapEx that's going on out there?

I have no expectation of what our competitors will do or will not do. I don't know. Steven Pelayo - HSBC: Are your competitors potentially at a competitive advantage in any way given that a lot of this mobile strength is coming from U.S. and European customers, where they both plan to or currently have fabs? Does TSMC need that fab in Europe and U.S.? Or does that help them in any way? Do you think it's geographically positive for them?

I don't really think so. I think the geographical location of fabs is a pretty minor factor, frankly. I think there are other factors that are far more important than geographical location. For instance, if one fab had a high yield than another fab, then I would choose the higher yield fab regardless of where it's located. And there are many, many factors in this foundry business. Location is I think a minor one. Steve Pelayo - HSBC: And my one final to what you're speaking as, give us some thoughts on your tax rate. I was a little bit surprised in the fourth quarter, what's that for 2011? That's my final question.

Tax rate will go up in 2011 and in last year our effective tax rate were around of 5%, but this year we'll go up to 10%, 11%.

Well in the interest of time, I think we will allow the last caller. Operator, please.

There's a follow-up question from the line of Mehdi Hosseini of Susquehanna International. Mehdi Hosseini - Susquehanna International: I just had a follow-up question, actually two follow-up questions. How should we think about the D&A in 2011, depreciation amortization?

Depreciation, for this year? Mehdi Hosseini - Susquehanna International: Yes.

The depreciation amortization will go up by around 30% over last year. Mehdi Hosseini - Susquehanna International: And then in terms of capacity addition and cash outflow for the equipment purchase spending, is it going to be a kind of spread throughout the year or front-end loaded or back-end loaded?

The capital expenditure of the 7.8 billion will be front-end loaded at a rough 50%, 40% spread.

She says 50%, 40%.

Yes, 50% for cash.

All right. So this concludes our Q&A session. Thank you for joining us today. We hope you will join us again next quarter. Good bye.

And before we conclude TSMC's for 4Q '10 results webcast conference call. 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.